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Results Briefs April 26, 2019

Improving Energy Efficiency and Security in Jamaica

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Solar panels instaled in a poultry farm, Jamaica.

Photo: World Bank


Improved energy efficiency and security of Jamaica through the implementation of Jamaica’s National Energy Policy Specific results include: (i) legal, regulatory systems and framework and respective energy sector institutions strengthened; (ii) greater investments in non-oil sources of generation, (iii) improved energy efficiency policy and implementation (through expanded and renewed energy efficiency testing chambers); (iv) access to financing for small-medium enterprises to implement energy efficiency/ renewable energy project.

Challenge

Jamaica’s energy sector had been characterized by high energy costs and high dependence on imported petroleum products (in 2008, 94 percent of all energy used was imported). In addition, the energy sector was a mix of several private and public institutions, resulting in complicated decision-making processes and coordination challenges. The resulting high levels of inefficiency led to high electricity costs and tariffs.

The country’s goals for improvements included reducing the cost of electricity and eventually lowering prices; lowering the sector’s vulnerability to oil price fluctuations by reducing its reliance on imported petroleum products; strengthening the sector’s regulatory framework by providing clear policy directions, regulations, and incentives; mobilizing private sector financing for energy infrastructure; and reducing greenhouse gas emissions. 

Approach

When the Jamaica Energy Security and Efficiency Enhancement Project was approved, Jamaica’s macro-fiscal situation prevented any large full-scale approach to addressing the issues. As a result, the World Bank directed the limited resources available mainly toward technical assistance, focusing on the pressing core issues affecting the sector. These included: (i) strengthening the regulatory and institutional framework to improve sector performance, increase private investment, and transition to cleaner fuels (for example, by introducing a liquefied natural gas (LNG) program to support off-oil diversification); and (ii) developing energy efficiency and renewable energy potential (for example, by expanding the energy efficiency lab testing center in the Bureau of Standards, carrying out feasibility studies for small hydro sites, promoting wind and solar generation, and providing a line-of-credit for private sector investment in energy efficiency and renewable energy investments).


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17%

Renewable energy generation doubled from 9% at project start to 17% by the end of 2017.


Results

While all results noted cannot be attributed solely to the project, the Government of Jamaica recognized that they could not have been achieved without it. Most notably, oil dependency decreased from 95 percent (2010) to 71 percent (2017), and it is expected to fall further, to approximately 50 percent, by the end of 2019. The regulator determined the impact of this shift: Under the current matrix and with equal conditions, the tariff would have been US$0.1318 per kilowatt hour (kWh), as compared to the 2012 generation cost (US$0.188/kWh); projecting to 2020, the cost would be US$0.1253/kWh. 

In addition, the project supported the following results:

  • Technical assistance aided in updating the Electric Lighting Act of 1890 with the modernized Electricity Act in 2015, which encompasses a comprehensive energy strategy that includes renewable energy, biofuels, energy from waste, energy consumption and efficiency, and carbon trading.

  • Market conditions were established for developing an Integrated Resource Plan (IRP) that projected electricity demand over a 20-year period to help determine generation capacity and technologies needed.

  • Energy sector agencies were realigned, resulting in better defined roles, responsibilities, and coordination and updating key players to international best practices. The Generation Procurement Entity and the Government Electrical Regulator were also created.

  • Technical assistance for planning and regulation of the gas sector facilitated more than US$1 billion of private sector investment in LNG (including two new plants and associated infrastructure — a 120-megawatt (MG) plant installed on the country’s north coast and an additional 190 MW plant due to become operational in 2019 — to replace outdated oil plants).

  • Renewable energy generation doubled from 9 percent at project start to 17 percent (15.4 percent from large plants) by the end of 2017, following the determination that the country’s grid could absorb increased renewable energy sources and the development of new regulations, market mechanisms, and tariff options.  

  • Feasibility studies determined locations for six hydro sites for generation plants.

  • Expanded and refurbished energy efficiency testing chambers aided compliance with the country’s new energy efficiency standards.

  • Through the Development Bank of Jamaica (DBJ) line-of-credit, 55 loans, totaling US$5.38 million, were disbursed for private sector energy efficiency projects.

Bank Group Contribution

The World Bank, through the International Bank for Reconstruction and Development (IBRD), provided US$15 million, of which US$14.5 million were disbursed. Absent prevailing macro-economic constraints, the amounts would have been higher. Under the DBJ line-of-credit, however, a private sector financing market was created, leading 12 additional lenders to participate by extending financing for energy efficiency and renewable energy of 3.08 billion Jamaican dollars (approximately US$28 million).

Beneficiaries 

The population of Jamaica has benefited from (i) having greater energy security through the diversification of the energy matrix and reduced reliance on imported oil; (ii) reducing energy costs for the Jamaican population, with the average tariff falling from US$0.40 per kWh to around US$.23 per kWh; (iii) reducing the energy cost burden for small- and medium-sized enterprises through energy efficiency measures; and (iv) providing the overall population with options for obtaining appliances with improved energy efficiency.

Moving Forward 

The project has closed, but the government of Jamaica is implementing the new Electricity Act and issuing an Integrated Resource Plan. In addition, new cleaner power plants are expected to come online by 2020, replacing old, inefficient, oil-based power plants, thus improving resiliency by reducing dependency on foreign oil.