Caribbean Tour 1 - Renewable Energy Outlook

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The Caribbean is a massive archipelago consisting primarily of Small Island Development States (SIDS). The majority of these SIDS have nominal domestic supply of oil and natural gas exposing them to the volatility of importing essentially all of their energy needs. As a result, SIDS typically have extremely high prices of electricity ranging between 25-50¢/kWh (USD). Utilities are often required by the government to include a “Fuel Cost Clause” that discloses the energy costs associated with the imported fuel. With electricity prices that high, grid parity is achieved.

Connectsun was established to evaluate the regions opportunities and create a network of local integrators for North America Project Developers to partner with. Providing the ideal combination of local labor and financing that neither party could obtain effectively if left to their own devices. (CSB – Sept 22)

The tour started in Aruba at the 5^th annual Caribbean Renewable Energy Forum (CREF 2013). Over 500 delegates represented companies ranging from solar manufacturers to wind farm developers to regional utilities. Other organizations present included Inter-Americas Development Bank (IDB), World Bank, and Caribbean and Latin America (CALA) government officials. (CSB – Oct 12) Aruba aggressively boasted 100% clean energy by 2020. (CSB – Nov 6)

After Aruba, Connectsun fulfilled a short term consulting contract with Smart Energy, an energy solutions firm in Trinidad and Tobago (TT). TT was an interesting market to work in considering they are one of the only nations in the region that is a net-exporter of oil and natural gas. Not to mention the price of electricity there is heavily subsidized and only 6¢/kWh (USD). On top of this, interconnection and procurement is completely absent thus grid tied renewable energy projects do not stand a chance. The government did however promise a 100MW wind farm is under development. (CSB – Nov 5^th)

The last leg of 2013’s trip was to Barbados. With 40% of residents having solar hot water systems installed on their roof and new legislation promoting Independent Power Producers (IPPs), Barbados at face value seemed to be the next market to take off. The issue in Barbados is a 100% Canadian owned monopolistic utility that has the same issues with renewables that every other utility has with even less of an incentive to deviate. (CSB – Nov 20)

The tour of these three distinctly different nations, meeting with various stakeholders, offered strategic insight into the major issues associated with successful renewable energy projects in the CALA region. The major limiting factors are as follows:

1. Infrastructure- electrical configurations, grid compatibility, and site location

2. Enabling Environment- access to finance, gov’t procurement and interconnection

3. Capacity Constraints-peak demand, handling intermittency, and available space.

The Caribbean’s   forward progress for renewable deployments will be possible due to recognized economies of scale and mimicking successes learned abroad.  The challenges facing these states are solvable and will not stop major renewable energy penetration for the SIDS’ electrical grids.

Barbados - Renewable Energy Outlook

Approximately 40% of Bajans have embraced solar hot water systems. There are three major players in this space; Aquasol (now Solaris), SunPower, and Solar Dynamics. Thousands of these systems are sprinkled on the roof tops of hotels, apartments complexes, and single family homes.

Barbados also has a Net Billing mechanism in place making grid connected photovoltaic possible as well. This scheme is similar to net metering, but it slightly favors the utility. Electric bills in the US are typically divided into two major charges; Supply and Delivery. Each category is calculated on a unique per kWh rate according to usage. The supply rate is tied to the commodity price of electricity while the delivery rate is linked to the costs of running and maintaining the power grid. With Net Metering, all items on the bill calculated on a per kWh basis are eligible for a renewable energy generation offset. The ratio is one to one.

Net Billing is different. Islands throughout the Caribbean that heavily rely on foreign oil almost unanimously include a fuel cost clause that displays varying costs associated with imported fuel. Any unit of electricity sent to the grid from a renewable energy source effectively eliminates this cost to the utility. Net Billing in Barbados is a policy to reward this "avoided cost". Fortunately, this cost fluctuates between 20-30 ¢/kWh so the economics are not greatly affected. Not to mention, the utility is happy avoiding unnecessary costs and still collecting a check from distributed renewables, right?

Wrong. Barbados Light and Power Company (BLPC) is not only a monopoly, but it is also 100% owned by Emera, a Canadian company. PV Grid interconnection is possible and has been achieved in Barbados, but there is a definite consensus among integrators that the utility is not playing ball. Several small solar projects under 10kW have been completely installed and ready to connect for over a year! A representative of the projects stated the utility had been very enthusiastic about the systems initially, but the actually interconnection process has been convoluted seemingly with the intent to delay. 

There is good news on the horizon: Barbados is set to pass the Electric Light and Power Act (ELPA) which starts to give rights to Independent Power Producers (IPPs). If passed, up to 16MW of distributed generation could come online- 5kW cap for Residential or 50kW cap for Commercial systems. The ELPA also requires the utility to publish a grid code which will standardize the interconnection policy. An Advisory Committee will be established to regulate the licenses given to the IPPs and prevent any additional monopolies from forming. 

