Zia Mian, Contributor

The state of the power sector in Jamaica is quite precarious and in need of robust short-, medium- and long-term strategies.

In the short term, the challenge is to ensure that there are no wide range black or grey outs in the country. This requires determining the need for new generation capacity during the next 12 to 24 months and ensuring that this capacity is acquired on a timely basis.

However, the Government must also ensure that the generation capacity is acquired within the context of the 2001 Electricity Licence (through competitive process) and the fuel choice does not place extra burden upon the already high price of electricity. The Office of Utility Regulation is working closely with the stakeholders to achieve this objective. It must, however, fully protect the consumer while sanctioning the erection of new generation plants.

In the medium to longer term, the objective is to reduce Jamaica's reliance on highly volatile oil imports to generate electricity; improve the overall system efficiency; and reduce system losses. This means that the country must make rationale and practical choices with regard to the technologies and available fuel options.

In the last article, it was shown that the existing power system is characterised by low-efficiency factors. In the longer term, the economy would have to acquire units which support higher efficiency levels. The combine cycle gas turbines (CCGT) burning natural gas are not only relatively cheaper, but are also more efficient than any other types of generation units. Natural gas-based CCGT units have an efficiency factor of over 58 per cent. In the case of Japan and Korea, where the fuel for electricity generation, among others, is imported natural gas in the form of LNG, the LNG use efficiency is over 85 per cent. This is achieved by deploying advanced CCGT technology and recovering the cryogenic energy during the re-gasification of LNG and using it in the industrial and food processing plants.

Coal cost

Coal is attractive to many for being abundant and cheap. The cost of electricity generated from coal is estimated to average between US$0.04 and US$0.08 per kWh. The cost of electricity generated from natural gas is expected to vary between five US cents and seven US cents per kWh (according to the International Finance Corporation - IFC). As far as the cost of electricity generation is concerned, both technologies are at par. However, not only that the front-end cost of coal-based technologies is high (cost for handling and crushing facilities as well as generation unit sizes that might adversely impact the loss of load probability for the smaller systems - blackouts in case of large generation unit failures), but it is also carbon intensive.

The CO² emissions from the coal-based plants usually average at 1,100 grams/kWh (ranging: 800 to 1,700 grams/kWh depending on technology and type of coal). The CO² emissions from natural gas-based power plants are likely to average at 450 grams/kWh (ranging: 400 to 850 grams/kWh). However, the coal also contains NOX and sulphur emissions (source: IFC).

Environment tax

At present, in Jamaica, the per capita carbon dioxide emissions are estimated at about four tonnes per annum. This is higher than the per capita carbon dioxide emissions in China (source: IFC and Energy Information Agency - EIA). Considering the global concerns regarding the green house gases (GHG), there could be considerable pressure to avoid the construction of coal-based plants in countries like Jamaica. The global community is expected to enforce this strategy by sanctioning environment tax on coal. With natural gas as the fuel, the using country is likely to earn tradable carbon credits that can lower the fuel cost and consequently the electricity price.

Concerns are raised regarding the availability and long-term price of natural gas. Some believe that the natural gas producers are likely to form their own cartel. This view was once expressed to me by the former minister of energy and energy industries, from Trinidad and Tobago, Eric Williams. Because of the nature of the market, this is considered a remote possibility and is unlikely to happen at least in the next two decades. Natural gas is a regional rather than a global business, and does not have an open market like oil.

The development of LNG as a means to transport natural gas to distant markets requires dedicated front-end investments both on the producing and receiving ends. Hence, long-term 20-25 year supply and purchase agreements are necessary components of security packages that facilitate the financing of such mega projects.

US market

The price of natural gas in the US market (Henry Hub) is not directly determined by the global supply/demand situation of natural gas. It is a function of land-based supply/demand equation with natural gas supplies from the north and the prevailing weather conditions. If the United States had large LNG receiving terminals, the price of natural gas in the USA would be dramatically moderated.

During his presentation on March 4, the EIA administrator (Guy Caruso) informed the United States Senate Committee on Energy and Natural Resources that in the longer term (2010-2030) natural gas price in the United States is expected to average around US$ 5.50 per million Btu (in 2006 prices).

The policy makers in Jamaica should therefore carefully consider the coal-versus-natural-gas option before fully committing the future generation capacity.

With the development of pebble-bed technology leading the way for smaller size nuclear power plants, it is expected that in the longer term, the nuclear power plants would become more relevant to the Jamaican-size power systems. The longer-term strategy that the policy formulators may wish to consider might be to build natural gas CCGT plants and within 25 years transition to nuclear pebble bed plants. The nuclear plants have negligible environmental emissions, the levelised generation costs vary between US$0.025 and US$0.07 per kWh. However, the issues regarding the handling of nuclear waste would have to be carefully considered.

I am confident that a well-informed and structured strategy for the future expansion and replacement of power generation capacity in the public sector would allow the economy to lower the cost of electricity in Jamaica.

Zia Mian, a retired senior World Bank official, is an international consultant on information technology and energy. Send your comments to mian_zia@hotmail.com.