The Inter-American Development Bank (IDB) said it would consider financing projects for waste to energy in Jamaica, but cautioned that the cost of doing so would have to be around US$0.12 per kilowatt hour for it to make sense to consumers.
“We could finance waste to energy,” but “at the end of the day, it’s going to come down to the cost. I think that’s a key component which I don’t know if it has been fully analysed,” said lead investment officer at the IDB, Stefan Wright.
He said that if solar energy was currently being produced at US$0.12/kWh,”it makes no sense financing waste-to-energy at US$0.20/kWh because JPS [Jamaica Public Service Company] won’t buy that.”
Renewable energy is a focus of the Inter-American Investment Corporation, the private-sector arm of the IDB which last year reorganised three of its four private-sector windows specifically to be more strategic, align with the IDB’s country strategy and become more effective in terms of how the Bank deploys private sector resources, Wright told a Gleaner Editors’ Forum on Tuesday.
“We are working with entities in Jamaica now to finance renewable energy projects,” said Wright, noting that Jamaica has done a good job in bringing more renewable energy on the grid and reducing the 90 per cent oil bill, “and we are very much interested in partnering with those entities who want financing”.
Referring to Jamaica’s main garbage-disposal sites, including the Riverton dump in Kingston, Wright said it would be good to be able to use those resources in a more environmentally friendly way, “but at the end of the day it must make sense for consumers”.
He also pointed to the Government’s efforts, announced by Prime Minister Andrew Holness with the formation of an enterprise team in October last year, to manage the State’s waste-to-energy programme, contracting out of solid-waste management and collection and divestment of the Riverton City landfill.
At that time, Holness was quoted as saying that the Government had received more than 30 expressions of interests to either bid on the waste-to-energy programme or to collect solid waste or both.
“We stand ready to finance projects which come out of that,” said the investment officer, noting that after the tender process is completed, entities wishing to invest in the facility would seek financing from the IDB to make the business a reality.
However, he pointed out that one of the key requirements is that such entities engaging in such energy supply programmes must obtain power purchase agreements from the JPS.
“So we are certainly willing to help to participate in that,” he said. “We will finance any sustainable project which is helping to generate economic growth,” he added, noting that the IDB was offering loans between US$5 million and US$200 million per project, “and we don’t have any country limits now in terms of what we can finance”.
Wright said “we are looking at a number of projects and renewable energy and waste energy is something that we would certainly consider.”
General manager for the IDB’s Caribbean Country Department, Therese Turner-Jones, who also participated in the forum, said she has been to a series of renewable-energy conferences where private-sector interests offer various solutions, “and they look at the Caribbean as being ripe for investment because we’ve done so little”.
Comparing Jamaica with Hawaii, where the goal is 100 per cent renewables, Turner-Jones, noted that the US state is “almost there”.
“So it’s possible (for Jamaica) to do it. The technology exists,” she added.
JPS, which controls power distribution, is now reporting that renewables should account for around 12 per cent of its electricity production this year. Jamaica is aiming for a mix of 30 per cent by 2030.
Solar power is now cheaper than coal in some parts of the world. In less than a decade, it’s likely to be the lowest-cost option almost everywhere.
In 2016, countries from Chile to the United Arab Emirates broke records with deals to generate electricity from sunshine for less than 3 cents a kilowatt-hour, half the average global cost of coal power. Now, Saudi Arabia, Jordan and Mexico are planning auctions and tenders for this year, aiming to drop prices even further. Taking advantage: Companies such as Italy’s Enel SpA and Dublin’s Mainstream Renewable Power, who gained experienced in Europe and now seek new markets abroad as subsidies dry up at home.
Since 2009, solar prices are down 62 percent, with every part of the supply chain trimming costs. That’s help cut risk premiums on bank loans, and pushed manufacturing capacity to record levels. By 2025, solar may be cheaper than using coal on average globally, according to Bloomberg New Energy Finance.
“These are game-changing numbers, and it’s becoming normal in more and more markets,” said Adnan Amin, International Renewable Energy Agency ’s director general, an Abu Dhabi-based intergovernmental group. “Every time you double capacity, you reduce the price by 20 percent.”
Better technology has been key in boosting the industry, from the use of diamond-wire saws that more efficiently cut wafers to better cells that provide more spark from the same amount of sun. It’s also driven by economies of scale and manufacturing experience since the solar boom started more than a decade ago, giving the industry an increasing edge in the competition with fossil fuels.
The average 1 megawatt-plus ground mounted solar system will cost 73 cents a watt by 2025 compared with $1.14 now, a 36 percent drop, said Jenny Chase, head of solar analysis for New Energy Finance.
That’s in step with other forecasts.
