Jamaica and the case for energy abundance By Matthew Yglesias

Jamaica and the case for energy abundance

By Matthew Yglesias

Jamaica and the case for energy abundance

Or, how a small middle-income island could save the world

Noah Smith did an interesting post just before Christmas on what’s worked and what hasn’t for Jamaica’s economic development. The country is doing a lot better than many, but its growth of living standards seems to have stalled out in the 21st century, while other countries (mostly in Asia, but also the nearby Dominican Republic) have raced ahead. And the tl;dr is that Jamaica hasn’t really managed to get on the manufacturing train to supplement and complement their tourism sector (which is a notorious development dead end) and natural resource exports.

I don’t know a lot about Jamaica, but this saga does seem to me to intersect with an obsession of mine: energy abundance.

All the islands of the Caribbean are blessed with a great deal of natural beauty but face serious problems in their energy sectors, which is a big impediment to developing a manufacturing economy. And I think that more than just about anyplace else in the world, Jamaica would be well-suited to try to leverage its ties to the United States into a solution to its — and the world’s — energy problems by being the place that’s willing to say yes to advanced nuclear designs.

All this bauxite and no aluminum

Something Noah Smith mentions is that development success stories tend to feature export discipline, with domestic companies encouraged to compete in global export markets.

What’s Jamaica’s problem here? Well, a majority of their exports are made up of bauxite, a material that’s used to make aluminum. This is lucrative enough to keep the value of Jamaica’s currency high and make it a bad place from which to do very low-end globally competitive manufacturing. But the blessing of even the lowest-end manufacturing is that it gets you on the path of export discipline where you can move up the value chain from apparel to light goods to more advanced products. Bauxite mining, by contrast, is a road to nowhere.

(James L. Amos | Getty Images)

But if the point of bauxite is to make aluminum, how come bauxite mining isn’t a step on the road to manufacturing aluminum? According to Esther Figueroa, they don’t make aluminum in Jamaica because they don’t have enough electricity:

Smelting requires 13,500 kWh of electricity per ton of aluminum, more energy than any other metal. Jamaica has never smelted aluminum because the industry requires cheap electricity (usually hydro electric, coal or more recently liquid gas), and Jamaica has relatively high electricity costs. But Jamaica has for almost 70 years exported bauxite and processed alumina. And new mining leases have been awarded for the next 30 years which would project Jamaica into at least a century of extraction.

If Jamaica had abundant electricity, it would be natural to make aluminum there rather than just shipping out the bauxite. And once you’re making aluminum, you could become a place that manufactures things that are made out of aluminum.

But right now Jamaicans are paying $0.39 per kilowatt-hour of electricity while prices in the U.S. range from $0.075 in Louisiana to $0.28 in Hawaii. And it’s not a coincidence that Hawaii is the most expensive state — this is a common issue for islands. On the mainland, prices max out in Connecticut at $0.19 per kilowatt-hour.

Beyond manufacturing, this is just a big issue for living standards. If Jamaica could achieve Connecticut’s electricity prices, that would still be way too expensive to anchor an aluminum industry. But ordinary families could afford to light and cool their homes at a lower cost, with more money flowing into consumption of locally produced services rather than lining the pockets of foreign oil producers.

Small island problems

According to the U.S. National Renewable Electricity Lab, “more than 94% of the island’s electricity is generated from petroleum-based fuels.”

These fuels flow through Petrojam — a state-owned enterprise that serves as the island’s only oil refinery — making gasoline, kerosene, diesel, and even liquified petroleum that you can use in a gas stove where Americans would use natural gas (because Jamaica is an island, it’s not convenient to deliver natural gas via pipelines). As you might expect of a government-run monopolist, Petrojam doesn’t seem to be particularly well managed and was recently involved in a huge scandal. At the same time, you can see why the island wouldn’t want its population to be at the mercy of a privately owned oil refining monopoly.

What you want is competition, but Jamaica is suffering a diseconomy of small scale. The market is just not large enough to support multiple competing oil refineries and liquified gas import terminals. And unlike in a small community in the U.S., there isn’t really any plausible threat of entry from new producers.

Given this context along with island nations’ obvious vulnerability to climate change, there is a lot of interest in renewable power sources that would reduce dependence on expensive imports from abroad. Unfortunately, the standard litany of complaints about renewables apply with unusually strong force here.

The promise and peril of renewables in the Caribbean

The United States relies on a mix of nuclear, hydro, and coal to provide baseline power. We have solar and wind generating electricity that is now cheap on average but isn’t always on. And then we have natural gas plants, which are easy to cycle on and off. They fill the gap between whatever is needed at the moment and whatever our renewable installations happen to be generating. As renewables grow, we turn off coal (or, tragically, nuclear) plants and add natural gas as a complement. This has thus far allowed us to significantly reduce the carbon intensity of our electricity grid — both because the renewables have zero emissions and because the gas is a lot cleaner than coal — and it should keep working for a while.

At a certain point, though, it stops working, and you need some combination of large-scale storage and massive renewable overcapacity. But we can cross that bridge when we come to it, aware that battery costs are falling and that replacing internal combustion engine cars with EVs ensures growing electricity demand.

But because islands are small, all these issues bite more tightly. You can’t rely on interregional power transmission to move electricity from places where the sun is shining to distant places where it isn’t. And for all Jamaica’s reliance on fossil fuels, there are only four fossil-fired power stations on the island because, again, it’s pretty small.

