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Jamaica Faces Trek To A Green Economy

May 12, 2016 Webmaster

KHAN… what we want is for them to own, as much as possible, what has to be done in each sector

From the “historical momentum in favour of brown industries” – those overly dependent on fossil fuels – to “bias in the political system towards short-run and against long-run perspectives”, the deck appears stacked against Jamaica’s efforts towards a green economy.

These factors, according to the recently published Green Economy Scoping Study, in addition to others, include IMF prescriptions that preclude Government providing tax incentives to encourage greening.

Still, the study – done with United Nations Environment Programme and European Union support – notes that in as much as these factors are barriers, they are also justification for the transformation of the economy into one typified by efficient resource management, a low-carbon footprint, and which is socially inclusive.

And it cites a variety of opportunities that can be pursued across key sectors – agriculture, construction, energy, tourism, and water – from the private sector’s demonstrated leadership in some fields to existing policies and programmes.

Elizabeth Emanuel, one of the study’s authors, said the Vision 2030 Jamaica, for which she is programme director, is one such.

“One of the benefits Jamaica has in advancing to a green economy, compared to other states, is that our own national development plan had the foresight to include the green economy as a pathway to prosperity. That plan speaks to the green economy and what a green economy would look like for Jamaica,” she told The Gleaner.

Possibility Indicators

And there are some good indicators of what’s possible, Emanuel added, noting that there have been, for example, advances in the diversification of the island’s energy mix.

“We also have a society that is more aware, companies that are thinking and talking green, and all of these are creating the demand for a green economy,” she noted.

According to Emanuel, there is no question of the need to pursue the transition – whatever the constraints.

“The green economy is not just about environmental protection, but it is our planet, our people, our economy and how we marry those three to create sustainable solutions that will advance the prosperity of our land of wood and water,” she said.

Eleanor Jones, head of Environmental Solutions Limited, agreed.

“When it comes to what we need, we need to look at our resources management because that is also a part of it … . But you can’t just wave a magic wand. It has to be a structured approach with legislation and incentive … ,” she said.

“We like to talk about the IMF putting in all these strictures, and they have, and you have to watch your budget. But not everything has to cost a lot of money… . We have to encourage our suppliers to retool and encourage our consumers to manage their resources,” Jones added.

Colonel Oral Khan, chief technical director in the Ministry of Economic Growth and Job Creation, said the coming months should see a re-engagement of key actors towards the green economy.

“The various sectors were consulted in the preparation stage. We now need to re-engage with these sectors at the highest levels because there have been a number of changes,” he said.

“What we want is for them to own, as much as possible, what has to be done in each sector. We expect that they will go through the list of recommendations that are there and see which ones are to be done in the short to medium term, so they can embrace those and seek to work them into their respective strategic plans. That is the approach we will take,” he added.

Among the recommendations from the study are:

• Sustainable land management and water management systems for agriculture;

• Enforce the new building code, as well as adopt codes and standards that mandate green construction practices for the construction sector; and

• Promote and incentivise renewable energy use and water use reduction, as well as planning for climate change for the tourism sector.

There is, too, the recommendation to develop more extensive sewage recycling, as well as reduce energy cost and diversify sources for the water and sewerage sector.

pwr.gleaner@gmail.com

The Gleaner

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World Bank Raises 2016 Oil Price Forecast

April 27, 2016 Webmaster

Amid improving market sentiment and a weakening dollar, the World Bank is raising its 2016 forecast for crude oil prices to $41 per barrel from $37 per barrel in its latest April 2016 Commodity Markets Outlook, as an oversupply in markets is expected to recede.

The crude oil market rebounded from a low of $25 per barrel in mid-January to $40 per barrel in April following production disruptions in Iraq and Nigeria and a decline in non-Organization of the Petroleum Exporting Countries (OPEC) production, mainly US shale.

A proposed production freeze by major producers failed to materialise at a meeting in mid-April, the World Bank said in a release.

“We expect slightly higher prices for energy commodities over the course of the year as markets rebalance after a period of oversupply,” said John Baffes, senior economist and lead author of the April 2016 Commodity Markets Outlook.

“Still, energy prices could fall further if OPEC increases production significantly and non-OPEC production does not fall as fast as expected,” he added.

All main commodity indices tracked by the World Bank are expected to decline in 2016 from the year before due to persistently elevated supplies, and in the case of industrial commodities – which include energy, metals, and agricultural raw materials – weak growth prospects in emerging market and developing economies.

Energy prices, including oil, natural gas and coal, are due to fall 19.3 per cent in 2016 from the previous year, a more gradual drop than the 24.7 per cent slide forecast in January. Non-energy commodities, such as metals and minerals, agriculture and fertilisers, are due to decline 5.1 per cent this year, a downward revision from the 3.7 per cent drop forecast in January, the World Bank said.

