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Warren Buffett: Solar and Wind Could ‘Erode the Economics of the Incumbent Utility’

March 1, 2016 Webmaster

In his annual investor letter, Buffett addresses the new set of risks faced by electric utilities.

Billionaire investor Warren Buffett says that renewable energy and efficiency are pushing utilities beyond a “sloppy” operational model and into a more competitive environment.

In his annual letter to Berkshire Hathaway shareholders, Buffett outlined the risks posed by distributed generation to traditional power companies. Berkshire Hathaway, a multinational holding company worth nearly $200 billion, owns 10 energy companies, including three large electric utilities serving territories across 11 Midwestern and Western U.S. states.

The business of electricity is entering a period of uncertainty, wrote Buffett.

“In its electric utility business, our Berkshire Hathaway Energy (“BHE”) operates within a changing economic model. Historically, the survival of a local electric company did not depend on its efficiency. In fact, a ‘sloppy’ operation could do just fine financially,” wrote Buffett. “That’s because utilities were usually the sole supplier of a needed product and were allowed to price at a level that gave them a prescribed return upon the capital they employed.”

“That’s all changing,” he wrote. Sloppiness is no longer an option.

More and more regulated power companies are facing a world where third parties, like solar service providers, can compete with them directly on cost. (Although Buffett stresses that the only reason for this competition is because of federal subsidies.)

“Today, society has decided that federally-subsidized wind and solar generation is in our country’s long-term interest. Federal tax credits are used to implement this policy, support that makes renewables price-competitive in certain geographies. Those tax credits, or other government-mandated help for renewables, may eventually erode the economics of the incumbent utility, particularly if it is a high-cost operator,” wrote Buffett.

The Investment guru assured investors that Berkshire Hathaway’s utilities will remain competitive because of their adoption of renewable energy, energy efficiency, and increased focus on operational efficiency.

“BHE’s long-established emphasis on efficiency — even when the company didn’t need it to attain authorized earnings — leaves us particularly competitive in today’s market (and, more important, in tomorrow’s as well),” wrote Buffett.

Berkshire Hathaway Energy has poured $16 billion into renewables in recent years, according to Buffett. The company’s electricity portfolio now consists of 7 percent wind and 6 percent solar. The company also plans to increase its investments in large-scale renewable energy projects in support of international climate goals. “We’re not done,” wrote Buffett.

Buffett did not mention state policies like net metering, which his utilities have strongly opposed. Berkshire’s power companies, particularly NV Energy in Nevada, have been heavily criticized and even demonized by the solar industry for fighting to get rid of net metering.

Some argue that Buffett and SolarCity Chairman Elon Musk are locked in a battle over the future of solar energy. Both believe in the promise of the technology; however, Buffett thinks centralized solar power plants are the most economic choice, while Musk thinks rooftop solar will dominate.

Whatever the dominant model — distributed or centralized — Buffett believes his utilities will ride the transition.

“None of these problems, however, is crucial to Berkshire’s long-term well-being,” he wrote. Many other companies in Berkshire’s portfolio have adapted to change in the past. “And we will continue to do so.”

Greentech Media

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Traditional Energy Industry Declares War on Solar Energy

February 18, 2016 Webmaster

Solar’s threat to the utility industry is deeper than not having to purchase electricity

Now that solar power is reaching prime time, the fossil fuel industry is doing all that it can to stop its growth.

For many years solar was on the periphery, installed by early adopters and helped along by government subsidy. But over the last several years, solar has emphatically become mainstream. It is still growing from a low base, but it is now one of the most preferred sources of new electricity generation. The cost of residential solar have been cut in half since 2010, and utility-scale solar has achieved even greater cost declines.

In 2015, the U.S. saw 16 gigawatts of new renewable energy capacity installed, which accounted for two-thirds of the total. Solar alone accounted for about one-third of new capacity last year. Natural gas only captured 25 percent of the newly installed capacity despite several years of incredibly low prices. The banner year for clean energy occurred while 11 gigawatts of coal-fired electricity came offline as old plants were retired amid rising costs and stricter environmental regulation. The clean energy transition is very much underway.

