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Local News>Ja's electricity charges regionally competitiveBy Camilo Thame, Business Reporter |
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The price Jamaican consumers pay for electricity is the mid range of the cost of the utility in other Caribbean markets, recent surveys suggest.
But the rates here would likely be substantially cheaper if the local light and power company, Jamaica Public Service (JPS), didn't lose nearly a quarter of the electricity it generates to inefficiency and theft and was able to run more of its power plants on cheaper fuels.
"The most important factor in the cost of electricity is the cost of fuel," said Gregory McGuire, an energy economist at the St. Augustine, Trinidad, campus of the University of the Wet Indies (UWI).
According to a 2005 survey of electricity tariffs conducted by Caribbean Electric Utility Services Corporation (CARILEC), an umbrella association of light and power companies, the average 20.4 US cents (J$13.10) per kilo-watt hour (KwH) Jamaicans paid for their power ranked the island as the seventh cheapest of the 18 markets reviewed and placed its tariff around the regional mean.
However, more than half the price Jamaicans pay for electricity is determined by the fuel surcharge, which is determined by a combination of what it costs JPS for fuel to fire its generators, how efficiently it converts power into electricity and how much of the electricity it produces actually reaches consumes - the so-called system losses.
At present, 23 per cent of the electricity generated by JPS is lost somewhere between production and transmission to customers, cost borne by the company and consumers.
But a another significant problem for Jamaica is the relative age of its plants and the limited mix of fuels it uses, a factor not unique to JPS.
Indeed, apart from Trinidad and Tobago, where power plants a fuelled primarily by natural gas produced in that country, and Belize, which buys 60 per cent of its electricity from nearby Mexico, Caribbean power companies largely use huge amounts of liquid petroleum to fire their generators.
"The problem is with the type of fuel used (in Jamaica), why the electricity is so expensive," said Damian Obriglio, the chief executive officer at JPS.
"The lower the process involved in creating the fuel, the cheaper electricity that you have," Obriglio explained. "For instance, it would be expensive to use gasoline to generate electricity, because it has been through several processes for it to be used in your car."
While fuel cost is a constant issue for Caribbean power companies, some have managed to slightly lower their spend on oil by efficiently mixing the use of diesel and gas-fired plants and steam turbines, which burn cheaper fuels, such as Bunker C, to create the high pressure hot air to turn generators.
Take the case of Grand Bahama Power Company, which, at the time of the CARILEC survey, charged on average, charged its customers 17 US cents per KwH, or 3.4 cents cheaper than JPS charged Jamaicans. Grand Bahama Power generated 74 megawatts (MW), or 53 per cent of 140-MW capacity, with steam turbine generators, using cheaper, lower- processed fuels.
STEAM PLANTS
And there is Aruba's N.V. Elmar, which primarily uses heavy fuels to generate
steam to turn its turbines. In 2005, N V Elmar, charged Arubans, on average,
16.7 US cents per KwH for power. Caribbean Utilities Company in Cayman
utilised a similar proportion of steam plants to generate electricity
at 16 US cents per KwH.
Barbadians, who two years ago were paying an average 22 US cents per KwH for electricity, would had among the region's highest power bills. But this rate by the Barbados Light and Power, could largely be explained largely by the fact that it generates over 80 per cent of its electricity using more expensive gas and diesel.
However, the greater use of lower grade fuels, which appeared, in some Caribbean countries, to have translated into lower electricity, appeared not to have been quite the case in Jamaica, 46 of whose electricity is generated using steam and slow-speed diesel generators. Diesel is cheaper than gas (Jet fuel) and slow speed diesel requires less fuel to generate the same amount of electricity as a high speed turbine.
Another 13 per cent of the island's power is from combined cycle plants, which means that the facilities are driven by a combination of steam and gas. These plants are newer and more efficient than the older diesel plants.
JPS generates four per cent of its electricity from renewable energy sources, such as wind and hydro power.
But there is that fuel surcharge, which is corrected for plant efficiency and the system loss allowed by regulators. For example, JPS is allowed to pass through to consumers up to 15.8 per cent of the difference the electricity it generates and what is measured as usage by its customers.
TECHNICAL LOSSES
The Jamaican light and power company estimates that of the 23 per cent
of the power it loses, about 10 per cent is what is considered technical
losses; that is, power lost during the process of transmission and distribution.
While Obriglio insists that his plants, of the same type, as as efficient
of those in the United States of similar age, JPS' systems loss actually
jumped from 16.88 per cent in 2001. Last year's 23 per cent was the highest
in nearly two decades.
