Jamaicans stand to profit from collective financing

- of wind and solar projects

David Cooke

Wednesday, March 15, 2017    

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We saw in last Wednesday’s article, entitled ‘When will JPS prices drop by more than half?’, that we could have much cheaper power if utility provider Jamaica Public Service (JPS) switches to wind and solar energy coupled with pumped hydro storage, displacing onerous and expensive foreign fuel imports. By having the finances ready and upfront for this coupling, we could have this entire low-priced electricity transformation done in less than three years to full operation. Otherwise, it will take us much longer than 10 years.

But would it be worth it to the individual household to finance this via our monthly JPS bills? Would this be a drag on our pockets? A cost, or a tax? Or would this instead become positive investment growing to become substantial retirement savings for us all?

Let’s look at other cases. For one, Germany used a monthly levy on electricity to transform its 99 per cent fossil fuel power market away from imported fuel, cutting the hold of Russia on fuel imports. Consider also Canadian provinces British Columbia and Quebec, both of which used investment bond instruments to make cheap power possible.

In Germany’s case, in 1990 they were facing loss of control due to Russia’s aggressive pricing of fuel supplied to them. They were entirely dependent on fossil fuels for 99 per cent of electricity generation. They needed to break Russia’s stranglehold by adding wind and solar quickly. So they introduced a cess, a surcharge of US$0.08 per kWh mainly on residential households, thus relieving most businesses of the burden of higher electricity. In this way, businesses got low electricity prices equivalent to the USA’s, which kept them competitive and vibrant and allowed them to employ more people. Households had the extra levy burden, but with increased employment were able to absorb it, albeit with some tightening of their belts. Sun-poor Germany became the world leader of solar-PV. The country now has some 40,000 MW of solar, and even larger quantities of wind. These new-age technologies now approach 30 per cent of Germany’s entire generation, displacing large amounts of fossil fuels. Despite the levy on households, home electricity bills are no higher than before, at around US$90 per month, the levy being more than offset by a drop in electricity prices due to the addition of wind and solar on the national grid.

In the case of British Columbia, vast yet sparsely populated territory, which is larger than all of Europe combined, featuring mountainous and snowy conditions makes it ideal for hydro power. Rainfall during cold winters appears as deep snow on mountaintops, Earth’s natural way of water storage. So there is no shortage of water year-round if rivers are dammed and water flows controlled and regulated through a cascade of dams, eliminating flooding. By installing hydro generators and transmission lines, they had all the power they needed. But hydro dams are hugely expensive, so the government of the province offered bonds to the public. In units of CAN$1,000 up to CAN$10,000, these instruments had a fixed profit of some six per cent per year for some 40 years. (Dams last much longer than that, by the way). At that six per cent rate, an initial investment of CAN$10,000 turns to over CAN$60,000 in the 40-year time frame if held in a tax-sheltered retirement account (which the Government provided). So, by spreading the offering to all citizens, they were able to quickly finance these massive projects and each citizen was able to build a retirement account. Electricity prices in this region is now among the lowest anywhere in the world – CAN$0.12 – and it’s similar for the Quebec province.

I should quote the experience of Denmark as well, a country similar in size to Jamaica. This small nation, decades ago, took a decision to use its abundantly windy conditions to produce power. Denmark now averages over 80 per cent of its power generated this way and on some days it’s up to 140 per cent (they export the rest), and became the world leader of wind power. This spawned wind turbine-manufacturing companies that now dominate world markets like Vestas, and developers like DONG Energy (Danish Oil and Natural Gas). The Danes are now pioneering wind generation offshore on nearby shallow continental shelves, in hugely larger quantities than on land and away from sight, so big their sizes rival nuclear power plants. These can be quickly constructed, unlike nuclear plants, and they outcompete them on generation prices too. Continental-shelf offshore wind generation prices have dropped astronomically in just two years, sliding to under US$0.08 cents per kWh in better world locations and around US$0.12 cents elsewhere — similar pricing to Jamaica’s LNG. Denmark’s prices recently hit US$0.05 cents in three separate locations by three different companies, including Shell Oil Co, and the slide continues.

So let’s learn from all three examples, combining relevant aspects for maximum profit to Jamaican householders.

We could start with a levy to gather funds quickly. We already have the National Housing Trust to use as a template for establishing a brand-new renewables energy trust company. If we use Germany’s rate ofUS$0.08 cents per kWh, US$300 million would be gathered each year (a figure similar to India’s result). When these new pumped-storage facilities are operating and producing profit in about three years’ time, each household would have accumulated an average of US$1,000 in levies, albeit without a return of profit to the households until then. It is then time to convert these and issue investment bonds to each JPS account holder instead. The annual rate of interest should be determined at that time, but should be guaranteed to be no lower than five per cent to generate trust by the householder and escape the dread that “levy is tax”. Investment bonds build wealth instead. To boost profit, we could charge JPS some US$0.03 cents per KWh for pumped storage instead of US$0.02 cents.

With the continued build-up of over US$300 million per year of capital in the renewables trust fund, we could selectively buy back some or all of the existing solar and wind installations, continually fuelling the profit in the fund for these householders. Solar and wind installation companies are constantly looking for buyers for their installations to release their capital for new endeavours elsewhere. In around 10 years’ time when we have completed it all and domestically own it all, we could modify the mandate of the fund (or start a new fund) to become an infrastructure fund and start buying back our toll roads!

So, if we all collectively become the “bank” we can grow a really strong retirement fund for every household, breaking the status quo of Jamaica being for the rich only and changing the dynamics of our country.

And despite the levy, our monthly electricity bills would go down by quite a lot due to cheaper electricity additions of wind and solar with each round of installations. We would chop our old JPS rates by half or more (by at least US$0.13 cents per kWh). The result would be very low electricity prices and strong household wealth. The alternative is to continue with high electricity prices for who knows how long — at least 10 to 15 more years.

There also stands to be other large-scale benefits of the proposed speedy financing option that would impact every household. See my next article for that discussion.


David Cooke is a UWI-trained electrical engineer. He has run enterprises in Jamaica that use large amounts of electricity, not least his own food-processing business. He is now a budding clean-energy developer and advisor. Contact him at: deeco3@ earthlink.net.





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