Gov’t Facilitating Investment in Renewable Energy

The Government of Jamaica has taken steps towards creating a legislative and regulatory framework that will facilitate investment in the renewable energy sector.

Minister of Science, Technology, Energy and Mining, Hon. Phillip Paulwell made the announcement on July 24, during his 2012/13 Sectoral Presentation in Parliament.

Minister Paulwell said renewables represent the shortest route to both diversification of Jamaica’s energy mix and a positive impact on energy costs.

He cited the introduction of net billing as one of the first steps, noting that in May of this year, licences for the first 11 participants in a net billing initiative were signed.

“This marked the birth of distributed generation in Jamaica, as for the first time, homeowners could generate electricity and sell their excess to Jamaica Public Service (JPS) via the national grid,” Mr. Paulwell said.

The Minister explained that net billing is an attractive energy management solution not only for homeowners, but also to small business operators, who presently consume some 700 million kilowatt hours (kWh) annually.

Minister Paulwell also announced that step was taken to remove the exclusivity of the Petroleum Corporation of Jamaica (PCJ) to develop renewable energy in Jamaica.

“The removal of the exclusivity will mean that the renewable energy market in Jamaica will be fully liberalised and open to competition. The Office of Utility Regulation (OUR) is empowered to seek competitive bids for the addition of major renewable energy capacity to the grid, but for generators that intend to supply 25MW or less, all that is required is a Power Purchase Agreement (PPA) with JPSCo and approval from the OUR,” the Minister said.

The Energy Minister also informed that his Ministry was working to make Jamaica more favourable to renewable energy investors through the tariff regime. He reported that the current rate set by the OUR pegged the tariff to the avoided cost of generation.

“While there was international precedence for this method, it resulted in the unfortunate situation of generators being asked to sell electricity at around US$0.11 per kWh when Jamaica’s current cost of generating electricity from oil is around US$0.25 per kWh.

He explained that the Ministry conducted a study with the assistance of the World Bank, on a ‘Feed-in Tariff regime’ that would recommend alternative and more representative tariff structures. The objective, Minister Paulwell said, was to establish a tariff that would strike a balance between encouraging investment and reducing electricity prices.

According to Minister Paulwell, the recommended tariffs range between 11 and 15 US cents for electricity generated from hydropower, biomass and from waste; around 14 US cents for wind; and between 26 and 32 US cents for electricity generated by utility-scale and consumer photo voltaic systems respectively.

The Minister advised that these rates would strike an important balance and the recommendations in this report would be presented formally to Cabinet and Parliament for consideration and final approval.