The solar supply chain is experiencing “a Wal-Mart effect” from higher volumes and lower margins, according to Sami Khoreibi, founder and chief executive officer of Enviromena Power Systems, an Abu Dhabi-based developer.
The speed at which the price of solar will drop below coal varies in each country. Places that import coal or tax polluters with a carbon price, such as Europe and Brazil, will see a crossover in the 2020s, if not before. Countries with large domestic coal reserves such as India and China will probably take longer.
Coal industry officials point out that cost comparisons involving renewables don’t take into account the need to maintain backup supplies that can work when the sun doesn’t shine or wind doesn’t blow. When those other expenses are included, coal looks more economical, even around 2035, said Benjamin Sporton, chief executive officer of the World Coal Association.
“All advanced economies demand full-time electricity,” Sporton said. “Wind and solar can only generate part-time, intermittent electricity. While some renewable technologies have achieved significant cost reductions in recent years, it’s important to look at total system costs.”
Even so, solar’s plunge in price is starting to make the technology a plausible competitor.
In China, the biggest solar market, will see costs falling below coal by 2030, according to New Energy Finance. The country has surpassed Germany as the nation with the most installed solar capacity as the government seeks to increase use to cut carbon emissions and boost home consumption of clean energy. Yet curtailment remains a problem, particularly in sunnier parts of the country as congestion on the grid forces some solar plants to switch off.
Sunbelt countries are leading the way in cutting costs, though there’s more to it than just the weather. The use of auctions to award power-purchase contracts is forcing energy companies to compete with each other to lower costs.
An August auction in Chile yielded a contract for 2.91 cents a kilowatt-hour. In September, a United Arab Emirates auction grabbed headlines with a bid of 2.42 cents a kilowatt-hour. Developers have been emboldened to submit lower bids by expectations that the cost of the technology will continue to fall.
“We’re seeing a new reality where solar is the lowest-cost source of energy, and I don’t see an end in sight in terms of the decline in costs,” said Enviromena’s Khoreibi.
Malvern, St Elizabeth — Eighteen months after ground was broken, the 36.3-megawatt wind farm run by BMR Jamaica Wind at Potsdam, Malvern, high in the Santa Cruz Mountains, was formally commissioned in mid-August.
Priced at US$89.9 million, the wind project, located across the road from another wind farm run by light and power company Jamaica Public Service Company (JPS), is being described as the single largest investment in St Elizabeth since construction of the Alpart alumina plant at Nain in the late 1960s.
The BMR project includes eleven wind turbines, which will provide energy to JPS’s national grid at US12.9 cents per kilowatt-hour.
BMR Jamaica Wind is a subsidiary of US-based BMR Energy. Guests at the recent formal commissioning were told that billionaire British investor, Sir Richard Branson — who turned up for the commissioning — was in the process of acquiring BMR through his wide- ranging and far-flung Virgin Group.
Branson, who triggered laughter by ripping up and throwing away what he said were his speaking notes, told his audience that his motive for the acquisition was to promote a clean energy revolution.
“I decided recently that we needed to get one or two core (clean energy) companies under our belt so that we can actually get out there and speed up this revolution …” he said.
“ We were delighted to acquire BMR and we will be out there trying to hustle and bustle governments all over the Caribbean and other countries to hurry up towards carbon neutrality by 2050. Personally, I don’t need to make money out of it, if it makes a bit of money, fine; if it doesn’t, fine. I just want to get the wind out there get the solar out there, … be powered by sun, wind, sea… a green energy revolution and bring the cost of energy down for everybody; get rid of the dangers of coal and oil and the dirty energies that we are using today… ” said Branson, founder of the Virgin Group.
Funding for the BMR project in Malvern was sourced through a package including a US$42-million loan from the US quasi-government investment agency Overseas Private Investment Corporation (OPIC), which pushes US overseas investment globally; US$10 million from the International Finance Corporation (IFC), which promotes private sector development; US$10 million from the IFC-Canada Climate Change Programme and equity investment of US$26.9 million from BMR Energy.
Jamaica’s energy minister Andrew Wheatley said the BMR wind farm formed part of the government’s drive to significantly reduce reliance on fossil fuels and reduce the current annual oil bill of about US$2 billion. Ninety-two per cent of Jamaica’s energy needs are currently met by oil imports, he said.
The project was in line with the target of 30 per cent renewables in the national energy mix by 2030, as stated in the National Energy Policy, and in keeping with Vision 2030 Jamaica, the minister said.
“Projects like BMR continue to establish Jamaica as a clear renewables market leader within the Caribbean. By the end of this year, we would have added 80 MW of renewable energy to the national grid, through Wigton III (a wind farm at Rose Hill in southern Manchester), Content Solar (solar plant in Clarendon), and this facility,” Wheatley said.