TIME

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Using Oil, LNG Might Negligibly Affect Electricity Prices – JPS

February 17, 2016 Webmaster

The Jamaica Public Service Company (JPS) says it is unable to definitively state how the use of both automotive diesel oil and liquefied natural gas (LNG) at the Bogue power plant in St James will impact the price of electricity to consumers.

It said the power plant currently burns on automotive diesel oil “and we are doing a conversion that adds the capability to also burn natural gas. So we will end up with the ability to burn both fuels at no extra cost”.

Responding to Wednesday Business queries about the rationale for the dual-fuel facility, the JPS said natural gas will be the primary fuel on which the plant operates and automotive diesel oil will be a back-up fuel “in case we have any problems with receiving natural gas”.

It added that under normal conditions, the plant will effectively be a gas-fired power plant.

IMPACTON ELECTRICITY PRICES

As to how it will impact the price of electricity the JPS said in emailed responses that “we cannot speak to the likely impact on electricity prices given the uncertainty of prices in the future (for oil vs LNG)”.

However, it said that the impact is expected to be negligible given that Bogue only represents approximately 10 per cent of the company’s total costs.

“What we can say with fairly good certainty is that the cost of electricity today is 30 per cent lower than it was one year ago, and we expect that trend to continue throughout 2016, given that 80 per cent of our net generation (production) will still be based on oil, 10 per cent will be from natural gas, and we expect renewables to make up 10 per cent of our net generation once the three renewable energy projects currently under construction (for circa 80 megwatts) are completed before the end of 2016.”

The JPS, an integrated electric utility company and the sole distributor of electricity in Jamaica, added that “that means we continue doing a good job as a country of increasing the penetration of renewable, while also diversifying our fuel mix and reducing our overexposure to oil”.

It said that it is hoping to continue doing more of that through the 37 megawatts of renewables currently being pursued by the Office of Utilities Regulation through a request for proposal, as well as its 190 megawatt gas-fired power plant that will be commissioned in mid-2018.

IMPROVING COMPETITIVENESS

Reducing the cost of electricity is critical to improve competitiveness, according to the International Monetary Fund’s latest updated memorandum of economic and financial policies.

It said that the action plan prepared by the Electricity Sector Enterprise Team foresees replacing current oil-fired generation capacity with gas, coal and ethane-fired plants to achieve significant cost savings.

Next steps will include the conversion of the Bogue power station from oil to gas, a process which the JPS is currently undertaking.

In addition, said the memorandum, the Government has approved the construction of Jamaica’s first natural gas-fired power plant, a 190-megawatt facility to be built and operated by JPS, and to be completed by 2018. Several renewable energy projects are also under way.

The Government said it will prepare a plan to ensure that all public entities – central government, local government and public bodies – meet their financial obligations in a timely manner.

In the memorandum, the Government also pointed out that urgent actions will be taken to reduce the time needed for entrepreneurs to get an electricity connection. Plans foresee the automation of the work processes within the government electrical regulator and the acquisition of an Application Management and Data Automation (AMANDA) software to streamline procedures for scheduling, inspecting, approving and certifying electrical installations.

An action plan for implementation of the reforms and adoption of the AMANDA system are expected to be completed in fiscal year 2016/17, with support from the Inter-American Development Bank.

The Gleaner

Electricity JPS News Oil

JPS yearly profit jumps 24%

February 17, 2016 Webmaster

Light company at ease with increase in customer satisfaction

Light distributor Jamaica Public Service (JPS) has reported a 24 per cent jump in annual profits, increasing from US$23 million in financial year 2014 to US$28.6 million for 2015.

The increase in profits came despite a 54 per cent decline on year-on-year net profits for the December period, with the quarter closing at US$4.87 million ($589 million), compared to almost US$10.5 million for the same quarter in 2014.

The decline in net profit was led by a US$47.6 million dip in revenues as oil which fuels most of JPS power stations continues to trend downward and the consistent passing of the reduced rates on customer’s electricity bills, according to just released data.

