Cayman’s energy market will need to see a radical transformation over the next two decades to meet the ambitious goals outlined in the first National Energy Policy passed last year.
Especially the aim to derive 70 percent of all electricity from renewable sources only 20 years from now demands a complete reconsideration of how Cayman generates its power.
Currently, less than 5 percent of energy is renewable, and the generation mix is simple.
Caribbean Utilities Company, Cayman’s exclusive energy provider, is running a diesel power plant that has a generation capacity of 161 megawatts. In addition, Entropy Cayman Solar Ltd. opened a 5MW solar facility near Bodden Town in June 2017 and rooftop solar panels generate approximately 3 to 4MW of energy.
Speakers at the Caribbean Transitional Energy Conference at the Kimpton Seafire in September offered the first indication of how Cayman could quickly reduce its overwhelming dependency on burning fuel for energy.
Infrastructure Minister Joey Hew said at the event that the 70 percent renewables target was “realistic and achievable” and government was doing its part by starting to convert its fleet of cars to electric vehicles.
“Government is attempting to lead by example and has committed to converting 10 percent of its fleet to electric vehicles over the next five years. Several electric cars are already in service and the infrastructure to support them – such as charging stations – are planned for installation at various locations,” Minister Hew said.
Additional government initiatives to promote cleaner energy sources include plans to install renewables on several government buildings and replace street lights with more efficient LED lighting.
Government would also assist the private sector with the adoption of solar energy. “Duty-free concessions are already available to homeowners and we are now looking at reducing the duties on building materials and appliances to incentivize consumers to choose more energy-efficient goods,” Minister Hew said.
The viability and affordability of renewable energy had been questioned for years but this is rapidly changing, he said.
The crucial question, however, is how Cayman can execute a more fundamental shift away from fossil fuels.
Energy generation based on the burning of diesel fuel is subject to large price fluctuations that impact the consumer and it is bad for the environment in terms of its high CO2 emission output.
To cut emissions in line with the Paris Accord target, which requires Cayman to have 60 percent fewer emissions per capita in 2030 than in 2014, Cayman’s energy generation mix will need to change dramatically.
Sacha Tibbetts, vice president of customer service and technology at CUC, is tasked with implementing the utility company’s energy target goals, including aggressive targets for renewable energy sources connected to CUC’s electricity grid.
Speaking at the CTEC conference, he said CUC has embraced the Paris Accord targets heavily and aims to reduce CO2 emissions accordingly by 2030.
A new mix
To reach the emission target, CUC’s Integrated Resource Plan study suggests two things: At least half of all power must come from renewable or non-CO2 producing energy sources. And the company will have to convert its existing diesel engines into dual fuel engines capable of burning natural gas, a fuel that produces less CO2 per unit kilowatt hour.
“What we are looking at is a complete change of what we have,” Tibbetts said. “[By 2030] half of what we have got is going to be completely converted. Everything else is going to be brand new.”
The plan suggested by the company’s study is to have 12 years from now about 58MW of new thermal units and 83MW of existing but converted thermal units, both running on natural gas.
Burning natural gas instead of diesel would not only reduce Cayman’s CO2 emissions by 20 percent, it would also be significantly cheaper. While the basis cost per unit of diesel is between $14 and $15, the same unit of natural gas in a pipeline in the U.S. is less than $3, Tibbetts said.
The issue is getting natural gas to Cayman. This would require new unloading facilities on Grand Cayman, with cryogenic hoses and cryogenic storage containers capable of pumping the liquefied natural gas from large container ships, in much the same way Cayman is currently receiving its diesel supply.
The needed infrastructure, transportation and distribution costs make up the bulk of the total cost of natural gas and increase the cost of landing it in Cayman to about $12 per unit, according to CUC estimates, although some distributors claim it could be as low as $8 per unit.
Because only a quarter of the price of gas is traded in the market, and the remaining costs are all capital recovery and fixed, the price stability is much greater than that of oil products and propane.
