How Renewables Are Redefining Jamaica’s Energy Economics (Part 4)

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Originally published on Worldwatch Institute.
By Philip Killeen

Never before has the opportunity to go green in the energy sector been as appealing and accessible as in the Caribbean. This four-part blog series documents the paradigm shift currently under way in the region, where the Dominican Republic, Haiti, and Jamaica present moving case studies on the momentum that is building to realize the Caribbean’s untapped sustainable energy potential.

sun-of-jamaica-910070_1920-672x372Jamaica is a leader in the transition to sustainable energy systems in the Caribbean. The country’s National Energy Policy, adopted in 2009, is vaunted as a model for lawmakers region-wide. The policy lays out aggressive targets for a 30 percent renewable energy share and a 50 percent reduction in energy intensity by 2030. Efforts to meet these ambitious targets have benefited from a robust enabling environment of tax exemptions and incentives. As a result, Jamaica boasts over 72 megawatts (MW) of installed renewable energy capacity from hydro, solar, and wind power plants.

Although these efforts are impressive compared to most of Jamaica’s neighbors, they only scratch the surface of what is possible in the country. Jamaica’s current matrix of renewable power plants comprises only 7.8 percent of total installed generation capacity. New research suggests that, by further developing its diverse renewable resource endowment of solar, wind, hydro, and biomass, the country can comfortably meet 40 percent of its total anticipated electricity demand by 2027.

Jamaica’s mandate to do so has never been stronger. The country currently sources 95 percent of its electricity use from petroleum-based power plants. Because Jamaica lacks domestic petroleum resources, it depends entirely on imports, resulting in significant economic and environmental costs for the country. Currently, Jamaica spends 9 percent of its GDP (or $1.3 billion annually) on petroleum imports, which contributes substantially to the country’s prolonged negative trade balance.

Like many of its Caribbean neighbors, Jamaica relies on the Petrocaribe agreement with Venezuela to secure petroleum for its power system on favorable terms. Although this agreement has sheltered Jamaica from international oil market volatility, it also has gradually eroded the country’s financial autonomy. The International Monetary Fund estimated that, as of 2015, Jamaica’s sole electricity provider, the Jamaica Public Service Company (JPS), owed Venezuela $2.4 billion in debt, an amount equivalent to more than 17 percent of Jamaica’s GDP.

The knock-on effects of this debt reflect a grim outlook for fossil fuel-based generation in Jamaica. Servicing the debt owed for imported fossil fuels means that fewer resources are left for JPS to invest in grid infrastructure improvements. As a result, Jamaica’s antiquated grid is plagued by high transmission and distribution losses that are consistently near 20 percent. Because of this inefficiency, far more electricity is produced than is ever consumed in Jamaica, burdening JPS with additional, unnecessary costs.

Any Port in a Storm

Clearly, business as usual is not a feasible long-term option for Jamaica, particularly when electricity demand in the island is projected to more than double by 2027. Recognizing this, Jamaica’s National Energy Policy endorses an “all of the above strategy” to diversify the country’s energy system away from petroleum.

In July 2015, the Jamaican government raised nearly $2 billion on the international capital market through bond issuance to pay off JPS’s longstanding debts to Petrocaribe. Leading Jamaica’s transition from petroleum, JPS has signed agreements with New Fortress Energy to install a 120 MW natural gas plant and with Jamalco to install a 100 MW coal-powered plant. Jamaica also is courting interest from the United States to establish a Floating Storage and Regasification Unit for the transport and delivery of U.S.-produced liquefied natural gas (LNG) to the rest of the Caribbean region.

Jamaica also has taken strides toward better utilizing its domestic endowment of renewable energy resources. Wigton Wind Farm stands out among other renewable energy projects in the Caribbean for its scale, ambition, and continued development. Located on a site with extremely high wind energy potential, the Wigton facility reliably provides 42 MW of generation capacity throughout the year. In January 2015, Jamaica’s energy regulator, the Office of Utilities Regulation (OUR), approved plans by BMR Energy to expand this capacity by 36.3 MW.

Although natural gas and coal clearly serve a purpose in reducing Jamaica’s exposure to oil market volatility and to the withering Petrocaribe agreement, they are only stop-gap measures. Because Jamaica lacks any substantial domestic coal and natural gas, these resources must be imported from foreign producers as well. The country’s current policy decisions related to the transition away from petrolrum fail to address the fundamental issue of energy security.

Clean Energy: A Clear Advantage

Jamaica’s aggressive expansion of wind generation capacity is an important first step on the path to energy independence and a sustainable energy system. These efforts can and should be replicated for the country’s other abundant renewable energy resources: biomass, solar, and hydropower.

Like other agriculturally focused Caribbean countries, Jamaica has substantial potential to generate energy from sugarcane and coffee residues and other organic wastes. Although biomass energy can have serious environmental and social impacts related to feedstock production and potential competition with food crops, developing these resources may help promote investment in other Jamaican renewable energy sources, such as solar and wind. Because biomass can be stored, electricity production from biomass-powered plants can be ramped up or down quickly to meet demand. As a result, biomass is well suited to offsetting the intermittency associated with wind or solar power plants.

A critical factor distinguishing renewable power from conventional fossil fuel generation is the operation and maintenance costs, since renewable energy generation does not require costly fuel imports. In Jamaica, operation and maintenance costs for petroleum plants are on average eight times higher than those for solar, wind, and hydropower plants that have comparable generation capacity.

The benefits of transitioning away from fossil fuels such as coal, natural gas, and petroleum and toward Jamaica’s abundant renewable resources extend well beyond increased energy security. Comparative cost assessments of the country’s electricity generation technology options make clear that, by 2030, Jamaica can save up to $12.5 billion in energy system expenditures by transitioning to renewables. By passing these savings on to consumers and directing funds to grid infrastructure improvements, Jamaica can greatly reduce the dampening effect of high electricity prices on the country’s potential for economic growth while creating high-value-added local jobs in the energy sector. Conveying these benefits is critical to convincing energy sector stakeholders that the high upfront investments required for renewable-based generation are worthwhile.

Read the Caribbean Sustainable Energy Roadmap and Strategy: Baseline Report and Assessment

Philip Killeen is a Research Assistant for the Climate and Energy Team at Worldwatch Institute. There he contributes to the Institute’s portfolio of project work, including co-authoring the 2015 Caribbean Sustainable Energy Roadmap Strategy (C-SERMS) and independent research on sustainable urbanization and climate finance in developing states. Philip also manages the Low Emissions Development Strategies Global Partnership (LEDS GP) Energy Working Group, an international practitioner and knowledge sharing network of over 120 energy experts.

Reprinted with permission.

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