That means that compared to the United States or another large country, each fossil fuel power plant you take off the grid represents a huge share of the country’s total baseline capacity. That makes for a bumpy and awkward transition where it’s harder to just plow ahead and assume the storage situation will keep improving before you face any really tough questions.

There’s also the question of space. Utility-scale solar and wind installations are pollution-free, but they take up a lot of land. This turns out to mean that a surprisingly large share of big clean energy projects end up provoking at least some opposition from some environmental groups. Sometimes that’s pure opportunistic NIMBYism, but it is also factually true that there is a tradeoff between using the Mojave Desert to erect a huge solar plant and letting it be a wildlife habitat.

These land-use issues are much more intense in Jamaica, which has 266 people per square kilometer versus 43 people per square kilometer in the contiguous United States.1 But Jamaica is also far more dependent than we are on agriculture to provide employment for its population (16% versus roughly 1%) and also on its natural beauty to drive the tourism economy in a way that we are not.

But most of all, while Jamaica — like all countries — should of course move to cleaner sources of power, it should really aim to do more than replace all of its dirty energy — Jamaicans need the ability to consume much more energy.

Energy middle income-ness

In the economic development context they have the concept of Energy Poverty, which is basically when you’re poor and you don’t have access to energy.

Middle-income countries like Jamaica tend to get kind of neglected because their problems are less morally urgent than those of truly poor countries. And from the standpoint of the global donor community, that’s fine and makes a lot of sense. But of course the residents of middle-income countries want to be rich, and in terms of the overall future of the world, the fate of large middle-income countries like India and Bangladesh is extremely important.

It turns out that even though Jamaica is quite hot, it’s pretty rare for a Jamaican home to have air conditioning. There’s a way of making this out to be an aspect of the national character that you’re proud of, but realistically this is just what happens when the ratio of electricity prices to income is so high.

Jamaica has about 179 motor vehicles per thousand people, which is way less than the United States. And if you have urbanist sensibilities, maybe that sounds nice. But in Denmark it’s 481 and in the Netherlands it’s 531. Even Singapore has more vehicles per capita than Jamaica. Being too poor to afford cars is not an urbanist success story; it’s just another sign of being poor. So while in the United States, “electrify the current vehicle fleet” might be a success, in Jamaica you’d like to see over time the replacement of well over 100% of current vehicles — greening, but also getting richer — which again requires more energy than the country currently has.

Jamaicans also suffer from sporadic but meaningful bouts of water insecurity that are likely to get worse as a result of climate change.

The country is of course surrounded by water, but the problem is that it’s salty. In my original post on “The Case for More Energy,” I mentioned desalination as an example of a technology that works perfectly well but happens to be too energy-intensive to be economical in most cases. From the dawn of the Industrial Revolution until about 1970 or so, humanity found ways to make more and more energy for less and less money. Had that trajectory continued over the past 50 years, we would’ve found desalination getting cheaper and cheaper and water scarcity issues evaporating despite the growing world population.

This and the aluminum smelting are the two big specific applications to Jamaica. If you assume a can opener and say the country finds some way of generating much more electricity, then they can address their freshwater issues, preserve their open space, and create a new industry higher up the value chain. Then as a richer country, they can get more cars and air conditioners and have a higher quality of life. The air conditioning thing sounds trivial, but research indicates that air conditioning helps kids learn more in school and improves productivity in private industry.

In search of a can opener

I don’t have a big reveal here where I unveil a magical solution to the energy scarcity problem.

But I do want to urge everyone to take more seriously all the dimensions of the energy problem. It’s easy to sit in a rich country (especially one like the U.S. where energy is cheaper than average) and see the problem as “how do we replace our existing energy sources with cleaner ones?” But almost everyone lives in countries that are much poorer than the United States, and they need more energy. More energy to get richer, but also (somewhat paradoxically) more energy to cope with climate change. So the energy innovation question is in many ways even more important than most people realize.

This brings us to nuclear power. I try not to get into the internet thing where people become fanatical partisans of hypothetical technologies.

But I can tell you that lots of people with engineering degrees and PhDs think there are various promising models for advanced microreactor designs that can be built (in factories rather than on-site) and operated (with occasional service rather than constant hands-on work) much more cheaply than traditional large light-water reactors. Are they right? I don’t know. But I do know that the existing American regulatory framework is poorly designed to give them a chance.

And this is where I think Jamaica could do not just itself but the world a huge favor. Jamaica already has the Caribbean’s only nuclear reactor, a 20-megawatt research reactor at the University of the West Indies. They also have people like Charlyne Smith, a Jamaican-born nuclear engineer who’s a postdoctoral associate at the Idaho National Lab here in the U.S.

Twitter avatar for @UFMSE

Jamaica has its own nuclear regulatory agency, which in theory could do what the U.S. Nuclear Regulatory Commission can’t and promulgate safety rules that take the benefits of cheaper zero-carbon electricity seriously. If I were a Jamaican official, I’d try to strike a deal with one (or several) of the nuclear startups and say they should get their investors to give us cheap advanced reactors as a loss-leader and proof of concept to the world, and in exchange we will roll out the regulatory red carpet.

I hope we will improve policy in the United States. But I fear that we are just not desperate enough for new zero-carbon power to overcome the inertia and FUD that surround any new technology. A country that is developed enough to already have a nuclear regulatory framework but sufficiently constrained enough in both energy and open space to really need new sources of small-scale, pollution-free energy might fit the bill. And if they could make it work, it would be a boon not just to Jamaica’s economic development but to the whole world.