JAMAICAN officials recently noted their willingness to allow bauxite industry players to choose what energy source to power their plants
Christopher Serju, Gleaner Writer
FOUR PATHS, Clarendon
JOHN CARBERRY, operations manager of Jamaica Broilers Ethanol Limited, says that capital outlay is reduced in the operation of solar-powered chicken farms because the system does not require a battery bank, which has traditionally been a major cost factor.
Instead, this system forces the operator to “make hay while the sun shines” during daytime when the energy demand is at its highest and revert to the national grid at nights when much less energy is needed.
Under this project, for which financing is provided by the Development Bank of Jamaica, commercial banks and other financial institutions, the solar equipment is used as the collateral, in what is effectively a lease system, with payback time of about five years.
Game changer
Alex Hill, managing director of Iree Solar, a full systems renewable energy developer and installer, sees this financial arrangement as a major game changer given that in Jamaica, the high start-up cost has long been a deterrent to the use of solar-energy systems. He explains the difference with traditional offerings where the farmer would have to put up his/her holdings as collateral: “Leasing equipment is very attractive to a company because you are able to write off the capital expenditure in its entirety, as well as interest expense, as an expense on your profit and loss. So you don’t have to take a loan with interest accruing, just a straight monthly payment.
“And on their sheet, as a profit and loss, they can write it off as an expense for which they get a tax benefit. This is different from a loan in which you are just taking an amount of money and paying an interest rate on it. So it’s a very attractive option for these farmers.”
However, Hill wants the Government to do more to make investing in solar systems more attractive as although the panels and inverters come in duty-free, there is still 20 per cent duty on solar water heaters, LED (light emitting diodes) lights and solar LED lights.
“These are items which the Government needs to address immediately if they are going to put out the message that they are going to be fostering renewable energy because duty is really hampering the uptake of this equipment,” said Hill.
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We were truly impressed with what Phillip Paulwell has done at his home – the conversion to solar as its primary source of electric power.
Mr Paulwell, of course, is not the first person in Jamaica to do this. But as minister with responsibility for energy, his may be a persuasive example for a more robust Jamaican engagement of renewable energy sources, to reduce the use of petroleum that accounts for more than 90 per cent of energy. Oil is not only expensive, but more environmentally pollutant than other fuels.
Additionally, sunshine, as a fuel, is plentiful. The sun is estimated to generate more energy in an hour than the world’s requirement for a year.
The downside of solar energy to power a national grid, as with many renewables, is its supply and distribution instability, and the cost of technology – though declining – is still relatively expensive. The cost will have to reach grid parity with other technologies before it begins to replace other fuels.
Solar beneficial but …
In the meantime, however, some firms and private individuals will find solar a useful and attractive alternative to oil and other hydrocarbons. Some governments may even find it economically, politically and environmentally strategic to encourage its use, which we presume to be the point of Mr Paulwell’s showing off of his solar panels and storage batteries.
Indeed, most people will find extremely attractive, and would be happy to enjoy, an 83 per cent decline in their monthly electricity bills from the light and power company, as has been reported by Mr Paulwell. He now pays around J$4,000 a month.
But there is a catch. Few Jamaicans could upfront the J$2 million that Mr Paulwell invested for his home conversion. Given his past bills, Mr Pauwell will recoup his investment in around seven years and could reasonably enjoy returns on his capital for another eight.
So, as attractive as these numbers seem, the returns are too far in the future and the upfront costs too high to encourage hordes of individuals to leave the national grid for solar. Nor are firms, except for the few for which the economics are compelling, likely to do so in droves.
Mr Paulwell, wearing his energy hat, has to run on many tracks at the same time. He must promote policies that will make solar and other renewables attractive and affordable.
An economically competitive grid
But more urgently, he has to ensure that there is a more efficient and economically competitive national grid.