COST PROBLEM

According to a March 2016 International Monetary Fund (IMF) working paper titledCaribbean Energy: Macro-related Challenges, the single most important cost problem is the region’s heavy dependence on expensive, imported fossil fuels.

As in the United States, the cost of using petroleum to produce electricity is several times higher than alternative fuels, it said.

Excluding Haiti, biomass represents around 11 per cent of Caribbean energy supply, mostly concentrated in Jamaica, the paper said.

It noted that Jamaica is the second-largest electricity consumer, after Trinidad and Tobago, with aggregate consumption of three billion kilowatt hours in 2012. That represents 32 per cent of total regional electricity consumption, excluding Trinidad and Tobago.

The IMF estimated that the net benefit to Jamaica from a decline in oil prices as a per cent of gross domestic product was four per cent.

Gleaner

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Trinidad Confronting Major Shock From Fall In Oil Prices — IMF

March 21, 2016 Webmaster

Trinidad & Tobago is confronting a major shock with the sharp fall in energy prices that accelerated early this year.

In a statement following the conclusion of a mission from the International Monetary Fund earlier this year, head of the IMF mission Elie Canetti said that based on available information, including that of job losses and continued supply-side constraints in the energy sector, Trinidad’s economy is expected to contract one per cent this year.

The mission also said that declines in energy-based revenues will constrain the government’s ability to act as an engine of growth.

Still: “With substantial financial buffers and low, albeit rising levels of public debt, Trinidad and Tobago is not in a crisis. Nonetheless, in recent years, taking into account the size of energy revenue windfalls, the country has under-saved and underinvested in its future,” the IMF said.

“As a consequence, the imbalances that are now starting to build up could lead the country to uncomfortable levels of debt and external financial cushions absent further action. The new Government agrees that policy adjustments are needed.”

The fund noted that in the half-year since they took office, the Keith Rowley-led administration has already taken “some difficult but necessary steps”, such as widening the value tax base, cutting fuel subsidies, and cutting the number of ministries.

BUDGET DEFICIT

Despite these measures, the IMF said it projects a 2016 Budget deficit at some 11 per cent of GDP. However, if asset sales were to be counted as revenue rather than financing, the deficit would be equivalent to about five per cent of GDP, it said.

“Continued projected deficits of this size call for further fiscal consolidation, perhaps of around 6 per cent of GDP over the next few years,” said the multilateral agency.

Trinidad has agreed to conduct a wide-ranging expenditure review, and will seek the assistance of the World Bank to rationalise and reverse the unsustainable increases in spending on transfers and subsidies over the last several years.

“We support the Government’s intent to conduct a national dialogue on fuel subsidies with a view to phasing them out over time,” said the fund. “The country’s external situation has been very challenging. Against a backdrop of foreign exchange shortages that have intensified since the beginning of 2015, the recent sharp falls in energy prices are further reducing the available supply.”

During the recent visit, the mission met with government officials, banks, and private-sector representatives to assess the foreign exchange market. The fund noted that the current shortage appears to be driven by business uncertainty but also speculative trades.

“While it is appropriate that the central bank paused in its interest rate hiking cycle in January, there is little scope, as the bank agrees, to cut interest rates, at least until shortages of foreign exchange are ameliorated,” the IMF said.

Gleaner

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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

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Jamaica Stands To Lose If World Bank’s Oil Price Prediction Holds

January 27, 2016 Webmaster

While Jamaica has spent US$20 million (about J$2.3 billion) to hedge against the risk of a sharp increase in oil prices, the World Bank has lowered its forecast for crude oil to US$37 a barrel from US$51 a barrel in its October 2015 predictions.

The bank, in its latest commodity markets outlook, said that oil prices fell by 47 per cent in 2015 and are predicted to decline, on an annual average, by another 27 per cent this year.

If the World Bank’s prediction prevails, it would mean that Jamaica would take a hit, given that its hedging contract, with a strike price averaging US$66.74 per barrel, started in June 2015 and is set to expire in about September this year.

Lower oil prices, as well as the ongoing economic adjustment under Jamaica’s economic support programme with the International Monetary Fund (IMF), have been attributed to the macroeconomic stability which the fund’s executive board reported last month has continued to strengthen.

Those factors have also been credited for the inflation and the current account deficit falling to historical low levels.

In the report released yesterday, the World Bank said the lower forecast for crude oil reflects a number of supply-and-demand factors.

These include sooner-than-anticipated resumption of exports by the Islamic Republic of Iran, greater resilience in United States production due to cost cuts and efficiency gains, a mild winter in the Northern Hemisphere, and weak growth prospects in major emerging market economies, according to the World Bank’s latest quarterly report.

However, from their current lows, a gradual recovery in oil prices is expected over the course of the year, for several reasons.

“First, the sharp oil price drop in early 2016 does not appear fully warranted by fundamental drivers of oil demand and supply, and is likely to partly reverse,” the report said.

