Editorial | Paulwell’s energy plan

Phillip Paulwell’s promise of more than 60 per cent reduction in electricity rates should the People’s National Party (PNP) come to office in this year’s election is a tantalising prospect, which demands further particulars and serious debate.

For the cost of energy is, or ought not to be, a campaign gimmick – which is not our contention about Mr Paulwell’s assertion – given its centrality in any effort for the transformation of Jamaica’s economy from its anaemic state, to one that delivers greater productivity and robust growth. In other words, the government, too, has a stake in lower energy prices as part of Prime Minister Andrew’s Holness’ recent declaration of his administration’s “pivot” from its pursuance of macroeconomic stability to a drive for robust growth.

Speaking in Montego Bay last week, the former energy minister who now shadows the portfolio for the parliamentary opposition said: “I am determined to bring the cost of electricity down from the current US$0.40 odd cent to US$0.15 per kilowatt hour. And I am so convinced and enthused and that’s the reason why I can come here and put my ideas on the line.”

Mr Paulwell offered two clear strategies upon which he will construct his price reduction programme.

First, he will open the market for liquefied natural gas (LNG), in which the US company, New Fortress Energy (NFE), is the sole supplier, expecting that competitive forces will drive down the price of fuel.

Second, he will ensure the construction of solar-powered microgrids in communities for the 200,000 people (a number equivalent to a third of its paying customers) who steal electricity from the monopoly light and power transmission and distribution company, Jamaica Public Service (JPS).

SOCIAL WELFARE PROGRAMME

This theft – which has gone on for decades, sometimes treated by governments as a kind of social welfare programme – accounts for between 17 and 20 per cent of the electricity generated by JPS.

“Get rid of that and your bills will be down by almost 20 per cent,” Mr Paulwell said.

He also proposes “a massive” expansion in solar power generation, including by encouraging householders to install their own systems. It is already government policy that at least half of Jamaica’s energy, now at around 17 per cent, should be generated from renewables by 2030.

Ignoring for now his promise of an aggressive exploration for oil, Mr Paulwell’s other notable, but less tangible proposal in his cost-reduction strategy, is incorporating more “consumer-friendly” requirements in JPS’s new operating licences when the current one expires in 2027.

Jamaica is in the top third of countries with the most expensive electricity. Compared to key regional peers, based on data by the online energy tracking publication, GlobalPetrol.com, Jamaicans, on average, pay 63 per cent more for electricity than in the Dominican Republic; it is 38 per cent more expensive than in Costa Rica; and Belizeans pay 25 per cent less than Jamaicans.

Given energy’s component in the cost of most enterprises, especially in manufacturing, it is clear why electricity costs have long been a drag on Jamaican industry, contributing to the retreat, in the 1990s, of many industrial firms from the island. Indeed, it helps to explain, too, why the island alumina plants are so-called “swing producers” in the global industry, fulfilling demand after deliveries by more efficient facilities. Energy cost is among the reasons why its Chinese owner, Jiuquan Iron and Steel Company (JISCO), has, for several years, left the Alpart alumina refinery in Nain, St Elizabeth, in mothballs.

FRUSTRATE THE WISH

Unless the issue is seriously addressed, the high cost of energy will frustrate the wish by the investment and industry minister, Aubyn Hill, as declared in his Senate address last year, that Jamaica places itself on an export-led path to growth. Indeed, it was largely for these reasons that Jamaica, in the 2010s, began the pivot to LNG, as well as its bid to accelerate renewables, with the expectation of significantly reducing the cost of energy.

The initial gains have not been sustained, although the power company says that prices would have been nearly 10 per cent higher without the shift from oil to gas at some generating plants.

Yet, there is a need, this newspaper insists, for a fuller discussion on energy in the context of a joined-up industrial policy to help deliver sustainable growth, beyond the annual average of one per cent of the past four decades.

In that context, it is important and urgent that the government formally launch its upgraded Integrated Resource Plan for the energy sector and stimulate a public discussion around it. This is especially important in the face of the imminent expiry of JPS’s operating licence and the need to negotiate a new one, for which Mr Paulwell’s ideas seem to have implications, especially if he becomes the minister.

Mr Paulwell must therefore explain, for instance, the structure, cost and maintenance of his proposed microgrids and the expected infrastructure arrangements in a competitive LNG market. Would New Fortress, for example, be expected to accommodate new suppliers on its existing infrastructure, and what would be the pricing mechanism for this system?

In other words, it is not sufficient to provide sweeping proposals for the devil, as they say, is usually in the details.