At around US$0.40 per kilowatt-hour, Jamaica has among the most expensive electricity in the Caribbean. This has been a major contributor to the denuding of the Jamaican manufacturing sector and also has a hobbling effect on services – whose operations are heavily electricity dependent.
There has been much heated debate in recent years on these issues, including, at one point, a decision to proceed with a conversion to natural gas at some of our power plants. The Jamaica Public Service Company has the monopoly for the transmission and distribution of electricity, and won the tender for more than 400 megawatts of gas-fired power plants. That process, however, seems to have run out of steam, as, it appears, have Mr Paulwell’s other energy initiatives.
Energy is too important a matter to be subject to the Jamaican penchant for talk without effective action.
The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.
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Minister of Science, Technology, Energy and Mining Phillip Paulwell has vowed to abolish the ‘avoided costs’ system used to compute and compensate independent power providers (IPP) supplying electricity to the national grid as an incentive for renewable-energy producers.
The alternative will be a feed-in-tariff mechanism, designed to accelerate investment in renewable-energy technologies and, unlike the avoided costs system, offer cost-based compensation, price certainty and long-term contracts that can help to finance investments.
Paulwell said that for years, when IPPs entered into purchasing agreements with the Jamaica Public Service Company (JPS), they are told that the price JPS will pay them must be related to the avoided costs, “which is a theoretical concept based on what is assumed to be the least cost of an additional unit of electricity to the grid.”
“That to me does not provide the incentive and the framework to encourage people to get into the business,” said Paulwell, at the launch of an energy cost containment initiative rolled out by Jamaica Broilers Group at one of its contractors’ poultry rearing facilities at Atkins Farm, Four Paths, Clarendon, last Wednesday.
To treat with the issue, “we recently conducted a consultancy through the World Bank and we are about to promulgate a feed-in-tariff mechanism that will reward people based on the actual costs of the technology that is being deployed. And we are going to abolish this issue of avoided costs so that we can properly incentivise those of you who wish to get involved,” the minister added.
According to a declaration by the Office of Utilities Regulation (OUR) dated December 2010, “avoided costs for the JPS electric grid can be defined as the costs to the electric utility of energy or capacity or both, but for the purchase from the qualifying facility(s), the utility would generate itself or purchase from other sources.”
Avoided costs in electricity generation and distribution refer to the cost the JPS escapes by purchasing electricity for resale from other parties instead of building a new plant. It consists of generation fixed costs or capacity costs, and generation variable costs or energy costs.
The OUR said the avoided costs considered in making the declaration are generation fixed costs, which include capital costs for new generation capacity to be installed over the planning period, depreciation of the investment and the fixed operation and maintenance costs for those facilities. Variable costs include fuel costs and variable operation and maintenance costs.
Paulwell told poultry farmers and business people that another issue “we are going to insist on for this year is the ability of businesses to establish generation in one location and to be able to wheel that to another location utilising the grid.”
Emphasising the need for Jamaica to diversify its energy sources, the minister said he intends, very shortly, to present to the country a schema in relation to how the Government will get the price of energy significantly reduced, as well as outcomes in relation to the liquefied natural gas project.
Paulwell said he will again be speaking to the use of coal as an alternative source of fuel, but wanted to “ensure and assure our environmentalists that we are not going to do anything that is going to, in any way, be reckless and careless in how we implement that project.”
The minister, who has installed solar panels – obtained from Cuba – at his home in St Andrew, said the Jamaican Government was also trying to secure a technical agreement with Cuba to train Jamaicans into assembling the panels here.
“I don’t believe it has to be a government project. I want to challenge the private sector to step forward and see how we can manufacture panels in Jamaica” with a view to exporting to other areas in the region “if we can manufacture enough,” he said.
mcpherse.thompson@gleanerjm.com
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Baldwin Atkins (left), contract poultry farmer, meets Phillip Paulwell (second right), minister of science, technology, energy and mining, just before the start of a press conference to announce roll-out of the Best Dressed Chicken Cost Containment Initiative, held at Atkins’ Farm at Osbourne Stores in Clarendon on Wednesday, July 11. Dr Claudette Cooke (second left), Jamaica Broilers Group’s marketing executive, and president and CEO Christopher (right) look on. – Ian Allen/Photographer
McPherse Thompson,
Businesses which undertake energy management and implement energy audits often enjoy annual savings on energy bills of up to 12 per cent, says the head of a local consultancy.
