Sun | Jul 25, 2021

Editorial | Get the dialogue on electricity going

Published:Sunday | June 20, 2021 | 12:09 AM

In his report to Parliament on his portfolio a month ago, Daryl Vaz, the energy minister, announced that the Government would soon go to market with requests for proposals for renewable energy systems, in keeping with the administration’s plan to have half of Jamaica’s electricity generated from renewables by 2037.

Given the contribution of fossil fuels to global warming and climate change, the policy on renewables has broad support of this newspaper. But as we said in the aftermath of the minister’s presentation, this matter requires full transparency, and would benefit from robust debate, ensuring that whatever energy mix emerges, the initiative has strong backing from Jamaicans.

Two aspects of Mr Vaz’s and the Government’s approach to the process, thus far, have therefore caused surprise. While the minister may say it is still early days, we expected he’d already be engaged with the public on the project, including introducing Jamaicans to the “new leadership” of General Procurement Entity (GPE), the body that will spearhead the process. Second, its inexplicable that the renewables initiative is seemingly being kept clear and distinct from a review of the Electricity Act of 2015 by a joint parliamentary committee, although the outcomes of the group’s efforts is likely to impact how the GPE goes about its job.

The potential for overlap is clear in the universal opposition of the independent power generation companies, who sell their output to Jamaica Public Service (JPS), the monopoly electricity transmission and distribution company, to a clause in the law that grants JPS first right of refusal in replacing its own generating capacity and the end of its life.

If JPS – ‘the single buyer’ under the law – exercises that option, rather than allow the new generating capacity to go to competitive bidding, the replacement cost mustn’t exceed the “generation avoided cost”, or the cost it would save by purchasing energy, instead of building a new plant, after taking into account the capital and operating costs of the new facility.

UNCOMPETITIVE

Private power suppliers insist that the clause is uncompetitive and, conceivably, could prevent Jamaica from realising the benefits of innovation on power technologies, including renewables, while keeping the price of electricity to consumers high. They argue that in exercising the first refusal option to build its replacement capacity, the single buyer could well price the facility just below the avoided cost to fulfil its legal obligation and give the veneer of competitiveness. Should lawmakers decide to keep the clause, they say, it should be applicable to all electricity generators.

But this isn’t the only issue regarding the potential pricing of electricity that will confront policymakers.

Currently, around 17 per cent of Jamaica’s electricity is generated from renewables. According to Minister Vaz, with the planned request for proposals, that should increase to 32 per cent in a decade, by 2030. And by 2037 roughly half of the country’s power will come from renewables. If that is achieved, Jamaica’s power plants will pump substantially less planet-heat pollutants into the atmosphere than they do now. Which is good.

But there are two other bits of context around which Minister Vaz and the GPE should begin a conversation.. First, Jamaica’s net electricity production and sales have been flat for years. In the five years to 2029, they annually averaged just over four million and three million megawatt hours (MWh), respectively. Those figures are likely to have dipped in 2020, given the slump in economic activity because of COVID-19.

LAGGED GROWTH

A decade ago, with an assumption of relatively robust growth, electricity consumption was expected to push past seven million MWh a year by 2030. But growth has lagged.

Meanwhile, power companies, especially JPS, have, in recent years, replaced some old oil-burning generators with LNG plants. These investments apart, there are other generators whose life cycles are not yet at an end. Against that backdrop, the renewable energy capacity proposed by Minister Vaz will possibly push overall generating capacity beyond what may be required for the next decade or so. If that is indeed the case, consumers could well have to pay the non-fuel charges of these plants, even though they may not be generating electricity.

Maybe there are broader social, economic and existential trade-offs to be made, for a time, in favour of clean, rather than cheaper, energy. In that case, they are issues on which people should be engaged. Or, the Government may have better data, proving the congruence between electricity consumption and the generating capacity that’s in the pipeline.

That’s why Minister Vaz must have a coming out of the GPE team and set them talking to Jamaicans. The matter is urgent.