Broken promise?
Why LNG didn't make your electricity bills lower

THE Jamaica Public Service Company (JPS Co) is defending its introduction of LNG amid criticisms that the promise of cheaper electricity hasn't been forthcoming.

Speaking at the latest Jamaica Observer Business Webinar, principal consultant at ENBAR Consulting an energy and environment service consultancy, and founding director and past president of Jamaica Solar Energy Association, David Barrett said "liquefied natural gas [LNG] was to deliver a lower electricity price; unfortunately, it did not and it's not likely because natural gas is going to be the go-to fuel for most countries trying to meet their climate change obligation, so we really have to be looking down the line of renewables."

In defence, senior vice-president of generation & special projects at JPS Joseph Williams argued, "the introduction of LNG was to really treat with the diversification of fuel primarily for stability of prices."

Williams further disclosed, "What we can say today is that over the period that we have introduced LNG into the system here, if we were to continue burning the automotive diesel oil [ADO] that we would have used in the plants that are now using fossil fuel, we would have been paying much more than we have been paying. So, we have benefited, not just from the low carbon footprint of LNG compared to heavy fuel or ADO but certainly on the matter of price."

Williams said he is aware that the expectation was that electricity bills would have been significantly lower but maintained that Jamaicans are benefiting regardless.

In fact, he told the webinar that Jamaica is now protected from higher electricity prices due to the terms of JPS' LNG contract with its supplier.

"In relation to what's happening now in Europe and the high prices I would say that we're actually now protected by the gas contracts that we have in place because we're seeing spot market prices for fuel which are driven by the demand in Europe, multiples of the price we are paying with the contracts that we have now. Yes, the index prices would have moved but there's a component of the price in the contract that would have had to remain stable despite the turbulence in the market," Williams contended.

On the other hand, general manager at Petrojam Winston Watson refutes the claim that diversification was front of mind when JPS decided to introduce LNG. He said failure to diversify is the primary reason electricity prices aren't much lower right now.

"The plants were not typically running on ADO except for the Bogue plant which would have used ADO which is a more expensive fuel than HFO. One of the things we did is we switched to LNG, we didn't diversify, we switched and therefore if you had diversified you would have had some LNG, some ADO and some HFO," said Watson.

He explained "these are commodities, they move with supply and demand, that's why we haven't seen the benefits that were anticipated, you're not going to because it's a commodity that people buy and sell, supply and demand moves it and when people started switching to LNG, countries started switching saying this fuel is cheap and cleaner, yes but the demand went up and with the demand the price would go up. That is why a better solution would have been to have more of a diversified energy fuel, not a switch which is what we did."

"We are now seeing the effects with the war in Russia and Ukraine. Russia cut off the gas supply to Europe, the LNG that we would typically get at a better price out of the US, they're sending it to Europe because they're getting better prices so we are paying for that now because we didn't diversify the way we should have," Watson opined.

Williams, however, maintains that diversification was a big part of JPS' strategy "if we go back to what I can recall in terms of the diversification, it was never meant to be a switch it was about price sustainability coming out of about 2009 thereabout when we had all of those price volatility, that was really what the diversification strategy was about. If you look then and even recently prior to the instability in Europe right now you would have seen on a long-term projection where LNG prices were much more stable."

Notwithstanding, Barrett agrees that the promise of lower electricity bills with LNG was a promise which was oversold to Jamaicans.

"I sat in those rooms where the discussions were held about LNG and it was pointed out more than eight years ago that we would see an escalation in LNG price and there are some persons who were confident that we would have good prices and others that were equally confident that LNG would begin to have a volatile market, the way that oil and gas does. We are seeing that volatility now, that is the reality," said Barrett.

He said more emphasis should have been placed on integrating renewables "49 per cent of your electricity bill is fuel now, can you imagine if you replace that with renewables?"

In the meantime, Williams noted "when we look at LNG we believe it's what some persons refer to as the right bridge fuel to get to lower your carbon footprint with the integration of more renewables. It provides that flexibility to facilitate the integration of more power from the wind and sun whilst reducing significantly what we would have seen in terms of sulphur emission that we had in the HFO and some of the ADO that we would have been burning. To stay here today and look back and say, did we make the right decision? In life you never have that opportunity. I believe the national energy policy as with any other will need some revisiting now to say how we move forward."

A power generating plant in Jamaica.
WATSON...a better solution would have been to have more of a diversified energy fuel, not a switch which is what we did.
BARRETT...LNG was to deliver a lower electricity price, unfortunately it did not.
WILLIAMS...I would say that we're actually now protected by the gas contracts that we have in place because we're seeing spot market prices for fuel which is driven by the demand in Europe, multiples of the price we are paying with the contracts that we have now.
Andrew Laidley

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