Editorial | Resurrect energy law review

It’s half a year since Daryl Vaz, the energy minister, shut down a parliamentary cross-party review of Jamaica’s electricity law and, therewith, a debate over the direction of the island’s power sector.

Ostensibly, Mr Vaz’s move was to give the Government time to do a comprehensive analysis of the global energy environment in the face of the Russia-Ukraine war, and of the impact that was likely to have on Jamaica. Presumably, the oil and energy markets were so fundamentally changed by that war that all the information Jamaica’s energy analysts had previously gathered now counted for nought.

However, in the period since Mr Vaz pulled the plug on the committee, other bodies, including government agencies, apparently did not halt their own programmes on Jamaica’s energy future. Which makes it important that Mr Vaz offers clarity on how the Government intends to proceed on the matter, and what’s likely to be new in the energy policy.

Last week, for example, the Office of Utilities Regulation, whose regulatory remit includes the electricity sector, in discussing Jamaica’s energy future with stakeholders, including potential investors, estimated that Jamaica would need US$1.2 billion in new capital to achieve the Government’s target of 50 per cent of the island’s electricity being generated from renewable sources by 2030. Around 12.5 per cent of Jamaica’s energy now comes from renewables.

OFFERING LOANS

Separately, the Government’s Export-Import (EX-IM) Bank of Jamaica is offering loans of between J$5 million and J$50 million for small and medium-sized enterprises for the installation of solar energy systems. The EX-IM Bank scheme will likely accelerate the trek by businesses away from the national electricity grid, potentially meaning higher costs for the consumers who remain.

“EX-IM Bank has sought to create a new product that we think will help to respond to the needs of some of our clients and, in fact, improve their own competitiveness,” said the bank’s managing director, Lisa Bell. “The cost of electricity continues to rise, and we have heard the cry of our clients in the context of how much this contributes to their expenses and those line items.”

Clearly, settling Jamaica’s energy policy, and with it the broad parameters of its power market, is urgent. The last big initiative was the conversion by Jamaica Public Service Company (JPS), which has a monopoly on the transmission and distribution of electricity, of some of its own power plants from heavy fuel oil to liquefied natural gas (LNG). Gas now accounts for 59 per cent of the fuel in the generation of electricity for the national grid.

Some large manufacturers have also installed LNG power plants and migrated from the grid, while many companies and private homeowners have gone solar.

Initially, the Government’s policy was to achieve 30 per cent of Jamaica’s power from renewables by 2030. In 2018, Prime Minister Andrew Holness pushed that to 50 per cent. However, there is no signal from Generation Procurement Entity, the government-appointed body responsible for procuring new generation capacity for the grid, of when it intends to make requests for proposals (RFP) for more renewables. Clarity on this issue is seemingly urgent. JPS has around 171 megawatts of generating capacity that will soon reach, if it has not already passed, its replacement period.

FIRST RIGHT OF REFUSAL

Under the existing law, JPS has first right of refusal on its replacement, at a price based on avoided costs. However, independent power suppliers, who sell electricity to JPS for the grid, argued to the now-shuttered parliamentary committee that the law should change and the capacity and any RFP be open to all players.

Any new capacity will likely be renewables, whose last RFP in 2015 brought 37 megawatts to the grid.

Energy analysts argue that improved technologies, including more efficient battery storage for power, have not only brought down the cost of renewables, but made them more reliable – and competitive with fossil fuel.

The question for Jamaica is how to employ these gains to ensure an efficient and price-competitive national grid, so that those who remain on it can enjoy affordable power. There must be, too, a legislative framework that supports price stability.

It cannot be beyond the capacity of Mr Vaz and his experts to, at the same time, discuss the economics of electricity, and the legal framework within which it is generated, transmitted and distributed.

Since the war in Ukraine and the sanctions placed on Russia, the European Union members have almost entirely removed its dependence on Russian oil and gas to fuel their economies. This massive reorientation of supply and distribution chains happened almost overnight.

Jamaica must can do its own sums on price and production and make assumptions about supplies. And how difficult could it be for the experts to analyse the relative costs of renewables and fossil fuel generation in the context of existing and emerging technologies, while being engaged with Parliament on policy? It is time to put those discussions back on track.