If Barbados is to pass the ELPA by the end of the year, Aruba and Barbados will be the markets to watch in 2014 as the USVI starts to slow down after the tax depreciation bonus expires at the end of this year. Strong legislation is critical to cultivating an enabling environment for renewables and IPPs to flourish in a market that is currently a monopoly.

UP NEXT: Trip Summary

No More Excuses, Utilities

Interconnection is the most arduous, meticulous process of any renewable energy project. The simple reason is utilities do not want IPPs and Distributed Generation. Many utilities hide behind rational arguments against common renewable energy incentives like Net-Metering stating these systems are not directly offsetting the local power consumption. Simply put, someone with solar energy on their house is not sharing the costs of the grid at the time they are truly utilizing it in the early evenings during residential peak demand. As a result, someone without solar energy will be "punished" when the utility has to raise the price of electricity to compensate for the lost revenue from IPPs. Meanwhile, increased electricity tariffs make solar energy and other renewable technologies more attractive perpetuating the polarity in the debate.

The reality is utilities are not making money from clean tech, they are loosing money. A myriad of large North American utilities can absorb losses associated with 20% renewable energy by 2020, but imagine a small, privately held monopolistic utility volunteering to sacrificing 20% of its revenue for the greater good.

When a single utility owns the grid without checks and balances, the interconnection policy can be as convoluted and costly to the renewable integrator as the utility demands. Even if the government of a particular SIDS wants to achieve fossil fuel independence, the a-political, foreign owned utility does not have to abide. Importing oil at obnoxiously high and variable prices only affects the costs that are directly passed onto the rate-payers or the government as a fuel cost adjustment. There is no incentive to deviate from the current paradigm.

Regardless, around the world and even in the Caribbean, we are seeing Utilities willfully participate in changing the future of energy. As mentioned in a previous post, Aruba's utility has signed on to 100% renewable energy by 2020. With the introduction of a grid upkeep fee and a unique Net-Billing policy focusing on avoided-cost savings, the utility will not loose a significant portion of profits. A nearly identical policy has been introduced in Arizona- A "grid-usage" fee for APS net-metering customers will be applicable for all systems installed after January 1st, 2014.

One of Germany's largest utilities RWE has admitted defeat and embraced a new model to adapt to the changing marketplace focusing on "creating value by leading the transition to the future energy world." They want to become a "Project Enabler" and a leader developing large utility scale renewable energy projects across Europe.

Other progressive utilities, poised to remain afloat amidst the energy revolution, will explore storage technologies, frequency regulation, and smart grids to profit from the intermittency and effective integration problems associated with distributed, non-base load renewable energy.

As the world's energy mix becomes cleaner, some utilities will indefinitely be left behind as nothing more than an O&M provider for transmission lines while others will lead the charge forward.

UP NEXT: Barbados - Renewable Energy Outlook

Aruba - Renewable Energy Outlook

100% renewable energy by 2020. Today's date is Wednesday, November 6th, 2013. That is 2,239 days from now. It is a remarkable initiative, but is it also insurmountable?

Currently the most notable project on the island is the 30MW Wind farm in the south completed a few years ago. This 30MW facility covers  roughly 18% of the annual electricity consumption by the 100,000 people that call Aruba home. Aruba needs about 135MW more to satisfy their ambitious target. Approximately 5MW of clean energy has to hit the grid every quarter until 2020. The US has added over a GW of solar power YTD. Just solar. Aruba's target is not that ambitious, right?

Wrong. In the US solar accounts for a very small sliver of the energy pie. Wind is a similar story. When the sun shines and the wind blows, the US electrical grids will eat that power up without a burp. Aruba will be alone, trailblazing renewable penetration levels that no national grid has ever seen. Issues such as curtailment, intermittency of power, and voltage fluctuations will be big issues for WEB, Aruba's water and electricity utility.

The good news is they realize this and are up for the challenge. A closer look at 100% Clean by 2020 reveals that 50% will be allocated for solar and wind, while the other 50% will be devoted to biofuels which can help provide base load electrical demand while the wind is not blowing or its night time.

On top of this, Aruba is investing in some innovative storage technologies to address the intermittency issues with high renewable penetration. Hydrostor, a company based in Toronto, recently announced at Green Aruba, just one day prior to CREF 2013, they would be developing an underwater electrical storage facility. Essentially, power flows into giant underwater balloons and is stored as potential energy. The process is over 90% efficient. Perhaps the most interesting point is the power is only stored between 4-6 hours. That is all the time needed to stabilize the flow of electricity.

There are still challenges in the market. An unclear interconnection policy is crippling the distributed generation market. Net Billing is great and a "grid upkeep fee" for IPPs is an innovative way to keep the utility happy, but having a consistent and clear procurement process is actually the first step in creating a healthy renewable market. It is like not having your cake, but being able to eat it. Fortunately, the political pressure from self inflicted aggressive targets should entice the establishment of a more streamlined process very soon.

