The cost of energy in the Caribbean is the highest in the world, according to the Caribbean Development Bank, but governments have increasingly been pushing renewable sources of energy, like these solar-powered road on Highway 2000 in Jamaica.
GEORGETOWN, Guyana (CMC) – A senior official of the Barbados-based Caribbean Development Bank (CDB) says the operationalising of the Green Climate Fund (GCF) provides an important opportunity for regional countries to not only adapt to climate change but also to mitigate its effects.
In addition, Selwin Hart, the Climate Change Finance Advisor with the CDB said the fund could also assist the Caribbean move towards renewable energy and energy efficiency.
“The cost of energy in the Caribbean is the highest in the world. This represents a serious strike on competitiveness, economic growth and job creation and the GCF presents a once in a lifetime opportunity for countries to have a stable source to financing to address the vulnerabilities both as it relates to importing fossil fuels as well as the impacts of climate change,” he said.
He said one of the major problems facing Caribbean countries in the past has been the lack of capacity to effectively access and use funds even when they were available.
“Many of the requirements for accessing global funds lie outside of the reach of many of the small capacity-constraint counties of the region. You have to undertake a rigorous examination in terms of fiduciary standards and social and environmental safeguards,” Hart said.
The CDB, as part of its climate resilient strategy, has been assisting countries to build that capacity. However, in some instances it is more feasible for that capacity to be built at a regional level rather than at the level of individual countries.
The bank has also been tasked by Caribbean leaders to lead the resource mobilisation effort and in this regard, the CDB is trying to position itself to serve at a regional financial intermediary.
The GCF will support projects, programmes, policies and other activities in developing countries using thematic funding windows’. It is intended to be the centre piece of efforts to raise climate finance of US$100 billion a year by 2020.
Meanwhile, the GCF for which preparations have been ongoing since 2010, has recently been finalised by its board; marking an end to a long and tedious process and giving the green light for the fund to move forward to mobilise resources.
Executive director at the GCF secretariat, Hela Cheikhrouhou, said that this is an important development which will put in place
a multilateral financing institution that is focused on providing concessional financing to both private and public sector beneficiaries in developing countries.
We share the concerns of paying customers of the Jamaica Public Service Company (JPS) whose electricity will be turned off for half the day in the JPS’s latest effort to combat electricity theft. Yet, we can’t but empathise with the light and power company, the stealing of a large chunk of whose output is enabled by an irresolute State and compliant politicians.
Put another way, by maintaining an environment that insulates the thieves, the Government has up to now forced JPS to provide social welfare to dwellers of poor communities, which is like imposing a tax on the company for earnings it doesn’t make.
JPS is the sole distributor of electricity in Jamaica. It is a majority ownership by Japanese and Korean interests, representing substantial foreign direct investment – something, given Jamaica’s economic circumstance, our Government declares it is keen to encourage.
For years, JPS has been confronted with the theft of its service. Of the 28 per cent of the output that it ‘lost’ in 2013, 60 per cent went to thieves, translating to hundreds of millions of dollars of unrecovered revenue. Such thievery is often rationalised as the result of the high price of electricity and that it is perpetrated by poor people against a supposedly rich company. The Robin Hood syndrome!
That argument is an inadequate response to the fundamental issues at stake. For instance, with shareholder equity of around US$1 billion, the company’s US$9 million in profit last year represented return on investment of less than one per cent.
Moreover, in the past financial year, the company’s receivables, at 90 days or more, at US$64 million, were approximately six per cent of its operating revenue. Since other customers are unlikely to have been allowed to owe JPS for so long, we can assume that the debt is largely the Government’s, to which must be added the company’s enforced social-welfare expenditure in the form of electricity theft.
That’s not all. That overdue debt has not only cash-flow implications for JPS, but foreign-exchange risks, given that while the company’s income is in Jamaican dollars, the bulk of its expenditure is in foreign currency. Such risks are exacerbated by the company’s declining revenues, which would likely cause unease to the company’s bankers and impact its ability to borrow for new plant and equipment. JPS is hardly in robust health.
