Raymond M. Wright

1
Jamaicas Energy SectorPresent Status and
Future Perspective

• Raymond M. Wright
• Petroleum Corporation of Jamaica
• June 28, 2005

2
CHINA CONSUMESIn 2004 China had 20 of
the worlds population. In 2004 Chinas oil
demand increased by 16.9. Product imports
increased by 33.
3
Oil Price Volatility, 2001-2005West Texas
Intermediate, US per barrel
4
Predicting Oil Prices

• In 1999 many predicted that oil prices would
  remain around 10/barrel for the foreseeable
  future.
• However, demand and supply are catching up with
  an oil-hungry world.
• OPEC has little margin to spare, perhaps only
  another 1.5 million bpd above its present quota
  of 27.5 million bpd.
• IEA forecasts demand growing by 1.8 million bpd
  in 2005 hence there is a demand and supply
  problem.

5
Global Oil Demand 1995-2005
(expected)
6
Oil Demand The Real Story

• Demand is strong because prosperous countries,
  led by the USA and Europe, are enjoying solid
  economic growth in spite of high oil prices.
• Almost all developing global economies led by
  China, India Brazil, are growing.
• Demand in 2006 is likely to continue to grow.

7
Oil Supply The Real Story

• Last years myth was that higher oil prices will
  create an increase in supply.
• Many key oil producers are at or past their peak
  oil output.
• As with surging demand, the flattening oil supply
  situation is not unique. A high percentage of the
  worlds oil still comes from discoveries that
  were made more than a decade ago.
• Lack of spare capacity exists at every step of
  the supply chain from drilling and producing,
  to transportation and processing.
• Any spare wellhead capacity is for heavy and sour
  crude.

8
Countries Past Peak Oil Output
9
Countries with Ability to Expand Oil Gas
Capacity
10
Selected Global Gasoline Prices
Sources Reuters, EIA Others
11
Caribbean Economies and EnergyGlobal economys
effects on electricity demand
Bahamas
12
Generalized Daily Demand Curves Japan Jamaica
JAPAN
JAMAICA
7 8 9 10 11 12 1
2 3 4 5 6 7 8 9 10
NOON
13
We have to make decisions as to which ball to
play and what action to take.
14
THE RIGHT MOVES
15
Diversification

• Diversification of energy supplies will reduce
  demand for petroleum.
• Natural gas and coal will remain important for
  the remainder of this century.
• Hydrogen fuel cells and other ways of storing and
  distributing energy are a foreseeable reality and
  will replace the Oil Age.
• Renewables will grow to make a supporting
  contribution to the energy mix.

16
Natural Gas

• A combustible gaseous mixture of simple
  hydrocarbon compounds, mainly methane (CH4).
• Found by itself or with crude oil and hydrocarbon
  condensates.
• The cleanest burning fossil fuel.
• Available for transport by pipeline or as LNG and
  CNG.

17
Natural Gas

• The present move to natural gas will see an
  increase in its share of global energy from 22
  today to about 33 by 2030. Effective in
  combined cycle and cogeneration technologies,
  natural gas may also become a favourable fuel for
  the transport sector. As LNG, it is the natural
  fuel for diversifying the energy mix of many
  Caribbean countries. The Dominican Republic
  established an LNG import terminal in 2003 and
  Jamaica plans one for 2008/9.

18
LNG Growth

• LNG demand is expected to grow by over 8
  annually from 2005 through 2015. This compares
  with the projected 2.5 annual growth rate for
  overall global gas demand.
• Thus the LNG market will double within the next
  decade.
• Presently 14 countries are importing LNG. By 2015
  an additional 16 countries will import LNG.
• Demand driven by economic growth and power
  consumption.
• Environmental factors play a key role in driving
  the market.

19
Existing LNG Importers (2005)
20
Expected LNG Importers
21
CNG in Vehicles

• CNG generally used in vehicles at 3000-3600
  p.s.i.
• Equivalent energy content
• 1 gallon gasoline 125 scf CNG
• 1 gallon diesel 130 scf CNG

22
Natural Gas Engine Manufacturers

• Cummins-Westport, Inc.
• Caterpillar
• Detroit Diesel, Corp.
• John Deere Powers Systems
• Mack Trucks, Inc.