The difference between the maximum allowable pass through and the JPS' actual system loss - 7.2 percentage points - is has to be absorbed by the company. JPS tends to attribute rising system losses to electricity theft, pointing to the fact that its technical leakage has remained at below 10 per cent for well over a decade. However, in 2003, when the company's overall electricity loss was 18.5 per cent of production, the company's then technical manager, Michael Moss, reported at a seminar in Trinidad that actual theft was around six per cent. Three per cent was chalked up to faulty equipment.
The influence of fuel on power costs is best demonstrated in the USA, where states - District of Colombia and Hawaii - that primarily use petroleum to generate electricity - have the highest bills. In these two states residential customers for the year up to last October, paid an average 18.58 US cents per KwH for their electricity. Residential customers in Jamaica over the same period paid an average 24 US cents per kwh.
But as the grade of the primary fuel used for power in the United States got lower, or the power generation technology grew higher the price of electricity declined.
Nuclear power which accounts for the majority of the electricity consumed in northeastern states such as New York, New Jersey and New Hampshire, for instance, the typical residential customer 14.03 US cents per kwh.
COAL-FIRED PLANTS
Electricity from gas was cheaper at 12.7 US cents per kwh, while that
generated by coal-fired plants - over 50 per cent of all electricity in
the US - cost, on average, 8.96 US cents per kwh.
Hydroelectric power, from which states such as Idaho, Oregon and Washington derive their electricity, was, at 6.87 US cents per kwh on average, the cheapest in America.
It would appear to make sense if Jamaica was to shift some of its power generating mix to a cheaper fuel, such as coal, which, however, is likely to be a flash-point for environmentalists.
JPS does, in fact, have such a plan: for a 150MW coal-fired plant at Old Harbour, for which it has already purchased the land. However, the local light and power company, controlled by the American Mirant Corporation, had agreed to push back that plan by nearly four years, to 2012, to accommodate a planned natural gas fired plant that was to accompany the major expansion of the Jamalco alumina refinery in Clarendon.
That plant, if it happens, is to provide the power to run the expanded refinery and still supply 85 MW of power to the national grid. The project, however, has become stuck on Jamaica's inability, so far, to find a supplier of liquified natural gas (LNG), which, initially, had been promised by Trinidad and Tobago.
"We haven't receive formal notification (of a postponement) but we who would have to implement the plan for coal plant closer to the time," said Obriglio.
NATURAL GAS
If the Jamalco project is eventually done and Port of Spain supplies the
LNG, it is unlikely that the gas can delivered at the price enjoyed by
the Trinidad and Tobago Electricity Company (T&TEC) for the natural
gas it uses to run its plants and to supply among the cheapest power in
the region.
Indeed, the average price of electricity in Trinidad and Tobago last year 2006 was four US cents per KwH.
According to the UWI's McGuire the price of natural gas, which does not have a standard clearing market as in the case of oil, is determined by a range of factors, such as the price of the product the gas is being used to make.
DIRECT NEGOTIATIONS
In the case of Trinidad and Tobago's domestic market, McGire explained,
"prices are determined via direct negotiation between state agencies
and producing company".
For instance, McGuire said, Trinidad and Tobago's National Gas Company (NGC), which purchases almost all of the natural gas used in domestic market, "does not seek profit from selling gas to Trinidad and Tobago Electric Company".
Another factor contributing to cheap electricity in the gas-rich Caricom country, is the lower cost of the 100 million metric cubic foot per day of gas produced by NGC's compression platforms. This is gas that would otherwise have been flared during petroleum production. It represents a significant portion of the fuel used in electricity generation.
Natural gas and coal are not the only energy sources to which Jamaica is looking to ensure not only cheaper, but also a more sustainable energy mix.
A 2005 energy policy analysis, for instance, estimated the island's potential for renewable energy 210 MW, of which 30 MW represented the potential for hydro power and 85 MW the energy potential from bagasse, the trash from sugar cane.
Belize Eletricity Limited (BEL), which after it turned to Mexico's Comision Federal de Electricidad increased its tariff an average four US cents to 22, is also seriously looking to develop alternate energy sources.
The Belizean firm commissioned a 7.3 MW hydro plant in September 2005 and started another 3.4 Mw last year.
But its biggest participation in renewables, apart from indirectly thorough CEF, will be 13.5 MW of generating capacity it will purchase from Belize Cogeneration Energy Limited (Belcogen), which received a loan from the Caribbean Development Bank last year to help finance a 32.5 megawatt biomass co-generation power plant. That plant will use bagasse as its fuel.
camilo.thame@gleanerjm.com