Bruce Levy, president of BMR Energy, said the company had plans to expand the wind farm at Malvern by an additional three wind turbines. Small farmers would co-exist with the energy-generating operations, he said.
Jamaica Public Service Company (JPS) claims that switching all its low-consuming users to prepaid meters would increase the risk profile of the utility provider, and secondly, cost it hundreds of millions in lost non-fuel revenue annually – an ironic twist given that the meters are meant to curtail losses.
JPS currently offers prepaid meters in select inner-city areas under a pilot programme, but its admission of the cost puts the timeline for its larger role in question.
“If all customers consuming less than 100 kilowatt hours switched to the prepaid service, JPS stands to lose J$399 million in non-fuel revenues per annum,” the power utility said in its annual tariff application documentation published late last month by its regulator, the Office of Utilities Regulation (OUR).
“By any measure, this exposure is significant and further increases the risk profile of the company, especially given the challenges in meeting certain financial covenants.”
JPS holds US$324 million in long-term loans, and its financial covenants require a minimum undisclosed debt to earnings before interest tax depreciation and amortisation. The company was fully compliant with all its loan obligations as at September 2015.
Customers that consume less than 100 kWh are classified as Rate 10 users. These users usually are low-income households but account for some 222,000 of the 594,000 JPS customers, according to OUR documentation.
Regular customers – Rate 20 – who consume less than 75,000 kWh per month would remain revenue neutral for the switch to prepaid meters.
JPS added that this level of loss is “unsustainable” and is only acceptable for the remainder of the prepaid pilot which offers prepaid meters to a relatively small number of customers. The power utility wants the OUR to increase the prepaid rates to Rate 10 customers in order to remove a large part of that shortfall.
“We would, however, like to state that the rate structure should aim for revenue neutrality as the prepaid programme evolves,” said JPS.
The company proposed an adjustment to non-fuel tariff rates for Rate 10 prepaid customers to $14.4311/kWh for the first 119kWh in a 30-day cycle; and $20.5719/kWh for every kWh above 119kWh in a 30-day cycle.
The OUR rejected that specific JPS proposal. It approved instead a Rate 10 prepaid rate of $13.19/kWh for the first 100kWh in a 30-day cycle and $20.85/kWh for every kWh thereafter for a 30-day cycle.
JPS made US$23.7 million net profit over nine-months ending September 2015 on revenues of US$583 million which nearly doubled the US$12.5 million in profit earned a year earlier.
There was no response to mailed queries and calls to JPS for comment on this story up to press time.
The U.S. Department of Agriculture (USDA) has announced $63 million in loans and grants for 264 renewable energy and energy efficiency projects nationwide.
USDA is supporting these projects through its Rural Energy for America Program (REAP), which was created by the 2008 farm bill and was reauthorized by the2014 farm bill.
These newly funded projects are expected to generate and/or save 207.8 million kWh of energy – enough to power more than 13,600 homes for a year.
“This funding will have far-reaching economic and environmental impacts nationwide, particularly in rural communities,” says Agriculture Secretary Tom Vilsack. “Investing in renewable energy and energy efficiency projects supports homegrown energy sources, creates jobs, reduces greenhouse gas pollution and helps usher in a more secure energy future for the nation.”
Eligible agricultural producers and rural small businesses may use REAP funds to make energy efficiency improvements or install renewable energy systems, including solar, wind, renewable biomass (including anaerobic digesters), small hydroelectric, ocean energy, hydrogen and geothermal.
Since the start of the Obama administration, USDA has supported more than 9,600 renewable energy and energy efficiency projects nationwide through REAP.
The next application deadline for REAP grants is Nov. 2. In the coming weeks, USDA will issue a notice of available funding with more details on how to apply.
With reference to your headline article, ‘Solar power risk’ in The Gleaner Tuesday, June 3, I think that our policy decisions in relation to electricity should be based on long-term considerations, such as the amount of foreign exchange spent on fossil fuels, and the threat of global warming, rather than on return on investments.
My initial observation is that we have failed to capitalise on the opportunities provided by solar energy. Neither Jamaica Public Service (JPS) nor the Office of Utilities Regulation has educated the public on the win-win situation, which is possible with net-billing. More people might be interested in applying for net-billing if the application process were quicker, and the steps involved, detailed instructions for which are given on JPS website, were less onerous. Most people are unaware that you do not need batteries to run a solar system if you have a grid-tie with JPS. In fact, going that route is more environmentally friendly and less expensive, as shown by the calculation below.
