The Jamaica Public Service Company (JPS), managers of the national electricity grid expects Golar LNG to ship liquefied natural gas to Jamaica, despite its heavy losses.
Golar is contracted to New Fortress Energy (NFE), the latter being JPS’s selected partner to develop and supply natural gas to the Jamaican utility. New Fortress is five months behind schedule with deliveries.
JPS President and Chief Executive Officer Kelly Tomblin said that even in the worst-case scenario, the power utility remains protected.
“Golar is a public company with a market cap of about US$1.5 billion and a balance sheet with over US$4 billion of assets. It’s been in business since 1946 and is widely followed by investors all over the world,” said Tomblin in a response to Gleaner queries.
“New Fortress Energy has indicated to me that they have been a dependable and reliable partner in preparing to deliver gas to Jamaica. JPS is protected contractually if New Fortress fails to bring gas, as required in the gas supply agreement.”
NFE earlier this year contracted Golar for two years to ship LNG to Jamaica. The first shipments will feed JPS’s plant at Bogue in Montego Bay, which has already been retrofitted to burn gas as well as diesel oil.
In early June, NFE acknowledged Gleaner queries regarding the implications of Golar’s finances, but did not follow through with a response.
NET LOSSES
Golar reported net losses of US$80 million for its first quarter ending March. The loss was mainly because of its US$61.5 million in operating expenses, towering over its US$18.6 million in revenues for the period. Over 12 months, Golar posted a US$197.6-million net loss for financial year 2015 and US$43 million in net losses for 2014.
Last month, CEO Gary Smith resigned, and its former CEO, Oscar Spieler, retook control of the company amid restructuring of the operations.
Tomblin expects the LNG projects at Bogue and, later, at Old Harbour, along with additional capacity from renewable plants, to reduce the power utility’s reliance on heavy oil from 95 per cent to 50 per cent in the medium term.
Cheaper coal and gas will do nothing to derail the renewable energy revolution according to BNEF’s New Energy Outlook 2016.
Bloomberg New Energy Finance states 60% of installed capacity will be zero-emission energy sources by 2040 and wind and solar power will take the lion’s share of new power generation capacity added – 64%.
Solar power is forecast to be the cheapest generation technology in most countries by 2030 and account for 3.7TW, or 43%, of new capacity added in 2016-40. This will represent $3 trillion of new investment.
A very important point in the report is that around 2027, new wind and solar will be cheaper than running existing coal and gas generators, particularly where carbon pricing has been implemented. In just over a decade we may see a marked uptick in current fossil fuel generation plants being shuttered. The report says there will be a net closure of 286GW of coal in OECD economies by 2040.
By 2040, BNEF states Australia will have wind and solar penetration of more than 50%.
Another prediction will get electric vehicle supporters excited – BNEF’s modeling suggests EV’s will comprise a quarter of the global car fleet by 2040. This is also good news for the residentialand commercial solar sector as it will accelerate a reduction in battery costs through technology development, economies of scale and enhanced manufacturing know-how.
BNEF sees a very healthy future for small-scale solar power, with it accounting for 10% of global generating capacity by 2040. With regard to home battery systems, Bloomberg expects solar energy storage to be commonly deployed alongside rooftop solar panel systems by 2020.
Behind-the-meter energy storage generally will see a sharp rise from around 400MWh today to nearly 760GWh in 2040.
While the news is upbeat about renewables generally, forecasted additions won’t be enough to rein in carbon emissions to the required degree.
“Some $7.8 trillion will be invested globally in renewables between 2016 and 2040, two thirds of the investment in all power generating capacity, but it would require trillions more to bring world emissions onto a track compatible with the United Nations 2°C climate target,” said Seb Henbest, lead author of the report and head of Europe, Middle East and Africa for BNEF.
BNEF suggests approximately USD $5.3 trillion would need to be invested in zero-carbon power by 2040 to prevent carbon dioxide levels rising above 450 parts per million.
Reacting to concerns that the raising of taxes on fuel has resulted in the spike in electricity bills consumers will face this month, Finance Minister Audley Shaw is arguing that the increase in special consumption tax (SCT) on heavy fuel oil (HFO) is only a nominal percentage of the rate increase the Jamaica Public Service Company (JPS) announced last week.
