Lack of LNG pricing worries bidders in 480MW project
Published:Wednesday | January 26, 2011 | 12:00 AM
Prospective bidders on Friday complained that two months before the close of tender for the supply of 480 megawatts of new generating capacity to the national grid, they are yet to be provided with the indicative price at which liquefied natural gas (LNG) is to be sourced.
Because of this, the potential bidders warned they may not be able to produce competitive bids.
"Because you don't have a firm price where fuel is concerned, without knowing what the price of gas is going to be, it is impossible to do a bid which embraces gas as the fuel strategy," said Wayne McKenzie, general manager of Jamaica Energy Partners.
"In the power-purchasing agreement, gas has to be the fuel of choice."
McKenzie was addressing the Government's plan to add LNG to the mix of fuels - replacing up to 15 per cent of oil, according to previous reports - in generating electricity.
Christopher Zacca, head of the LNG steering committee created under the government's push towards introduction of the gas by December 2012, was present at the consultation, but had no clear answers on the matter.
"The commercial structure of LNG is currently under review and we are working towards an indicative price as soon as possible," said Zacca.
Neither was the Office of Utilities Regulation (OUR) - which convened the session - able to assist.
"The preference is that we would have the prices before then. If we don't have those prices, we will use the prices that are in our study to hold a reference across the board," said Peter Johnson, project manager at OUR.
The government has made LNG a critical component of its new energy policy and there will be a bias for contracts which are in compliance with its use in the assessment of bids for the new 480 MW of capacity.
McKenzie contends that, coupled with other requirements in the request for proposal and power purchase documents, it will result in "very very conservative bids and instead of getting the cost of electricity down, might just get it higher,".
According to OUR analysts, the use of LNG as the preferred fuel for the 480 MW supply could lead to reduction in the cost of electricity by an estimated 10-20 per cent.
Exclusive right
Jamaica Public Service has the exclusive right to transmit and distribute electricity throughout Jamaica.
According to information obtained from the request for proposal document, the utility, at the end of 2009, had a customer base of 584,623.
The gross peak demand to date, it said, is 644 MW, and the average system load factor is approximately 74 per cent.
JPS supplies this demand from a functional firm-system capacity of approximately 785 MW, of which 190 MW is provided by independent power producers.
Of the 595 MW of capacity owned by JPS, 292 MW of the base-load is more than 33 years old, representing inefficient plants within the system that are now being replaced.
The new capacity is to be supplied in two tranches - 360 MW by January 2014, and the other 120 MW by January 2016.
Bids for the new capacity are to be submitted by the end of March 2011.