Revenue for the three-month period ending December 2015 was US$176.7 million, compared with US$224.3 million a year earlier.

“It’s really great to have lower prices, yes, but what’s not great is for them to go up and down. So we’ve worked on how we do create a more sustainable environment that doesn’t have that volatility. I have to say that the one that’s right here, right now is the Bogue project,” JPS CEO Kelly Tomblin stated at a press conference earlier this month.

“The other thing that will help with this problem is an integrated resource plan (IRP), which will help us in determining what resource and where will best support sustainability and most of all affordability,” she added.

Consumer electricity rates are currently at a five-year low.

Despite seeing significant declines in net profit, JPS expressed some satisfaction with the quality of service being provided to consumers which trended upwards at 70 per cent in 2015.

JPS saw one of its lowest satisfaction rates back in 2012 at 22 per cent; however, Tomblin is encouraged by the growth in customer satisfaction and plans on implementing 10 initiatives geared towards continued growth in customer service.

“You can see how customer satisfaction has grown; it’s almost at 70 per cent. We are not happy with that but we have worked very hard to say to our customers we appreciate you and we want to be in a different conversation,” she said.

Senior vice-president for energy delivery and technology, Gary Barrow, noted that the company has already seen a 30.3 per cent decrease in the frequency of outages when compared with the previous year. The company also noted that it is working on the Government of Jamaica to improve payment for street lights, as it moves to implement LED lighting over the next five years.

Throughout 2016, JPS plans on completing the conversion of the Bogue power plant, while partaking in initiatives to lead in a ‘clean and green’ Jamaica. Additionally, the company has started the process of implementing advance smart grid, proliferate prepaid meters, improving customer engagement, and the implementation of the JPS mobile application.

JPS also plans on connecting 10 new communities during the year.

Jamaica Observer

Electricity Government JPS

JPS writes off $100m of electricity bills

February 8, 2016 Webmaster

Kelly Tomblin, president and CEO of JPS.

Jamaica Public Service Company (JPS) said it wrote off $100 million in debt owed by residential and commercial customers for electricity under its year-end amnesty programme.

It offered customers the opportunity to start the new year at least partially debt free.

The power utility also said it continues to work with the Government, through the Ministry of Finance, to ensure payment for street lights on a timely basis.

In introducing the amnesty, which ran from November to December 2015, JPS said it had identified critical cases where some of its customers’ debts to the light and power provider had accumulated so significantly over time that they had been classified as bad debt.

However, for customers who wanted to regularise their accounts and in some cases restore their electricity, JPS gave residential rate 10 and commercial rate 20 customers an opportunity to negotiate up to 70 per cent debt forgiveness.

Persons qualified to apply were those owing in excess of $50,000 at August 2015 and had their service disconnected; as well as residential and small commercial customers who owed more than $100,000 up to August, but whose accounts were still active.

Last Friday, JPS President and Chief Executive Officer Kelly Tomblin, addressing a media briefing at the company’s offices in New Kingston, said more than 1,000 account holders benefited from the amnesty.

STREET LIGHT REPAIRS ONGOING

As for the issue of defective street lights, Tomblin said repairs were ongoing, while acknowledging that the utility got daily complaints.

JPS has about 100,000 street lights and last year the company replaced 27,700 of them, an average of 514 per week.

“We are replacing street lights, hundreds and hundreds every week, so it’s not that JPS isn’t aware…”, she said.

Against that background, Tomblin said: “There are two things that are going on that we have to fix.

“We are working with the Government right now to find a way for us to get paid more promptly,” she said. “I have a commitment by the minister of finance. We work with him all the time. We all know that we have a lot of different obligations and a lot of different challenges to meet and we do know today that we are working on solutions to run our street lights on, for instance, LED.”

At the same time, she said the company has to be careful how much it invests in the current solution “if we are going to have this three to four year plan to replace them.”

She acknowledged the issue is, for some, one of security, but said the street light problem is compounded by theft.

“With the level of electricity theft, we will never have first-class street lights … we cannot have street lights operating if we have a couple of hundred people stealing,” the utility boss said.

