CARIBBEAN PETROLEUM UPDATE April 2012

Caribbean Energy Information System (CEIS) April 2012

For many Caribbean citizens just the thought of lowering their electricity bill is enough to bring on a broad smile. Now imagine having the ability to not only pay zero on your electricity bill, but also be able to sell excess energy back to the public electricity grid! Is this possible you may ask? The answer to that question is yes. The next question that comes to mind is “How is this possible?” The Caribbean being rich in natural renewable energy resources has the potential to generate electricity from natural resources such as sunlight, wind and water. This electricity that is generated can be used by the generator or sold. However, the move to do so has been slow primarily due to the cost associated to investments in these areas and the longterm dependence on imported fossil fuels.

made bold steps in including renewable energy generation in their energy mix. One such country that has made significant strides in this area is Jamaica. However, the question still remains as to whether the steps taken by these countries have reduced their dependence on imported fossil fuels?

In this issue of the CEIS Petroleum Update, we will look at the introduction of Net Billing with the aim of assessing whether this arrangement can assist with reducing the Caribbean’s dependence on petroleum fuels.

What is Net Billing?

Net Billing allows consumers to sell unused energy

In recent times, some Caribbean Countries have CARIBBEAN PETROLEUM UPDATE

To access CEIS website

generated from devices that harness renewable energy to the public electricity grid. This means that customers who own/use renewable energy generators such as wind turbines and photovoltaic (solar) systems to generate electricity for personal use, can sell excess energy to the Utility or National Grid at wholesale or “avoided cost” - prices set by a regulator or the Utility. Using net billing, the customer will however purchase electricity at the existing rates, as outlined in the Utilities Tariff Schedule and sell to the Utility at a lower rate. This is different from Net Metering which allows customers to interconnect to the grid and supply any excess electricity through a net metering arrangement. “If the system produces more electricity than needed, the excess electricity will be given to the public power supply. The meter then spins backwards.

If the system produces less electricity than needed, the shortage will be

continued on page 2/ CONTACT US

Caribbean Energy Information System Scientific Research Council Hope Gardens, Kingston 6, Jamaica 1-876-927-1779 (Telephone) 1-876-977-1840 (Fax) ceis@src-jamaica.org www.ceis-caribenergy.org

is a monthly Bulletin which highlights petroleum issues affecting or relevant to the Caribbean, international developments that may affect the region’s way of life and movements in oil prices and retail prices for fuel regionally.

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Call: 1-876-927-1779 | Caribbean Petroleum Update : April 2012

CAN NET BILLING REDUCE/IMPACT THE CARIBBEAN’S PETROLEUM USE?...continued from page 1/ taken from the public power supply .

The meter then spins forward.

At month’s end the give and take will be balanced out, hence the electricity bill will be reduced by the amount the system produced.”

GRENLEC in 2008 introduced an interconnection policy that allowed for any excess electricity generated from renewable energy systems up to 10kW to be sent to the national grid.

Barbados in 2010 approved and Interconnection Policy that allowed for Net Billing under a 2 years pilot project—up to 5kW for domestic RE facility and 50kW for any other facility.

Jamaica introduces Net Billing The Government of Jamaica recently announced a successful renegotiation of some the terms of the licence of the Jamaica Public Service Company (JPS). This renegotiation is expected

to propel the efforts of the Jamaican government to ensure a take-off of the country's energy policy. These include energy security, the development of renewable energy sources, increases in energy efficiency and reinforcement of the regulatory framework to encourage investments in the sector.

This follows growing public outcry for the Jamaican government to take steps to make energy more affordable, in particular electricity, which is considered the major cost/input in the country’s manufacturing industry.

Following this outcry, Jamaica’s Office of Utilities Regulation (OUR) and the Jamaica Public Service Company Ltd. (JPS) developed a Standard Offer Contract (SOC) for the purchase of ‘as-available energy’ see - www.our.org.jm.

The OUR in the SOC has outlined the terms, conditions and pricing regime for small power providers to sell excess electricity generated from renewable energy sources to the national grid referred to as “Net Billing” Under the SOC for ‘Net billing’ owners of dedicated renewable energy equipment (such as wind and solar power) are allowed to sell excess power, generated from their equipment, to the Jamaica Public Service Company's (JPS) grid. This will allow consumers to realize significant savings on electricity bills which are charged

