By: Kimberley Gray
On any given day in Jamaica, one can step outside and feel the sun’s heat. Commenting on the sun and its heat is a daily activity for many. Yet, we are not fully taking advantage of this or other abundant renewable energy sources.
The ever-increasing cost of electricity is a source of frustration for many. In addition, fossil fuels make up most of the energy mix, much to the chagrin of advocates for a sustainable future. There is an urgent need for increased renewable energy, and Jamaica has the natural resources to do so. Solar and wind power have a high potential to meet the island’s entire energy demand. The tropical climate ensures consistent solar photovoltaic output throughout the year. In addition, assessments have also shown that wind power has the potential to meet 50 percent of the energy demand. Most recently, the government has indicated its plans to include nuclear power as a part of the island’s energy mix.
The transition, however, has been slow-moving due to the existing regulatory framework. Tackling the existing regulations is the first domino.
Fossil fuels make up 89 percent of Jamaica’s energy mix. The remainder of the energy mix is comprised of wind at 6.5 percent, hydropower at 3.5 percent, and solar at only 1 percent. The heavy reliance on fossil fuels has clear climate impacts. Greenhouse gases generated by burning fossil fuels for electricity and heat are a large share of global greenhouse gas emissions. In addition, over 75 percent of global greenhouse gas emissions and nearly 90 percent of all carbon dioxide emissions are caused by fossil fuels such as coal, oil, and gas. Jamaica, like many SIDS, has noticed the impacts of climate change, including decreased rainfall, high temperatures, and flooding.
In 2015, increasing renewable energy generation was included in Jamaica’s national development plan, Vision 2030. The current target for renewable energy is 30 percent by 2030 and 50 percent by 2037. Although, it is unclear how the 30 percent target will be shared among renewable energy sources. Despite these ambitious goals, very little progress has occurred. Since 2014, the share of renewable energy has only increased by 1 percent. Existing policies do not align with the goals presented.
The organization of the energy sector is organized must be assessed. Currently, the Jamaica Public Service Company (JPS) is the centerpiece of the energy sector. JPS, formerly owned by the government, was privatized in 2001, with the government of Jamaica maintaining 19 percent ownership of the company. Marubeni Corp and TAQA own 80 percent of the company and the existing regulatory framework gives the company significant control in the energy sector. The All-Island Electric Licence gives the company the legal monopoly to transmit, distribute, and supply electricity throughout Jamaica until July 8, 2027. The company also has generating capacity and is the largest generator of energy on the island.
As a private company, JPS is profit driven. However, the Jamaican market, like energy markets in other SIDS creates challenges. The small size of Jamaica’s electricity system creates diseconomies of scale; increasing the scale of the company’s operations does not lead to cost advantages. Fuel rates and the company’s high operating costs also pose a challenge. One of the measures the company utilizes to ensure profitability is to pass expenses on to the consumer. These expenses include potential upgrades to facilitate the transition to renewable energy. This presents a challenge to increasing renewable energy as consumers already face high energy costs.
There are also provisions in the All-Island Electric license that are a barrier to additional players in renewable energy generation. JPS’s current license has a Right of First Refusal (ROFR) clause. ROFR gives JPS the right to replace its generating units when it becomes due to be retired. Industry stakeholders have lambasted the clause, highlighting that it hinders the competitive bidding process.
The energy sector’s net billing policy has also faced criticism. With net billing, JPS customers with renewable energy generators can sell excess energy to JPS. Currently, this compensation is at a wholesale rate; the customer sells electricity to JPS for less than the cost to purchase energy back from the company. Making the energy produced less valuable discourages increased investment in renewable energy. The alternative, net metering, makes the electricity uploaded to the grid by the consumer the same value as the electricity purchased from the grid. Receiving full retail credit for the energy sold allows customers to maximize their investment in renewable energy.
Amending the All-Island Electric Licence with JPS will allow the government to maintain the relationship with the company while meeting the targets set in Vision 2030. Provisions must be implemented to encourage additional clean energy generators into the sector. This includes removing the ROFR clause and introducing net metering.
Push-back from JPS should be expected in seeking to make changes to the energy sector’s regulatory framework. The government must ensure that there is adequate leverage to introduce new measures. Sourcing the necessary financing will provide some leverage. Incentives for JPS to facilitate the transition to clean energy must also be developed.
A recent announcement made in parliament is a source of some optimism. Cabinet approved amendments to the All-Island Electric Licence to enable the Jamaica Public Service (JPS) to replace 171.5 megawatts of its generating capacity with renewable energy sources under the ROFR clause in the JPS license. The government also announced the advertisement for the expression of interest for the supply of 100 megawatts of renewable energy-based power generation facilities. This will be on a build, own, and operate basis has been published. Although these changes move the needle in the right direction, there is much to be done to meet the expressed targets in Vision 2030.
Jamaica’s natural resources provide a competitive advantage in renewable energy, but to make the transition, we must assess and amend weak points in the existing framework.
About the Author
Kimberley is a graduate student in the M.B.A./M.A. International Relations and Diplomacy program and is expected to graduate in December 2023. In her studies at Seton Hall University, she has focused on and gained expertise in sustainable development. Furthermore, as a Caribbean native, the region has been the center of her writing. She is deeply invested in the region’s potential for sustainable development and recognizes the immense opportunities to foster inclusive economic growth, environmental stewardship, and resilient communities.