23
Natural Gas Engine ManufacturersNorth America

• More than 50 manufacturers produce 150
• vehicle models.
• Blue Bird Corp.
• Elgin Sweeper Company
• Ford Motor Company
• Freightliner Trucks
• Mack Trucks
• Neoplan
• New Flyer of America
• Peterbilt
• Thomas Built Buses
• Volvo Trucks North
• America

24
Advantages of Natural Gas

• Air Quality Most studies indicate a reduction
  in
• NOX of approximately 50 and PM of more than
• 75
• Potential Fuel Cost Savings Viking Freight
  Study showed average fuel costs per mile of 0.11
  for CNG and 0.16 for diesel when natural gas and
  Diesel fueling were on site (31 fuel cost
  savings)
• Political Benefits Most fleets switch to
  natural gas because of political benefits
• - Meet government requirements
• - Promote energy security
• - Enhance public image

25
Paving the Way for Fuel Cell Vehicles

• Natural gas and hydrogen are both gaseous fuels
• Lessons learned from developing natural gas
  technologies may aid transition to hydrogen
• Shared issues include
• Fuel storage
• Fueling
• Station siting
• Training
• Facilities
• Public acceptability

26
Nuclear Energy

• Once deemed as expensive and dangerous, nuclear
  is making an unlikely comeback against fears
  about the consequence of fossil fuel use.
• The potential for nuclear to take on a more
  central role in the energy mix is apparent
  mainly because nuclear reactors do not produce
  greenhouse gases.
• Nuclear power accounts for 16 of globally
  produced energy. This saves around 0.6bn tonnes
  of CO2 emission per year, nearly twice the
  amount that the Kyoto Protocol is designed to
  save.
• The IAEA clams that the nuclear power chain emits
  some 2-6 grams of CO2 per kilowatt hour about
  the same as wind and solar power.

27
Source International Energy Agency
28
Nuclear Power

• PROS
• Nuclear Power is well suited to supply baseload
  electricity.

• CONS
• Difficult economics, because of high capital
  investment costs.

29
It isnt pollution that is harming the
environment it is the impurities in our air and
water that is doing itDan Quayle, former US
Vice President
The Environment
30
Climate Change

• A national inventory of greenhouse gases in
  Jamaica shows that energy use caused more than
  75 of emissions. This is in keeping with a
  global average of 70.The strategy, therefore, is
  to reduce the adverse environmental impact of
  energy use by using cleaner technologies and
  improving energy efficiency.

31
Sea Level Rise
1 metre
2 metres
4 metres
8 metres
32
CHANGE IN HOLE IN OZONE LAYER
33
RENEWABLE ENERGY
(A fuel source that is not used up when power is
generated.)

• Solar Energy
• Wind Energy
• Tidal/Wave/Ocean Thermal Energy
• Biomass Energy
• Hydroelectric Energy
• Geothermal Energy

34
How to Foster Growth of Renewables

• Fiscal Measures
• Tax relief low interest credit.
• Investment Support
• Local, national and regional support energy
  supplies eco-bonus for sustainable building
  local banking and private sector to participate
  project financing.
• Regulations
• Energy and building standards obligations.
• Other
• Information and awareness campaigns.

35
The Value of Renewables

• Caribbean energy policy supports the continuing
  diversification of our energy systems both by
  energy type and by source. In this scenario
  renewable energy should play an increasing role.
• The value of renewables lies in their ability to
  respond simultaneously to the three main
  challenges confronting the energy sector energy
  security, economic growth, and sustainable
  development.

36
Value of Renewables (Contd)

• Development of renewables is not too risky
  because it reduces the overall variability of
  national expenditure and, therefore, reduces
  risk. It has the characteristics of insurance.
• Renewables are an insurance hedge against
  volatility and risk. Perhaps this concept of
  insurance is a reasonable basis for encouraging
  support for renewables.

37
A number of market-oriented points apply to
renewables.

• Market opportunities lead to increased production
• Increased production reduces costs
• Lower costs stimulate sales
• Increased sales expand production

38
Some Renewable Energy Production Goals
39
Some Factors Boosting Renewables

• Worldwide effects of Kyoto Protocol, especially
  on multinational corporations.
• EU Emissions Trading Scheme.
• High oil prices.
• USA production tax credit.

40
Opposition to Renewables

• Many people do not want to look at renewable
  energy installations and will use any financial,
  legal, or political power to block projects.
• Several acronyms have emerged
• NIMBY Not in my backyard
• NOTE Not over there either
• CAVE Citizens against virtually everything
• GOOMBY Get out of my backyard
• BANANA Build absolutely nothing anywhere near
  
• anything.All of this
  NIMBYISM is conducted out of self-interest, but
  uses methods pioneered by environmental groups.

41
COST DISTRIBUTION OF SOME POWER SOURCES
Nuclear (0.06 c/kWh)
Natural Gas (0.046 c/kWh)
Coal (0.05 c/kWh)
Wind (0.059 c/kWh)
42
Wind Energy

• Competitive with fossil fuels (oil, gas and coal)
• Is a hedge against volatility in oil prices. The
  wind resource is free.

