By Dennise Williams, Staff ReporterAS JAMAICA'S electricity needs grow by 30 mega watts per year, the question arises of whether or not its power needs can be provided in a cost-effective manner. There are some in the energy sector that believe that Jamaica Public Service Corporation (JPSCo) cannot do so. Of course, the utility company refutes this. However, electricity generated from natural gas seems to be the solution that will take Jamaica away from its fossil fuel dependency.
In 2001 Mirant Corporation purchased the JPSCo and was awarded the exclusive licence to distribute electricity to Jamaican consumers, but as a part of that licence, the exclusive right to add new generation only lasted three years.
During that time, JPSCo installed new capacity at their Bogue plant. This added 120 megawatts to the national power grid that was desperately needed as, "Jamaica was at the verge of rolling blackouts," as revealed by an industry insider.
However, the same insider stated that the cost of the new power, "was over US$1,000 per kilowatt or over US $120 million, which was higher than prevailing market rates for new generation capacity.
EXPANDED CAPACITY
To this, JPSCo's Winsome Callum, manager of corporate communications states, "The cost of constructing the Bogue plant was not outside the typical benchmark cost of developing a combined cycle plant of this size." However, the expanded capacity of the plant ran on diesel and steam. And the diesel component carries an alleged heavy cost.
As explained to the Financial Gleaner by our energy industry source, "Given the fuel choice, this was an expensive plant for Jamaica and tremendously increased the foreign exchange burden of the Ministry of Finance. By way of reference, other fuels used elsewhere in Jamaica for power generation in different types of equipment cost approximately half of what diesel oil costs." To this, Ms. Callum states, "The combined (diesel and steam) cycle technology allows for greater efficiency of conversion, that is, it will utilise less fuel to generate each unit of electricity relative to the Company's other generating units.
This will result in reduced fuel costs to JPSCo, and ultimately to customers. It must be recognised that the cost of fuel is outside JPSCo's control, and is determined by the price of oil on the global market." Currently, oil is approximately US$38 per barrel. Ms. Callum continues, "However, JPSCo is working with the Government and the Regulator on efforts to diversify fuel sources, and ultimately reduce the cost of fuel." In light of the national need to reduce the cost of fuel, in the contract negotiated with Mirant, the right to create new power capacity expires on March 30, 2004.
CHEAPEST COST
From then on, any able provider, including JPSCo, can bid for the right to provide additional capacity to JPSCo for supply to consumers. Zia Mian, energy policy advisor in the Office of the Prime Minister explained, "Right now future generation capacity will be bid on and awarded to the company who can provide electricity at the cheapest cost for the next 20 years. That includes the private energy producers at Rockfort and at Old Harbour.
We wanted to create competition on the energy generation level. However JPSCo still has the exclusive right to supply and distribute energy to Jamaican consumers." In terms of the components, mainly diesel oil, of power generating equipment, Mr. Mian believes that eventually Jamaica can move away from the high cost fossil fuels that we are so dependent on now. "In the future we want to replace diesel and fuel oil with natural gas. By 2007 we want to be producing 50 per cent of our electricity by natural gas. It is a more efficient, environmentally friendly and cheaper gas. Natural gas also has security of supply.
When this is implemented, JPSCo's cost of fuel and the cost of the equipment to supply the fuel will go down. A natural gas plant will cost 60 per cent less than an oil-fired power plant. And JPSCo has indicated its willingness to support the Government in this endeavour."
