Our Energy Crisis – Understanding the choices

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Since the Arab-Israeli conflict of 1973, which led to the OPEC embargo against the West, and the resultant sharp rise in crude oil prices, Jamaica has been grappling with trying to find a sustainable solution to the cost of energy. The Jamaica energy sector, and in particular the electricity sector was built around a single fuel source, which was oil based. Since then, the sole electricity supplier has diversified from solely steam-fired plants, to a mixture of hydro and wind, gas turbine, and combined cycle plants. However, with this diversification, the unit cost of electricity to the consumers in Jamaica is still one of the highest in the world at US$0.44. Why is this so and what can be done to ameliorate this problem?

Why the High Cost?

Between 1970 to 2001 while the JPS was under Government ownership, the necessary investments in technology upgrades, and new plants were limited. The Hunts Bay B6 commissioned in 1976 was designed pre-1973, and as such being a new plant in 1976, the efficiency of this base load plant was not paramount consideration when it was being designed. The investment in gas turbines in the early 1980’s did not take efficiency or the final price to the consumer into consideration. The only consideration was to solve the energy shortage the country was going through at that time. Hence, despite the fact that these units (gas turbines) were highly inefficient, and were not suitable for base load application, as they are more suitable for peaking load application, they were commissioned at a great cost to the JPS bottom line.

By the late 1990s, the growth in energy demand started to outstrip the supply, and it became necessary to add more capacity in the shortest possible timeframe. The Independent Power Providers came onto the landscape, with the 60 MW based load plant at Rockfort, and the 74.16MW peaking load plant at Old Harbour. These new independent producers did not use steam plants, but diesel plants utilizing heavy fuel oil. The objective for the addition of these plants was not the price of energy to consumers, but to expand generating capacity to meet the rising demand in the shortest possible timeframe.

JPS was sold to Mirant in 2001 with one of the conditions of the sale being the expansion of the JPS generating capacity, which was the addition of new base load units. The 120 MW combined cycle plant at Bogue joined the energy generation landscape. The use of combined cycle technology was an attempt to increase plant efficiency, which would benefit the consumers in lower prices.

Energy Policy

It is against this background that the government of the day decided to craft a comprehensive energy policy 2006 – 2020. The Green Paper called for a diversification of the fuel source, along with the use of higher efficiency generating plants. In 2009, the Government launched the National Energy Policy 2009 – 2030, which called for diversification of fuel source, with the preference source in the short to medium term being liquefied natural gas (LNG).

Possible Solutions

The single largest issue that the country now faces is the high cost of electrical energy.This high cost is crippling business and stifling economic growth. Using a one dimensional  approach will not solve this problem. There are several compelling factors at play in determining the final unit price to the consumers. Factors such as efficiency, location of generating plants from load centres, fuel types, and tariff structures must all be taken into consideration when determining the final cost to the consumers. However, fuel types and efficiency are the two factors that I would like to focus on in determining the solution matrix.

Fuel Types LNG

We have to face one simple fact which is, the only way unit cost will be reduced to  consumers in a significant way is by adding efficient base load units to the generating system using the cheapest fuel source available, always keeping in mind price volatility. The 2009 – 2030 energy policy articulated LNG as the preferred fuel of choice. LNG prices were fairly low, and supply abundant when this policy was crafted. However, since then LNG supplies have tightened and prices have risen steadily from US$3.00 mmBtu in 2008 to US$9.00 mmBtu in 2011, a 300% increase in three years.

Heavy Fuel Oil (HFO)

Heavy Fuel Oil is the fuel that is currently being used to power the island’s power plants, and this since 1973 has been the single most significant factor determining the final cost of electric energy to the consumers. Couple this with inefficient plants, technical losses (due to the distance from the power plants to the load centres) and non-technical losses (theft of electricity), and then we have the perfect recipe for our current problems.

Over the years, several attempts have been made to wean the country from its 100% dependence on this type of fuel, without much success. We have explored the use of peat from the Black Morass, and more recently the use of pet coke, which would have been generated in sufficient quantities once the Petrojam Expansion project was completed.

