Barbados Feed-In Tariff in the works


barbados-solar-feed-in-tariff

As solar power matures and becomes more of a mainstream source of power generation, the “training wheels” phase of feed-in-tariff programs around the world is coming to an end. The underlying concept was to provide long term contracts with fixed renewable energy pricing which would attract investment. As the sector evolves FIT programs are being replaced by net-metering programs for smaller distributed RE generation and power purchase agreements (PPA) for utility scale projects.

This transition is relatively straightforward for other countries as they generate electricity from more stably priced sources such as coal, natural gas or nuclear. Barbados on the other hand is different; we generate electricity from imported fossil fuels such as Bunker C, diesel and Av gas, which leaves us vulnerable to oil price volatility.

Tying the renewable energy credit to electricity prices by extension causes it to be linked to fossil fuel prices. That might work when oil prices are going up, as they were a few years ago, but it falls apart when prices drop.

When the Renewable Energy Rider was first introduced as a pilot program there was a $0.315/kWh minimum or floor set. It guaranteed that someone who purchased a solar PV system would receive at least that amount. Customers liked it and banks liked it. That was in 2010 and oil prices were rising. When the Fair Trading Commission conducted their review of the program to make changes for the permanent version, the floor was removed. The reason given was that the RER was intended for the sale of excess electricity, not for people to make money from it. BL&P proposed a top-up RE credit if the FCA dropped to a point that the amount the RER customer pays is more than they would have paid if they were offsetting their usage with an off grid system. It was inconceivable that oil prices would drop, so this proposal was not implemented.

Four years later the price of oil plummeted by 50%.

barbados-fuel-clause-adjustment-2015

In August 2014 the fuel clause adjustment was $0.463592/kWh, therefore the RE credit was 1.6 x FCA = $0.741747/kWh. For someone purchasing a system at that time the ROI would be reasonable.

Now let’s look at just one year later in 2015. The FCA fell by 50% to $0.232769/kWh, bringing the RE credit to just $0.37243/kWh. The financial numbers for the system don’t look as appealing.

The results have placed an unexpected challenge on the solar PV industry within Barbados. The return on investment of systems has changed. Financing can be difficult to obtain under these new conditions, with some banks that had previously deemed solar loan worthy, now withdrawing loans and calling solar high risk. But it is not the solar that is risky; it is the connection to oil.

The relationship is clear to see, if RE prices are linked to oil prices they will be subject to the same volatility. Those unpredictable fluctuations ultimately cause entrepreneurs and investors to avoid RE investments.

Since we have no control over the price of oil, the solution is to decouple the price of solar electricity from the price of oil. Without this dissociation, solar investment within Barbados, solar businesses and solar employment will be subject to erratic boom bust cycles. Most troubling would be that our dependence on imported oil would still be in effect, at a time when our country needs energy independence more than ever.

As a result, the Division of Energy is preparing a Barbados feed-in tariff proposal for review by the Fair Trading Commission. Currently, the RER is distinct from a feed-in-tariff which is applied in other jurisdictions, as it does not offer a premium payment for RE, neither is a contract expected to be offered for the design life of the RE technology employed. Either the RER will be revised, or an entirely new program created, we will have to see.

This Barbados FIT pricing would finally allow renewable energy development to advance unencumbered by oil price volatility which has limited the amount of financing available. A stable RE pricing system will attract even more entrepreneurs, investors, and banks to propel the industry forward.

Leave a comment

Your email address will not be published. Required fields are marked *