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Jamaica's energy conundrum

Published:Sunday | November 4, 2012 | 12:00 AM
Garnett Roper guest columnist

Garnett Roper, Guest Columnist

IN 2010, the Jamaican Government, relying upon the wisdom of the Office of Utilities Regulation (OUR), handed the sole bidder, the major shareholders of the Jamaica Public Service Company (JPS), a licence to build a 360-megawatt gas turbine power plant which, while producing electricity efficiently, primary fuel source is liquified natural gas (LNG). Its alternative fuel, automotive diesel oil, is the most expensive liquid fuel for power generation.

It is clear that the OUR did not do its homework in respect of the cost and the technology and the location of the 360 MW plant proposed by the JPS. Let us take each in turn. First, the cost has no bearing on reality and at U$600m is almost twice the price of international benchmark for similar projects. For example, Wartsila has been contracted to build a 573-megawatt plant in Jordan, at a cost of approximately U$1m per megawatt. The benefits of choosing the Wartsila technology procured in Jordan should be carefully noted when compared with the 360MW gas turbine technology project for US$600m that JPS shareholders won.

A 573MW dual fuel plant for overall cost of US$552m compares favourably (to put it mildly) with the JPS's 360MW plant for U$600m. This plant will initially run on heavy fuel oil (HFO) to then later be switched seamlessly to natural gas. In Jamaica's context, this technology-based power plant is relatively easy to construct and the plant could be completed in less than 18 months rather than 36 months projected by JPS, using its proposed gas turbine technology. This would see Jamaica's consumers enjoying a lower electricity price sooner.

superior technology

The technology employed by Wartsila is superior in efficiency and flexibility at varying temperature, humidity and loading. Both in the price tag associated, which is at best inflated, and the technology and

implied fuel source make it obvious that Jamaica will not have benefited from the best option. Jamaica should be looking to have full and true fuel diversification versus the effective single fuel technology they are proposing. As the price of LNG could increase in the future, the ability to switch to the less-expensive HFO, would protect Jamaica against a runaway price in either fuel.

The OUR clearly is not up to the mark, if it has awarded a licence at a price which is significantly above market (U$600m instead of closer to U$400m) and locked us into a single fuel source, and one which may never come to Jamaica, given the cost of the infrastructure to bring into the island.

There is not much wisdom in locating 360 MW in one plant. For all the obvious reasons of the vulnerability of such a plant, it is better to have the power generation in three or four locations, despite the incremental increase in cost. In fact, it is not necessary to have 360MW at this juncture; what is needed is 292MW to retire inefficient units. Furthermore, and of utmost importance, is the fact that the JPS with the witting or unwitting assistance of the OUR has been able to pass on all of its technical losses to the consumer. Some US$160m of losses, which include so-called technical losses, is passed on to the consumer annually. What this means is the electricity losses in transmission from, say, Old Harbour, where the power generation is done, to Kingston where the electricity is used, are routinely added the bills of consumers. If the OUR does not allow JPS to pass on those technical losses to the consumers, then JPS would be forced to become more efficient in order to stay in business.

The elephant in the room is the fact that however incompetently devised, a licence has been granted to JPS and Government cannot easily walk away from it.

The Government needs to be able to open discussions with JPS to present a brand new plan for Jamaica energy, and persuade JPS along with public pressure to give up its licence for the 360MW.

In return for giving up the licence, Government can offer JPS an option to develop a basket of power generation technologies - roughly as follows:

a. A 170MW dual fuel reciprocating technology in Old Harbour - less than 24 month timeline.

b. A 120MW dual fuel in the Caymanas area, 30MW of which is for an industrial park - less than 18-month timeline.

c. 60MW of renewable energy - 12-month timeline.

d. Either smaller plants of dual fuel or coal for the bauxite plants.

The option of providing 30MW of power to an industrial park which is able to use thermal energy, as well as the more efficiently priced electricity produced 120 MW dual fuel power plant at Caymanas, would be a development of signal importance. The Gleaner published a story of a similar industrial park to be built in Haiti. I have been advised that there are investors wringing their hands to make just such an investment in Jamaica. What stands in the way is the cost of energy.

Rev Garnett Roper is president of the Jamaica Theological Seminary. Send comments to columns@gleanerjm.com or garnettroper@hotmail.com.