Independent Power Providers (IPPs) are private entities that own and operate facilities to generate electricity for sale to the national grid. IPPs invest in generation technologies and recover their cost from the sale of electricity.
The first step in an IPP’s entry into the market is participating in the ‘competitive bidding’ process led by the Office of Utilities Regulations (OUR). Through a Request for Proposal (RFP), the competitive bidding process ensures a level playing field. In addition, it maximises the value to the ratepayer by analysing prices submitted by several competitors.
Competitive bidding keeps each IPP honest when presenting its price so that the cost most beneficial to the ratepayer is selected. If an IPP bids too high, the OUR can reject that price as it is not in the best interest of the ratepayer. Through market reads or the analysis of the energy prices in the region, there is a limit that dictates what price point is feasible and what is not. That is why all new generating assets are usually more cost-effective than their antecedents.
Furthermore, IPPs cannot enter the market without a contract (PPA) between them and the utility (Jamaica Public Service), the Government and the OUR. Once the utility signs a PPA with an IPP, the IPP can then commence energy production. PPAs usually span twenty years, where the utility must purchase electricity from the IPP for that period and under the type of contract mutually agreed upon, i.e., whether TAKE AND PAY or TAKE or PAY.
According to the Electricity Act, 2015, and the ‘JPS monopoly’, IPPs only have the right to generate energy for sale to JPS. Therefore, under any circumstances, they cannot sell power directly to you, the ratepayer. In other words, JPS is the sole distributor and transmitter of electricity in Jamaica. This they achieve through their generation fleet and purchasing power from several Independent Power Providers.
Today, IPPs, including renewables, are among the cheapest energy solutions in Jamaica. Renewable technology now costs significantly less to implement and carries a fixed price since it is not influenced by fuel price.
So, who are these Independent Power Providers? Nine IPPs currently operate in Jamaica, producing electricity utilising different energy technologies. They are Wigton Wind Farm, Content Solar, BMR Energy, EREC Paradise Solar PV Park, New Fortress Energy, South Jamaica Power Limited, Jamaica Energy Partners, West Kingston Power Partners and Jamaica Private Power Company.
To share a bit of history with you – established in 1995, the Doctor Bird Power Station (DBPS) is the island’s first IPP, followed by JPPC in 1996. DBPS and JPPC came online, under special provisions, with 74MW and 60MW, respectively, in response to the Government’s need for emergency capacity in 1995. Wigton Wind Farm is the largest wind energy facility in the English-speaking Caribbean. The facility, located in Rose Hill, Manchester, comprises three plants: Phase I (20.7MW), Phase II (18 MW), and Phase III (24MW) — a total capacity of 62.7MW.
The first of its kind in the Caribbean region, the Content Solar Project, was dubbed in 2013 as one of the largest solar investments. Content Solar is located in Clarendon and delivers 20MW of energy to the grid. In 2016, BMR Energy, another green energy giant, began producing wind power for Jamaica. The wind farm is situated in Malvern, St Elizabeth and has a total capacity of 36MW.
Finally, EREC Paradise Park Solar PV Park is the largest solar plant in the Caribbean. Hailing from Westmoreland, Paradise Park has a total capacity of 37MW. Jamaica’s energy mix also includes 444MW of natural gas-fired plants. New Fortress Energy is the island’s sole gas supplier and owns the 94MW Jamalco plant, based in Clarendon. Located in Old Harbour Bay, South Jamaica Power Company Limited represents another 194MW of the 444MW of natural gas.
Also, part of the energy mix is 250MW of thermal energy generated by Jamaica’s largest independent power provider, the Jamaica Energy Partners (JEP) Group. JEP Group comprises three companies – Jamaica Energy Partners (Doctor Bird Power Station), West Kingston Power Partners (WKPP) and Jamaica Private Power Company (JPPC). The individual assets are based in Old Harbour Bay, on Marcus Garvey Drive and Windward Road.
Now that we understand who the country’s IPPs are, let’s discuss some benefits and why they are relevant to Jamaica’s energy sector. Pre-2001, when the Government had a 100% stake in JPS, the energy company did not have to compete for generation. Post-2001, after Mirant acquired 80% of the Government’s share ownership, the energy market became competitive.
Independent Power Providers play an integral role in ensuring a sustainable energy sector which can be further explained using the Energy Justice model. Energy justice (EJ) is the theory of embedding justice, fairness, and social equity principles into energy systems and energy system transitions. EJ consist of three tenets of what is also known as the energy trilemma: energy equity, energy security and climate change mitigation or decarbonising.
Energy Equity
Energy equity indicates the distribution of costs and benefits of an electric grid and the accessibility to affordable energy across customers in a country/region. Approximately 95% of Jamaicans or more than 600,000 homes presently have access to electricity. Remember, maximising value to the ratepayer is equally important. Therefore, the structure of RFPs encourages active competition in the energy space, ensuring parity for all connected customers.
Energy Security
Energy security demonstrates a country’s ability to produce its own electricity, withstanding geopolitical shocks and economic conditions. Currently, Jamaica is low on the energy security index since we don’t produce oil or gas, have a 21% renewable power capacity and no storage.
Unlike Jamaica, countries like Trinidad and Guyana rank higher on the energy security index with continuous and endless opportunities regarding their oil and gas supply. Another example is Costa Rica. The country produces nearly 100% of its electricity from renewable sources (wind, hydro, geothermal and biomass). On the other hand, Jamaica’s dependence on fossil fuels exposes us to vast economic strain, especially in times of war or pandemic, which cause supply chains and economies to go awry.
Increasing the island’s renewable capacity and implementing storage can go a long way in elevating our ‘energy security’ status. Although renewables, compared to oil and gas, have lower operating costs and are unaffected by inflation and oil and gas prices, the fossil fuel solutions are critical, offering reliable backup when renewables are unavailable.
Decarbonisation/Climate Change
Decarbonisation is the process of reducing ‘carbon intensity’, lowering the amount of greenhouse gas emissions produced by the burning of fossil fuels. Private renewable technology accounts for 155MW and is among the least expensive in Jamaica. Renewables also reduce greenhouse gas emissions as their operations don’t involve fossil fuels. Natural gas is considered a ‘cleaner’ fuel type than HFO since it has a lower carbon ratio and nitrogen/sulphur contents than oil.
Still, the JEP Group is the second cleanest of all the island’s HFO plants and can be converted to gas once the price is beneficial to the ratepayer. Furthermore, Independent Power Providers also contribute to decarbonisation via Corporate Social Responsibility (CSR) initiatives such as tree planting, coastal clean-ups, environmental education campaigns and any activity that ensures the preservation of the island’s natural resources.
IPPs also support climate change by complying with NEPA and World Bank environmental standards. Additionally, partnerships with local environmental NGOs/foundations, or establishing a ‘green’ affiliate like Evergo, which is part of the InterEnergy/JEP Group and currently installing electric vehicle charging stations islandwide.