JPS is manager of the national grid and monopoly distributor of electricity supplies. The utility collects around $100 billion per year in billings.

The Gleaner

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Paulwell says net billing to resume, but solar energy providers still in limbo

February 1, 2016 Webmaster

Energy Minister Phillip Paulwell

ALMOST a year after net billing was suspended, there are indications that the programme is to resume, although Energy Minister Phillip Paulwell is yet to set a timeline.

He said recommendations have been made to the Office of Utilities Regulation (OUR) to resume processing licences. But, before that can happen, the Electricity Lighting Act must be amended and the Jamaica Solar Energy Association (SEA) raised concerns that nothing has been done to have the legislation amended.

At Wednesday’s national conference for the development of an energy services company industry in Jamaica, Paulwell said that the Government is committed to reopening net billing.

He, however, explained that while the law names the Energy Sector Enterprise Team (ESET) as the body responsible for regulating new generation capacity, it was felt that it (net billing) is not appropriately placed at ESET, and that the OUR is expected to resume processing net billing licences.

So far, more than 300 licences have been issued, but solar energy providers have not been able to interconnect to the JPS grid since May of last year.

David Barrett, president of SEA, says the association’s membership is still in a state of confusion.

“It’s static now (the sector) because people have no entity to get a licence from, they don’t know who to go to. Some persons have gone to the OUR or the JPS (Jamaica Public Service company) but they can’t do it because of the obvious reasons,” he told the Jamaica Observer last Thursday.

Over the months, entrepreneurs in the solar energy sector have complained bitterly of suffering millions in losses after the JPS stopped net billing to carry out an assessment of the pilot. The review was completed by the United States’ National Renewable Energy Laboratory and the report made public in June, but all grid interconnection for new net billing projects islandwide have still remained on hold.

Solar energy providers say the prolonged suspension has dealt their outfits a serious blow, arguing, too, that the JPS has too much power over the arrangement and that the Government needs to act decisively on the issue.

Barrett said the members are neither pleased with the pace of the process nor the new conditions that are being established.

“What has been decided is that the cap is to be five megawatts instead of 11 as it would have been in the previous phase, and that the cap for the individual locations will remain as they are. The association is not too happy about that because we feel that there is easy opportunity to increase potential for renewables in Jamaica without disturbing the grid in any way,” he told the Observer earlier this month.

Additionally, Barrett expressed disappointment that the association had not been invited to the table when the new cap was being set. “So we don’t have the information that fed into the decision-making process,” he stated.

Net billing permits JPS customers, who own renewable energy generators, to produce electricity for personal use and to sell excess energy to the light and power monopoly at wholesale prices, which are set by the OUR.

Jamaica Observer

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Electricity bills getting lighter

January 14, 2016 Webmaster

THE Jamaica Public Service Company (JPS) says its customers will see yet another reduction in bills this month, as the light and power company continues to pass on savings from falling fuel prices.

“This month, customers will see a 4.12 per cent decrease in bills as the Fuel & IPP Charge on bills for January is $10.67 per kilowatt hour (kWh), compared to the charge of $11.83 per kWh applied to December bills. This is the lowest Fuel & IPP Charge since 2005. The total cost per kWh of electricity now stands at 21 US cents or J$25.29, for residential customers,” the JPS said in a release yesterday.

It added: “Therefore, a customer who consistently uses 165 kWh per month will be paying $182.55 less for his bill this month, compared to what he paid last month. This customer will pay $4,252.41 for the 165 kWh of electricity used, as against the $4,434.96 that was paid in December 2015 for the same usage.”

According to the JPS, it has not only passed on savings from the fall in the price of oil on the world market, but has improved efficiencies in the company’s operations.

At the same time, the company has urged customers to use energy wisely, as the final bill amount depends on how much energy is used.

The Observer

Electricity JPS News

JPS To Offer Prepaid Meters Islandwide Next Year

December 18, 2015 Webmaster

A Jamaica Public Service technician at work seeking to regularize electricity supply in Denham Town, Kingston.

Utility provider Jamaica Public Service (JPS) will offer prepaid service in all parishes next year, but expects power consumption to dip slightly in the process.

