Jamaica a role model for public-private partnershipsSunday, June 03, 2018
Governments worldwide have turned to public-private partnerships (PPPs) to design, finance, build, and operate infrastructure projects. In the Caribbean, PPPs have successfully enabled countries to build innovative alternative, less expensive clean energy solutions like solar farms and wind parks.
Jamaica in particular has been a role model for the region, and for other emerging markets, with PPPs, especially in the renewable energy sector.
Since Jamaica implemented its PPP policy in 2012, it has completed five projects, three of them in renewables, with a total investment value of approximately US$1.3 billion. In addition, the country was also ranked fourth in the 2017 Infrascope PPP Programme Index for Latin America and the Caribbean.
This success for Jamaica did not come easily. Some significant weaknesses of the country's early PPPs included ineffective monitoring and inadequate coordination within the Government. Then Jamaica conducted an extensive review programme that led to a variety of structural reforms. Remarkable progress followed. Today, Jamaica can be seen as the leading country in the Caribbean for renewable energy development.
Here are some of the highlights on how that was achieved:
PPPs in the renewables infrastructure space are one of the main drivers for the reduced energy costs. In 2016, for example, Jamaica's Office of Utilities Regulation selected a company that proposed 8.54 US cents/kWh for a 33.1 MW photovoltaic (PV) project — and with that the cheapest source of electricity in Jamaica — as the winning bidder. Compared to the country's 2014 tender, which saw two wind projects awarded at 12 cents and 13 cents/kWh and a 20 MW solar project awarded at 18 cents/kWh, this represents a decrease of more than 50 per cent in energy costs within two years.
The PPPs came to the right place, at the right time. The OUR ran the second auction process for the addition of renewable energy capacity in 2013 — right after the global financial crisis. Investment opportunities in the US and European renewable energy markets were scarce. Project developers flocked to the Caribbean. Both the right timing and the prevalent market appetite led to an outstanding success of Jamaica's second renewable energy capacity tender in 2013.
The renewable energy sector receives consistent governmental support that clearly focuses on green energy. The Government of Jamaica has established a dedicated PPP unit that is located within the Development Bank of Jamaica and aims at achieving 30 per cent of the country's energy consumption from alternative resources by 2030. As of last year, Jamaica has already obtained 10.5 per cent of net electricity from renewable energy.
Jamaica continues to lead the region in finding new ways to partner with the private sector. From installing solar generation systems in 30 public secondary schools across the island and developing the Caymanas Special Economic Zone as a logistics and business hub for the region, to the rehabilitation of the Jamaica Railway Corporation, the country is keen on exploring new possibilities in the PPP sector.
However, there are still some challenges that need to be addressed. Jamaica not only has to build on its institutional capacity and knowledge to execute projects more consistently and efficiently, but the country also needs to make its public registry of PPP projects available online. The latter would guarantee a higher level of transparency that could benefit the overall investment environment. If the Government persists with its dedication to the success of the programme, as it has done so far, the process itself is bound to improve.
As Prime Minister Andrew Holness pointed out during the Third Chief Executive Officers Summit of the Americas in April this year: “A robust PPP allows for unlocking the value of assets, reducing debt, and mobilising local and foreign direct investments in the economy.”
By focussing on building successful and effective PPPs, the Government of Jamaica's role as an enabler of growth will continue to be a model for the Caribbean and for all emerging markets globally.
Martin Vogt is managing director at MPC Renewable Energies, the exclusive investment advisor to MPC Caribbean Clean Energy Fund. MPC Caribbean Clean Energy Fund intends to invest up to US$50 million of equity in Jamaica during the next five years. Most recent investments include the 51 MWp Solar PV in Paradise Park, Jamaica.