Jamaica's current generation mix is heavily oil-dependent. New energy policies call for diversification.
Jamaica is hostage to oil and needs to diversify its energy mix. Astoundingly, in 2010, the country’s oil imports exceeded its exported goods in value by 118 percent. Like most Caribbean island nations, Jamaica has limited domestic fossil fuels and relies heavily on outside sources to meet its energy needs. In 2010, it imported 20.5 million barrels of oil at $1.62 billion, representing 11.6 percent of GDP.
The electricity sector accounts for 32.4 percent of Jamaican oil consumption and is the country’s second largest oil consumer, after transport. Ninety-five percent of domestic power generation is oil-based, compared with only 5 percent for renewables. As a result, the electricity sector is heavily susceptible to oil price fluctuations, and as prices rise, the country needs to look to other energy sources to provide power.
In 2010, Jamaica elaborated a new energy policy that includes long-term targets for fuel diversification and renewable energy use. The plan stipulates that by 2030, the primary energy mix should include a 70 percent non-oil-based supply. Options include natural gas as well as a range of renewable energy sources, including wind, solar, and biomass.
Liquefied Natural Gas (LNG)
Looking to meet its 2030 target, the Jamaican government recently selected Samsung to build and operate a new LNG terminal by 2015. The Jamaica Public Service Company (JPS) will complete the project by procuring LNG and building the necessary distribution infrastructure. After the terminal is built, the gas will be supplied to three main sources: the bauxite/alumina industry, a new gas-fired 320 megawatt (MW) combined-cycle power plant, and a 124 MW diesel generator, which will be converted to run on natural gas. The LNG supply will be ramped up from 0.8 million tons a year in 2015 to 2.5 million tons by 2020, to account for rising electricity demand and increasing alumina production.
Like oil, however, natural gas is subject to price volatility. In nearby Dominican Republic, which also relies on LNG for its natural gas supply, prices have soared, suggesting that Jamaica will need to add other primary energy sources to its electricity mix.
Renewable Energy Potentials
Jamaica’s National Renewable Energy Policy stipulates that 20 percent of the primary energy supply must come from renewable energy by 2030. In addition to policy, there is also opportunity to add a sizeable amount of renewables as the country retires its dated and inefficient oil-based power plants.
Hydropower. Jamaica currently has a hydro capacity of 22.3 MW, which operates at a very high capacity factor of 78 percent (i.e., the plant’s actual output over its maximum rated output). JPS is currently expanding a small run-of-river hydro plant at Maggotty that will add 6.3 MW to the power grid, and Jamaica has an additional 56.1 MW of hydro that can be utilized. One deterrent to hydro is the high upfront capital cost; however, hydro remains the cheapest electricity option available to Jamaica when considering the lifetime cost of a power project.
Wind power. In 2009, Jamaica was home to 20.7 MW of installed wind capacity, and by 2011 this capacity had increased to 41.8 MW as a result of the addition of Wigton II and Munro. Only one additional wind project is currently being planned, Munro II, which will add 14 MW to the grid. Investing in wind power in Jamaica can be lucrative, both because the country has high wind potential (recent wind farms have reached a 35 percent capacity factor) and because additional revenue streams such as the Clean Development Mechanism (CDM) enable wind farms to turn a profit very quickly. Wind power is already at grid parity in Jamaica, and projects can be developed in phases, without requiring high upfront capital. Given that wind farms currently have the highest capacity additions in the renewable energy sector, and that Jamaica will need more wind capacity to meet its renewable energy targets, the country will need to plan and develop more wind projects in the coming years.
Solar photovoltaics (PV). Jamaica has a high solar potential due to its climate and location. According to the mapping company 3TIER, the country receives an average of 5.25 kilowatt hours per square meter daily of global horizontal irradiance, which translates to a 24 percent capacity factor. Aside from one planned 24 MW solar PV project, there are no existing solar PV projects in Jamaica. Solar is currently an expensive option for the country, although solar power is expected to be at grid parity by 2020 given the predicted 55 percent reduction in installed costs. Jamaica needs to encourage pilot-scale solar projects today so that large-scale developments are possible by 2020.
Bagasse. Jamaica has a well-established sugar industry and processed 1.52 million tons of sugar cane in 2011. Bagasse, the fibrous material that remains after juice extraction, has a reasonable calorific value and can be used for heat and power production. Utilizing bagasse, with a processing efficiency of about 25 percent, Jamaica’s sugar industry can export 100 kilowatt hours of electricity per ton of sugar cane to the grid. In 2011, the industry had the potential to export about 152 gigawatts hours of electricity, or about 3.7 percent of electricity demand. This share will increase significantly if processing efficiency is improved and capacity is increased. By investing in efficient cogeneration power plants that are supported by the CDM, the sugar industry can make windfall profits.
Promoting Renewable Energy Development
The integration of renewable energy into Jamaica’s electricity grid is currently limited. To achieve the country’s 2030 targets, barriers to investment, especially for the private sector, need to be removed. Investment in renewables can be encouraged through the following recommendations:
- Tariffs. The government can establish a preferential pricing structure for renewable energy producers to promote the use of clean and domestic energy resources. Jamaica already provides a price premium to renewable power producers, and even higher rates to distributed household and small commercial renewable generators. The government is considering establishing a feed-in tariff that would further support renewables with guaranteed prices.
- Infrastructure development. Because areas with high wind, solar, and sugarcane resources often have limited infrastructure, a public-private partnership can be established wherein the government provides infrastructure in return for a share of the profits.
- Operating costs. The local workforce can be trained in operation and maintenance of renewable generation facilities, resulting in lower energy costs and more local jobs.
- Capital costs. Financial incentives are required to reduce high upfront capital costs, especially for bagasse cogeneration projects. The national utility can be encouraged to invest in these projects, sell steam/electricity to the sugar mill, and export excess electricity to the grid.
- Land. Land ownership and leasing issues increase implementation times for both the projects themselves and the associated transmission lines. These issues are ubiquitous, and Jamaica has the opportunity, given the infancy of its renewables industry, to implement policies that protect property rights while also encouraging renewable energy development.
To break its oil dependence and drive economic growth, Jamaica needs a diversified energy mix. The new national energy policy is a step in the right direction. However, simply shifting from oil to natural gas would make Jamaica again susceptible to imported energy and the associated price volatility. Renewable energy can help transition Jamaica away from imported fuels, provide energy security, and create jobs.
Jamaica is currently at a crossroads, where the policies adopted today can create a sustainable future in 2030. With a preferential pricing structure for tariffs, infrastructure development, and financial incentives, the country can create a climate where its 20 percent target for renewables by 2030 can be met and surpassed.