The prepaid service will become available to all residential customers who opt for it, but will not initially be offered to commercial customers.

“By the end of 2016, we will offer prepaid meters to all parishes,” JPS President Kelly Tomblin told the Financial Gleaner in a telephone interview this week. “That’s our goal – to focus on residential customers.”

She explained that the service will eventually launch an app that will allow persons to top-up their accounts on their telephones or other devices.

Expectations of reduced revenues

Tomlin said the prepaid meter service is expected to reduce total revenues to JPS because of an expected reduction in consumption. However, the savings should give customers more disposable income to spend or save.

“It will help to grow the economy because if you use less (energy), then you have more money to spend, which helps the economy,” Tomblin said.

JPS introduced a prepaid electricity service as an option as part of the fulfilment of its pledge to find alternative energy solutions for all Jamaicans.

“It is intended for those Jamaicans who have asked us for a payment option that can better assist them in predicting and budgeting for their electricity bills. Although new to Jamaica, prepaid electricity is a standard service product offered by many electric utilities the world over for decades,” JPS said in response to Financial Gleaner queries.

To introduce the service, JPS opted to do a limited pilot of the programme across Kingston, St Andrew and St Catherine, which the company intends to use to tweak the product before a wider roll-out across the island in 2016.

JPS added that the service is currently available to all residential and Rate 20 (general services/small commercial) customers and potential customers across Kingston, St Catherine and St Andrew.

“Prepaid electricity service was never designed, and is not intended, as a tool to fight electricity theft,” the JPS said.” It has, however, proved to be a very effective tool for budget-conscious customers who want more control to tailor their consumption to match how much they have to spend at any given time,” the company added.

JPS made US$23.7 million in 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. The light and power provider said that it requires a new tariff to be approved by the Office of Utilities Regulation (OUR) as prepaid is a new and different service from the normal post-paid payment solution.

“Designing and developing a new tariff for a new utility service can be a complex matter and JPS and the OUR have been in discussions for many months on the subject,” said the JPS communications department. “This involved JPS making submissions to the OUR, showing different forecasts of what we believe the demand for the new service will be over time and the impact this will have on revenues, depending on the rate and structure of the tariff design,” it added.

The Gleaner

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Coalition urges action to phase out fossil fuel subsidies

December 7, 2015 Webmaster

Members of the Jamaican delegation to COP21 at the Wider Caribbean Pavilion (from left) Ambassador Sheila Sealy Monteith, under secretary for the Multilateral Affairs Division at the Ministry of Foreign Affairs and Foreign Trade; Vilma McNeish, ambassador to the Kingdom of Belgium and the European Union; Senator Arnold J Nicholson, minister of foreign affairs and foreign trade; Dr Orville Grey, senior technical officer in the Ministry of Water, Land, Environment and Climate Change; and Jeffrey Spooner, head of the Meteorological Service of Jamaica.

PARIS, France — An unprecedented coalition of close to 40 governments, hundreds of businesses and influential international organisations have called for accelerated action to phase out fossil fuel subsidies, a move that would help bridge the gap to keep global temperature rise below 2°C and perhaps close to the 1.5°C for which Caricom and other Small Island Developing States are advocating.

On the opening day of the UN Conference on Climate Change (COP21) last week, New Zealand Prime Minister John Key formally presented the Fossil Fuel Subsidy Reform Communiqué to Christiana Figueres, executive secretary of the UN Framework Convention on Climate Change (UNFCCC), on behalf of the Friends of Fossil Fuel Subsidy Reform, The Prince of Wales Corporate Leaders Group and other supporters of the communiqué.

The communiqué calls on the international community to increase efforts to phase out perverse subsidies to fossil fuels by promoting policy transparency, ambitious reform and targeted support for the poorest.

Governments spend over $500 billion of public resources a year to keep domestic prices for oil, gas and coal artificially low. Removing fossil fuel subsidies would reduce greenhouse gas emission by 10 per cent by 2050. It would also free up resources to invest in social and physical capital like education, healthcare and infrastructure, while levelling the playing field for renewable energy.

