By Raymond Wright, Contributor
Wind energy has been used in Jamaica for centuries. This windmill was experimentally used for water pumping by the National Water Authority at Flagman, St Elizabeth in the 1980's. - File
THE DEBATE over climate change and warning of the dire consequences of a predicted rise in global temperatures of between 1.5 degrees and 5 degrees centigrade by the end of this century, has focused attention on renewable sources of energy.
This focus has been perhaps less in the US where the drive is to maximise the availability of all energy sources at the lowest possible cost, including the revival of nuclear power. This means that renewables are likely to make their greatest impact in Europe where individual countries are progressively implementing legislation through incentives and tax regimes that encourage participation in the energy market. However, the tragic events of September 11, 2001, may well persuade the US Congress of the importance of domestic renewable sources.
In Jamaica, about 90 per cent of energy is imported at significant cost to an economy already burdened by debt repayments. Thus, every effort should be made to bring more indigenous renewable energy into the energy mix. As we do, we will initially have to look to European sources for technology. The relative strength of European government support measures has already had a significant effect on the manufacturing industry, with the emergence of several large wind turbine manufacturers such as NEG-Micon, Vestas, Enercon, Nordex, Gamesa and Bonus. The market capitalisation of NEG-Micon and Vestas at December 2001 was approximately US$5 billion each.
In the US, technology has primarily centred on solar, with international companies such as BP Solar and Astropower (with a valuation of about US$750 million). Shell renewables now operates in both American, Latin American and European markets. Wind and biomass developments have been encouraged by particular US states such as California, Texas, Iowa, Wisconsin and Vermont with European operators being active in addition to domestic stakeholders such as FPL and Cinergy. In Japan, there is particular strength in solar technology led by Kyocera, in wind with Mitsubishi as a manufacturer, while Tomen and Nichimen are active globally in project development.
Investors now recognise the growing potential of renewable energy. Favourable analyst reports have appeared in the financial press and investment funds during 2001. Merrill Lynch, CSFB and Jupiter are amongst those providing the opportunity for the introduction of capital into companies engaged in renewable energy technology and project development.
There is a potential future upside provided by carbon trading. For example, a planned 20 MW wind farm at Wigton in Manchester, will save 50,000 tonnes of C0(2) emissions per year. Traded at say US$3 per tonne, this project could provide an additional income to the developers of approximately US$150,000 per year.
The global level of investment required in renewables is significant. Ernst & Young forecasts that the likely expenditure in the first decade of this century will be of the order of US$30 billion per annum. Europe will be a dominant player in renewable energy generation. Its strong tax laws and quota-based policy regimes, encourage substantial growth rates in a highly motivated industry with good delivery capability already in place.
The strongest new developments in Europe is in offshore wind, with projects under implementation worth over US$5 billion. Wind technology costs are falling as the pace of development is hastened in Germany, Denmark, Spain, UK, France and Japan, due to attractive tariff arrangements. For this reason, wind is the leading new renewable technology, with a growth rate of about 24 per cent per year on the $4 billion investment that took place in 2001. Solar energy investments depend not only on government support, but also on its attractiveness as a niche supplier to off-grid and integrated building markets. Its growth could be of the order of 20 per cent per year above the approximately US$2 billion 2001 investment level. Solar market penetration will improve if thin film technology takes off, and its costs curve resumes a downward trend, because recent capacity limitations have led to price increases.
Biomass projects are likely to be successful where benefits such as natural availability of feedstock is strong. Pyrolysis and cogeneration technologies in the sugar industry will drive this technology in Jamaica. The risk and value drivers in this industry locally include trading issues, the regulatory system, access to markets, the distribution chain, generating infrastructure, the extent to which embedded generation benefits can be captured, and the likelihood of planning approval. Technology risk will always be an important factor, as the financial sector appreciates tried and proven technology.
In the longer term, the renewable energy technologies in Jamaica are likely to benefit from a role as a form of embedded distributed generation, reinforcing the grid and providing power closer to the user. In the case of solar energy, net metering provides the opportunity for full democratisation of power, allowing individual consumers to become producers and so participate fully in a connected economy. The direct contact between provider and consumer, created by the two-way movement of electricity, will reinforce the will and understanding needed to provide transitional support to a changing electricity generation scenario.
Jamaica has now taken the plunge towards economically viable wind energy with the 20 MW wind farm at Wigton in Manchester, slated for commissioning in the second half of 2003. Wind is competitive with hydrocarbons and there is great potential for growth. Wigton may be only a beginning.