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at US$0.40/kWh or more depending on the type of customer and the rate category in which they fall. Providers however under the SOC, must obtain a licence to sell the excess ‘asavailable energy’ from Intermittent Renewable Energy Facilities up to 100kWh, facilitated through a fiveyear licence to participate in net metering, but only if generated by solar or wind devices. Compensation for the customers, under the SOC, is determined via a net billing agreement, whereby the customer will pay the prevailing retail price for energy consumed from the national grid, as is applicable to the customer’s rate and class, and JPS will purchase the customer’s excess electricity at the “short run avoided cost of generation” which could be anywhere between US$.10/kWh to US$0.25/kWh. To date the Jamaican government has awarded 11 licences. Below is a formula showing how the payments are calculated as taken from the SOC developed by Jamaica’s Office of Utilities Regulations - OUR: SCHEDULE 3: ENERGY PAYMENT CALCULATION AND CHARGES TO QE FOR THE PURCHASE OF AS-AVAILABLE ENERGY FROM INTERMITTENT RENEWABLE FACILITIES OF UP TO 100 kW. The Energy Payment as expressed in Jamaican dollars for each Month commencing with the Commercial Operations Date, shall be computed as follows:

Y S T E M

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(CEIS)

Caribbean Petroleum Update : April 2012 | Call: 1-876-927-1779

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CAN NET BILLING REDUCE/IMPACT THE CARIBBEAN’S PETROLEUM USE?...continued from page 2 1. Energy Payments EPi = AVRi x (1 + Premium) x EOi x IERi EPi = Energy Payment in Jamaican Dollars.

AVRi = Avoided Cost Rate in United States Dollars per kWh (in effect as at the Contract Date and which shall be fixed for the life of the contract) example. US$0.10/kWh. EOi = Energy Output (kWh) delivered to JPS by the QF for Month i - e.g.

20kWh IERi = The invoice exchange rate which shall be the arithmetic mean of the spot market weighted average of the selling rate of exchange of authorized dealers in Jamaica offering to sell US Dollars for Jamaican Dollars, as published by the Bank of Jamaica for the Month i calculated three (3) Business Days before the end of the Month i. - e.g. J$86 i = The numeric representation of a Month - e.g. 1 2. Charges to QE a. DPC = J$[XXX] DPC = Direct Program Costs in Jamaican Dollars, which is billed monthly for the cost of meter reading, billing and other appropriate administrative costs to be approved by the Office of Utilities Regulation on recommendation by JPS. 3. Net Monthly Payment to QE NMPi = MBi - EPi + DPC C

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NMPi = Net amount in Jamaican Dollars payable by or to the QE after all payments and applicable charges are considered MBi = Month Electricity Billing in Jamaican Dollars for electricity purchased from JPS in accordance to the applicable Rate Schedule.

Caribbean Petroleum usage and cost in the electricity sector.

The Caribbean electricity sector consumes over 40 Million barrels of oil per annum with prices ranging between US$80 and US$110 per barrel for oil. This suggests that between US$3.2 billion and US$4.4 billion is spent on fuel for electricity generation in the Caribbean annually. This cost is incurred to generate over 51,000 GWH of electricity per annum for eighteen Caribbean countries (CEIS Member States). Of the electricity generated in the Caribbean, each kilowatt hour that reaches the consumer is charged at rates ranging between US$0.20/kWh and US$0.40/kWh. With a rough calculation, this is costing Caribbean consumers between US$102 billion and US$204 billion annually to pay for electricity in the eighteen countries. In Jamaica if foe example an avoided cost rate of US$.10/kWh is paid to the consumer who sells electricity under the net billing agreement to the grid, this would amount to approximately 25% of the tariff rate charged by the Utility (Jamaica Public Service) for electricity normally consumed/charged at a US$0.40/kWh. With that in mind if the approximately 575,000 Jamaican E

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consumers were to be paid 10kWh this would amount to approximately US$575,000 in savings which would in turn offset approximately 5300 barrels of oil using the higher rate of US$110/BBL. This is suggesting that any savings in the kWh cost of electricity through the implementation of net billing agreements can reduce the Caribbean’s dependence on petroleum imports.

This type of arrangement can also be considered an incentive to generate using renewable energy and will ultimately improve the energy security of the region. If the savings realized are used to increase the renewable energy generation then the benefits will be compounded. However, the realization of reduction in imports of petroleum fuels is also dependent on reducing the consumption of electricity through energy efficiency and conservation measures.

If consumers continue to increase consumption then the need for increased generation will propel the need for fuel which usual results in Utilities increasing capacity using fossil based generators.

The conclusion therefore is that Net Billing can aid in the reduction of imports of petroleum based fuels for Caribbean countries if other countries were to take the step that Jamaica has taken and do the necessary due diligence.

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(CEIS)

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Call: 1-876-927-1779 | Caribbean Petroleum Update : April 2012

CARIB PETROLEUM NEWS & HAPPENINGS BAHAMAS

TRINIDAD & TOBAGO

Oil could be billion-dollar business for Bahamas, says analyst >> 30/04/2012

Chile, Japan Show Interest in Trinidad & Tobago’s LNG >> 16/04/2012 Rowley: 'Massive oil find' a hoax in same vein as assassination plot >> 04/04/2012

CUBA

VIRGIN ISLANDS

Cuba positive about emerging oil industry >> 12/04/2012

VIWAPA Issues Two Invitations for Bid for Fuel Oil Supply >> 30/03/2012

INTERNATIONAL

JAMAICA PM steers key talks with ALCOA Executives >> 26/04/2012 No Fire at JPS Power Plant >> 15/04/2012 JPS Continues Investigations into Power Outage >> 14/04/2012

South Sudan 'agrees $8bn deal with China >> 28/04/2011 European Parliament condemns Argentina's YPF nationalisation >>20/04/2012 Caribbean ill equipped for oil spills >> 17/04/2012 India and Qatar ink oil and gas pact amid Iran pressure >>10/04/2012

Curacao Caribbean Lesser Antilles Bullenbaai crud-oil fuel tanks petroleum petrochemicals depot storage Source : www.fredhoogervorst.com/

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The Sol Group (BVI) is a leading petroleum company.