“Fossil fuel subsidy reform is the missing piece of the climate change puzzle,” Prime Minister Key said. “It’s estimated that more than a third of global carbon emissions, between 1980 and 2010, were driven by fossil fuel subsidies. Their elimination would represent one-seventh of the effort needed to achieve our target of ensuring global temperatures do not rise by more than 2°C. As with any subsidy reform, change will take courage and strong political will, but with oil prices at record lows and the global focus on a low carbon future, the timing for this reform has never been better.”

In accepting the communiqué, Figueres said: “These subsidies contribute to the inefficient use of fossil fuels, undermine the development of energy efficient technologies, act as a drag on clean, green energy deployment and in many developing countries do little to assist the poorest of the poor in the first place.

“The huge sums involved globally could be better spent on schools, health care, renewable energies and building resilient societies. The current, very low oil prices are a good opportunity to really get going on this issue.”

Chair of The Prince of Wales Corporate Leaders Group (CLG) and former president of Alstom Power, Philippe Joubert, also spoke last Monday.

“The CLG’s long-standing efforts to put a price on carbon, including most recently working with the World Bank through the Carbon Pricing Leadership Coalition, will soon deliver results. It doesn’t make sense that, at the same time, governments artificially deflate the cost of coal, oil and gas, the primary cause of GHG emissions. Fossil fuel subsidies must be ended to stop this contradiction and enhance a real transition to low carbon energy,” he said.

For the OECD’s part, Secretary-General Angel Gurría commented that countries need to demonstrate their seriousness about combating climate change with concrete actions and policies.

“Reforming harmful fossil-fuel support is a good place to start,” Gurría stressed.

Close to 40 countries have endorsed the Fossil Fuel Subsidy Reform Communiqué, including Canada, Chile, France, Germany, Italy, Malaysia, Mexico, Morocco, Peru, The Netherlands, The Philippines, Samoa, the United Kingdom, the United States, Uganda, and Uruguay.

The communiqué is supported by The Prince of Wales’s Corporate Leaders Group (23 global companies employing two million people worldwide with combined revenues exceeding US$170 billion) and other business organisations working with thousands of corporations and investors, including The B Team, the World Business Council for Sustainable Development and the We Mean Business coalition.

The communiqué has also been endorsed by influential international organisations, including the International Energy Agency, the OECD and the World Bank.

Eliminating fossil fuel subsidies can accelerate the economic shift needed to tackle climate change and remove one of the obstacles to delivering the low-carbon future for which COP21 is aiming.

“History will prove fossil fuel to be a dead end,” Stefan Löfven, prime minister of Sweden, said. “Sweden will be amongst the first fossil-free welfare nations of the world. And eliminating fossil fuel subsidies is an important step on this path.”

Hakima El Haite, Morocco’s environment minister and candidate for the presidency of COP22, added: “Not only do fossil fuel subsidies put a strain on government coffers but they also don’t help the poorest of society.”

COP21 began on November 30 and will run until Friday, December 11.

Jamaica Observer

Alternative Energy Government LNG News Oil Uncategorized

Financially Speaking | Jamaica’s Spectacular LNG Record

December 7, 2015 Webmaster

Lest we forget, Jamaica has been trying to strike deals to migrate to liquefied natural gas (LNG), and failing at it spectacularly, for well over a decade.

It all began four prime ministers ago, when Percival James Patterson was in charge and sought to broker a deal with his counterpart, Patrick Manning, in Trinidad in 2001. And we knew Patterson was serious about the issue, because that time he did not form a committee around it.

Still, it didn’t end well. Trinidad began to waffle – after all, it could get better prices for its fossil elsewhere. Jamaica wanted concessionary pricing for a yearly 1.1 million tonnes of natural gas as a family member in Caricom, but Trinidad was in favour of the hub. Business, after all, is business.

Patterson even put a dedicated man in charge of the LNG programme. That didn’t help. And since then, almost every effort at adding gas to the energy mix has coagulated. You know you have a problem when international headlines pop up asking, ‘Is Jamaica’s Energy Cursed?’

