• Admits pricing formula ‘not attractive’ to investors
• Provider: Told you it was ‘non-starter’ from 2019
• Proposal to switch larger systems to net billing
By NEIL HARTNELL
Tribune Business Editor
Bahamian energy regulators have conceded their renewable policies are “not attractive” for companies and investors seeking to enter the sector, and are proposing a pricing structure switch.
The Utilities Regulation and Competition Authority (URCA), in its just-released consultation on “cost effective tariffs” for the fledgling renewable energy industry, unveiled a move away from the “buy all/sell all” pricing that one provider yesterday described as “a non-starter” from the very outset.
The regulator, in a much-criticised compensation proposal for larger grid-tied renewable energy systems, last year mandated that those capable of producing more than 500 kW (kilowatts) were to compensated by Bahamas Power & Light (BPL) for selling energy to the grid via a “buy all, sell” method.
This required participants with such systems, mainly larger businesses and government facilities, to not consume any electricity generated by their renewable systems. They instead had to export all energy they generated to BPL, and consume all the electricity they need from the state-owned monopoly at the standard retail tariff levied on all its customers.
Those who “sell all” under this arrangement have been compensated by the equivalent of BPL’s appropriate monthly fuel charge, which normally accounts for just 50-60 percent of customer bills. Such a mechanism was vehemently opposed by private sector renewable energy players on the basis that producers will not be fully compensated for what they produce.
They have argued at the time that reducing the rate of return on utility investments in such a fashion will discourage Bahamians from investing in renewable systems, and URCA now appears to agree based on the results of a study it commissioned from independent consultants, The Cadmus Group and Energynautics.
“The current RESG (Renewable Energy Self-Generation) policy design is likely not attractive for larger projects that are compensated at fuel rates under a buy-all/sell-All arrangement,” URCA concluded.
“While the current RESG policy design is cost effective for smaller projects that can offset significant electric purchases with self-generated energy, the current design is likely insufficient to attract participation for larger projects that are not able to offset electric purchases and are compensated at a fuel rate which is insufficient to cover project development expenses and provide system owners with the required rate of return.”
Philip Holdom, president of Alternative Power Supply (APS), told Tribune Business the study’s conclusion totally vindicated arguments he has been making since 2019 while suggesting that another year has been wasted when it comes to developing a Bahamian renewable energy industry.
“It is what I said from day one. I told them from day one that the RESG would never fly off the ground. It was a non-starter. There was no value to the business,” he said. “We were very clear that no business would sign up for such a thing. Obviously from the amount of sign-offs they got that was true.
“If the Government [BPL] is buying all of your electricity that you are producing, and they sell it back to you at double the cost, why would anyone sign up to that? It was self-evident at the time. What business would sell you something at half the cost and buy it back at double the cost?
“It was a non-starter. Anyone signing up for that does not know renewable energy and does not know business.” URCA is now proposing to go with a net billing compensation structure for grid-tied renewable energy systems capable of producing 500 kW and 1 Mega Watt (MW), which is the same as that currently offered to those between 100 kW and 500 kW.
Net billing enables persons with grid-tied systems to “net off” the difference between what they supply to, and consume from, BPL. However, Mr Holdom added: “Even net billing is not reasonable. In America it is net metering, not net billing.
“If business is not leading the way, renewable energy cannot be expeditiously expanded. There’s two kinds of renewables. There’s renewables led by government, which means borrowing and debt, and renewables led by business, which means jobs and growing the economy. Which one do you want?”
Net metering credits grid-tied solar system users for the energy they sell to the grid. URCA, in unveiling the buy all/sell all compensation structure, acknowledged that it was only a temporary solution until the “cost effective tariff” study was completed, but a year has now been lost to a mechanism that is likely to have deterred investment in the sector.
The proposed net billing switch comes as the Davis administration placed significant focus on renewable energy both in its Blueprint for Change election manifesto and the Speech from the Throne. In particular, it is aiming to revive the target of generating 30 percent of The Bahamas’ energy needs from renewable sources by 2030.
Many observers believe that will be a tough target to achieve, and URCA’s compensation switch is another illustration of how far The Bahamas has to travel to attain such goals. The regulator, meanwhile, added that buy all/sell all compensation at cost-based rates will give renewable investors more certainty but increase costs for consumers.
“A buy-all/sell-all arrangement with cost-based rates may offer certainty to project investors that they will cover project expenses and earn a return on investment, but rate payers will purchase solar PV electricity that is more expensive than the existing generation, which will increase electric rates,” URCA added.