As a result, the price of natural gas, propane and oil is expected to diverge over the next three decades, a development that would further increase the price advantage of natural gas over other fuels. New and converted thermal units would amount to a capacity of 141MW. But the role of thermal energy is only as a backstop, when not enough renewable and stored energy is available at the required load, for example in the middle of the night.
Renewable energy, in turn, is expected to come from utility-scale solar energy (140MW) and utility-scale wind energy (30MW).
Another 46MW will come from rooftop solar panels, which CUC believes will come down in price and make this significant growth in residential solar power economically viable, even without subsidies.
Tibbetts said: “We believe the cost of solar will come down enough that there will be a cost benefit for consumers to invest in solar.”
The waste-to-energy facility that, according to plans, will burn the trash from Grand Cayman’s landfill to create energy is estimated to contribute about 6MW to 7MW by 2030.
Given that solar energy is only generated during the day time, CUC will have to invest in storage and the company expects it will need between 60MW and 80MW of batteries to facilitate the higher amount of renewable energy.
This would enable the company to turn off the natural-gas powered plant at times during the day when it generates excess power from renewable sources.
Ocean Thermal Energy Conversion
A wild card in the energy mix scenario is ocean thermal energy conversion (OTEC), which uses the temperature difference between warm surface seawater and cooler deep seawater to run a heat engine that produces electricity.
OTEC International LLC seeks to provide renewable energy to CUC from a set of floating power platforms moored off the coast in North Side. The project is still awaiting regulatory approval.
“OTEC is the holy grail of renewable energy for the Cayman Islands,” Tibbetts said. While solar and wind only produce energy at certain times of the day, OTEC is an energy source that can provide base load power around the clock every day of the year.
The engineering appears very solid, Tibbetts said, but the challenge is that OTEC is commercially unproven. However, he is optimistic that the project will get to a point where it is economically viable. “We believe it will happen,” he said. “I think we are fairly close.”
In 2016, OTEC Cayman and CUC submitted a power purchase agreement for 6.25MW of energy to the regulator but have yet to receive regulatory approval. In the long term a floating power plant connected to a shoreside facility by underwater cables could provide electricity on a larger scale of up to 25MW. While ocean thermal energy conversion is expected to be a fraction more expensive than solar and the current price of diesel, one advantage is that OTEC would mean less solar energy is needed.
Tibbetts said, “Our models show that if you had a decent-size OTEC plant, the [expected] 240MW of solar would go down to 95MW. That will save may be 200 acres of land.”
According to OTEC, Cayman has an optimal location because of seawater temperature differences and deep waters that are relatively close to the shore. If all the regulatory requirements are fulfilled and the project is approved, OTEC Cayman is looking at a 36-month construction process.
What needs to be done
Given that 2030 is only 12 years away, much needs to be done to plan and execute the revamp.
The regulatory framework to grant licenses to generating entities must be adapted and Cayman will need a renewable energy procurement strategy to determine the best prices and options for consumers in a cost-effective and transparent way.
CUC will need to develop an energy storage plan and decide which types of batteries for ramping support, for load shifting and for operating reserves are needed. “You don’t want to buy the wrong ones, because these things are tens of millions of dollars,” Tibbetts said.
In addition, CUC’s thermal capacity needs to become more flexible as more solar is coming online, to react quickly to fluctuations in energy generation – for example, when clouds suddenly block the sun. The company said it is working with its engine manufacturers on the issue.
Because CUC would like to enter the solar-generation business itself, Cayman also needs a new regulatory rulebook. Under current rules, CUC can procure solar energy but it would constitute a conflict of interest if the utility company was also one of the respondents. OfReg, Cayman’s utility regulator, is aware of the issue and will run a consultation later in the year.
“That is a lot of work,” Tibbetts said. “I cannot even imagine the number of projects that it is going to take to do this.” However, he emphasized: “This is not pie in the sky.”