In response to questions from The Gleaner, the minister said that of the 12.8 per cent increase the JPS intends to apply, the increase in the SCT on HFO “translates to a mere 2.3 percentage points” or 18 per cent.
“As estimated in the tax measures, the effect of the increase in the overall SCT (specific and ad valorem) on HFO and LNG is approximately J$1.35 billion (or approximately US$11 million) in fuel costs to JPS. This would then approximate to a cost of US0.36 cents per kWh,” the minister said.
“Given the US two-cent-per kWh increase by JPS to consumers and the impact of the increased SCT of US0.36 cents per kwH to JPS costs, the percentage contribution of the tax to the pending JPS electricity bill increase would be 18 per cent. Therefore, the increase in SCT on HFO translates to a mere 2.3 percentage points of the 12.8 per cent electricity bill increase.”
Additionally, Shaw said he at no point stated that the increase would not affect the rates of the JPS as no one specifically asked him about the SCT on HFO.
“With reference to the comments by the minister of finance and the public service at the post-Budget press conference, it should be noted that the minister spoke to a question posed on the impact of the J$7.0 increase in SCT on fuel used for the purposes of ground transportation,” the statement read.
“The minister’s comments were not geared towards the impact of LNG or HFO on electricity prices. There were no questions posed about the effect of the increase in the overall SCT (specific and ad-valorem) of HFO.”
The increase in SCT on HFO that was announced during Shaw’s May 12 Budget presentation was one of three reasons Jamaica’s only power distribution company attributed to this month’s increase.
During his post-Budget press conference on May 13, Shaw, in responding to concerns that the new tax measures would affect light bills, said: “The argument also is that JPS light bills will go up as a result. And I want to remind everyone that this tax (on fuel) does not apply to Jamaica Public Service at all. It is only related to SCT for fuel for road transport only.”
JAMAICA Public Service (JPS) customers will be asked to pay more for their electricity this month — partly due to the recent increase in the Special Consumption tax (SCT) on heavy fuel oil (HFO), the light and power company advised yesterday.
The company said the spike is also due to an increase in the cost of the fuel used for electricity generation, caused by rising oil prices on the international market, and the continued devaluation of the Jamaican dollar.
“This is definitely not the best news for us at JPS, or for our customers,” JPS President and CEO Kelly Tomblin said in a release.
The Government last month introduced the $7 per litre increase as part of the revenue package to help finance its $580-billion 2015/16 Budget, but Finance Minister Audley Shaw, at the time, assured the panicking public that the tax would only apply to fuel at the pumps.
“This tax doesn’t apply to JPS at all. It is only related to SCT for fuel for road transport,” Shaw said at a post-budget press conference. The SCT is expected to yield $6.4 billion for the Government’s coffers.
In announcing the 12.8 per cent increase yesterday, the JPS urged consumers to “conserve on their electricity usage, as the upward trend in oil prices has resulted in an increase in the cost of electricity”.
“The overall increase will result in residential customers paying US$0.21 per kWh on average for electricity in June, compared to US$0.19 in May. This means that the average residential customer using 165kWh of electricity for the month, will see a $500 increase in his or her June bill, which will move from $3,875 in May to approximately $4,372 this month,” the JPS said.
The JPS president stressed that, despite the increase, electricity bills are still 20 per cent lower than they were in June 2015 when customers were paying US0.27 per kWh. The company argued that Jamaica continues to enjoy one of the lowest electricity rates in the region, behind Belize and Trinidad.
Reacting to the news, Private Sector Organisation of Jamaica (PSOJ) President William Mahfood reiterated that the sector had recognised from the outset that the imposition of the tax on the HFO and Liquefied Natural Gas (LNG) would have an incremental increase in the cost of electricity of five per cent.
“As far as the price of oil goes, this is a matter that is beyond our control (but) we still feel there should be some amount of hedge put in place to mitigate against future increases in the price of oil,” he remarked, noting that the sector is in full support of the phasing out of older power plants which rely on HFO and diesel.
He said that, while the phasing out of JPS’ 190-megawatt facility at Old Harbour will take a couple more years, eventually more plants will convert to LNG.