On the whole, companies selling solar systems encourage purchasers to buy batteries. Their pitch is that you can cut your electricity bills and even get off the grid entirely. They also tell you that JPS pays you only half of what you pay JPS per kWh, which is true, but they don’t tell you that batteries would cost more. Also, most people use more electricity in the summer than in the winter. To get off the grid entirely, one would have to install sufficient panels to supply one’s summer needs, and then one would have excess in the winter. It would be better to be able to send the excess to the grid in the winter and draw from JPS if necessary in the summer.
My calculation is based on a monthly average of 200 kWh being sent to JPS in the day, and drawn from JPS at night. (It does not include the excess amounts being sent or drawn). Nor does it take into account escalating costs. I make the optimistic assumption that a battery bank will last for 10 years.
WITHOUT SOLAR PANELS
200 kWh x J$40 = $8,000 monthly x 12 = $96,000 annually x10 years = $960,000.00
With solar panels and net billing (cost corresponding to half of $40.00)
200 kWh x $20 = $4,000 monthly x 12 = 48,000 annually x 10 years = $480,000.00
With batteries, no net-billing, cost would be $0, but cost of 16 batteries at $40,000.00 each with life expectancy 10 years max = $640,000.
In contrast, as Mr John Kistle states, JPS would be faced with the challenge of providing everybody with electricity at peak hours after sunset, or on overcast days. Some of that generating capacity would have to be turned off at peak sunshine hours, thus reducing the return on whatever investment was made in a new power plant. However, solar power would cut down on the amount of fuel needed to run the plant.
Given the importance of the cost of electricity to all of us in Jamaica, perhaps there are some other things we can do. Could there be a consensus, for example, on turning off our fridges during peak hours? Or JPS charging different rates at peak hours?
I think that all stakeholders need to be involved in making these hard decisions.
JPS goes after $10-b annual return
JAMAICA Public Service Company (JPS) is hoping to clear US$94-million ($10.3 billion) profit a year should its proposed rate hike be approved.
The light and power company applied to the Office of Utilities Regulations (OUR) for a raft of changes to its non-fuel tariff (the rate that recovers cost associated with transmitting and distributing electricity rather than generating it).
Residential customers will see the monthly charge for network access (which up to now has been called the customer charge) increase by a range of 70 per cent to 420 per cent, depending on usage, if JPS gets its way.
What’s more, the monopoly electricity distributor hopes to raise the non-fuel, or energy charge to households by a range of 48 per cent to 93 per cent, moving from the lower end of the range to the higher end, the more electricity is used.
For commercial customers, the rates for which JPS has applied, decreases with higher usage, supposedly to promote greater use of electricity for business purposes.
On the other hand, the utility proposes a 65 per cent increase for the smallest commercial users, while enterprises can’t realise a decrease in the overall rate until they have consumed some 140,000 kilowatt-hours (kWh).
Indeed, the utility devised creative ways of encouraging more efficient consumption, such as recommending to the regulator that it altogether remove the non-fuel rate charged to large industrial customers.
That would see JPS give up just under $5 billion in revenue, which it would earn back from proposed increases to the demand charge that are applied to bills of consumers with heavy-duty electric machinery.
When factoring in the fuel charge, the rate hikes might not seem so daunting.
JPS figures that using a fuel rate of 23 US cents per kWh, the residential tariff increases, on average, by 22 per cent. Most commerical customers, or 98 per cent of them would see an average increase of 16 per cent, using the same math.
Of course, the proposed non-fuel tariff rates coupled with the fuel rates would put the cost of electricity at 45 US cents per kWh for the average household and 43 US cents per kWh for the overwhelming majority of commercial customers.
In its latest five-year tariff review application, JPS rationalised that it accumulated net profit of US$96 million, or an average of US$24 milion a year, from 2010 to 2013.
“The target profit for JPS, allowed (not guaranteed) through the revenue requirement, has never been achieved, representing an allowed return on equity (ROE) of 16 per cent that was approved in 2009, which should have resulted in a net profit of approximately US$43 million per annum”, said JPS of its profit performance over the tariff period that recently ended.
High system losses over the period factored heavily in its shortfall.
The utility company estimated that it was not allowed to recover US$111 million in fuel costs due to penalties from 2009 to 2013.
“The magnitude of the penalty varies with the price of oil and the risk exposure was amplified with the spike in the price of oil over the past two years,” said the light and distribution company. “At the end of 2013 losses, technical (8.6 per cent) and non-technical (largely theft –18.04 per cent), stood at a total of 26.64 per cent.”
The cost of electricity has risen to a new record this month on continued slide in the value of the dollar and higher cost of fuel.
Higher fuel and IPP charges have pushed the cost of electricity up by 3.5 per cent this month after a four per cent increase in September. Together both increases mean the cost per kilowatt hour of electricity is at its highest level ever for households.
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.