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For at least the past two decades, the Government in power has prevented the Jamaica Public Service Company (JPS) from implementing plans developed by the company for investment in a generating plant, despite the company’s careful technical and economic analyses.
In all instances, the utility’s calculations had indicated that investment in a new coal-burning plant would have provided the lowest-cost electricity for supply to consumers.
Towards the end of the 1980s, the JPS, then fully government-owned, was instructed not to proceed with its proposed investment programme, but was directed instead to invite proposals from private entrepreneurs for diesel-powered generators, as this approach would reportedly provide electricity to the grid at the lowest cost.
These instructions resulted in power supply contracts between the JPS, on the one hand, and Jamaica Private Power Company Limited and Jamaica Energy Partners (JEP) on the other.
Interestingly, when it came to public attention in 1998 that the decreases in fuel oil prices were not being reflected in lower consumer bills, as should have resulted from stringent application of the company’s contracts with its consumers, JPS stated that its actions had been made necessary by the high cost of private power.
The promise of lower power costs from independent power producers had not been realised.
Detailed plans
In the mid-1990s, the JPS developed detailed plans for the construction of a new coal-burning unit at Old Harbour. The studies supporting the utility’s conclusions were reviewed by local and international experts with appropriate competence, none of whom expressed serious concerns with the studies’ fundamental conclusions. About that time, majority shares in the JPS were purchased by the United States-based Mirant company, which approved of and initially planned to implement the JPS’ investment proposals.
However, before implementation commenced, the Government instructed the JPS that liquefied natural gas (LNG) could be sourced from Trinidad at prices that would result in much lower electricity costs than could be achieved with a coal-burning plant. The utility was, therefore, instructed to cancel its plans for coal-burning equipment while government-to-government negotiations for LNG supplies were being conducted.
As new generating equipment was urgently needed to satisfy the increasing consumer demand, the JPS installed a 120-megawatt (MW) combined-cycle facility burning diesel fuel and also entered into a new contract with the JEP for supply of an additional 60MW of diesel-generated power, burning heavy fuel. The opportunity for lower power costs were once more postponed, awaiting the realisation of the mirage of cheap LNG.
In 2006, the government in Trinidad informed its Jamaican counterpart that it would be unable to meet Jamaica’s price expectations for LNG supplies. The JPS was once more informed that it could proceed to implement its plans for a coal-burning power station and resumed developing the appropriate plans.
In 2007, the party forming the Government changed after the general election. Initially, the new administration supported coal as the fuel of choice for new base-load generation; but in 2008, after a change in the minister with portfolio responsibility for energy, the political directorate once again decided that natural gas was to fuel all new major thermal power-generation units, including those installed to replace units retired because of obsolescence.
Under the new energy policy announced in April 2010, the Government announced that LNG was the preferred fuel for power generation and alumina production in Jamaica. The Cabinet decided that LNG would be imported by a private-sector company selected to source the LNG supply, own and operate a floating re-gasification terminal and construct the pipeline infrastructure for supply to the consumers of the gas – primarily the electricity-generation and alumina-production sectors. The Ministry of Energy and Mining stated that 480MW of new generating capacity would be installed to replace older, inefficient units, as well as to provide the increase in overall generating capacity needed to satisfy the growing consumer demand.
Commissioning of the new generating plant was projected for 2012. No estimate of the relative LNG demands of the electricity and alumina sectors was given, but the switch to the new fuel was estimated to reduce the national balance of payments by US$300 million and reduce the cost of electricity to residential customers by up to 30 per cent.
Concerns raised
As the cost of the fuel consumed in alumina production is not a drain on the country’s balance of payments, it is to be assumed that the projected reduction in the value of that statistic applies to the electricity sector only.
The Government’s plans for the electricity sector raise some concerns. Every study to which the public has access indicates that coal would be the most economic fuel for public power generation in Jamaica. These studies include those undertaken by the JPS itself; by a World Bank team in 2008 for Jamaica alone; and by the United States consultants Nextant in 2009, under contract from the World Bank, to determine the most economic fuel for power generation in the Caribbean.
The public can gain access to all of these studies, none of which selects LNG as the most economic fuel for power generation in Jamaica’s electricity supplies. The Least Cost Power Generation study undertaken by the Office of Utilities Regulation and available on its website accepts the initial 480-MW LNG programme specified by the Government until 2014, but finds coal to be the most economic fuel from that point onwards until 2020, the end of the period reviewed.
No one with sound understanding of the thermal power-generation process would consider coal to be the ideal fuel to be utilised in that process. If the economics of the process were not relevant, natural gas would easily be the preferred fuel because of its lower adverse environmental impact and the higher fuel-to-electricity conversion ratio attainable with combined-cycle technology, which cannot be employed with coal.
But if economics is not a critical factor to be considered in fuel selection, then hydrogen would be an even more desirable choice, but few consumers would then be able to afford the resultant cost of electricity. All thermal power-generation technologies impose some environmental cost, and in the selection process, the choice is normally given to the fuel which can meet the mandatory environmental standards at the lowest financial cost.
The generation investment studies available for public review have all applied that principle in conducting their evaluations, and have all selected coal as the fuel which would generate electricity for the Jamaican grid at the lowest economic cost while complying with the statutory environmental standards.
