The Jamaica Solar Energy Association says there is need for critical evaluation of the barriers which resulted in what it says was an anaemic response to net billing during the trial period which ended this month.
Net billing allows renewable energy producers to sell excess power to the national grid.
According to the association the net billing policy was a good one and therefore there is need for evaluation of the reasons the offer was not taken up by more players in the renewable energy market.
The association says it has provided substantial recommendations for improvement of the next phase of net billing.
It says these include simplifying the process and improving programme coordination and removing onerous and unnecessary prerequisites for obtaining a standard offer contract with the Jamaica Public Service Company.
The solar energy association says the Office of Utilities Regulations (OUR) should increase the generation capacity, especially for commercial entities and reduce the cost barriers.
The association is urging the OUR to implement these recommendations within the next few months.
Meanwhile, the association says commercial enterprises also await the implementation of power wheeling.
It is calling for the inclusion of renewables in this initiative.
The Jamaica Solar Energy Association is raising concern that there has been no word lately from the Office of Utilities Regulations (OUR) about the procurement for the supply of 115 megawatts of power from renewable energy sources.
The association says it is calling for probity, transparency and urgency in relation to the renewable energy project in light of the problems currently facing the 381 megawatt project.
The OUR has already named three bidders for the supply of 78 megawatts of that power but the association says the regulator has been silent on the next steps since March.
The association is calling for the OUR to ensure due diligence is observed in relation to the 115 megawatt procurement in light of the problems now plaguing the 381 megawatt project.
The Government last week announced that it is looking to revoke the licence issued to Energy World International after it failed to post its performance bond in relation to the project.
The IDB is reportedly withholding its support because of alleged procurement breaches in the inclusion of EWI in the bidding process which were highlighted by the Office of the Contractor General.
Now the solar energy association is demanding that the OUR exercise due diligence to determine the technical competence and financial ability of the three bidders for the 115 megawatts project to begin construction in August 2014 for commissioning by July 2016.
The association is demanding that the OUR make public the licences issued for the supply of the renewable energy generation capacity in the same way that the licence to EWI was published.
Meanwhile, the association says the OUR had committed to issuing a new request for proposals for the remaining 37 megawatts of energy for the project in early 2014, but is yet to do so.
It says it is anxiously awaiting the start of the bidding process for those 37 megawatts.
Up to yesterday, there was still no word from the Office of Utilities Regulation (OUR) on the security bond from the three selected preferred bidders for the 115 megawatts of electricity-generation project using renewable energy-based power-generation facilities on a build, own and operate basis.
On October 1, the OUR announced that it had selected three companies which would supply 78 megawatts of the required amount. They had until this past Tuesday to provide the OUR with the applicable proposal security.
The named preferred bidders were Blue Mountain Renewables LLC, to supply 34 megawatts of capacity from wind power at Munro in St Elizabeth; Wigton Windfarm Limited, to supply 24 megawatts of capacity from wind power at Rose Hill, Manchester; and WRB Enterprises Inc, to supply 20 megawatts of capacity from Solar PV through facilities in Content Village, Clarendon.
The proposed delivery price to the national grid for these projects ranged from US$0.1290 to US$0.1880.
The Office of Utilities Regulation (OUR) has selected three preferred bidders for the supply of up to 115 megawatts of electricity-generation capacity from renewable energy-based power-generation facilities on a build, own, and operate basis.
In a release yesterday, the OUR said from the proposals for energy-only, the evaluation panel recommended three entities as preferred bidders with capacity amounting to 78 megawatts. These comprise two projects offering energy from wind, amounting to 58 megawatts; and one offering solar, amounting to 20 megawatts.
The preferred bidders are Blue Mountain Renewables LLC, to supply 34 megawatts of capacity from wind power at Munro in St Elizabeth; Wigton Windfarm Limited, to supply 24 megawatts of capacity from wind power at Rose Hill, Manchester; and WRB Enterprises Inc, to supply 20 megawatts of capacity from solar PV from facilities in Content Village, Clarendon.
The proposed delivery price to the national grid for these projects ranged from US$0.1290 to US$0.1880.
The preferred bidders have been directed to provide the OUR with the applicable proposal security by October 15.
The OUR said on June 3 that it had received 28 bids from 20 interested entities, which submitted proposals to supply renewable energy electricity generation of greater than 100 kilowatts and up to 115 megawatts to the national grid.
The bids were tendered by both local and international entities, with eight proposals received from local companies. Two proposals were received for wind, one for biomass, and 25 for solar energy.
Is there an energy problem in Jamaica? The growing energy crisis in Jamaica has been a cause for concern ever since the Government divested the Jamaica Public Service Company (JPS).
Consumers and producers complain about the high cost of energy. Firms often blame their low productivity, low output, high price for final goods and services, as well as low profitability, on the high cost of energy in Jamaica.
Jamaica consumes approximately 605 mega watts of energy per day. The country has the capacity to produce in excess of 700 mega watts per day from the old, inefficient power plants across the island. However, plans are being put in place to replace 475 mega watts of our daily usage with cleaner, more efficient sources; a 360-mega watt plant and 155 mega watts from renewable sources including, but not limited to, solar, wind mill and hydro. These two projects combined, are expected to reduce the cost of energy to the consumer by 25 to 30 per cent by 2016.
What is being done about the issue?
The winner of the bid to establish the renewable-energy sources has not yet been announced, but Azurest Cambridge Consortium has won the bid to possibly build this new energy plant that will supply 360 mega watts of Jamaica’s daily usage.