43
Two of twenty-three 900 kW wind turbines in a
20.7MW Windfarm at Wigton, Manchester, which was
commissioned end April 2004
44
Comparative Costs for Wind Power and Conventional
Energy Sources, 2005
Price (US cents per Kwh)
Gas Coal Nuclear
Energy
Wind speed m/s
Production cost range

Land-based Offshore
Source Windpower Monthly, January 2005
45
Biomass - Jamaica

• Intention to pursue cogeneration in the sugar
  industry from bagasse, supply grid electricity.
• Use of bioethanol in transport fuels, reaching
  approximately 10 of gasoline, replacing MTBE as
  the octane enhancer.
• Annual demand for ethanol locally is presently 68
  million litres and could reach 91 million litres
  by 2010.
• A new ethanol plant of 40 million gallons will be
  commissioned in July, 2005, as a joint venture
  with Coimex of Brazil.

46
Ethanol

• Ethanol will become the major product of a
  renewed Jamaican sugar cane industry.
• The sugar industry would then produce sugar,
  molasses, rum, ethanol and electricity from
  bagasse.

47
Ethanol - Brazil

• Ethanol use expanding at about 8 per year.
• 60 billion litres per year of ethanol needed by
  2010.
• Greatest export market for Brazilian ethanol is
  India, followed by the USA, Korea and Japan.
• Gasoline in Brazil has at least 25 ethanol.
• Nearly 30 of cars in Brazil can use 100
  ethanol.
• Ethanol (US 55 cents per litre) is cheaper than
  gasoline (US 85 cents per litre)partly because of
  a 34 tax on ethanol and a (higher) 45 tax on
  gasoline.

48
Annual Investment in renewable energy, 1995-2004
49
SMALL SCALE HYDROPOWER

• Usually defined as less than 10MW
• Renewed interest because of strategic concerns
  about energy supplies.
• Advances in electronics which have greatly
  reduced the cost of controlling the output of
  small turbo generators.
• Some 23 MW installed in Jamaica. Potential for
  another 30 MW or more.

50
Solar

• There are four major solar energy processes
• (1) Photovoltaics which converts sunlight into
  electricity through solar cells in a plate or
  concentrator.
• (2) Low temperature solar thermal systems used
  to heat water or air, are an important part of
  Caribbean energy systems. Solar drying and
  distillation, as well as solar water heaters,
  fall into this category.

51
Solar

• (3) High temperature solar thermal systems
  that produce heat that is converted into
  electricity in a conventional cycle, through a
  concentrator system. There are no systems now
  producing electricity by this method in the
  Caribbean.
• (4) Passive solar systems, that seek by
  design to reduce space cooling and lighting.
  This is exemplified in the design of many
  energy-efficient buildings in the Caribbean.

52
Solar Water Heaters

• Significant increases in use as demonstrated by
  Cyprus and Barbados.
• In Cyprus 0.86m2 of solar water heaters per
  capita have been installed, avoiding nearly 4 of
  total CO2 emissions.
• More than 35 of households have SWHs in
  Barbados, with approximately 37,000 installed in
  a population of 260,000.

53
Solar Drying

• The potential for solar crop drying has not been
  fully realized in Jamaica although it is a means
  of preventing spoilage which affects as much as
  30 of crop production.
• Crops such as bananas, papaya, sorrel, sweet
  potato, yam, ginger, nutmeg, pimento, grasses and
  leaves can be dried by solar dryers which range
  from the simple wire basket dryer to
  approximately two square metres of roof solar
  collectors.

54
OTEC

• Ocean Thermal Energy Conversion (OTEC), an energy
  source using the difference in temperature
  between surface ocean waters and deep water (at
  least 200C).
• Jamaica, and a number of Caribbean islands, have
  OTEC potential.

55
FUEL CELLS

• Quiet and have more efficient production of
  energy from hydrogen and oxygen than an internal
  combustion engine
• Only emission is benign water vapour
• Works like a battery but does not run down
• Creates electricity for as long as it receives
  hydrogen

56
FUEL CELLS

• A future energy solution for homes, vehicles and
  electric utility systems, fuel cells are a highly
  efficient power source that emits only water and
  heat. Using hydrogen as a fuel they are
  virtually pollution-free. However, the hydrogen
  may come from the conversion of hydrocarbon fuel
  such as natural gas or methanol, and that process
  creates some emissions.
• At present hydrogen is not available as a
  commodity fuel, and even if it were, there is no
  infrastructure to deliver it.