Mahfood said also that, like rising oil prices, the devaluation of the dollar against the US currency is out of Jamaica’s hands and can only be militated against by economic growth.
The most important piece of news on the energy front isn’t the plunge in oil prices, but the progress that is being made in battery technology. A new study in Nature Climate Change, by Bjorn Nykvist and Mans Nilsson of the Stockholm Environment Institute, shows that electric vehicle batteries have been getting cheaper much faster than expected. From 2007 to 2011, average battery costs for battery-powered electric vehicles fell by about 14 percent a year. For the leading electric vehicle makers, Tesla and Nissan, costs fell by 8 percent a year. This astounding decline puts battery costs right around the level that the International Energy Agency predicted they would reach in 2020. We are six years ahead of the curve. It’s a bit hard to read, but here is the graph from the paper:
This puts the electric vehicle industry at a very interesting inflection point. Back in 2011, McKinsey & Co. made a chart showing which kind of vehicle would be the most economical at various prices for gasoline and batteries:
Looking at this graph, we can see the incredible progress made just since 2011. Battery prices per kilowatt-hour have fallen from about $550 when the graph was made to about $450 now. For Tesla and Nissan, the gray rectangle (which represents current prices) is even farther to the left, to about the $300 range, where the economics really starts to change and battery-powered vehicles become feasible.
But in the past year, the price of gasoline has fallen as well, and is now in the $2.50 range even in expensive markets. A glut of oil, and a possible thaw in U.S.-Iran relations, have moved the gray rectangle down into the dark blue area where internal combustion engines reign supreme.
Still, if battery prices keep falling, the gray rectangle will keep moving to the left. The Swedish researchers believe that Tesla’s new factories will be able to achieve the 30 percent cost reduction the company promises, simply from economies of scale and incremental improvements in the manufacturing process. That, combined with a rebound in gas prices to the $3 range, would be enough to make battery-powered vehicles an economic alternative to internal combustion vehicles in most regions.
But this isn’t the only piece of good energy news. Investment in renewable energy is powering ahead.
The United Nations Environment Programme recently released a report showing that global investment in renewable energy, which had dipped a bit between 2011 and 2013, rebounded in 2014 to a near all-time high of $270 billion. But the report also notes that since renewable costs — especially solar costs — are falling so fast, the amount of renewable energy capacity added in 2014 was easily an all-time high. China, the U.S. and Japan are leading the way in renewable investment. Renewables went from 8.5 percent to 9.1 percent of global electricity generation just in 2014.
That’s still fairly slow in an absolute sense. Adding 0.6 percentage point a year to the renewable share would mean the point where renewables take half of the electricity market wouldn’t come until after 2080. But as solar costs fall, we can expect that shift to accelerate. In particular, forecasts are for solar to become the cheapest source of energy — at least when the sun is shining — in many parts of the world in the 2020s.
Each of these trends — cheaper batteries and cheaper solar electricity — is good on its own, and on the margin will help to reduce our dependence on fossil fuels, with all the geopolitical drawbacks and climate harm they entail. But together, the two cost trends will add up to nothing less than a revolution in the way humankind interacts with the planet and powers civilization.
You see, the two trends reinforce each other. Cheaper batteries mean that cars can switch from gasoline to the electrical grid. But currently, much of the grid is powered by coal. With cheap solar replacing coal at a rapid clip, that will be less and less of an issue. As for solar, its main drawback is intermittency. But with battery costs dropping, innovative manufacturers such as Tesla will be able to make cheap batteries for home electricity use, allowing solar power to run your house 24 hours a day, 365 days a year.
So instead of thinking of solar and batteries as two independent things, we should think of them as one single unified technology package. Solar-plus-batteries is set to begin a dramatic transformation of human civilization. The transformation has already begun, but will really pick up steam during the next decade. That is great news, because cheap energy powers our economy, and because clean energy will help stop climate change.
Of course, skeptics and opponents of the renewable revolution continue to downplay these remarkable developments. The takeoff of solar-plus-batteries has only begun to ramp up the exponential curve, and market shares are still small. But it has begun, and it doesn’t look like we’re going back.
This column does not necessarily reflect the opinion of Bloomberg View’s editorial board or Bloomberg LP, its owners and investors.