To recap, the actors in Jamaica’s LNG serialised melodrama have included Anthony Hylton, James Robertson, Clive Mullings, Christopher Zacca, Phillip Paulwell, Kelly Tomblin, Exmar, Caribbean LNG, Azurest, Energy World International, Jamaica Public Service Company and now Abengoa SA. Perhaps the only clairvoyant in the mix was Mullings, who, back in 2008, began touting coal as a more practical choice for diluting the viscosity of oil on Jamaica’s balance of payments, given the vagaries of supply in the LNG market.

Not everyone loved the idea. The thought of coal was a bit dirty, and risky, but it wasn’t entirely dismissed. Fracking has now changed that dynamic somewhat.

In 2014, some 13 years since the Patterson-Manning bro-pact and a decade after the more formalised LNG heads of agreement, ESET emerged as the latest reset when current Prime Minister Portia Simpson Miller reached out to an old and trusted ally of Patterson’s – Dr Vincent ‘Head of Kitchen Cabinet’ Lawrence – to bring an end to the confusion that had become Jamaica’s energy policy.

Being a glutton for punishment, Jamaica held on to its LNG ambitions, but also opened up to proposals for coal, compressed gas, and natural liquid gases such as ethane and propane.

Blame it on the cosmos

But even the doc, despite the heavenly moniker that had been bestowed on him in the past, has been no match for the supremacy of Murphy’s law, or whatever it is in the cosmos that appears to want Jamaica to stay wedded to crude. First, the American Ethane/UC Rusal arrangement fell apart – which Lawrence insisted would not derail the 2018 schedule to begin cutting electricity prices – and now there is Abengoa.

Right about now, JPS boss Kelly Tomblin likely has fingers crossed, hoping that New Fortress Energy won’t throw up any surprises; that the arrangement with the American company to supply gas to JPS’ Montego Bay plant will – please, oh please – go right.

General Electric is currently retrofitting Bogue for LNG – a US$22.54-million project that seems to escaped the curse – and Fortress Energy is to start delivering gas by mid-2016. The final terms of the Fortress engagement are now being negotiated.

Before the LNG project was revised from a 360MW single project and split into bite-size pieces under ESET, JPS itself had tried to take on the task under a US$600-million plan that went nowhere. The power utility was said to have a financing revolver lined up but could not secure the gas supplies at the right price.

Under the reset, JPS has two projects to execute – the 120MW Bogue project in Montego Bay for which it has contracted New Fortress, and the 190MW project in Old Harbour Bay. For the latter, JPS reportedly got several bids but chose Abengoa SA, which just days later filed for bankruptcy protection to restructure billions of debt.

Somebody hadn’t done their homework. One would have thought that JPS’s foreign parents Korea East West Power Company and Marubeni – both of which operate in the energy field – would have the temperature of another big energy player. But it appears that they, and the JPS consultants, did not.

Still, Tomblin and team appear to have other options were Abengoa to falter. The Spanish company has four months to right the ship, a timetable that collides with JPS’, which wants to start site prep for the Old Harbour plant by March in order to keep its 2018 commitment. Right about now, JPS is probably reinvestigating the other bidders, hopefully using a different set of consultants than the ones who delivered up the embarrassment of Abengoa.

Old Harbour is an important project for Tomblin, who wants her legacy at the Jamaican utility to be one of transformation. She got a Jamaican power generator and distributor to run, but she wants to leave it as a ‘gas and electric utility’ with a role in developing a regional gas supply hub for the Caribbean market. Old Harbour would be the fulcrum, assuming it gets built.

With Bogue and Old Harbour in play, around a third of base load capacity would be fired by gas, a cleaner and, as important, cheaper fuel source that will allow JPS to produce and supply electricity to the grid at a price below 13 US cents per kilowatt-hour, and knock 1.2 million barrels of oil off the country’s annual orders of crude.

Still, Murphy’s law is tenacious, which means that all Jamaica can do is pray that the stars will finally align in its favour and that the energy gods are in affinity with Vin.

The Gleaner

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