57
FUEL CELLS

• 3. Niche opportunities will develop in the next
  five years, in transport and distributed
  electricity, giving this technology a base for
  launching into mass transport and the power
  industry by 2025.

58
Emissions Trading

• There is now a strong European CO2 emissions
  market.
• In February 2005 2.4 million metric tonnes were
  traded.
• Prices are as follows
• Delivery Date Price/Euro/mt
• Dec 2005 8.20-8.40
• Dec 2006 8.30-8.40
• Dec 2007 8.35-8.60
• Spot trading also takes place.

59
Emissions Trading

• Projects must be independently validated and
  baseline measurement methodology and on-going
  monitoring methodology are approved.
• Emissions must be verified and certified before
  CER certificates are issued.

ADVICE Any energy project relying on CERs to
make it cost effective is probably too marginal
to be a good investment.
60
Energy Efficiency Driving Forces

• Three factors propel energy efficiency
• Electricity Costs
• Environmental pollution, particularly as it
  affects the tourist sector.
• Globalisation, and the competition it generates,
  require overall economic efficiency.

61
AVING

• As an example, a current programme in Jamaica,
  should sell some 150,000 CFLs by August 2005.
• This will result in savings of 112,500 barrels of
  imported oil, and a reduction of 375 tonnes of
  CO2 emission over a possible 8-year life of each
  bulb.

62
Measures

• Among the measures that have been
• successfully applied are
• Codes and standards for buildings
• Efficiency labels for appliances and lighting
• Improved efficiency of boilers and furnaces, as
  well as heating, cooling, ventilation and air
  conditioning.

63
Transport Sector

• In the transport sector consumers seem willing
  to trade fuel economy for power, comfort,
  convenience and safety. Higher taxation on
  larger engined vehicles that are less
  fuel-efficient is to be encouraged, as is the
  improvement of public transport systems and new
  traffic management schemes .

64
Transport Sector

• Stimulate use of diesel-engined vehicles.
• Promote electric/gasoline hybrid vehicles.
• Consider CNG for mass transport such as urban
  buses.
• Tax vehicles based on fuel efficiency and
  pollution factors (CO2).

65
Some Matters for Active Consideration in Energy
Policy

• Growing demand for energy services.
• Energy supply and trade patterns.
• Energy prices and taxation.
• Energy and poverty alleviation.
• Public versus private investment in energy.
• Environmental and health issues.
• Use of cleaner technologies, including
  renewables.
• Efficiency in energy use.

66
The Role of Stakeholders

• Education and public awareness is cardinal.
• Jamaicans must begin to think about energy in the
  same way they would think about national
  security, education and health care as an
  essential enabler of the quality of life.

67
Utility Electricity Generation (June 2005)

• Installed Capacity 780 MW
• Owned by JPSCo 621 MW
• Owned by IPPs 159 MW
• Required increase by 2010 250 MW
• Number of customers on the grid 517,500
• Peak demand in 2005 642 MW
• Reserve margin 19

68
(No Transcript)
69
A POSSIBLE (REACHABLE) 2015 ELECTRICITY SCENARIO

• Utility Company Installed Capacity 1250 MW
• Fuel Sources
• Heavy fuel oil and diesel 380 MW
• Natural Gas ( Coal) 700 MW
• Wind 70 MW
• Hydropower 35 MW
• Solid Waste 10 MW
• Bagasse and fuelwood 35MW
• Ocean energy 10 MW
• Solar Photovoltaics 0.2 MW
• Fuel cells 9.8 MW
• 1250 MW
• Renewables would supply 12.8 of electricity

70
Summary

• There will still be dependence on conventional
  fuels for at least another four decades.
• Biomass will continue as a critical component of
  an appropriate energy mix.
• Natural gas, for environmental reasons, is the
  most obvious conventional energy source for many
  countries.
• Hydropower has yet untapped potential.
• Coal will continue to be important, and the
  ultimate stimulant for clean coal use is carbon
  sequestration.

71
Summary (contd)

• Nuclear power may be too high in capital cost and
  large in scale, to have Caribbean relevance
  small reactors need to be developed.
• Competitive renewables, such as wind, will
  continue to grow rapidly.
• The optimal energy mix calls for regional and
  cross-border integration of energy supply systems
  and markets.
• There is no simple recipe. The tasks ahead call
  for collaboration and careful implementation.
• In the meantime use energy rationally!

72
Only a fool tests the depth of the water with
both feet. -African Proverb
73
(No Transcript)
74
We have to look beyond the horizon for cleaner
energy technologies
Thanks For Listening
THE END