Illegal connections removed
Indeed, no company anywhere could be asked to forgo, or hand over as welfare, the value of nearly a fifth of its output. Few could survive. JPS has tried to combat the problem by having 200 employees, or about 15 per cent of its staff, dedicated to the anti-theft effort. Last year, it removed 197,000 illegal connections, approximately one-third of the amount of its registered customer base – from its system. These and other technological solutions have failed to beat the problem. And they won’t.
The solution is primarily political. Indeed, the seven communities against which the JPS has moved, in the capital’s western belt and St Catherine, like others where electricity theft is endemic, are mostly garrison communities, those zones of exclusion where our brand of politics breeds a sense of entitlement and impunity.
That perceived right to trespass on other people’s property can’t be solved by single companies taking civil action or proffering criminal charges. It demands a fundamental shift of political attitudes, combined with a resolute State, especially if the Government is serious about encouraging investment – local or foreign.
THE Office of Utilities Regulation (OUR) has summoned Jamaica Public Service Company (JPS) officials to a meeting today as public anger grows over the company’s decision to cut the number of hours that power is provided to some communities in an effort to combat electricity theft.
The regulator said it requested the meeting after being alerted about the matter by its Consumer Affairs Unit, which received complaints from the public, as well as JPS’s own news release on the issue yesterday.
According to the JPS, it took the decision as part of a strategy to get more persons in communities where more than 70 per cent of the power is stolen to pay for the electricity they use, and reduce the overall cost to paying customers.
“The communities to be affected in the initial phase of this curtailment strategy are Jones Town, Seaward Drive, Trench Town, Denham Town, Rema, Maxfield Avenue, Central Village, and Spanish Town Road,” JPS said, adding that it “has been working with these communities for some time, with limited success, and continues to encourage illegal users to take immediate steps to have their service regularised”.
“We have tried everything to reduce electricity theft,” the JPS release quoted Gary Barrow, the company’s senior vice-president for energy delivery.
“Our efforts have included a combination of initiatives, such as the removal of illegal ‘throw up’ lines, account audits and meter investigations, arrests in collaboration with the police, community intervention, and the installation of costly technology solutions. The company also has more than 200 employees working to reduce losses,” Barrow said.
The company, which some years ago launched a compliance campaign with the tag line ‘How Come?’, explained that in 2013 it removed more than 197,000 illegal lines, carried out more than 113,000 account audits and meter investigations, and facilitated the arrest of more than 1,200 persons for electricity theft.
It also said that it has installed more 7,600 Residential Automated Metering Infrastructure meters, but most of the potential customers targeted have not signed up for legal service.
According to the power company, its efforts to serve paying customers in communities with high levels of theft continue to be hampered by extensive damage to its equipment and ongoing power outages caused by illegal connections.
“Customers also suffer significant damage to their appliances and equipment as a result of the system overload caused by illegal connections,” JPS said.
As such, the company said that it “will make an effort to provide electricity for not less than 12 hours per day, and will remain sensitive to the safety concerns of the residents”.
The firm added that it “was also making every effort to minimise the impact on businesses, hospitals, and schools in these communities”.
In a letter to the JPS yesterday, the OUR asked for “critical information, such as the number of paying residential and commercial customers in the affected areas, and the alleged level of damage done to JPS equipment as a result of electricity theft in these communities”.
The OUR said it was treating this issue with the highest priority, given the impact on legitimate customers in these communities.
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.
ENERGY Minister Phillip Paulwell
ENERGY Minister Phillip Paulwell is seeking legal advice from the solicitor general with a view to taking Contractor General Dirk Harrison to court over his report on the bidding process to implement the 381-megawatt energy project, according to a well-placed source.
Consultations, the newspaper was informed, are already underway between the solicitor general and the embattled minister, who is fighting to clear not only his name, but to repair any reputational damage that occurred to the country with the Inter-American Development Bank (IDB) reversing its position to support the 381MW project as a result of the contractor general’s report.
