Sun | Aug 14, 2022

Phillip Paulwell | Here we are again: Another energy crisis

Published:Sunday | June 5, 2022 | 12:06 AM

The point has been raised that as the JPSCO licence will come to an end in 2027, the GOJ must use its greater leverage to start to effect certain changes early in exchange for concessions that the company will need to remain viable with new licences under
The point has been raised that as the JPSCO licence will come to an end in 2027, the GOJ must use its greater leverage to start to effect certain changes early in exchange for concessions that the company will need to remain viable with new licences under a more liberal regime.
Phillip Paulwell
Phillip Paulwell
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We are once again caught up in another energy crises. This is likely to be the worst yet. Prices at the pump for our poor motorists are at the highest ever, and we are close to surpassing the record price for electricity. By the lack of a sense of urgency being displayed by the Government, it is clear that they don’t appreciate the tremendous harm and hurt being done to our economy and people.

The Gleaner editorial of May 13 addressed an issue that I had raised in my sectoral presentation in Parliament on April 12 about a diplomatic approach being made to Venezuela for a new oil deal. I do hope that the Government will be able to triangulate this matter successfully among Kingston, Washington, and Caracas.

The Minister of Energy, Hon. Daryl Vaz, has indicated his intention to have follow-up discussion on the matter. It is a far better prospect for Jamaica’s rescue than the unspecific wishful wish list about importing natural gas and oil from Nigeria that the minister mentioned in his sectoral presentation.

However, there are some other issues relating to energy that we need to monitor. There has been a Joint Select Committee (JSC) of the Parliament reviewing the Electricity Act, which I piloted in 2015. One of the issues that has arisen has been the right of first refusal that the JPSCO has in relation to the addition of new generation capacity to the grid. This was conceded to them in 2015 because of the urgency to diversify fuel sources then. It has been one of the controversial issues for the committee and one that has elicited strong opposition from members. But it was confirmed to me that the company is actively pursuing a soliciting process for bids to replace 171.5 MW of existing capacity. Also, while their proposal is to use liquefied natural gas (LNG) as the main fuel, they will be using automotive diesel oil ( ADO) as the alternative fuel.

I have some concerns here. The demand for electricity has been falling, especially since the outbreak of COVID-19 in Jamaica. It is likely to continue to fall as many customers continue to move their business to other sources.

The questions that must be asked are:

1. Will there be enough demand to justify the addition of this new capacity to the grid (albeit replacing existing capacity)?

2. Would the JPSCO already overburdened customers have to pay the fixed-capacity charges even if this plant is not called upon to produce any electricity?

3. Would the JPSCO customers have to meet the commitment for fuel charges as another “take or pay” arrangement is institutionalised?

4. Why would the alternative fuel be ADO when heavy fuel oil (HFO) has proven to be a cheaper source?

5. Why would the company be rushing this process when the JSC is addressing this very issue in the review?

I also want to lend support to a clear recommendation coming from the JSC to enable operators in the Special Economic Zones to generate and distribute lower-priced electricity within the zones. This will encourage more export-oriented companies to be established.

PUZZLING OCCURRENCE

A most curious and puzzling occurrence has befallen the JSC. It last met on February 17 when some of these far-reaching issues were raised. And even though members have been available and anxious to complete our work, we have since been left into abrupt darkness. No meetings have been held, and we are now being advised that none will be held before sometime in July. Is the Government serious?

The GOJ has earmarked special funding for the small and medium-sized enterprises. One of the most significant factors affecting the growth and development of this sector is the high cost of energy. I want to suggest that a specific sum of funds from the pool be allocated and dedicated to the small and medium sector to enable them to establish modern solar or wind-generating facilities along with a vibrant mechanism to allow them to make important energy efficiency and conservation changes in their operations.

The point has been raised that as the JPSCO licence will come to an end in 2027, the GOJ must use its greater leverage to start to effect certain changes early in exchange for concessions that the company will need to remain viable with new licences under a more liberal regime. These negotiations should start now and be conducted in great earnest to effect some of the changes immediately.

The Government has again announced that it will be divesting its 20 per cent share in the JPSCO. The timing is bad as it is quite unlikely that the GOJ would realise maximum earnings at this time of crisis. Indeed, it is precisely during a crisis that the influence of the Government as a shareholder, with directors on the board, can be used to moderate the natural urges of the business to safeguard itself sometimes at the exclusive expense of the consumers.

Another subject requiring attention is that of our oil refinery, Petrojam. I reminded Parliament last year that the Zacca report was gathering dust. It is now three years since the committee that was established by the prime minister to make recommendations for the future of the oil refinery did so. Everything is on pause here. This inaction is creating the environment for Petrojam to disintegrate to a shell. There are some who believe that Jamaica is too small to operate a refinery efficiently. That is not true.

ENERGY SECURITY

In fact, if this new energy crisis has taught us anything, it is that energy security for a country like Jamaica is greatly enhanced with the operation of an oil refinery.

I made the following points last year about the operations of Petrojam.

1. It has been a significant manufacturer adding significant value while maintaining high-quality jobs in the economy.

2. It has been an earner of much foreign exchange from its exports and saves the country a huge amount of foreign exchange from its import-substitution production.

3. The country has never run out of fuel over the decades of its operations.

4. There has been significant shortage of refinery capacity in our region.

I am aware that the Government has received various expressions of interest by significant players in the industry. And some of them are keen on not only maintaining the oil refinery, but to do the long-awaited project of expanding the operations and investing in new technology to upgrade the plant.

The Government must also decide on the future of Petrojam Ethanol. It has become a shell, having been grounded for some years. I still believe that we can viably produce ethanol in Jamaica using sugar cane or sorghum as the base crops.

On the subject of oil and gas exploration, when I granted the exploration licence to Tulloch in 2015, I would have expected by now that specific drilling would have started. The Government needs to crack the proverbial whip and get the licensees to perform. I am still convinced, especially after the recent analysis of the 3D seismic survey, that Jamaica has commercial quantities of oil or gas or both on and off our shores.

Finally, we are still awaiting word from the Government regarding the policy on electric vehicles. Promises have been made about fast-tracking GOJ’s response to this obviously positive opportunity for Jamaica to embrace this new technology. Here again, we are seeing no sense of urgency.

These energy matters need attention now, not next year.

- Phillip Paulwell is member of parliament for Kingston East and Port Royal and former minister of science, technology, energy, and mining. He is the managing director of Cite Consulting Services Limited. Send feedback to columns@gleanerjm.com.