Despite lower oil prices, renewable still an attractive option, says IFC
The BMR Jamaica Wind Project will help the country reduce greenhouse gas emissions by approximately 66,000 tons of carbon dioxide equivalent per year, according to International Finance Corporation (IFC) Senior Manager for Central America and the Caribbean, Luc Grillet.
That decrease is equivalent to taking 13,000 cars off the roads, he said, underscoring how important it was that Jamaica has decided to add renewable energy to the generation matrix.
It is also equivalent to, for example, carbon dioxide emissions from consumption of 138,621 barrels or 6.73 million gallons of oil, according to Financial Gleaner estimates made using the United States Environmental Protection Agency greenhouse gas equivalencies calculator.
The 66,000 tons is also equivalent to carbon sequestered by 1.55 million tree seedlings grown for 10 years or 56,677 acres of forests in one year.
IFC, the private-sector arm of the World Bank Group, has partly funded the US$62.7-million BMR project with a US$10-million senior loan partly because of Jamaica's clear national energy policy as well as to encourage the transition, with the hope that it would also encourage further investment in the sector, Grillet told the Financial Gleaner ahead of the official opening of the wind farm in St Elizabeth on Thursday.
Historically, most of the IFC's renewable energy investment support went towards hydroelectric power plants. "That has shifted significantly and now most of our annual investment commitments volumes cover basically investment transactions in the wind and solar sectors," he said.
"That is because since 2008-09 the technology has become sufficiently competitive and a lot of regulatory support was introduced in several emerging markets to encourage the installation of renewable energy capacity, including in Jamaica," said Grillet.
The 36.3MW BMR wind project is part of the 115 megawatts of energy the Government is seeking to generate from renewable sources and that will put the Government on track to successfully transform the energy sector, he said.
"And that comes on top of the very important topic of also encouraging the use of natural gas in the energy matrix in Jamaica," he added.
He was mindful, however, that renewable energy is an intermittent source of energy, in that it is produced when the wind is blowing, the sun is shining or water is flowing, in the case of hydroelectric plants.
"So you need additional efficient base-load capacity to be part of the energy matrix of any country in order to balance the intermittent nature of the renewable energy capacity being added to the system," said Grillet.
He said that although every country will vary, experts have estimated that as a percentage of overall installed capacity, a country's electric grid can absorb between 25 per cent and 35 per cent of renewable energy.
"When you go beyond that, because of the intermittent nature of the renewable, you start getting into constraints," said the IFC senior manager.
Oil import bill down
Grillet said he believed that, largely because of the fall in world oil prices, Jamaica's yearly oil import bill recently went down from about US$2 billion to about US$1 billion, and about 40 per cent of that is used in the power sector.
"Now, you could also argue that with gas prices having gone down, doesn't that make the attractiveness of renewable energy or natural gas supplies somewhat less pronounced?" he asked.
Grillet said that at very low levels of oil prices "it may make it a little bit less attractive, but there is still a very sound business case for importing natural gas to the Caribbean region and particularly to Jamaica."
Even with the low oil prices, the Jamaica Public Service (JPS) average generation cost is currently about US$0.21 per kilowatt-hour, while the light and power supplier will take off electricity generated by BMR at about US$0.13 per kilowatt-hour.
"So you can see that at 13 US cents BMR's plant will be very competitive and will actually help to lower the average generation cost in the system," the IFC senior manager said.
Moreover, when combined, the 115 megawatts of renewable energy, along with the natural gas that the JPS will use at its Bogue plant in St James "will lead to a sizeable reduction in electricity prices," he added.
Grillet said the energy sector is not the only one in which it has investments or in which it is considering potential investments in Jamaica.
IFC currently has a committed portfolio of about $220 million in Jamaica, about a quarter of the roughly $900 million in the wider Caribbean region.
Roughly half of its portfolio is currently invested in the power sector, but it is also working in "other segments of the infrastructure space. We are also working in the tourism sector. We are currently doing work in the airport sector," Grillet said.
IFC is currently in an advisory engagement as part of the Government's move towards divestment of the Norman Manley International Airport, "but, hopefully, after that project has been awarded ... we will get involved in the financing of it," he said.
In terms of growth, "our strategy agreed for Jamaica is to focus on first improving the business environment, and having a reliable access to electricity is one important factor of improving the business environment".
It is also supporting public-private partnerships in energy, transport and logistics infrastructure.
In its last fiscal year ended June 30, 2016, IFC committed US$2 billion exclusively for the power sector, Grillet said.
Of the amount, about US$700 million was destined towards renewable energy generation projects worldwide, about US$1.1 billion directed towards thermal generation all of them clean natural gas-based, and about US$200 million to distribution.
The BMR Jamaica wind project is a renewable energy facility owned and operated by the United States-based BMR Energy. Power from the project will be sold to the JPS under a 20-year power-purchase agreement.