The price of oil closed above US$50 a barrel for the first time in almost a year, pushing oil stocks higher.
The Dow Jones industrial average briefly flirted with the 18,000-point mark but eventually retreated.
Benchmark US crude oil added 67 cents, or 1.3 per cent, to close at US$50.36 a barrel in New York. Oil has not closed at US$50 a barrel or higher since July 21. Brent crude, which is used to price international oils, added 89 cents, or 1.8 per cent, to US$51.44 a barrel in London.
In other energy trading, heating oil added four cents to US$1.54 a gallon and natural gas gained one cent to US$2.47 per 1,000 cubic feet.
The Dow held on to a gain of 18 points to 17,938.28. Earlier, the Dow was up as much as 82 points and appeared to be on track for its highest close since last July.
Golar LNG, the company which secured a two-year contract to ship liquefied natural gas (LNG) to Jamaica, posted huge net losses, has a working capital deficit and its chief executive officer resigned last month.
The shipping company continues to suffer from a slowdown of the LNG industry during a global oil price drop, symptomised by almost US$700 million of negative working capital.
The Jamaica contract is a bright spot for the company amid declining revenue.
“Partially mitigating the loss of this income was revenue earned by the Golar Arctic which commenced its two-year FSU service with New Fortress Energy, offshore Jamaica,” said Golar in financial results issued this week.
Golar also aims to refinance debt and launch new growth initiatives to adapt to the soft global LNG market.
New Fortress, an American company, is contracted by Jamaica Public Service Company to supply LNG to its Bogue plant. The pipeline and terminal have been developed but delivery of the gas, which should have started in April, has been pushed back to August.
On Wednesday, New Fortress promised responses on the implications of Golar’s finances for its contract, but had not followed through up to press time.
Golar reported net losses of US$80 million for its first quarter ending March. The loss was mainly due to its US$61.5 million in operating expenses towering over its US$18.6 million in revenues for the period.
Adjusted for exceptional items, losses would only have amounted to US$41.2 million.
Fundamentally, its revenue gap has defined the accounts since at least 2014. Consequently, Golar posted a US$197.6-million net loss for financial year 2015 and US$43 million in net losses for 2014.
Last month, CEO Gary Smith resigned and its former CEO, Oscar Spieler, retook control of the company. Golar cited restructuring as a necessary move to adapt to the new LNG reality, and the reason for the resignation.
Spieler, a naval architect, previously served as CEO of Golar between July 2009 and June 2011. He has a “successful track record of delivering complex offshore and shipping-related projects,” stated the financials. A release from the company indicated that both men previously traded the CEO position. Smith, who was promoted to CEO in January 2015, previously served as Golar CEO between March 2006 and July 2009.
Amid these changes, the company’s current assets
of US$530 million were overpowered by current liabilities of US$1.23 billion as at March 2016, resulting in negative working capital of US$670 million.
Burning through cash
Additionally, Golar has been burning though its cash holdings, which dropped from US$376 million to US$93 million in the space of one year.
The company still holds a strong US$1.8 billion in equity, but it fell from US$2.2 billion a year earlier.
Golar explained that the fast-growing LNG industry is going through a “rapid transformation” where monetisation of stranded gas, lowering the cost of LNG production and the opening of new markets are all critical success factors.
“An anticipated delinking of LNG prices from oil prices will also create additional demand for LNG. The traditional approach to executing LNG projects favoured by many oil majors may not cost effectively meet this new demand,” the company said.
Natural gas prices are reportedly at seven-year lows. The commodity is currently trading around US$2.40 per 1,000 cubic feet in the US.
At the same time, however, oil continues to trade below US$50 per barrel, which is still less than half the price crude was trading at two years ago.
ExxonMobil and others pursued research into technologies, yet blocked government efforts to fight climate change for more than 50 years, findings show
The patent records were among a new trove of documents published by the Center for International Environmental Law, and deepen the public relations challenge for Exxon. Photograph: Jessica Rinaldi/Reuters
The forerunners of ExxonMobil patented technologies for electric cars and low emissions vehicles as early as 1963 – even as the oil industry lobby tried to squash government funding for such research, according to a trove of newly discovered records.
