Jamaica Changes Its Government, But What About Its Energy Strategy

This blog post was originally published at Worldwatch Institute.

On December 29th, the Jamaican government called for a general election which resulted in a changing of the guard from the Jamaica Labor Party (JLP) to the People’s National Party (PNP). The PNP, led by Prime Minister Portia Simpson-Miller, assumes control of the government after having lost it to the JLP in the summer of 2007. With this change, many questions arise regarding current initiatives, especially those concerning energy. Despite many signals that the country is moving toward a more sustainable energy future, including a renegotiated contract to help make Wigton Wind Farm profitable, official legislation for net billing, and the rehabilitation of hydroelectric facilities, energy prices continue to burden most consumers and the country’s energy future still remains unclear.

While both the PNP and JLP support renewable energy initiatives in their rhetoric, actual energy performance has been mixed. Until 2007, the PNP led the country for 18 years, and in that time the country’s first utility-scale wind farm was installed at Rose Hill. Its initial phase brought 18 megawatts (MW) of installed wind capacity to the island to complement the 21 MW of already-installed hydro power. The PNP also established the Office of Utility Regulation (OUR), which oversees, among other things, the island’s electricity sector.

Similarly, the JLP boasts a number of initiatives supporting renewable energy. Among them is the finalization of a national energy policy in 2009, which is the product of a call for a national development plan that began in 2006. The plan details a national 25 percent renewable energy goal by 2030. It also stresses fuel diversification, however, which explains recent movement toward the installation of more than 300 MW of liquefied natural gas (LNG) capacity. In the JLP’s recent tenure, it expanded Wigton Wind Farm to 38 MW and moved forward a provision for net billing of electricity. Despite these efforts to improve the country’s energy situation, though, over the past decade electricity prices increased at a rate of about 6 percent per year. Jamaicans continue to pay high electricity prices – roughly USD $0.35 per kilowatt-hour (kWh) compared with US prices of $0.10 per kWh – making it an important political issue, although according to the Caribbean Electric Utility Service Corporation (CARILEC), Jamaica pays only average electricity tariffs relative to the rest of the region.

Immediately after winning the election, the PNP mad considerable changes to Jamaica’s energy sector. Minister of Energy, Clive Mullings, was replaced by Phillip Paulwell, and the ministry expanded from just covering energy and mining to also including science and technology. In a recent statement, Minister Paulwell laid out ambitious goals for tackling Jamaica’s energy crisis. He plans to advance an agenda that would break up the transmission and distribution monopoly currently held by the Jamaica Public Service Company (JPS,) but JPS has a license to maintain its hold through 2019 and dissolving that may prove to be difficult. And, in an effort to start bringing consumers economic relief, Paulwell has pledged to continue the PNP’s election promise of removing the general consumption tax (GCT) that is currently applied to Jamaican utility bills. In addition, Minister Paulwell has given himself three years to reduce electricity prices by at least 55 percent, as he expects the island’s electricity consumption will increase by 50 percent over the next three years due to economic growth.

For a long time Jamaica has relied on costly liquid petroleum for electricity generation. As a result, fuel diversification has become key to the country’s future energy strategy. To achieve lower electricity prices, Paulwell is open to the use of coal and petcoke, which are more affordable sources of fuel for electricity generation, but are also extremely polluting. Further attempting to diversify Jamaica’s fuel portfolio, the OUR awarded JPS the go-ahead to build a 360 MW combined-cycle gas plant to be completed by 2014 in the hopes of providing more affordable electricity to consumers and heavy industry such as bauxite mining. This does not mean, however, that greater implementation of renewable energy will cease. For example, before the election, when Paulwell was the PNP’s spokesman on energy, the party promised to replace traditional sodium vapor street lights with lights powered by solar panels, a move that is estimated to save the country USD $17 million annually. However, it remains in question how they will pay for and protect these new technologies. The last time a similar project was undertaken, one third of the 100 new solar panel lamps were soon replaced with sodium vapor bulbs due to theft and vandalism.

Aside from trying to diversify its sources of fuel for electricity, the government faces other hurdles to alleviating its energy concerns. In 2010, Jamaica turned to the International Monetary Fund for assistance in restructuring its debt and developing a standby loan facility. Since that relationship began, however, the country has had to reduce spending on items such as infrastructure, hospitals, and school. Following December’s election, the government began negotiating a new deal with the IMF. The original agreement is set to expire in the coming months and the next deal may include funding for loans to help jumpstart economic growth. In order to help spur successful investment in renewable energy, negotiators may have to revisit a provision in the original agreement that prevents the waiving of import duties on renewable energy equipment.

Of equal importance will be continued support for policy measures such as the net billing provision that was instituted last year. This provision not only allows consumers to generate electricity for their own consumption from renewable sources, but it also permits them to sell excess electricity to the grid. At issue, however, is the rate at which JPS purchases electricity from consumers, which is currently determined by the “short-term avoided cost of generation.” Some have argued that the avoided cost does not factor an accurate price for oil or the potential impact that renewable energy may have on future electricity prices as its share of the island’s energy matrix increases, and therefore needs to be re-calculated. As it is, the avoided cost is around USD $0.10 per kWh, while electricity purchased from JPS hovers around USD $0.35 per kWh. This spread diminishes the benefit of net billing for the consumer, and moving forward, it is clear that the new PNP government will have to address this issue if it is to see successful adoption of policies meant to facilitate the development of renewable energy in Jamaica. One option is for the island to consider net metering instead. In that case, as an alternative to selling electricity at one rate and buying it back at another, the rate for every kWh is the same, making the determination of a balance simpler and increasing the likelihood a consumer will receive a net benefit from selling electricity to the grid.

Like the JLP, the PNP has a track record of at least trying to move Jamaica toward a more sustainable energy future. Despite their respective efforts, citizens still suffer from exorbitant electricity prices. Hopefully the new government will prioritize renewable energy and foster smart decisions to help reduce the island’s reliance on fossil fuels. Doing so will allow Jamaica to continue to set an example for other small-island states that seek a greater level of energy independence through economic investments in renewable energy.