The estimated cost, including buildings, barges, the plant and other infrastructure is US$690 million. Total cost, minus labour, is estimated to be US$580 million. In total, the plant will use three barges, the first barge will be delivered 17 months after Azurest and JPS sign off on a power-purchase agreement. Negotiation are expected to start within the next three weeks, and should take about three to four months.
Azurest plans to sell the energy to JPS, at a price between 13 and 22 cents US per kilo watt hour, earning no more than 20 per cent return on its investment.
The US$100 million core equity committed to project, with hopes of raising US$50 million locally, and the rest overseas, in a 78 per cent to 22 per cent debt-equity ratio.
How will they finance the rest?
IFC plans to raise US$500 million, or J$51 billion, from the issue. The bonds will have a triple-A rating and will be targeted at pension funds, banks and other investors. The bonds will also carry lower interest rates than the Bank of Jamaica Treasury Bill Rates.
This strategy to raise funds is not new as it was employed in the Dominican Republic to raise approximately US $10 million to fuel two micro-finance operations in the country. The IFC is unsure as to the exact date these bonds will reach the market, but know it will occur during the course of Jamaica’s four-year agreement with the IMF.
Upon establishment of the plant, Azurest will sell all the energy it produces to the JPS, who operate both a monopoly and a monopsony market.
What is a monopoly market?
This is a situation where there is only one seller of goods and/or services in the market. There is no competition as other firms cannot enter the market freely due to barriers to entry.
In this case, based on JPS’s contract with the Government, no other firm can supply electricity in Jamaica.
Given that JPS is the only supplier in the market, if unregulated; it can charge any price it desires. The company usually charges a price higher and supply less than what is efficient.
What is a monopsony market?
A monopsony market is the other way around, instead of one sell such as the case with the monopoly, in this case there is only one buyer of goods and/or services.
JPS is the only company that buys energy in Jamaica. Any company can produce energy, but given that JPS is the only distributor of electricity, it is the only company that buys energy.
In this case, if unregulated once more, the JPS can push the cost price down because there are no other firms in this purchasers market.
In Jamaica, The Office of Utilities Regulation monitors JPS’s activities.
It regulates and prevents any abuse of monopoly and/or monopsony power that the JPS might be tempted to exercise.
JAMAICA continues to agonise over the cost of electricity and the capacity to pay for its oil imports. This agony started with the first oil price shock in 1973 and the degree of agony has varied with the ebb and flow of oil prices. The country is in the throes of trying to reduce the cost of electricity and the oil import bill.
Much attention is now being devoted to finalising the outcome of the bidding process for an additional 360-megawatt (MW) of electricity at the most competitive price. The Office of Utilities Regulation (OUR) is being lambasted over its handling of the selection of the “best” bidder to undertake the construction of a 360MW-generating power plant to provide additional generating capacity to the national grid. The heightened anxiety is also due to the impending changes in the terms of PetroCaribe, an eventuality that should have been anticipated and prepared for.
Meanwhile, the productive sector continues to be stymied by the high cost of electricity and households are impoverished by their electricity bills. Jamaica has a very high price of electricity at 0.26 USD/kW h, which puts the economy at a substantial disadvantage in being internationally competitive. The cost of electricity has contributed to the deindustrialisation of the country, which is most evident in the manufacturing industry.
Jamaica has a peak daily demand of approximately 600 MW, which is provided through a number of steam and combustion gas turbine plants as well as a few small hydro plants. The Jamaica Public Service Company (JPS) has been the main supplier until fairly recently. About 25 per cent of this generating capacity (197 MW) is supplied by non-JPS sources. JPS has an exclusive franchise on transmission, distribution and retail supply. Almost half the generation capacity is over 30 years old and transmission losses are estimated at 23 per cent.
The real problem is not the JPS, the OUR or rapacious oil-exporting countries. It is the absence of a national energy policy aimed at lowering the cost of electricity by a combination of less expensive alternatives to oil and an increased reliance on renewable energy sources such as solar and wind.
The cost of oil imports during the last 40 years has had little success in prompting the exploration of alternative energy solutions in Jamaica, unlike many other countries for example Germany where solar and wind account for 22 per cent of electricity generation. Wind and solar contributed an insignificant amount of our energy needs despite its potential. In 1995, the PCJ was mandated to develop indigenous renewable energy resources. The Petroleum Corporation of Jamaica (PCJ) established a wholly-owned subsidiary, Wigton Wind Farm Limited (Wigton) in 2000. Wigton is the first commercial wind farm. Electricity purchase agreements allow Wigton to sell electricity to JPS. Solar sources have the potential to save on oil imports but not enough homes and business establishments have installed capacity. This is inexplicable because falling prices have made solar power competitive with conventional sources of energy. In the 1970s solar panels converted sunlight into electricity at a cost of US$70 a watt, but today that figure is less than 80 cents.
Jamaica’s energy crisis is an indisputable failure of successive governments of both political parties. The Jamaican people have paid a high price for this incompetence and mismanagement with little prospect for change for the better.
General Manager for Loan Origination and Portfolio Management at the Development Bank of Jamaica (DBJ), Edison Galbraith (left), in conversation with Managing Director at FosRich Company, Cecil Foster, at a recent energy forum, held at the Montego Bay Convention Centre, in St. James.
The Development Bank of Jamaica (DBJ) is offering a special energy efficiency loan at eight per cent, for business operators to cut costs and advance the country