“Second, high-cost oil producers are expected to sustain persistent losses and increasingly make production cuts that are likely to outweigh any additional capacity coming to the market. Third, demand is expected to strengthen somewhat with a modest pick-up in global growth,” it added.

The anticipated oil price recovery is forecast to be smaller than the rebounds that followed sharp drops in 2008, 1998, and 1986.

PROSPECT

“Low prices for oil and commodities are likely to be with us for some time,” said John Baffes, senior economist and lead author of the commodities markets outlook. “While we see some prospect for commodity prices to rise slightly over the next two years, significant downside risks remain.”

In the IMF report submitted to the board for the 10th review in December, the Jamaican authorities also observed that despite increased surrendering requirements since the beginning of last year and reduced foreign exchange demand from public enterprises, given lower oil prices, there has not been any trend increase in the central bank’s net foreign exchange purchases. “Indeed, net purchases were negative in September and October 2015,” it added.

When Jamaica purchased hedging contracts from Citibank NA, covering six million barrels of oil imports over a 15-month period, expectations last year were that crude prices may climb back to US$75-US$80 per barrel on the world market.

However, prices have since fallen to just over US$30 a barrel.

The transaction was the Jamaican Government’s first oil-hedging arrangement, resulting from a policy decision to manage the country’s exposure to a predicted spike in oil prices from lows of about US$40 per barrel reached earlier in 2015.

The fall in world prices since 2014 has boosted Jamaica’s balance-of-payments position due to a lowering of the oil import bill – crude imports total nine million barrels per year – even as it threw tax revenue collections off-target due to lower special consumption tax receipts from the state refinery Petrojam.

Jamaica imports about nine million barrels of crude oil per year.

A new Energy Stabilisation and Energy Efficiency Enhancement Fund (ESEF) has been introduced to, among other things, finance the purchase of the hedging instruments.

Legislation and regulations governing the use of the ESEF are expected to be adopted by February this year, ahead of the parliamentary debate for the fiscal year 2016/17 Budget.

The Gleaner

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Trinidad PM warns of hard times for energy-dependent economy

January 5, 2016 Webmaster

PORT OF SPAIN, Trinidad (AP) — Trinidad and Tobago’s leader has warned the Caribbean nation that it will have to adjust to making do with less amid major declines in energy revenue and declining production of natural gas and oil.

In a late Tuesday address, Prime Minister Keith Rowley said the twin-island nation must make serious adjustments if it is to avoid the kind of economic contractions it suffered during a 1980s oil bust.

He says the country could face the prospect of entering into a future loan agreement with the International Monetary Fund if it doesn’t make adjustments.

Rowley says US$1.5 billion will be taken from a stabilisation fund over the next two years. Meanwhile, the government might also explore for natural gas with Venezuela in an offshore field that straddles the two nations’ territories.

Jamaica Observer

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President Obama to help Caribbean reduce energy cost

June 19, 2015 Webmaster

KINGSTON, Jamaica – United States President Barack Obama says he is pleased with the level of talks between himself and Prime Minister, Portia Simpson Miller this morning, on a range of issues including security, energy and economic growth.

In his statement issued at the Office of the Prime Minister Wednesday following a bilateral meeting, the US president said energy was one of the main areas discussed as well as his country’s role in helping Jamaica and other Caribbean states reduce costs associated with it.

“People in the Caribbean despite having less resources, are paying significantly higher prices for energy. If we can lower those costs through the development of clean energy and increased energy efficiency, we could release a whole host of additional investment and growth. There are going to be a whole host of areas where the US can be helpful,” he said.

The commitment comes, even as Venezuela, backed by 29 countries, including four Caricom states, signed a letter which it issued to the United States embassy in that country, and which was carried in one local newspaper, calling on the president to withdraw the executive order which the White House issued earlier this month, labelling the oil-rich South American country a threat, and imposing new sanctions against it.

A number of Caricom countries, including Jamaica, now enjoy preferential arrangements through the PetroCaribe Agreement, under which they are allowed to buy oil from Venezuela, and repay a percentage of the cost up front. In Jamaica’s case, the balance must be repaid over 21 years, at one per cent interest. But, the International Monetary Fund (IMF) has cautioned such countries that there could be a negative impact on their economies if Venezuela’s external liquidity problems escalate.

In the meantime Jamaica’s prime minister said within the context of the government’s extended fund facility with the IMF, the leaders had “explored additional ways of imploring our trade and economic relations”, including in the area of energy security and renewable energy.

She also pointed out that one of the outcomes of the visit was the signing of a statement of intent between the countries, to pursue the development and deployment of energy-related technologies.

“We aim to encourage increased bilateral trade, boost the development of emerging technologies and industries and pave the way for future innovation in energy-related fields,” she said.

The US President leaves the island later today for the Seventh Summit of the Americas, in Panama.

Alphea Saunders