Early last year Grand Cayman’s sole electricity provider, Caribbean Utilities Company, and the Cayman Islands Electricity Regulatory Authority launched a programme to allow customers to connect renewable energy systems to CUC’s distribution system in a bid to reduce their monthly energy bills, by generating their own power from renewable energy while remaining connected to CUC’s grid. Business Editor Lindsey Turnbull assesses the impact of the agreement just over a year on and reports.
When the consumer-owned renewable energy programme known as CORE was launched on 14 January, 2009, it was hoped by many that it would kick-start a buzz of excitement and activity among Grand Cayman’s population when it came to looking to alternative energy sources. Instead, the response was in some cases one of disappointment that the programme did not go far enough or sufficiently reward those who were generating their own electricity.
The CORE programme is a means by which customers who generate their own electricity (via solar panels or wind turbines) can remain connected to CUC’s grid system and receive the benefit of the continuous source of electricity. If excess electricity is generated on the customer site this can be fed back into the CUC grid system. CUC then pays the customer for that electricity generation but the customer must then pay CUC when their own electricity generation system is not in operation (for example at night when solar power is not able to be generated).
How Cayman measures up internationally
Feed in tariffs, i.e. the amount paid to individuals, communities or businesses that generate electricity from alternative sources such as solar or wind turbines, vary greatly from country to country. In some parts of the world, such as parts of Canada, power authorities match or even better what the customer pays via a net metering programme in order to encourage participation from the public in such schemes.
The Ontario Power Authority, for example, launched its pricing for the feed in tariff programme this time last year with solar PV rooftop generation earning its owners between CAN$0.80 to CAN$0.54 per kWh, which was determined to be the true cost of production of this energy depending on the level of output.
There is heated debate in the UK over the perceived lack of encouragement by the ruling Labour party in the area of alternative energy. A recent report in The Guardian newspaper states that the UK government’s FIT programme only offers between five to eight per cent return on investment, which remains the same as their commitment a year ago and well below Germany’s typical level of 10 per cent.
Although UK energy Secretary Ed Miliband states in the article that the UK’s plans “represent a significant level of ambition and are comparable to countries that are leading in this area” the Energy Minister also acknowledges that the overall aim to produce 2 per cent of the UK’s electricity by 2020 via alternative means fell short of 6 per cent, which campaigners say is a realistic aim.
The opposition Conservatives say the Government’s proposals “lack ambition” and conservationists are also disappointed. Dave Timms, spokesperson for Friends of the Earth, which led the FIT campaign in the UK is quoted in the article as saying: “…ministers have been far too timid with a policy that could make a significant contribution to cutting emissions and boosting energy security.”
The article also highlights statistics revealed from a Friends of the Earth survey, which showed that 71 per cent of UK homeowners would consider installing green energy systems if they were paid enough cash.
Grid reliance costs money
In Cayman we spend approximately $0.27/kWh on our power bills. There are only two individual homes that have signed on to Cayman’s CORE agreement with one waiting approval. When electricity is generated in these homes during the day that exceeds the requirement of the home the excess energy is delivered back to CUC’s grid system and a credit is given to that customer of the present fuel factor plus $0.005 per kWh. The credit is around $0.175/kWh. However, at night, when solar power is inoperable, or during the day if the solar system does not meet all of the household demand, these customers still have to pay the regular price for their electricity.
Scott Murray, electrical sales administrator with Mega Systems, says net metering ought to be available to customers in Cayman.
“Net metering is a policy that allows homeowners to receive the full value of the electricity that their solar energy system produces. Net metering allows homeowners who are not home when their systems are producing electricity to still receive the full value of that electricity without having to install a battery storage system. Essentially, the power grid acts as the customer’s battery backup, which saves the customer the added expense of purchasing and maintaining a battery system. I think this would help to encourage the use of renewable energy sources in Cayman,” he said.
Richard Hew, president of CUC says that when the programme was launched customer expectations were higher, based on experiences in European and North America.
He states: “The CORE programme was a big step for giving access to the grid for generation from renewable sources in the Cayman Islands; however the CORE tariff did not include a subsidy for the CORE generator which does not make the programme financially appealing. A subsidised rate would allow CUC to provide a financial incentive to the CORE customer which could then be spread out among customers, as is the case in many other countries.”
Governments have other ways of incentivising businesses to explore alternative energy usage, as Hew says: “In some countries for example, the government makes an attractive offer (such as a tax subsidy to corporations) to anyone interested in participating in a self generating alternative energy scheme which makes it not only viable for customers to participate, but also provides them with a return on their investment, thereby creating serious incentives to participate.”
As there is no direct taxation in Cayman government incentives to alternative energy methods are currently limited to duty waivers on equipment brought in to install such systems.
Customers participating in the CORE programme receive a credit for the electricity they produce while still receiving the reliability of CUC’s grid system when their own electricity production is insufficient to meet their needs.
“For a true evaluation of the benefit of the CUC service CORE customers need to look at what it would cost them as a stand alone customer verses one that still requires electricity from CUC’s island-wide grid,” Hew states. “CUC must be mindful of three specific requirements when it comes to electricity generation and distribution: reliability, price and the environment. We walk a tight balance between all three.”
The future for alternative energy
A clause was written into the CORE agreement between the ERA and the CUC which requires both parties to review the tariff system charged and reimbursed to customers at the end of this year.
Hew says that Cayman has made great progress in initiating the CORE agreement and that the next step may well be to take another look at the incentives for individuals looking to pursue alternative energy options.
“CUC has participated in the public/private sector committee which is working towards a white paper on climate change impact and adaptation in the Cayman Islands. The development of a national energy policy will likely emanate from this process and CUC expects to be a key player in assisting with its development. We are definitely moving ahead in this regard.”
For CUC’s own part, it is committed to exploring methods of obtaining new forms of electricity generation that are reliable and at the least cost financially and to the environment.
CUC is currently looking to incorporate wind turbines into its electricity generation and is currently in the final stages of evaluating proposals from independent third parties who responded to a call for bids last year.
Hew states: “Subject to approval by the ERA, CUC would enter into a power purchase agreement with the successful bidder to purchase output from the turbines that can be fed into the grid.”
The construction and commissioning of the turbines would take approximately two years from the signing of a contract. At their peak the wind turbines that are intended for installation could produce around 10 per cent of electricity needs in Cayman. They will not of course be able to work at this level at a constant rate due to fluctuating wind levels but Hew confirms they ought to at least provide an average of 2-3 per cent per annum of total electricity requirements.
Watch this space for an update on wind turbines in Cayman in future editions of The Journal.