Zia Mian, ContributorThe Jamaican economy is relatively energy intensive. Per capita energy consumption is estimated at over 10 barrels of oil equivalent (boe). Between 1990 and 2006 the GDP growth averaged at 1.1 per cent, while the increase in the demand for energy averaged at 2.5 per cent per annum. The oil import bill has increased at 10.1 per cent per annum (Table 1).
In 2006, the oil import bill accounted for over 87 per cent of Jamaica's export earnings. In 2007, it is expected to account for about 95 per cent of export earnings. As a consequence of the oil price volatility and the adverse effects of hurricane Dean, the real GDP in 2007 (in 1996 prices) is expected to decline by 1.25 per cent and the oil import bill is projected to increase by about 15 per cent.
Jamaica primarily depends on imported oil to meet its energy needs. Table 2 shows that in 2006, more than 94 per cent of the energy supply mix was based on imported oil. About 95 per cent of Jamaica's energy was imported (coal and oil). The remaining five per cent came from local renewable sources such as wind, fuelwood/charcoal, bagasse and hydropower.
Oil increases
The oil consumption is mainly concentrated in transport (21 per cent); power generation (19 per cent) and bauxite/alumina (35 per cent) sectors. These three sectors collectively represent 75 per cent of the demand for oil (2006). Notwithstanding the increases in oil prices, the oil intensity of the Jamaican economy over the years has been increasing. In 1990 Jamaica used 608 Btu to produce one J$ of output (in 1996 prices). In 2006 the energy input to produce one J$ of GDP (1996 prices) was 759 Btu representing an average increase of 1.4 per cent per annum.
The heat rates (oil input to generate electricity) in the power sector are high and so are system losses. The generation heat rates vary between 7,000 Btu per kilowatt hour (kWh) to 14,000 Btu kWh. The system losses in 2006 were estimated at 23 per cent. When combined with the high oil use intensity, one might conclude that the Jamaican economy suffers from 'energy waste syndrome' (EWS).
In 2006, Jamaican household consumers paid USą 25.6 / kWh (for the electricity they purchased from the public utility. The average price of electricity to the Jamaican economy was USą 23.6 / kWh. This compares with the average price of electricity in Trinidad and Tobago of about USą 4.5 / kWh. It is not surprising that the Jamaican producers wish to relocate to cheaper sources of energy to remain regionally and globally competitive.
In 2005, Jamaica's exports to Trinidad and Tobago were US$ 15 million and imports were US$ 717 million. Jamaica had a net trade deficit of US$ 703 million with Trinidad and Tobago (source: International Monetary Fund Staff Report). This entire deficit was not owing to the price of oil. We rely for the import of basic consumer goods from Trinidad and Tobago; which reflects on our high cost of production for these commodities.
bauxite/alumina sector
As far as the secondary energy demand in Jamaica is concerned, about 48 per cent of it goes into the bauxite/alumina sector and 30 per cent into the transport sector. It is clear that Jamaicans would have to focus on changing the lifestyles they have become used to in order to adjust to the new realties of energy supply/demand equation and oil price volatility. The energy sector challenges that the policy makers must address include:
Assuring reliable electricity supplies and reducing dependence on standby generation capacity. Improving the efficiency of power generation, transmission and distribution systems. Bringing system losses down to acceptable levels. Bringing the electricity prices down to sustain productive competitiveness. Reducing Jamaica's dependence on imported oil by diversifying energy supply mix. Establishing appropriate regulatory and enabling framework to facilitate the diversification of the energy supply mix.
Assuring security of energy supplies to all Jamaicans at affordable prices while fully protecting the environment. Improving the energy efficiency of the economy; and Establishing sustainable and efficient institutional capacity to prepare and implement energy supply and efficiency improvement measures.Zia Mian, a retired senior World Bank official, is an international consultant on information technology and energy. He may be reached at mian_zia@hotmail.com.
