Editorial | Electricity and growth

The intention by Jamaica Public Service Company (JPS) to next year spend J$17 billion to strengthen its electricity transmission and distribution infrastructure is a good thing.

It should mean that the next time the island faces a storm, utility poles and power lines won’t fall over so easily, and it should not take the enormity of time to restore power as when Hurricane Beryl sheared the island’s south coast during the summer.

Additionally, JPS’s plan, announced by its CEO, Hugh Grant, to install 133 megawatts of renewable power over the next three years is, on its face, to be applauded. This suggests an acceleration of Jamaica’s efforts to move to clean energy as a replacement for fossil fuels – presumably at costs that are more affordable to consumers.

But while The Gleaner instinctively celebrates these announcements, we are concerned that there is no clarity of where, or how, in the Government’s larger energy and economic policy. This, especially in the context of the administration’s recently announced “pivot” from macroeconomic stability to a drive for robust and sustainable growth. Indeed, energy, or the price thereof, will inevitably be a critical component of any growth strategy. It is therefore urgent that the Government publish its updated integrated resource plan for the energy sector, as well as make clear whether it will renew the JPS’s monopoly for the transmission and distribution of electricity when its current agreement expires in 2027.

JPS’s investment posture, as articulated by Mr Grant, suggests that the power company’s majority owners, Marubeni Corporation of Japan and Korea East-West Power (EWP), are confident that the future of the operating licence is a settled matter.

These matters, however, are deserving of serious and transparent public discussion. For the fact is, which was noted by Mr Grant in his Montego Bay speech last weekend, efficient and competitively produced and delivered power is critical to the development of any modern economy.

“As Jamaica’s primary energy provider, JPS holds an immense responsibility to power the nation’s economic growth,” Mr Grant told business leaders in the north-western city. “We don’t take this lightly.”

NEW ECONOMIC ALIGNMENT

But despite the promise of a decade ago, when Jamaica embarked on a project to replace heavy fuel oil with natural gas to power electricity generation plants, the cost of electricity remains high, averaging over 30 US cents per kilowatt hour, which the island’s firms say help to keep them globally uncompetitive.

Indeed, based on comparative data posted by the international energy price-tracking group GlobalPetrolPrice.com, petrol electricity rates in Jamaica are, on average, nearly 60 per cent higher than in the United States. Energy in Jamaica is also more expensive than in regional peers such as Panama, the Dominican Republic, as well as Costa Rica, which has a well-developed renewables sector.

Against this backdrop, energy must be central in any discussion of how Jamaica intends to extricate itself from being a low-middle-income, low-productivity economy that rests on low wages, low technology and low value-added, to one that moves up the economic food chain.

Indeed, it is increasingly evident that while the macroeconomic stability – for which Jamaica has worked hard, and paid dearly for over the past dozen years – is an essential foundation for growth, it is not a sufficient condition, by itself, to aggressively expand GDP much beyond the average one per cent achieved over more than four decades. Which, no doubt, informed Prime Minister Andrew Holness’ recent declaration of his government’s “pivot … to focus on increasingly strong and sustained economic performance”.

Some of the policies outlined by Mr Holness for this pivot, and how his administration intends to go about it, have echoes of a good, old-time industrial policy, even if only in embryonic form. Which this newspaper supports.

However, neither Mr Holness nor his industry and commerce minister, Aubyn Hill, who has stressed the need for a shift towards exports, specifically addressed energy’s place and/or role in the proposed new economic alignment. That must now happen as a matter of urgency, and the issue, among others, brought within the purview of the National Partnership Council (NPC), which should become a coordinating body for the broad development of an industrial policy. The NPC has the advantage of disparate holders, including political parties, working together without succumbing to their instinct to reach for partisan extremes.

NO UPDATED PROJECTIONS

In that context, there must be clarity about the Government’s energy policy, the final price, and which new electricity-generating capacity – including 100 megawatts of renewables for which it has selected two preferred bidders–will reach consumers.

Much of this remains opaque in the absence of an upgraded, integrated resource plan. For instance, around 17 per cent of Jamaica’s generating capacity is from renewable sources, which the Government says it wants to reach 50 per cent by 2030, suggesting that, at the current consumption levels, renewables would have to supply around 350 megawatts at peak demand. But there are no updated projections for demand going forward.

Further, apart from the 100 megawatts of renewables for which the Government’s Generation Procurement Entity (GPE) – the legal body that oversees allocation and bids for new capacity – has already named suppliers, the administration, earlier this year, announced that it would put out another request for 168 megawatts. That has not happened yet.

It is unclear, therefore, whether Mr Grant’s reference to the JPS’s plan to install 300 new megawatts of renewables, incorporates the amount for which the GPE has not yet made a request for proposal. This, in addition to replacement of 171 megawatts of its own obsolete, which, under the law, it has first right of refusal, subject to meeting specific price parameters.

There are also other issues to be addressed, such as the efficiency of the grid and that a fifth of the electricity transmitted by JPS is stolen, a cost that is assumed by legitimate consumers.