John Myers Jr, Business Reporter
Ruth Potopsingh, group managing director of the Petroleum Corporation of Jamaica, says seismic data show good prospects. - File
Jamaica's efforts to pull in private capital for the development of renewable energy systems to replace as much as 15 per cent of the country's energy needs have so far failed to excite investors.
Two offers, one to divest the Wigton Wind Farm and the other to develop hydro energy, have so far yielded disappointing responses.
The latest invitation for private interests to develop hydro power got only one bid - a Canadian company which submitted a proposal at the end of the extended pre-bid period on April 11.
Gary Jackson, the general manager of Wigton Wind Farm Limited, a subsidiary of the Petroleum Corporation of Jamaica (PCJ), refused to comment on the tenders.
But Dr Ruth Potopsingh, his boss and managing director of the PCJ, later told the Financial Gleaner that there was only a single bid from a Canadian company.
She, however, said the tender was withdrawn subsequent to the Office of Utilities Regulation (OUR) opening a separate tender, offering investors the opportunity to submit proposals to supply electricity generated from renewable energy sources.
"We took a policy decision to let that process go through so that we would be able to have an objective and independent position because one of those winning companies may be able to partner with us," Potopsingh said.
The head of the PCJ, the agency responsible for developing Jamaica's energy resources, said the single bidder was instead directed to the OUR's offer, which has been extended from June 12 to July 24.
The OUR's offer document said the successful bidder would be offered a 20-year licence initially with the possibility for extension to build and operate a renewable energy generation facility whose power would be sold to the national grid under a power purchase agreement with the island's sole distributor of electricity, the Jamaica Public Service Company Limited.
The JPS is 80 per cent owned by Marubeni Caribbean Power Holdings Inc - a subsidiary of Japan's Marubeni Corporation. The Jamaican government which privatised the power company back in 2001 to Mirant, owns the other 20 per cent. Marubeni acquired JPS from Mirant in July 2007.
As Potopsingh pointed out, the PCJ felt that the OUR's offer provided greater detail that might attract more investors and would therefore provide her agency with a wider slate of candidates from which it might offer to enter into a joint venture.
"One interested bidder had come," she said.
"Should they come out a winner, then we will continue our dialogue."
The disappointing response to Wigton's attempt to get investors to develop hydro-energy facilities is similar to the agency's efforts to divest the 20 megawatt Wigton Wind Farm last year, which led to the offer being later scrapped.
"There was not a lot of interest based on the one application that we got, although companies had bought packages and had indicated an interest," she said.
"That has been our experience so far with both wind and hydro," she added.
But the inability to entice private interests to invest in renewable energy, despite a worldwide thrust towards renewables in light of spiralling oil prices, might be due to the low returns being guaranteed on electricity generated from these sources, when compared with countries like Germany, Switzerland and Australia.
The guaranteed rate of return in these countries ranges as high as 22 US cents per kilowatt hour.
"We were never near there. In fact, we have in our regulation a 15 per cent premium in addition to what (the avoided cost of generation) the OUR would have indicated so now it's coming out to be US 8.8 cents plus a 15 per cent (and that) would probably bring it up to 10 cents," Potopsingh said.
The mandate of Jamaica's Energy Policy to produce as much as 15 per cent of the island's energy needs from renewable sources by 2015, has pushed the latest tender offer from the OUR.
The PCJ plans to double the capacity of the Wigton Wind Farm to 41.4 MW and has identified three more sites where similar wind-powered plants of 20 MW each could be established.
The National Contracts Commission has already approved a contract - which is subject to Cabinet's assent - to purchase an additional nine wind turbines at a cost of over $3 billion from the Danish firm, Vestas Wind Systems AS for the expansion of Wigton.
It has also identified 10 sites, some of which already produce hydro energy on a small scale, that have potential for the development of hydro energy.
Based on the Energy Policy, this would require some 640,000 MW of energy to be produced from renewable sources.
Only about 5.5 per cent of Jamaica's energy is currently produced from renewables, mainly wind and hydro; the greater 95 per cent being generated from petroleum.
john.myers@gleanerjm.com