Patent records reveal oil companies actively pursued research into technologies to cut carbon dioxide emissions that cause climate change from the 1960s – including early versions of the batteries now deployed to power electric cars such as the Tesla.
Scientists for the companies patented technologies to strip carbon dioxide out of exhaust pipes, and improve engine efficiency, as well as fuel cells. They also conducted research into countering the rise in carbon dioxide emissions – including manipulating the weather.
Esso, one of the precursors of ExxonMobil, obtained at least three fuel cell patents in the 1960s and another for a low-polluting vehicle in 1970, according to the records. Other oil companies such as Phillips and Shell also patented technologies for more efficient uses of fuel.
However, the American Petroleum Institute, the main oil lobby, opposed government funding of research into electric cars and low emissions vehicles, telling Congress in 1967: “We take exception to the basic assumption that clean air can be achieved only by finding an alternative to the internal combustion engine.”
This 1970 patent, assigned to Esso (now ExxonMobil), is a design for a low-polluting engine system. Photograph: Handout
And ExxonMobil funded a disinformation campaigned aimed at discrediting scientists and blocking government efforts to fight climate change for more than 50 years, beforepublicly disavowing climate denial in 2008.
The patent records were among a new trove of documents published on Thursday by the Center for International Environmental Law, and deepen the legal and public relations challenge for Exxon.
“What we saw was an array of patent technologies that demonstrated that these companies had the technologies they needed and could have commercialised to help address the problem of C02 pollution,” said Carroll Muffett, president of the Ciel. “They then turned to Congress and said you don’t need to invest in electrical vehicle research because the research is ongoing and it’s robust.”
The findings echo those in the documentary Who Killed the Electric Car?, which explored the deliberate destruction of GM’s first electric vehicles.
Alan Jeffers, an Exxon spokesman, insisted he could not comment directly on the documents as he was unable to access the Center for International Environmental law website on which they were published on Thursday morning.
In an emailed statement, Jeffers said: “The Guardian gave us only a few hours to comment on documents from four decades ago.”
Jeffers went on: “This further illustrates the Guardian’s well-established bias on climate change issues which has been demonstrated previously through its keep it in the ground campaign.”
He said the company believed the risks of climate change were real, was researching lower emission technologies, and engaged in “constructive dialogue” with policy makers about energy and climate change.
Researchers discovered more than 20 such patents filed by oil companies from as early as the 1940s for technologies that could help in the development of electric cars.
However, Ron Dunlop, president of Sun Oil and API chairman, told a joint hearing of the commerce committee in 1967 that government funding of research into electric cars would be misplaced – because the oil companies were so advanced in their research of cleaner cars. “We in the petroleum industry are convinced that by the time a practical electric car can be mass produced and marketed, it will not enjoy any meaningful advantage from an air pollution standpoint,” he told Congress. “Emissions from internal-combustion engines will have long since been controlled.”
Muffett said the findings were the result of three years of research and were not exhaustive.
“The question is what did they do to try to commercialise these technologies, knowing what they did about climate change,” he went on.
The revelations, the second set of documents released by Muffett’s organisation, reinforce charges by campaigners that Exxon was well aware that the burning of fossil fuels was a main driver of climate change – despite its public posture of doubt.
In addition to the technologies with potential for electric cars, Exxon and other oil companies were actively researching methods to cut emissions of carbon dioxide – the main greenhouse gas.
In another historic document that surfaced last month, a Canadian subsidiary of Exxon admitted the company had the technology to cut carbon emissions in half. However, the corporate memo dating from 1977 said it would be prohibitively expensive – doubling the cost of electricity generation, according to the documents obtained by Desmog blog.
New York and 17 other attorneys general, including DC and the US Virgin Islands, are investigating whether the oil company lied to investors and the public about the threat of climate change.
Campaigners plan to further turn up the heat on the company next week when Exxon holds its annual shareholder meeting in Dallas.
Campaigners have argued for more than a decade that Exxon bankrolled a network of front groups and conservative think tanks aimed at discrediting well-established science – confusing the public and delaying governments efforts to cut the greenhouse gas emissions responsible for warming.
Those efforts to put Exxon on the spot gathered pace after Inside Climate News and the Los Angeles Times reported that the company’s own scientists knew as early as the 1970s that greenhouse gases caused climate change.
