THE Office of Utilities Regulations (OUR) is to partner with the National Contracts Commission to negotiate actively with four interested bidders for the building of a new power plant and present a recommendation to the Government in 30 days.

Minister of Science, Technology, Energy and Mining Phillip Paulwell, who made the announcement during his contribution to the 2013/14 Budget Debate at Gordon House in Kingston yesterday, said the OUR is to get additional powers of monitoring, evaluation and enforcement, similar to those it has over the telecommunications sector. “Legislation will be brought to Parliament during this year to amend the current Act,” he said.

Minister of Science, Technology, Energy, and Mining Phillip Paulwell makes his contribution to the 2013/14 Budget Debate at Gordon House in Kingston, Turn to POWER on Page 4 yesterday. (PHOTO: LIONEL ROOKWOOD)

In 2010, the OUR went to tender for 480 megawatts (MW) of generating capacity, and the Jamaica Public Service (JPS) was the sole bidder at the time and was awarded the right to construct a 360 MW combined cycle plant. It was contemplated that the Government

would be responsible for securing the supply LNG of fuel for the new plant, through the Liquefied Natural Gas project.

However, the OUR, on February 1 this year, informed the JPS and its shareholders that it had terminated the request for proposal (RFP) process in relation to the 360-MW project. The OUR said it ended the process after JPS missed a third deadline on January 30 to complete the requirements under the RFP for the 360-MW project and had requested a 30-day extension.

The JPS said the project scope changed significantly since 2011, when it was granted approval to proceed with construction of the plant saying its role initially was simply to construct the plant, but late last year the company was asked to take on the additional responsibility of identifying a supplier and managing the process of procuring the LNG.

A subsequent decision by the OUR to accept unsolicited proposals from the JPS and other companies, this year,

saw five entities presenting unsolicited proposals for 14 discrete projects.

Yesterday, Paulwell said this development was “a big turnaround from 2010, when there was a sole bidder, signifying confidence in this administration, its policies and regulatory framework”.

He said that following evaluations by international consultants Mott McDonald, which contemplated among other factors the firmness of the proposal, the overall price and expected impact on retail electricity rates of the 14 projects submitted, four were rejected because the information was incomplete.

The energy minister said, although 10 were screened for detailed technical and comparative economic analysis, of the 10, the OUR determined that three entities made the pitch. Those include Amorview/Tankweld, which presented a

232-MW project proposed for Old Harbour and a 122.4-MW project proposed for Caymanas; JPS, which presented proposals for a 323-MW and a 350-MW combined cycle plant, both proposed for Old Harbour; and Azurest/ Cambridge, which presented a proposal for a 388-MW plant mounted on a barge.

Paulwell said all three proposed the use of natural gas.

In the meantime, he said subsequent to the OUR receiving and assessing those proposals, the Government has since received another unsolicited proposal from a Hong Kong company, proposing to build an LNG receiving terminal and power plant and to supply LNG from its own gas fields. That company has proposed a combined cycle gas-fired 360-MW power plant adjacent to the LNG hub terminal.

“After several stops and starts, today I can speak with certainty that a positive change is about to come to the supply of electricity in Jamaica. It is essential that we begin construction of new generating capacity this year; there have been too many delays, and we can no longer live with these high electricity prices,” Paulwell told the House.

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This article has been submitted by the JPS.

As the Office of Utilities Regulation (OUR) evaluates proposals for the construction of the next generation of generating plants, the question of what is the best technology to deploy has ignited a public debate, as we saw with the recent article published in the Business Observer (Wednesday, April 3).

The two leading technologies that have emerged are the medium-speed reciprocating engines (diesel) (MSD) and the combined cycle gas turbines (CCGT). Both technologies are currently in operation in Jamaica and have some inherent advantages and disadvantages.

Total generation cost, flexibility of fuel options, ease and frequency of maintenance and environmental issues are all important considerations that will factor into the decision by the OUR in the technology choice. The analysis by JPS has concluded that the CCGT is the right generation solution for Jamaica at this time.

Policy & regulatory framework

The decision on the most appropriate technology for electricity generation is first framed by the policy objectives of both the Government and the OUR. The two most important objectives of the National Energy Policy and the regulator are:

1. A significant reduction in electricity prices; and

2. Fuel diversification.

The Government and the OUR have agreed that a policy of diversifying the mix of fuel used for electricity generation away from oil is the most effective in lowering electricity cost. JPS agrees with this policy approach and it is within that context it has conducted an evaluation of the available technologies to replace its existing capacity and prepare for sustainability and future growth in electricity demand.

Sector experience

JPS has been Jamaica’s electricity provider for 90 years and owns the largest block of power plants on the island. Its majority shareholders, Marubeni Corporation of Japan and Korea East-West Power Company together own and operate power plants (including diesels and combined cycle units) with an installed capacity of over 9,000 MW globally and using a full range of fuels: coal, gas, oil, hydro, wind, solar. No other entity in Jamaica and few others across the world can similarly claim this level of operational familiarity and experience with such a range of plants and fuel.

JPS drew on this knowledge, experience and policy objectives in preparing its proposal to the OUR and after careful analysis has concluded that the CCGT technology offers the best efficiency and flexibility option for generation expansion in Jamaica at this time.

