Editorial | Urgency in electricity review

With Parliament’s review of the Electricity Act suspended, and the Generation Procurement Entity (GPE) less than transparent about its ideas for adding capacity to the grid, there is a sense of drift and incoherence about Jamaica’s plan for expanding renewables.

No one appears to know where anything stands, including the Government’s view on the suggestion by the Jamaica Public Service Company (JPS), the monopoly electricity transmission and distribution company, that it is allowed to enter agreements for “buy-all, sell-all” arrangements with generators of solar – and possibly wind – power. It is therefore critical that the energy minister, Daryl Vaz, quickly conclude his own re-evaluation of the administration’s energy strategy so that legislators, in open sight, can get on with their critique of the legislation and determine what adjustments are required for the emerging environment.

The existing law governing electricity generation, transmission, and distribution in Jamaica was passed in 2015 and was due for review after five years. Although that process started late, it was ongoing for several months, until earlier, July 6, when Mr Vaz, its chairman, told a committee comprising members of both chambers of Parliament that he intended to “wheel and come again”. He blamed the decision on changes in the global energy environment, caused by the COVID-19 pandemic and the war in Ukraine.

“We, I believe strongly, and I hope my colleagues agree with me, have to review our premises and review all our assumptions based on current trends, against what we used originally, in relation to the matrix that we are using,” Mr Vaz said.

Although the minister, in the face of subsequent questions, said that the committee was previously scheduled to go on recess until September, there is as yet no timetable for his new “high-level, multiple-stakeholder team” to complete its “chart(ing) of a data-led way forward”. Neither has the group’s terms of reference, nor who precisely are its members, been announced.

THESE THINGS MATTER

These things matter for several reasons. Even though Minister Vaz argued that a change in global energy dynamics made the data on which Jamaica premised its strategic review obsolete, this newspaper is surprised that the Government’s internal analysis would have been static for the past two years, thus requiring a from-scratch review at this time. That is not what is expected in dynamic management.

Moreover, while sourcing and pricing of fossil fuels, and where they fit in the country’s energy mix are extremely relevant, Jamaica has long staked out the most critical element of its energy policy: it intends to have half of its electricity generated from renewables by 2030, up from around 17 per cent at present. The current energy crisis and the role of fossil fuels in driving global warming and climate change reinforce the logic of the Government’s ambition.

Which leaves three fundamental questions: whether the Government can deliver on the promise within the timetable it established; the basis upon which renewables will be priced; and who will be allowed to deliver new, or additional, generating capacity. Allied to the latter question is the role of JPS in these arrangements and how the policy review affects obligations in the existing law.

A subsidiary, though important issue, is what is to be done to drive Jamaica’s stagnant or low rates of growth in electricity consumption, which ultimately impacts the price of power to consumers.

In some respects, the question of the 2030 timetable, and the JPS’ role as non-monopoly generator of electricity overlap. The company owns just over two-thirds of the island’s generating capacity. Although other companies produce and sell electricity to the grid, and new capacity is based on competitive bidding, the JPS has the first right of refusal on the replacement of its own generating capacity at the end of their economic life. But that right is supposed to be subject to the company installing the plants at ‘avoided costs’, which do not disadvantage potential competitors and consumers.

EXERCISE OPTION

The JPS currently has nearly 180 megawatts of generating capacity in that category. It has signalled that it intends to exercise its option. Apparently, it is awaiting the Government’s direction on the future energy mix, including whether the new capacity, or what portion thereof, has to be renewables; and in that event, whether the system should have battery-storage technologies, thus lessening the requirement of backup, oil-fired generators. All of this is against the backdrop of calls by independent power suppliers, in briefs to the in-limbo parliamentary committee, for the sole-buyer’s (JPS) right of first refusal to be dropped from the law.

At the same time, the JPS has floated the idea of investors establishing solar-generating capacity on rooftops – presumably in dense urban environments – then selling all the power to the grid and buying their electricity needs from the power company. This is different from a net billing arrangement in which a private company or householder sells excess electricity at, essentially, the company’s wholesale cost.

The system, on the face of it, would have the advantage of limiting the use of potential productive lands – including the country’s “most fertile A1 soil’ – for solar or wind farms. Additionally, it provides for the direct connection to the grid without the need for investment in transmission lines as well as for the provision of the power generated to a specific geographic area.

How such a system might work in practice, and what it might mean for achieving economies of scale, calls for further, and open, discussion. Further, in the absence of a request for proposals and open bidding (as is required for new generating capacity), there is need for a fuller explanation of the recent statement by a government minister that the administration has in hand several proposals from investors for renewable energy supplies.

Jamaica does not have the time to waffle and meander on the energy issue. Getting it right does not mean it cannot be done quickly and transparently, with which Mr Vaz agrees. That he has to get the review process back on track.