Source: www.solpetroleum.com

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(CEIS)

Caribbean Petroleum Update : April 2012 | Call: 1-876-927-1779

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REGULAR UNLEADED GASOLINE AVERAGE PRICES AT THE PUMP April 2012 Retail prices for Regular Unleaded Gasoline in the sixteen Caribbean countries reviewed at the end of April 2012 showed increased prices in eleven countries when compared to the previous month. Marginal decreases were seen in St. Kitts/Nevis while prices remained stable in Antigua, BVI, Guyana and Trinidad & Tobago. The average retail price at the end of April 2012 for the product over the sixteen countries when compared to the average retail price seen in previous month of March 2012 was 2.5% greater.ď‚Ą

Regular Unleaded Gasoline Average Retail Price (US$/Litre) 2012 JAN

FEB

MAR

APR

ANTIGUA/ BARBUDA

1.23

1.23

1.23

1.23

4 Mths AVG 1.23

BAHAMAS [91 OCT] BARBADOS BELIZE [87 OCT] B.V.I [87 OCT] DOMINICA GRENADA (95 OCT) GUYANA JAMAICA 87 Octane[E10] MONTSERRAT ST. KITTS/ NEVIS ST. LUCIA ST. VINCENT/ GRENADINES SURINAME [95 OCT] TRINIDAD/ TOBAGO [92 OCT] TURKS/ CAICOS

1.33 1.55 1.41 1.26 1.12 1.23 1.11 1.23 1.19 1.20 1.21 1.19 1.40 0.42 1.58

1.35 1.59 1.45 1.27 1.14 1.28 1.08 1.30 1.21 1.19 1.22 1.16 1.43 0.42 1.58

1.44 1.66 1.51 1.29 1.19 1.36 1.09 1.32 1.29 1.32 1.22 1.13 1.49 0.42 1.61

1.46 1.72 1.54 1.29 1.25 1.42 1.09 1.37 1.39 1.29 1.24 1.17 1.52 0.42 1.70

1.40 1.63 1.48 1.28 1.18 1.32 1.10 1.31 1.27 1.25 1.22 1.16 1.46 0.42 1.62

COUNTRIES

NOTE: *US Gallon = 3.785 L *Imperial Gallon = 4.546 L *As at November 1, 2009 MTBE was phased out from all gasoline blends in Jamaica and replaced with 10% Ethanol.

Comparative Retail Pump Prices Regular Unleaded Gasoline

CHART:

APRIL Avg vs 4 Mths Avg (Jan - Apr 2012)

US$/Litre

2.00 1.80

APR

1.60

AVG

1.40

1.20 1.00

0.80 0.60 0.40 0.20 0.00

16 Caribbean Countries

See prices for other products at www.ceis www.ceis--caribenergy.org .

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Call: 1-876-927-1779 | Caribbean Petroleum Update : April 2012

Average Weekly & Monthly Crude Oil Prices (February ď §April 2012)

110.0

107.5

US$/BBL US$/BBL

108.0

107.2

106.0 104.0

103.8

102.0 100.0 98.0 96.0

Feb-12

94.0

Mar-12

Apr-12

92.0

WK 1 A review of International Crude Oil prices in the month of April 2012 indicated that prices were above the US$100/BBL mark for the entire month with the highest price seen at US$103.8/BBL. The average price seen for the month of April was US$103.2/BBL In comparison to the two previous month, average price for the month of April 2012 was approximately 3% lower than the average prices seen in March 2012 and approximately 2% higher than the average price seen in February 2012. Prices in April of the previous year when compared to April 2012 were lower. ď‚Ą

WK 2

WK 3 Period

WK 4

Mth Avg

Average Monthly World Crude Oil Prices (2009 - 2011) 109.61

108

US$/BBL

98

88.14

88 78

76.19

68

58 48

2009

2010

2011

38

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Jan

Feb Mar Apr May Jun

Jul

Aug Sep Oct Nov Dec

Period

Caribbean Energy Information System (CEIS) primary report of historical annual petroleum energy statistics provided for 18 Caribbean Countries.

Included are data on total energy production, consumption, and trade; overviews of petroleum, natural gas, electricity, as well as financial and environmental indicators for over twenty years.

Yr Avg

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