Traditionally, Jamaica’s economic driving force has been tourism, agriculture and bauxite mining. Thanks to Jamaica’s position in the heart of the Caribbean, its tropical climate is conducive to such industries. However one industry which we seem to overlook for years is renewable energy. While the government has been making some strides over the years to push this industry it still has a very far way to go especially in comparison to the rest of the world and the potential locally. Let’s explore the Renewable Energy industry in Jamaica, and attempt to answer the question of “Is renewable energy worth it yet”.
Jamaica has the acclaimed title of being one of the first countries in the world to have electricity! Thirteen years after Thomas Edison (inventor of the light bulb discovered electricity) the Jamaica Electric Light Company started to supply electricity from a small coal-burning steam generating plant on Gold Street in Kingston. It’s also widely said on the internet that Jamaica had electricity on the island before USA, however this one is extremely unlikely since electricity was invented in USA. Either way Jamaica was ahead of its time when it came to electrical power. At this time electricity generation was dominated by fossil fuels.
Throughout the decades, advances in technology made cleaner alternative energy sources possible such as nuclear, wind, solar, geothermal, hydrogen fuel cells, and others. In Jamaica, the generation of electrical power continued throughout the twentieth century into present day with a heavy dependence on imported non-renewable fuels (93% generation from Bunker C and Automotive diesel oil as of 2014).
Why Jamaica’s Electricity Is So Expensive
Seeing as though Jamaica imports oil, this drives up the cost of electricity significantly. So much so that a study conducted by the IADB’s Multilateral Investment Fund and Bloomberg (on the cost of retail electricity to end users in the LAC region) found that Caribbean countries account for half of the top 10 most expensive retail electricity prices in the Latin American and Caribbean (LAC) region (Jamaica costing around US 40c/KWhr). The impact of this high cost of energy also trickles down to every other industry as a high energy bill which is further passed on to consumers for every product they purchase. But wait there’s more, high energy costs also detracts potential foreign investors from investing their money on the island. This results in a country burdened with unnecessarily high cost of goods and missed opportunities for economic growth.
Currently the Jamaica Public Service Company (“JPS”) is the main provider of electricity on the island and are the owners of the national grid. I say main and not only because there are independent power producers (IPP) who partner with JPS to provide additional power to the grid. In terms of Renewable Energy Providers producers, JPS signed a 20-year Power Purchase Agreement with BMR Jamaica Wind Ltd., Wigton Wind Farm, and WRB Enterprises/Content Solar Ltd (Jamaica’s First Commercial Solar Energy IPP) to sell 78MW of energy to the national grid. Also are home owners who and installed solar capacity who sell back to the grid under a net billing arrangement.
Comparison with other countries
Germany a country with not nearly as much sunshine hours or brightness as Jamaica, has the highest installed capacity in the world by a long shot at 32.4GW installed PV as of 2013. This was already around ten times what Jamaica was producing from solar in 2016. Germany has continued to increase their solar and renewable energy capacity every year since. To be fair, Germany is a much larger country than Jamaica, and the energy demand would obviously be much more. So to put it into perspective, the percentage installed renewables capacity in Jamaica as of the start of 2018 is roughly 18%, while in Germany renewables covered about 100% of power use for the first time as of January 2018.
Fortunately the Government of Jamaica has developed a plan for the country to diversify its energy sector and reduce the overall cost of energy, with a goal to achieve 30% renewable energy production by 2030 . This plan was drawn from the “Vision 2030” National Development plan which encompassed the National Energy Policy 2009–2030. A consequence of this policy was the formulation of a Standard Offer Contract for the sale of electricity to the grid under a net billing arrangement as mentioned earlier. So if you’re looking to invest in solar not just for subsistence, you could sell excess energy to the national grid at the wholesale rate of JMD$14/KWhr set by the OUR through a net billing arrangement.
How Net billing works is that you’re metered for the net difference of the energy you use minus the energy you supply. Here is an example scenario:
Assuming you have a 10KW grid tied system, your average monthly usage is 300KWhrs, and assuming 5 hours of consistent bright sunlight.
Energy Produced per day = 9KW x 5 Hrs = 45KWhrs
Energy Produced per Month = 45KWhrs x 30 days = 1,350 KWHrs
Earnings per month =1,350KWhrs x $14 = $18,900
Energy used per month = 300KWhrs
Estimated bill = 300KWhrs x $44 = $13,200
Net Bill = $18,900 – $13,200 = $5,700
Considering that the cost to install such a system would be at least JMD $2.7Mil, if you were to take out a home equity loan from a building society, you may be able to reduce your monthly payments to a more manageable figure as can be seen in the example below
In this example a home equity loan was calculated for 2.7Mil @8.5% int amortized over 25 years which gave a monthly pay back amount of $21,740. This value too will vary based on your age and how cheaply you can get the system installed. You can play around with these number using VMBS Mortgage calculator. The key point is that if you can get your earnings from the solar to equal this monthly payback then the system will pay for itself. In most cases though the cost of solar in Jamaica isn’t quite low enough to profit from net billing. However we are very close to that point and when we do reach you will see far more investors chipping in, in return this will reduce the country’s dependence on utility power.
As you can see the benefit of Net billing means that if you produce more than you consume you will not have an electric bill and will in fact generate a profit. However due to the enormous difference between buying vs selling rates, it may be hard make a profit off a solar system. That said its not just a financial investment you would be making, but an investmentment in the enviroment and reduction of the country’s oil foot print.
International Monetary Fund. “Report for Selected Countries and Subjects