Basing electricity charges on a consumer’s peak use in any single month is a departure for the Caribbean Utilities Company, but executives say the scheme accords with its still-unpublished – and 15 months delayed – 30-year planning report.
The utility says it submitted its Integrated Resource Plan – commissioned in August 2016 and written during 18 weeks by Virginia-based Pace Global consultants – last year to the Office of Utility Regulation and Competition, OfReg.
The office shows few signs of releasing it, however, and has not said why, but CUC says the plan recommends enormous increases in renewable energy and using natural gas instead of diesel to drive its generators.
The clean-burning gas will replace the more-expensive diesel fuel – and its oily emissions – in at least some of the company’s 17 diesel engines, although to what degree remains unclear.
CUC’s Vice President for Customer Services and Technology Sacha Tibbetts says the Integrated Resource Plan “supports compliance with the Paris [Climate] Accord, which requires a 60 percent reduction emissions of tCO2e” – a metric ton of carbon dioxide – compared to what Cayman produced in 2014 ”while put[ting] Grand Cayman well on the way towards achieving the goals of its National Energy Policy.”
In its turn, the 30-page National Energy Policy, adopted by the Legislative Assembly in March 2017, is itself a 20-year blueprint for the Cayman Islands, focused on “exploiting renewable energy, promot[ing] energy efficiency and conservation measures and support[ing] energy security by reducing reliance on imported fossil-based fuels,” according to its 474-word introduction.
The document specifies diversification of power sources – mostly solar, trailed by wind and industrial incineration of solid waste to generate electricity – and calls for 70 percent of Cayman’s power to come from renewable sources by 2037.
According to CUC’s 2017 annual report, published in March, “the IRP dovetails with the National Energy Policy and will give shape to the energy generation plans for Grand Cayman over the next 30 years. Both the IRP and NEP call for a significant increase in renewable-energy projects.”
In pursuing the still-unpublished Integrated Resource Plan recommendations and the larger National Energy Policy, CUC in January unveiled “demand billing,” a scheme by which Cayman’s largest companies – and, ultimately, interested individuals – are charged for electricity based on their highest demand for power on any day in any given month.
CUC says the scheme is “revenue neutral,” meaning the company will earn neither less nor more money than previously, but will accomplish at least two goals: funding future expansion of power generation and encouraging power conservation through a dramatic change to its CORE program, consumer owned renewable energy.
CORE, started in 2011, encourages consumers to install renewable energy generators – usually solar, but sometimes wind. CUC buys all the power created, channels it into Cayman’s national electricity grid, then sells it back to producers at discounted rates. CORE subscribers are prohibited from using the power they generate on-site. Excess production attracts a CUC credit at the end of each month.
Producers wishing to use energy generated on site were forced to sever all links to CUC, going “off grid” as has been done at the new Cayman Technology Centre at 115 Printer Way and in a dozen private homes.
However, pressure from commercial and private consumers; from Cayman’s growing solar industry; even a 2011 Solicitor General challenge to CORE; and, finally, from its own Integrated Resource Plan and the demands of the National Energy Policy, prompted CUC to devise an alternative.
In January, CUC launched “demand billing,” which encourages consumers to spread consumption to alternate hours and to employ renewable energy systems to reduce demand on the grid. In anticipation of the change, CUC’s first step was the 2016 universal installment of “smart meters,” enabling the utility to measure – and consumers to manage – power consumption in 15-minute intervals.
Presently limited to CUC’s 129 largest commercial clients, the new scheme allows consumers to use power generated through their own small-scale renewable-energy resource system and sell any excess to CUC.
These independent arrays are called “distributed energy resources” – DERs – because they are widely disbursed, located wherever an individual chooses to build.
Rates vary among the four classes of consumption, but dramatically reduce the traditional “base rate” of 10.58 cents per kilowatt hour paid by general CUC consumers and CORE’s 450 subscribers.
Under demand billing, the base rates are reduced to .00333 cents per kWh for residential DER customers and as low as .00323 for larger commercial DER customers. Tibbetts says that the fine-grained differences were stipulated in a “cost of service study.”
Along with the reduced DER rate are new charges: a “monthly billing demand” and an “additional capacity charge.”
