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Editorial | Energy: a lesson for policy oversight

Published:Wednesday | May 11, 2016 | 5:00 AM

The fiscal discipline of the past five years apart, perhaps the most significant achievement of the Jamaican Government has been its recent progress in unravelling the country's energy muddle - the good fortune of a drop in oil prices notwithstanding.

This week, for instance, the Office of Utilities Regulation (OUR) named its preferred bidder to develop 33 megawatts of solar electricity, the latest tranche of an initial call for 115 megawatts of renewable power, of which 78 megawatts, mostly of wind, were awarded. What is significant about the latest outcome is the 8.54 US cents per kilowatt-hour at which, according to the OUR, the bidder, Eight Rivers Energy, says it will generate electricity. That, on the face of it, is the cheapest rate at which electricity will flow to the national grid from any of the systems now in play.

Additionally, the Jamaica Public Service Company, which has a monopoly on the transmission and distribution of electricity, recently completed a US$2.7-million conversion of its 115-megawatt power plant in Bogue, St James, for it to be powered by gas, instead of oil. The transition is only awaiting the completion of a facility by the US firm, New Fortress Energy, for the storage and regasification of liquefied natural gas. Additionally, JPS is well ahead in the development of its project for a 190-megawatt gas-fired power plant at Old Harbour, St Catherine.

These projects, and others of the kind that reduce the cost of energy, for which this newspaper has strenuously argued in recent years, are a potential economic game-changer for Jamaica, if what has happened in the country's enterprises over the past year or so is any guide to the future.

Jamaica, which imports more than 90 per cent of its energy, has long had expensive power. Before the crash of the petroleum markets, consumers paid up to 41 US cents for a kilowatt-hour of electricity. High electricity rates made the cost of doing business in Jamaica expensive. We couldn't compete with many regional counterparts, including Trinidad and Tobago, which produces oil.

 

IMPROVED COMPETITIVENESS

 

Over the past year, on the back of lower oil prices, electricity rates have fallen by about a third. This, combined with more rational economic policies, has given a fillip to Jamaican firms. Lower costs have improved their competitiveness, especially for those in manufacturing. The great revelation of this has been in the food-processing sector, where Jamaican companies increasingly compete with their Caribbean counterparts for the domestic market, which had been previously surrendered. This reflects itself not yet in increased exports, but declining imports - through import substitution - and an improved current account deficit.

Hopefully, even if oil prices rise again, lower energy costs will be locked in by the change in fuels that will fire the country's power plants.

These changes tell another not-so-obvious, but compelling story: of the value and efficacy of broad, non-partisan partnerships in effective policy formulation and implementation. There is little doubt, for example, that the Economic Programme Oversight Committee was important in policing the Government's adherence to the country's IMF agreement and the rational economic policies it has so far spawned. The Electricity Sector Enterprise Team helped to rescue a foundering power-reform project, which had lost public confidence, to deliver what is now in place. It provides a template, perhaps, for thinking about new arrangements for the appointments of boards of public agencies.