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The roof has a hole


JERRY FRANKLIN

The roof has a hole

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AT THE Caribbean Energy Security Initiative summit on January 26, 2015, United States Vice President Joseph Biden said: “There’s an old saying: the best time to fix a roof is when the sun is shining. The sun is shining now, figuratively speaking. The time is now.”

I am sure no one can dispute the wisdom of this statement. Yet our renewable energy sector has slowed dramatically and it’s reasonable to conclude that one of the major factors is low oil prices.

Can I blame individual Barbadians for this? Well, probably not. In tough economic times you would expect the people would be very selective with how they spend their money. If there is wisdom in Biden’s statement and our economy is at serious risk when the oil prices rise again, what should we do?

We should start with the right national energy policy, one that is ultimately focused on energy security and not a least-cost policy.

Then we need to change the current Renewable Energy Rider method of calculating the rate the utility pays consumers for their excess energy and last but not least we should be seeking to access the billions of dollars available for the adoption of renewable energy in the Caribbean for funding.

How serious is this situation? If we consider that the drop in oil prices has reduced our payments for oil by approximately $200 million, yet our foreign reserves levels drop by about the same amount, where would our foreign exchange levels be if the oil prices had stayed the same or increased?

Are we prepared for harder austerity measures? It seems to me that we have a gaping hole in our roof, the sun is shining and everyone is fine with that because they are not getting wet.

The attitude seems to be worry about the rain when it comes and enjoy the sunshine while it lasts. Maybe that’s fine for many Barbadians and maybe they don’t even know there is a hole in the roof, but I believe we need to fix it now.

So why do we need to fix the hole now?

Why not wait?

I am sure there are readers who would ask: “Why can’t we enjoy the low oil prices for a few more years and resume our drive when the price goes back up?’

Some might think this is a fair position to take. However, they would not think so if they understood some of the facts.

Firstly, the utility company has existing oil-based assets in operation today. Some of these assets have fully depreciated and some will soon reach that stage. This means that they need to invest in a new plant. If our national policy is least cost, a fossil fuel generator right now is the cheapest way for the utility to generate power.

However, if we invest in a five megawatt fossil fuel generator today, we would have it for the next 25 years.

So if oil triples in price tomorrow, we are stuck with that investment.

Secondly, even if oil prices stay low we still have to import oil, so foreign exchange has to be spent to generate electricity and thirdly, to reach reasonable levels of penetration of renewable energy to have significant impact on the oil import bill, will take a number of years, so the longer we delay the longer it will take.

What does this all mean and what can we do about it?

Before we even look at what Government should do, action can still be taken at an individual level.

Let’s acknowledge that in spite of the low oil prices there are still persons with very high electricity bills. Therefore it still makes good sense to purchase a system to significantly reduce it or eliminate it. The low oil price does have some effect on people’s rationale for financing the system purchase, however, each situation needs to be evaluated on its own.

There are many persons who can benefit from investing in an off-grid system. The simple reason for this is that the method of payback is not affected by the fluctuating oil prices once you justify the initial investment.

Off-grid systems use an avoided cost method of payback – you would avoid paying the utility, once you are using the system.

That is different from a grid-tied method, which is dependent on the current regulations that erode the cost benefit of a system when oil prices are low.

At the national level, a higher renewable energy penetration would have a significant enough positive impact on our economy for us to depend on individuals.

That’s why I believe the Government has to act. We should be seriously looking at accessing some of the many funds available for climate change mitigation and sustainable energy development to fund a temporary incentive.

The incentive would be designed to mitigate the effects of the low oil price and make it attractive for individuals to purchase a renewable energy system.

This incentive would have a specific objective and life spend. Another approach could be to use a small percentage of the $200 million reduction in the oil bill due to the low oil prices to fund an incentive such as a greater claim on your income tax.

It could perhaps be moved from $10 000 to $20 000 only for new installations of renewable energy or energy efficiency systems.

I am sure we can be creative and find a way to do this without any additional burden on the taxpayers.

The point is, we depend on our government to acknowledge these national challenges and find solutions for them.

We have a leak in our roof and it can’t be ignored. We have an opportunity to fix it, but we need to do so before the storm comes.

Jerry Franklin is managing director of EnSmart Inc. Franklin is an engineer, energy auditor, equipment tester, and energy solutions provider. Email: [email protected]

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