The Jamaica Observer was, however, unable to reach Paulwell last night for a comment.
The basis on which the minister can seek judicial review of the contractor general report lies in the legal response of the Office of Utilities Regulation (OUR) to the Office of the Contractor General’s special investigation report, the source said.
The OUR legal response, posted on its website, contends that the OCG erred in using the Government of Jamaica guidelines for consultancy tenders during its probe, whereas it should have used guidelines for Works Tenders. This, the source contends, is a serious error in law.
The OUR legal response further contends that the OUR conducted two distinctly different processes: an informal exploratory process in which expressions of interest were received, followed by a formal legal tender.
The source said that Energy World International (EWl), the company that eventually emerged as the preferred bidder to undertake the project, received Cabinet approval to be included after the deadline of the informal preliminary process but well before the commencement of the formal tender.
The sources said these two facts provided the foundation to apply for judicial review.
The project is to be built with a mix of EWI equity and multilateral funding. The imprimatur of the IDB is key to receiving the go-ahead for that funding.
It was Harrison’s first major report since assuming office in 2013. The report was issued on the same day that he issued the long-awaited Richard Azan report. But this isn’t the first time in recent years that a Government minister will be taking the OCG to court.
Transport Minister Dr Omar Davies last year sought leave for judicial review of a decision by the contractor general to monitor an oversight body set up by the minister to advise on the award of contracts to a public body.
The minister, however, withdrew the challenge.
Chris Bicknell, CEO of Tank-Weld Group.
A second effort at firing up the natural gas project seemed headed to derailment at midweek, but the candidate that would benefit from the collapse is keeping silent on its own readiness to step in.
A licence was issued to Energy World International to build a 381 MW LNG-fired plant on April 14, but the company has failed to secure backing for the project from the Inter-American Development Bank (IDB), which indicated that it viewed the procurement process that selected EWI as flawed.
EWI missed the payment window for its performance bond of US$36.85m, which was due to the Office of Utilities Regulation on April 24, but said it had made the payment on Wednesday. The company previously paid US$7.37m as a bid bond on its US$737m project. It still needs to tie down financing for the full project.
The next candidate in line to do a deal with the OUR is Energise Jamaica, a consortium led by Tank Weld Group and Musson Jamaica.
“Our Energise group has decided not to comment at this time. We want to see how the government is going to play this out. So we have decided to wait on the Government’s next move in this process.” said Tank Weld CEO Chris Bicknell on Wednesday.
Energise’s bid would deliver electricity to the grid at a more expensive price, US$0.1827. EWI’s project is predicated on pricing of US$0.1288. The first candidate, which failed to pay over its bond and lost out on the deal, Azurest-Cambridge, had proposed to deliver power at US$0.1390.
The OUR said last October that Energise proposes to run its plant initially on heavy fuel oil at a price of US$0.2154 for one to two years after which it expects to switch to natural gas.
Technically, Azurest’s second bid option, a heavy-fuel oil plant, also beat out Energise’s natural gas price, but it’s unclear whether the OUR is obliged to offer the American company another shot at a deal. A request for clarification was unanswered up to press time.
Energise is yet to disclose its expected sourcing of natural gas and how it will finance its project. Bicknell declined to answer those questions Wednesday as the EWI issue continued to play itself out.
Energise said previously that it has mobilised equity backers willing to put up capital in excess of US$60 million, and that its project would lead to 25 per cent savings on electricity costs.
Energy Minister Phillip Paulwell made it clear on Tuesday that he was willing to go to the mat for EWI and would seek to sway the IDB’s decision to a yes on financing for the Hong Kong-based but Australian-connected firm.