It is not often that a Small Island Developing State (SIDS), let alone a cooperating utility, leads the way in our green energy revolution. Aruba's clean technology mix and grid integration will set a standard for other countries in the region looking to achieve similar targets, but it will also help utilities in larger countries have a model to allow more renewable capacity to come online.

Trinidad and Tobago – Renewable Energy Outlook

All over the Caribbean we are witnessing the beginnings of an energy revolution. Developed nations such as Germany, Spain, Italy, Greece, and even the US and Japan have already experienced a jaw dropping capacity of renewable energy installed primarily including Solar and Wind. In 2011, Germany registered 123.5 TWh of renewable energy on their grid or approximately 50% of T&T’s energy demand in 2012.

Now that the price of integrating clean energy technologies worldwide has dropped significantly, the Caribbean is up to bat. A region characterized by complete energy dependence with high, volatile fuel prices and abundant renewable resource offers a unique opportunity to interconnect renewables at grid parity without subsidy.

Aruba has even gone as far as to pledge 100% renewable energy by 2020. Barbados is currently amending their interconnection policy. Jamaica’s JPS has introduced a “net-billing” statute which allows residents to be billed on the difference between the power they consumed and the power they produced similar to “net-metering”, a widely adopted policy abroad. In each of these cases, the government will not spend tax dollars supporting the technologies. The return on investment is attractive without them. However, in USVI, solar and wind energy is even more lucrative considering the peripheral tax credits from the US with payback between 2-5 years.

Unfortunately, Trinidad and Tobago is behind the curve and not following suit. In T&T’s defense, it is not like the rest of the Caribbean. With a stable, domestic supply of oil and natural gas, electricity prices are low and stable making it impossible for renewable energy to compete with T&Tech’s current rates.

At first glance, it seems like an open and shut case, but there is more to the story. Having a domestic supply of oil and natural gas does not necessarily keep electricity prices low. There will always be an opportunity cost associated with the volatile market prices of not exporting. The cost between the “Reference Price” and the “Retail Price” was historically passed onto the consumer. In the 1970s, to protect consumers from this price instability, the government introduced subsidies to make up the difference. Initially the entire burden was placed on the oil companies. They would subsidize the difference out of their own profits. Since the early 90s, oil companies have only had to devote between 3-4% of gross income to the program. The government, and thus taxpayers, has been covering the excess cost ever since.

It is hard to speculate what would happen if subsidies were removed. What would the price of electricity be? How would that affect the adoption of renewables?

“The prices would go up and solar could compete, but there is still the issue of interconnection.” Says Ian Smart, CEO of Smart Energy, a clean energy solutions company based in Port of Spain.

An alternative policy to level the playing field is to offer incentives to renewable energy such as a Feed In Tariff (FIT) where residents and small businesses install grid-connected systems on their property and the government agrees to pay for the power at a predetermined rate for between 10-20 years. The income from the FIT can offset any increasing rates of electricity as the oil subsidies are phased out.

At any rate, T&T must begin to shift its focus away from a dying form of energy, fossil fuels, and begin to look towards the future. As a leading nation in the region, the responsibility to combat climate change and lower CO₂ emissions is immense and the widely accepted renewables adoption of its Caribbean peers imminent.

TRINIDAD AND TOBAGO - GREEN SCREEN

Last night was Sustain TT's third annual Environmental Film Series adequately titled "Green Screen". Hundreds of people showed up to Digicel's IMAX for the opening ceremony and networked over local wine and local cheese. After the initial festivities, we were funneled into the theatre, handed our 3-D glasses, and greeted by the German Embassy's Deputy Head of Mission, Mr. Ullrich Kinne. 

"I would like to congratulate [Sustain TT] on their choice of date. Because like Halloween, Climate Change is also very scary." Teased Mr. Kinne. He continued his praise and expressed the embassy's ongoing interest in sponsoring similar events related to climate change and other environmental initiatives.

The first film, "The Last Reef", was in complete 3D IMAX. Elaborately colored Sea-slugs, magnificent sea urchins, camouflaged scorpion fish, intricate coral networks and more were radiating from the screen. It was Planet Earth totally rejuvenated. The coral bombed around Bikini Island during nuclear testing days has revived itself over the last 50 years into something spectacular. Although this is a testament to coral reef system's rigidity, other anthropocentric issues such as coral bleaching from Ocean Acidification are seriously compromising our reefs.

The second film was just as visually stunning, "Chasing Ice". It followed the journey of James Balog, the founder and director of the Extreme Ice Survey "EIS" where dozens of cameras were set up next to massive glaciers around the world to capture the phenomenon of glacial melting. The images were alarming and arguably more effective than any scientific proof of global warming.

I left the show with a bittersweet taste in my mouth. The visuals were absolutely stunning, but the message was absolutely depressing. Our emissions have already lead to some very extreme changes that are likely irreversible. The good news is people are starting to care. The event's mantra this year was "Seeing is Believing." I saw some things I could not believe and couldn't be more proud of my profession.

STAY TUNED for our Market Outlook Series focusing on Renewable activity and opportunity island by island.