Fueling Growth: Jamaica’s Energy Sector in Transition

Tuesday, November 10, 2015

Jamaica is the largest island economy in the English-speaking Caribbean and the third-largest island in the region, with a geographical area of 11,000 square kilometers and a population of 2.83 million people. In 2013, its gross national income was US$15.44 billion, approximately $5,450 per capita. The country has been heavily dependent on imported fossil fuels for its energy needs, but that is beginning to change.

Jamaica has limited hydro resources and no indigenous petroleum or natural gas. Over 90 percent of its energy use originated from oil products in 2012, with three sectors—bauxite/alumina, electricity, and transportation—accounting for about 75 per cent of petroleum consumption. The price volatility and geopolitics of petroleum have remained constant threats to the security of the national energy supply and the affordability of oil imports.

A combination of old-generation plants, dependence on oil imports, and limited energy efficiency incentives has resulted in electricity prices in Jamaica that are some of the highest in the Caribbean region. In 2012, electricity prices averaged around $ 0.40 per kilowatt hour (kWh). While electricity prices are now below US$0.26/kWh, due largely to the fall in oil prices on the international oil market, this respite is not being taken for granted.

National Energy Policy: Jamaica is on a path to attain developed country status by 2030, and in line with its National Development Plan–Vision 2030, the issue of access to and affordability of energy is a priority. To this end, Jamaica’s National Energy Policy 2009-2030 seeks to create and advance a “modern, efficient, diversified and environmentally sustainable energy sector providing affordable and accessible energy supplies with long-term energy security and supported by informed public behavior on energy issues and an appropriate policy, regulatory and institutional framework.” The National Energy Policy prescribes that there must be a rigorous move towards “the provision of more affordable energy supplies to Jamaican consumers, an improved competitive base for the country, as well as sustainable growth and development of the nation.”

Meeting the energy challenge demands bold decisions, innovative strategies, and long-term commitment. The energy transformation currently underway in Jamaica is characterized by major improvement in energy efficiency, modernized energy infrastructure, energy security through fuel source diversification, and development of renewable energy sources, all undergirded by a reformed and coordinated policy, legislative, and regulatory framework.

Energy Efficiency and Conservation: The government, with support from the Inter-American Development Bank (IDB), is retrofitting public sector buildings and facilities using cost-saving energy efficiency technologies. These include application of cool roof solutions and solar control film, replacement of inefficient air conditioning units with inverter type systems, and lighting retrofits. This is a model developed to also encourage the private sector to embrace energy efficiency and conservation. The World Bank’s International Bank for Reconstruction and Development (IBRD) extended a $4.6 million line of credit to this end for micro, small, and medium-sized enterprises; this is currently oversubscribed, and additional funds are being sourced.

Renewable Energy Development: More than 80 megawatts (MW) of additional renewable energy generation capacity is currently under construction and scheduled to be in service by early 2016. These three projects—two wind projects, 24MW and 36.6MW, and one 20MW solar project— resulted from an international competitive tender process, and each will sell renewable electricity to the electric utility under 20-year power purchase agreements. As a result of the successful tender process, another request for proposal for an additional 35MW of renewable energy generation capacity is currently open, for which bids are expected by January, 2016.

In addition, after receiving licenses from Energy Minister Phillip Paulwell, 120 renewable energy systems (mainly solar) representing 2.0MW of generation capacity have been in operation and connected to the electric grid by individuals and companies who sell their excess renewable electricity to the electric utility. It is estimated that another 30MW of renewable energy systems are in operation but not connected to the grid.

Base Load Fuel Diversification: Contracts are underway to retrofit the 120 MW closed-cycle diesel-fired Bogue Power Plant in Montego Bay to use liquefied natural gas (LNG) by May 2016. In addition, approval has been given for the electric utility to develop a new 190MW LNG power plant by 2018. Taken together, these projects heighten the prospect for establishing an LNG energy hub for the Caribbean region in Jamaica.

In addition, one of the bauxite/alumina companies has received approval for a co-generation coal-fired power plant, which would sell up to 50MW of power to the grid by 2020.

Legislative Framework: On August 27 of this year, a new Electricity Act was promulgated, replacing the 1890 Electric Lighting Act. The new law provides the legal framework to facilitate the orderly development of the electricity sector, clarify the roles and responsibilities of key stakeholders, and promote transparency in attracting investments in the sector.

Like many other countries, particularly those in emerging economies, Jamaica is increasingly recognizing the potential role of renewable energy and energy efficiency toward achieving energy security and a sustainable financial, economic, and social infrastructure. Based on the current governance framework for the energy sector and the progress being made towards achieving the imperatives of the National Energy Policy, the average tariffs for electricity will continue to decrease. It is now projected to be less than $0.18/kWh by 2020.