Yvette Batts, managing director of BCI Solutions, said an energy audit is an assessment of the usage at a facility, including an analysis of cost effective efficiency opportunities to reduce usage, bills and greenhouse emissions. She was speaking at the latest Wednesday Morning Seminar hosted by Myers, Fletcher & Gordon (MF&G) and the Jamaica Chamber of Commerce (JCC), which joined forces with the Development Bank of Jamaica (DBJ) and BCI in presenting the theme “Reducing Your Energy Costs While Improving Your Business Efficiency“.
Energy Audits are done at three levels: walk through, comprehensive and investment grade. The audit level is defined by the energy user, taking into account specific issues to be addressed, complexity of site, and the total budget available, said Batts.
She advised that energy audits and energy saving opportunities are best implemented in the context of an Energy Management Program (EMP) which should be in place before any audit is undertaken. An EMP should include a management structure with a formally appointed energy manager, the involvement of all staff in the programme, an energy management policy, and a system for monitoring energy bills.
While overall savings from energy saving programme may be rewarding, implementation can be costly.
The DBJ by its mandate to facilitate and promote economic growth has been providing loan financing through its network of approved financial Institutions, for projects in areas such as Tourism, Services and Agriculture among others.
Edison Galbraith, DBJ’s general manager, Loan Origination and Portfolio Management, said the institution provides loan financing for large projects in strategic sectors such as Renewable Energy through co-financing and direct lending. The DBJ’s also promotes and finances investments in energy conservation, energy efficiency and renewable energy technology at a rate of eight per cent to 9.5 per cent for up to 10 years. Additionally, assistance for energy audits is available, with funding to offset $200,000 of the cost of the audit. The institution also plays an active role in promoting energy conservation by facilitating public education, workshops and training. Notably DBJ has partnered with the Inter-American Development Bank to secure US$807,000 funding to promote energy efficiency/conservation in the SME Sector. To date DBJ has approved over $330M in energy loans to 20 projects.
Read more:
The United Nations
Energy Audit Explained
July 10, 2012
Yvette Batts
What exactly is an Energy Audit? Why do I need one? How much does it
cost? Unfortunately many think an Energy Audit is another piece of
expensive paperwork required to access low interest energy loans. An
Energy Audit is and can be much more.
An Energy Audit is an assessment of the energy usage at a facility. It
includes an analysis of cost-effective opportunities to reduce energy
usage, energy bills and greenhouse gas emissions. It can actually add
immediate value to an organisation by identifying simple no-cost and low
cost measures for energy conservation (EC) and cost reduction. These
include Energy Management practices, tariffs, operations improvement,
and culture. Our experience is that EC can result in as much as 12%
savings, sometimes more. As such EC measures may provide immediate
payback for the cost of the energy audit.
The Energy Audit can also go on to identify additional energy efficiency
(EE) measures that require investments, such as equipment retrofits,
upgrades, re-tooling and process improvement to further reduce
consumption. Investments can also include renewable energy (RE)
solutions, appropriately sized for the reduced energy footprint
resulting from energy conservation and energy efficiency. The result is
a package of energy saving measures that meet the financial criteria for
investment as specified by the customer and that can form the basis of
an Energy Strategy and Action Plan.
In short an Energy Audit facilitates improved energy productivity,
particularly important in an economic climate where cost control and
competitiveness are essential for survival.
There have been some questions/concerns arising from the local market
about
Minister of Industry, Investment and Commerce, Hon. Anthony Hylton, says that approximately 29 per cent of the country