The former, Tibbetts says, is “the measured peak load for the customer for the current billing month”; the “additional capacity charge,” he says, “is based on the peak monthly billing demand for the prior 24 months,” in other words, a customer’s two-year history of consumption and the materials and equipment CUC imported to supply it.
The two new rates, he says, make up for any losses incurred by lower base rates.
The program includes proscriptions on the size of solar arrays. It places a 250 kW size limit on any single DER and an overall 2 MW limit on all generation by all DERs.
Tibbetts says 250 kW “was a number agreed upon between OfReg and CUC that will allow more than a handful of customers to participate in this early stage of the DER program.
“Additionally, this is an amount that is generally quite simple to integrate into the grid and does not require a detailed system-impact engineering analysis,” he said.
He dismissed worries the 2 MW limit was intended to slow adoption of renewable energy, and rejected suggestions that CUC sought to make up for revenues lost to renewable energy – especially in the face of National Energy Policy calls for an addition of 10 MW every year. Section 32.4 of CUC’s transmission and distribution license forbids the utility to earn profits from renewable energy.
“The DER program has been launched in consideration of the NEP and CUC’s IRP,” he says. “The 2 MW cap is needed temporarily while plans and supporting projects are put together to manage the larger amounts of renewable energy that is conceived in the NEP and CUC’s IRP.”
Tibbetts says the demand billing and DER schemes are still taking shape, and will be rolled out over the next three years.
Most of the rates are “part of the phase-in for demand rates for large commercial customers, and [are] only applicable in 2018 and represent a 33 percent implementation of the demand rate.
“This phase-in was done to allow customers an opportunity to see the effect of demand rates on their bills without having a sudden effect of a 100 percent demand-rate implementation.”
In its December 2017 press release announcing the demand billing program, CUC indicated that individual and system limitations will be reassessed annually. The deeper CUC moves into the business of renewable energy, the greater technological challenges it will face.
Increasingly, the utility must plan for “solar+storage” systems, in which batteries save excess generation, enabling owners to shift times of use and diminish grid demand. In its most extreme form, called “demand destruction,” an owner could eliminate dependence on the grid.
“Yes, they can,” Tibbetts acknowledges, but says a storage system must be registered with the company.
“If a customer wishes to install battery storage interconnected with the grid, they are required to advise CUC of this by applying for an energy storage interconnection,” he says, calling storage systems such as the Tesla Powerwall and competing lithium-ion configurations “a different type connection than, say, a typical [uninterrupted power supply] battery, which only comes on once there is a grid outage.”
Meanwhile, the CORE program remains unchanged. The March-published annual report said the scheme “has proven very popular with residential and commercial customers connecting their solar panels or wind turbines to our grid.”
As of last month, CUC recorded 450 CORE subscribers, up from 242 at the end of December, producing 3.7 MW of electricity.
Tibbetts explains the difference between CORE and DER programs: “CORE customers receive a fixed per kWh credit for all of the energy their system produces …. There is a system size limit of 10 kW.”
DER customers, however, “receive a credit only for energy that is exported to the grid. The amount of this credit varies with the cost of fuel and other sources of renewable energy on the grid. The energy that is used in the premise only reduces the amount purchased from the grid.
“DER customers will be billed for the monthly billing demand and the additional capacity charge and the new base rate ….”
The new “excess energy rate” for DER users is .00259 cents per kWh, a sharp contrast to average CORE rates of slightly more than 14 cents per kWh, and a clear incentive for CUC to reduce CORE subsidies. Company records indicate CORE subscribers in 2017 generated 5.5 MW of power, and collected more than $1.9 million from CUC. Those figures compare with 2016’s 3.6 MW of generation, and company payouts of nearly $1.35 million.
In the Dec. 22 statement, CUC President and CEO Richard Hew said, “It is important for customers to understand [demand billing] is not a rate increase and that this new rate structure is revenue neutral.”
CUC, he said, seeks to ensure “that the rate structure reflects [the] cost to serve our overall customer base and is equitable on a cost basis between customer classes. Based on the studies which have been done over the years on demand rates, it is fair to say that with the introduction of demand rates, there are potential savings for our large customers.”