The attorney general of the US Virgin Islands has subpoenaed Exxon to turn over email, documents and statements over the last decades.
Exxon has dismissed the investigations as politically motivated.
However, the company has reversed its opposition to fuel cell technology. Earlier this month, the company announced it had been conducting a joint research effort on fuel cell power plants with FuelCell.
The initiative, which got underway in 2011, aims to route the carbon dioxide from fossil fuel burning power plants into fuel cells, producing low emissions electricity. The company has estimated it can cut 90% of carbon dioxide emissions.
“At ExxonMobil, we share the view that the risks of climate change are serious and warrant thoughtful action,” Rex Tillerson, Exxon’s chief executive, told the US Energy Association after receiving its annual award.
The Office of Utilities Regulation (OUR) says it will ensure that power utility Jamaica Public Service Company does not increase bills to consumers based on the delay in the delivery of cheaper gas fuel.
The first delivery of liquefied natural gas – LNG – by JPS’ supplier was expected in April, but has been pushed back to August.
New Fortress Energy has developed a terminal in Montego Bay to feed gas to JPS’ Bogue plant, which has been converted to burn either LNG or automotive diesel oil.
“The OUR has moved to assure consumers that it will be vigilant in ensuring that the delay in the delivery of liquefied natural gas to the Bogue power plant will not result in an increase in the price of electricity,” said the regulator in a statement.
While welcoming the completion of the conversion of the 120-megawatt combined cycle plant, the OUR signalled disappointment with the “four-month delay” in the delivery of the overall project.
The gas supply agreement signed by JPS and New Fortress Energy on August 5, 2015, stipulated that gas delivery would commence April 2016, the OUR stated.
“Safeguards for customers were included in the agreement with New Fortress to ensure that any delay on its part would not result in negative cost implications for customers,” noted OUR Director General Albert Gordon. “The OUR has been monitoring the project closely and will continue to keep the public abreast of its progress.”
Project’s goal
The Bogue project’s goals, which are aligned to those in the National Energy Policy, were to reduce fuel cost, and lower the operations and maintenance expenditure of electricity generation. Gordon noted that the OUR’s involvement in the project began in 2008 and that the agency mandated that the plant be upgraded to burn gas in the 2014-2019 JPS tariff determination.
“To ensure this, the OUR also made provisions for the setting up of the Bogue Plant Reconfiguration Fund (BPRF), financed through the tariff, to facilitate the conversion cost,” the agency said.
The revenues for the BPRF – which totalled $15 million – were collected by the JPS through a line item in the monthly fuel rate calculation on customers’ bills, over a twelve-month period, between February 2015 and January 2016, the OUR said.
Requests to JPS for comment were unanswered up to press time.
United States (US) Vice-President Joe Biden has warned regional leaders that volatile oil prices will return. On this basis, he is urging them to use every opportunity to explore clean and alternative energy sources to bolster the prosperity of the Caribbean and Central America.
“This is a moment of opportunity to turn that progress into sustainable energy security that will endure when volatile oil prices return. And they will return,” Biden cautioned the heads of government during the US-Caribbean-Central American Energy Summit in Washington, DC, held earlier this month.
“The good news is that we’re at a nexus for transforming, with transformative opportunities here. Low oil prices mean more money this day is available for investment in new energy infrastructure,” said Biden.
“It’s equivalent to US$1 billion of stimulus just in the region [and] lower energy prices. Our abundance of natural gas provides a critical, clear transition fuel as we’re moving towards adopting renewable technologies.”
Biden said strengthening energy security was among the focus areas for himself and US President Barack Obama.
He noted that North America – Mexico, the US and Canada – is the epicentre of energy production in the world and pointed out that his country recently inaugurated a liquefied natural gas export terminal that has just sent its first cargo of gas to Latin America.
The US had also announced a deal to export natural gas to Jamaica during last year’s staging of the Summit.
“Here’s the truth. We want you to be energy secure so more people across this region can – your region can start businesses, connect to the Internet, generate opportunities, attract foreign investment, grow, grow. The more you grow, the more you prosper, the better off my country is. And it strengthens our security, as well as yours. And it opens up new opportunities for shared economic growth,” he said.
