REMEMBER the Jamaican saying “What’s Good for the Goose may not be good for the
Gander”? Look at what it would cost the Government if they support wholesale
renewable energy production in Jamaica.
The political and economic reasons that may have driven the delayed lack of
support for Renewable Energy (RE) initiatives must include considerations that a
significant portion of government revenues come from sale of oil. Buying and
selling oil is big business. If significantly less people use oil-based energy
production systems, the government and oil merchants could face huge losses.
The issue, though, is deeper than simply government wanting oil revenue alone. In
order for RE investments to be viable, there has to be a payback that is of a
reasonable duration. That is even more the case where a tax-hungry government
adds non-value taxes to RE components imported into the country (such as an
environmental import tax on the very items which help to clean up the
environment!). Remember Jamaica is already paying higher transportation costs for
equipment than its larger neighbours who either manufacture the equipment
themselves, or have the benefit of economies of scale.
What this means is that unless one has a need which can only be met by an RE
system at any cost (an example is Mystic Mountain which would probably not get a
service from JPS at any reasonable price because of their location), then one
must connect to the grid in order to either bank and retrieve the otherwise lost
excess production by day, or sell that excess for hard dollars to the utility.
This is what augments the “payback” on the RE investment.
Up to now, every rational country has permitted that exchange between the small
RE power producer and the grid by way of a one-to-one transfer of power called
net metering. The actual mechanics of a net metering policy varies between
jurisdictions, e.g. some allow a single meter to measure the net power flow,
others require a separate second meter to measure the power passed to the grid,
but the essence of the policy is that 1 KWh consumed = 1 KWh produced.
Some jurisdictions do not even force the utility to pay for the annual excess
power produced by individual RE systems, so that e.g., at the end of a calendar
year, the excess production to the grid is lost, but at the very least this would
mean that your bill would be zero for the entire calendar year (I am not taking
into account the minimum payment for billing, distribution, etc.). Jamaica
however, has introduced the idea that the utility should sell us power at 42c per
KWh, and system owners should sell the utility power at 18-25c per KWh. This
Anancy system destroys any reasonable calculation of payback time on the RE
investment. But the government, instead of offering protection to the small RE
investor, has allowed its regulator the Office of Utility Regulation (OUR) to
introduce this net billing system which profits JPS and not the RE producer.
The Minister of Energy’s public preening about his role in setting up the net
billing system and a methodology whereby RE owners can sell their excess power to
the grid displays a pride of accomplishment which may not be justifiable because:
(1) – He achieved very little, it was in train and far advanced under the
previous administration (who equally were really doing little to protect the
public and advance RE take up, but of course Minister Mullings was also engaging
in exaggerated chest thumping) and, (2)– any genuine intention to really help
the public would have included an instruction to the OUR that the new
government’s policy is the furtherance and fostering of net metering and a
request to that office that it develop a methodology for implementation of this
policy.
And by the way, any concerns about JPS’s much touted guarantee can be dealt with
by a couple of lines of amendment to the Electric Lighting Act. If the government
can change the legislative landscape for telecommunications as radically as it
has appeared to have done in the past couple of days despite its promises and
entreaties to the investors back in 2000, then what is to stop it from changing
the equivalent legislative framework under which JPS operates?
So to understand the problem, start by recognising that oil revenue may not be
the only motivation for government tardiness in embracing progressive RE
policies. The government also depends on the revenue and profits from JPS earned
directly and indirectly. The question must be why does the government not mandate
net metering? Well, do they really want us to reduce our consumption of the JPS
product? Think on this — the government owns 19.9 per cent of JPS and gets 19.9
per cent of the profits made by that company on a continuing basis. For example,
in 2011, the amount was US$8.76 million, (over JA$750 million). The government
also collects GCT tax revenues from JPS. Finally, the government gets income tax
from JPS’ share of the profits. Government also gets a first bite at the revenue
cherry in the form of Petrojam, which imports oil and sells it to JPS and
everyone else, making vast profits which are turned over to the government.
The Paulwell Energy initiative can, in the kindest terms, be described only as a
good start. One obvious way to lower the country’s oil import bill is to use less
of it. That, apart from individual returns, is what RE provides. Minister Philip
Paulwell should now demonstrate his willingness to go the distance and, in short
order, modernise the RE landscape to a full net metering policy.
Paul Beswick is an Attorney-at-Law
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