Renewables

The use of renewables in the Jamaican energy sector has been gaining traction over the years. The JPS currently has 23 MW of hydropower in their generating capacity. Further feasibility studies are currently been carried out to determine the possibility of constructing new hydropower projects at various locations throughout the island. The Government has also invested heavily in renewable energy with the establishment of the Wigton Wind Farm in Manchester. Consumers, who can afford the high upfront cost have been installing solar power system in their households, and with the implementation of net metering billing by the OUR, this sector could see further growth.

The 2006 – 2020 Green Paper, and the 2009 – 2030 National Energy Policy clearly articulated the need for increasing the use of renewable energy sources in the electricity sector, and with the recent RFP issued by the OUR for 115 MW of new generation capacity based solely on renewal sources will go a far way in implementing this aspect of the National Energy Policy.

Coal

Coal has been discussed as part of our energy fuel source, but not implemented due to the environmental issues associated with its use. I should point out that the Caribbean Cement Company has been using coal as a fuel for its kilns since 1988, and the environmental impact has been negligible. The truth is coal is the one of the cheapest fuel sources existing at the present, and prices have been relative stable over the past decade.

What is required to be done

The energy problem facing Jamaica at this moment is two fold as follows:

1. To replace aging generating units with more modern efficient units, while at the same time increasing the generating capacity to ensure the minimum reserved margin as required.

2. To reduce unit cost of electricity to the consumers. In order to achieve points one and two, base load plants are required. The newly commissioned 65MW West Kingston Power Plant will replace some of the existing base load plants, but the fuel source used is still heavy fuel oil, with the capability of using LNG when or if it ever should come on stream. This additional capacity solves problem one, but it will not necessary mean lower prices to the consuming public. The use of LNG if it ever should come on stream will not lower the prices either, as the design that is used is diesel powered generation instead of steam powered generation.

In order to solve both problem 1 and 2 simultaneously it is imperative that we take the capital cost of the solution under consideration. The 2009 – 2030 National Energy Policy articulated a least cost expansion model. This model will not work if we are to tackle both problems at the same time. Therefore, what is required to the solve the problems are as follows:

1. Modify the least cost expansion model as articulated by the National Energy Policy, to one, which takes into consideration the twin problems that we currently face.

2. Due to the high capital cost of LNG implementation, the use of base load coal plants should not be ruled out in the energy fuel mix. Diversification was argued in the 2006 – 2020 Green Paper, but was left out of the 2009 – 2030 National Energy Policy.

3. Explore the feasibility of increasing the hydropower capacity of the island. It should be noted that hydropower implementation comes with great capital cost, and it also requires time. Hence, this option is not a short to medium term solution. However, if the energy policy as it relates to the electricity sector, is modified to take cost of fuel into consideration, then this option is worth pursuing.

4. Renewables, excluding hydropower, are the talk of the town now. However, no matter the technology gains that are will be made, unless the basic efficiency of a 4 solar panel is increase to be comparable with fossil fuel, then renewables can never be considered for base load application. However, there is a place for renewables in the energy sector landscape, especially as it relates to distribute power generation systems.

Conclusion

Cheap electricity is a pipe dream unless we take the necessary steps today to start the journey towards this goal. LNG in and by itself as a fuel source is not the answer, fossil fuel is not the answer, nor is solar/renewables. In order to get cheaper electricity cost in the near future, the least cost expansion model will have to be modified, as the more efficient base load units are capital intensive. The addition of diesel-generator set power plants are not as efficient as the combined cycle gas turbine using LNG as the fuel. JPS must be allowed to replace its existing aging inefficient units with more modern steam utilizing combined cycle technology. Finally, we have to be prepared to consider coal more seriously if the unit cost to the consumer is to be reduced.

Courtney O. Currie, P. Eng. is an Electrical Consulting

Engineer, and President of Limco Engineering Inc.  He is a registered engineer in Jamaica, the Republic of Trinidad & Tobago, and holds an engineering license in the State of Florida.

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