Here’s why.

Cost of Energy

AZUREST Partners and Cambridge Project Development are saying that natural gas electricity generation can happen in Jamaica in little over a year.

The two firms’ joint submission to the Office of Utilities Regulations (OUR) proposes to use natural gas-fired power barges, which can be built within 12 to 15 months after getting the go-ahead from the Government.

An LNG offshore terminal designed for unloading, storage and regasifying liquefied natural gas. Azurest and Cambridge propose to build power barges that would be fed by small LNG ships.

What’s more, they believe that they can access liquefied natural gas (LNG) economically, “because we will have our own LNG source in the US Gulf Coast, the cheapest gas source in the world”.

The idea is to directly feed the power barges located in Jamaica from its fleet of smaller LNG supply vessels.

“Our smaller ships, of a scale appropriate to Jamaica, make our LNG transport process economical,” said Kenneth Allen, managing director of Azurest.

Allen said that his proposal allows for a modular approach to building out the generating capacity — each barge can provide 100 megawatts (MW) of capacity — but if allowed to build all of the 400 MW, its LNG-fired plants could save the country US$415 million annually.

“If we are allowed to put in all of our 400 MW of clean LNG high-efficiency generation capacity, then we should be able to reduce the price paid by the Jamaican public by at least 10 US cents (from 40 US cents to about 28 US cents), or about 25 per cent across the whole country,” he said.

Five entities have presented proposals to the OUR in response to its announcement in February that it would review proposals to supply generation capacity.

The OUR aims to advise the Government of the final results of its analysis on Monday.

Jamaica Public Service Company (JPS) also submitted three proposals for consideration by the OUR, according to the power company’s CEO, Kelly Tomblin.

The proposals are for the construction of 360 MW of new generation capacity, using combined cycle technology and a combination of fuel sources: natural gas as primary fuel, with Automotive Diesel Oil (ADO) as backup fuel; natural gas as primary fuel with inlet air cooling power enhancement, and ADO as backup fuel; and Liquefied Petroleum Gas (LPG) as the primary fuel.

However, Wartsila Caribbean, which is the proposed technology provider for three of the bids, including the Cambridge/Azurest joint venture, has said that its reciprocating engines are a good deal more efficient than the combined cycle gas turbines (CCGT) being proposed for use by JPS.

The reciprocating engines could save over US$100 million a year more than the proposed CCGT, according to Wartsila Caribbean Vice-president Rodney George — and that’s even without LNG.

“Bogue is a living example where the CCGT plant has a combined cycle efficiency of only 40 per cent,” said George. “In comparison, the JEP (Jamaica Energy Partners) West Kingston plant with Wartsila reciprocating engines, have a simple cycle efficiency of close to 45 per cent… regardless of what fuel is utilised, be it LNG, LPG, or ADO, the efficiency quotient remains the same.”

Despite suggestions to the contrary, JPS is confident that combined cycle technology is of far greater benefit to the country than other options being considered, such as diesel engine technology, according to the JPS boss.

“While we haven’t seen the other proposals, our information shows that CCGT not only offers lower overall costs through greater efficiency and lower operating and maintenance costs. It is also more environmentally friendly,” Tomblin said. “Although JPS and the GOJ continue to evaluate all potential gas supply options, if the immediate supply options for LNG do not result in the desired reduction in electricity charges, LPG (Liquefied Petroleum Gas) is a great option.

“LPG is more accessible right now and can be easily incorporated in our long-term plans for fuel diversification and price reduction,” she added. “The current prices show LPG providing attractive cost reductions for our customers.”

In the meantime, George proposes that the use of backup liquid fuel such as heavy fuel oil (HFO) is “not far-fetched given the uncertainty of securing LNG or LPG supplies”.

Allen said that if the other bidders aren’t using LNG, “they are probably not the lowest cost solution for the Jamaican electricity consumer”.

Cambridge is a developer of energy and environmental infrastructure projects focused on the Caribbean and has in-house experience successfully developing over US$2 billion in projects in the Caribbean Basin, as well as the long-term management of over 12 independent power plants.

Azurest Partners is a financial advisory and capital-raising firm, where team members have collectively raised over US$900 million in equity and US$2 billion in debt financing for clients in the US, UK and Africa.

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The Office of Utilities Regulation (OUR) has given the Jamaica Public Service Company (JPS) until March 15 to submit the details of an alternative proposal for supplying 360 megawatts of power to the national grid.

Earlier this month, the OUR had announced it had ended the request for proposal process with the JPS for the 360 megawatts power plant.

A day after missing the January 30 deadline to provide final details of how it would undertake the project, the JPS had made an alternative proposal to the OUR.

But in a release last night the OUR said the company

The Office of Utilities Regulation (OUR) has given the Jamaica Public Service Company (JPS) until March 15 to submit the details of an alternative proposal for supplying 360 megawatts of power to the national grid.

Earlier this month, the OUR had announced it had ended the request for proposal process with the JPS for the 360 megawatts power plant.

A day after missing the January 30 deadline to provide final details of how it would undertake the project, the JPS had made an alternative proposal to the OUR.

But in a release last night the OUR said the company