The licence issued to EWI on April 14 was amended to remove a stipulation that the Energy Minister could take over the project during the construction phase if work on the plant had stopped for more than two days, but it maintains aspects of the ‘step-in’ or takeover provisions after the plant has been commissioned. These provisions allow the minister to acquire the plant if it is idle for more than 180 days but Jamaica would have to compensate EWI 75 per cent of the estimated present value of the business, based on its current and future cash flows projected out for 15 years.
The initial compensation in the April 4 version of the licence was 50 per cent.
How the OUR first ranked the LNG bids:
Rank Bidder Bid Price Fuel Type
1 Azurest-Cambridge 13.90 US c/kWh Natural gas
2 EWI 14.56 US c/kWhNatural gas
3 Azurest-Cambridge 16.35 US c/kWh Heavy fuel oil
4 Energise 18.27 US c/kWh Natural gas
5 Optimal 18.30 US c/kWh Natural gas
6 Energise 21.54 US c/kWh Heavy fuel oil
EWI later revised its price down to 12.88 US cents/kWh.
A Chinese company based here has approached the Government’s investment company, Jamaica Promotions Corporation (Jampro), with a view to assist with the fallout arising from Energy World International’s (EWI‘s) failed bid to meet all the requirements to construct a booster energy plant on the island.
A usually reliable source told the Jamaica Observer that officials of the Chinese company met with executives of Jampro in New Kingston yesterday and offered to work with the island to get the project off the ground.
“During the meeting with Jampro, the Chinese suggested that they were willing to work with EWI, and vowed that they could secure the necessary financing from China’s Ex-Im Bank to get the 381-megawatt project going,” the source said.
“The Chinese have said that they were also willing to meet with the Ministry of Science, Technology, Energy, and Mining as early as tomorrow (today) to get things started,” the impeccable source said.
Hong Kong-based EWI missed its deadline to pay a performance bond of US$37 million last Thursday.
The total cost of financing the project is US$737 million, of which one per cent — US$7.37 million — had been paid over as part of the bond arrangement.
However, EWI was pushed against the wall after it emerged that the Inter-American Development Bank, upon which EWI was relying to provide non-equity financing for the project, had opted against doing so, citing breaches of Jamaica’s procurement procedures in the award of the contract.
EWI was the preferred bidder to build a power plant that would bolster the national grid by supplying it with 381 megawatts of generating capacity.
The implementation of the natural gas-fuelled project would result in Jamaicans paying less for electricity, the cost of which is prohibitive to some, and has led to widespread stealing of the commodity. Jamaicans pay 42 US cents per kilowatt hour for electricity, and it is believed that when the project is fully implemented the cost will be reduced by approximately 30 per cent.
EWI has committed to deliver electricity to the grid at 12.88 US cents per kilowatt hour.
The latest move by the Chinese company would serve as the fillip that the embattled EWI needs, following countless calls for the company to be rejected as the preferred choice of generating capacity supplier.
The Office of the Contractor General (OCG) had said in a report last year that Energy Minister Phillip Paulwell intervened improperly in the bidding process by including EWI’s proposal after the closure of the bid acceptance period.
Based on that, the OCG said that the bidding process had been compromised and described the Office of Utilities Regulation’s (OUR’s) acceptance of EWI’s proposal as unfair.
Paulwell has been under fire in recent days, with the Opposition Jamaica Labour Party calling on Prime Minister Portia Simpson Miller to relieve him of portfolio responsibility for energy over the EWI affair.
Another source said that Simpson Miller met yesterday with members of the Private Sector Organisation of Jamaica, who suggested that she abandon the entire process of selection and allow a special monitoring committee to handle affairs relating to the matter.
Simpson Miller, the source said, had already laid down some conditionalities to EWI and expects the company to respond to her by Monday.
EWI, the energy arm of Energy World Corporation, is engaged in the production and sale of power and natural gas in several countries.
The company was the second preferred bidder behind United States-based consortium Azurest-Cambridge, but was upgraded last October when Azurest was disqualified after it failed to meet a 15-day deadline to produce a one per cent security bid for the project, which it projected would cost US$690 million to build.