Getting FIT for renewable energy

Cayman’s electricity provider CUC and the Electricity Regulatory Authority have agreed upon a revised Consumer-Owned Renewable Energy programme, which introduces a new feed-in tariff offer by CUC to purchase back extra electricity generated at a fixed rate. The new agreement still raises a number of questions among prospective renewable energy generators in Cayman.

Environmentally-minded individuals and businesses across Grand Cayman have been holding their collective breath in wait for this new CORE agreement with a tariff that is attractive enough to make them make the considerable investment in renewable energy sources such as solar or wind turbines.

The 7 cent differential

CUC’s revised CORE agreement pegs the price of electricity that CUC will pay to the consumer at 37 cents per kWh for the electricity that customers give back to the grid via their own production from renewable energy sources.

“The figure was calculated taking into effect a variety of variables and was, we felt, a fair price for those generating electricity via renewable means to make a profit on their investment,” Richard Hew, CUC president says.

The cost of consuming electricity, i.e. what the consumer pays CUC, is 30 cents per kWh, thus those generating their own electricity will gain a net 7 cents at present day prices.

Those who sign up to the new CORE agreement will be taking part in an initial year-long pilot programme, after which time several factors will be reevaluated, including the fixed rate.

Concerns have been raised by potential investors in renewable energy that the rate will not float in parallel with the cost of oil.

“A fixed price for energy at 37 cents may sound good now but when energy costs skyrocket in the years to come, CUC would be guaranteed energy at an extremely low fixed price for years, where the people that invested in renewable energy systems would, in effect, be providing the energy by which CUC is deriving their profits at no increased cost to CUC. In my opinion, the price paid to the renewable energy customers should be tied to a schedule related to the cost of CUC’s generation costs,” says Jim Knapp, a home owner who has invested in renewable energy.

“Is the seven-cent differential going to be maintained even with crude prices going up?” wonders Jay Easterbrook of the sustainable energy pioneer Lighthouse Point Development/Divetech Ltd.

Hew says the payback of ought not to be thought of in connection with the price of oil.

“The two are unconnected,” he says. “We looked at the cost involved with purchasing, installing and running renewable energy sources and believed this was a fair price. If the price of such installations comes down as we believe it probably will, this has to be taken into consideration when we look at the agreement again in a year from now.”

Louis Boucher, deputy managing director of the ERA, says there would have to be considerable pressure on the price of oil to take the cost of 30 cents per kWh over 37 cents and assures the figure will be examined after the pilot year is up.

Also to be reassessed are technological advancements, the number of new consumers to the system, the price of renewable energy equipment and the national energy policy being developed, Boucher states.

Binding in for the long term

CUC says that it will be bound to those who initially sign up to the agreement for 20 years, offering the agreement to individuals and businesses on a first-come-first-served basis, up to a maximum of 1 MW of total output across the board, or for one year; whichever is sooner. Knapp doesn’t like the idea that it’s limited to the first 1MW on the pilot programme when the customers are expected to sign a 20 year agreement.

Hew says the agreement allows individuals and businesses to make business decisions as to whether to invest in renewable energy sources in terms of payback that should eventually take place.

The cap of 1MW is important, Hew says, because the seven cents increase in what CUC will have to pay for electricity from renewable energy sources will only be negligible and not felt by consumers. Unrestricted purchases could lead to higher cost that might be felt by general consumers.

“We are going to see how the 1MW cap goes after a year,” he confirms. “At the moment 70 per cent of that 1MW can be generated by commercial enterprises and the remaining 30 per cent by residential investors. This works out at roughly 14 commercial enterprises producing a maximum of 50kW and 15 residential investors producing a maximum of 20kW. Typical residential installations are 5 to 10 KW though so the actual number of residential participants will likely be higher. We think these figures will be about right in real terms.”

More meters

Lindsay Scott, who has just built an energy efficient home, is eager to take the next step and install solar panels in his home. He is concerned about the type of metering that will be required to comply with this new CORE agreement.

Easterbrook also has concerns that the new metering system would make a good deal more work for him at Lighthouse Point.

The agreement requires extra two meters to be installed in one of two configurations, known as the grid tie or customer tie, the former requiring two new meters to be installed behind the main meter system giving CUC a reading net of CORE output. The latter configuration would be installed before the main meter serving the customer measuring gross consumption and output.

“It’s very important for us to be able to track how much energy is coming from various sources” Hew confirms. “It is important for us to know how much energy is tied to the system. In any case those currently using renewable energy and giving electricity back to the grid require two meters.”

He says that smart meters will eventually be rolled out to all electricity consumers on Island helping CUC feed power demand and enabling CUC to look at efficient resource planning.

Any money CUC owes to renewable energy generators at the end of the month will be shown as a credit on the customer’s account and credit balances will be refunded on a quarterly basis.

Knapp said settlements should be made monthly because CUC bills and shuts power off on a monthly basis.

Hew says that there should not be much residual electricity generated by the renewable energy generator because their capacity to generate electricity will be capped at either 20kW per residential customer or 50kW per commercial entity or CUC’s estimate of the customer’s peak load, whichever is less.

“The size of the system installed will be restricted to serve the customer’s needs,” he says. “There maybe times when the right weather conditions might cause monthly production to be greater than consumption and a slight increase in production by the customer, but it should not get to the situation whereby there is a net amount owed to the customer by CUC.”

Concerns have been raised over ensuring that the Planning Department are on board with the minutiae of the new CORE agreement, in particular the specific equipment configuration that CUC requires for the FIT/CORE programme. Hew says there are already three or four individuals already running renewable energy sources and selling back to the grid, thus the Department is already geared up for such new installations and that it should be a straight forward procedure for new parties signing up to have their systems approved.

Boucher says: “Those who sign up to the new agreement and have had their systems approved can expect to be up and running from 30 days of signing, thus everyone should be on board to make the FIT system operational.”

Despite the above concerns even the most critical of the new CORE agreement is pleased with the new moves. “This is a step in the right direction,” Knapp concedes.

Scott says they have been waiting for such news for a very long time, while Scott Murray, Electrical Sales administrator, Mega Systems is extremely upbeat: “As a supplier and installer of renewable energy systems we are very excited see this change. With the arrival of this new feed in tariff our existing clients will reap further rewards on the solar investments while our prospective clients will be encouraged by enhanced payback of their initial investment in renewable energy. We understand this is a pilot programme, but as fuel costs rise we hope adjustments will be made accordingly to the $.37 FIT so that renewable energy will continue to be looked upon as the future energy source for the Cayman Islands.”

Hew concludes: “Renewable energy continues to be more expensive than conventional power sources and we have to integrate it on a gradual basis so that the costs for general consumers do not increase. Our objective is to grow the programme. We will learn from this initial offering and be able to refine and improve it going forward.”