THERE ARE TWO TYPES of billing methods for a renewable energy system – “buy all, sell all” or “net metering”. Barbados has implemented “buy all, sell all” for systems over two kilowatts (KW) and people with systems two kilowatts and under have the option of net metering. Most people are just interested in a zero bill and don’t understand much about how the two methods work. While the result appears to be the same, there are fundamental differences.
The “buy all, sell all” method necessitates the installation of a second meter to measure the energy produced, while your existing meter measures what you consume.
Most people’s understanding of a renewable energy system is that they sell their excess energy to the utility company. While in theory that is what you are doing, in practice it’s not the case.
During the day when your renewable energy system is producing energy most people assume that they are using the energy they are producing to meet their demand and then sending the excess energy out to the grid. However, all the electricity you consume comes from the grid, hence “buy all”. Then you push everything produced from your system on to the grid which is measured by a separate meter, hence “sell all”.
If you use ten kilowatt hours (KWh) per day and produce ten KWh per day, your bill would be zero. However, if you use five KWh per day but produce ten KWh per day you would have produced excess electricity and the utility company would owe you money for five KWh per day of electricity. Likewise, if you use 15 KWh per day and produce ten KWh per day you would have to pay a bill for five KWh per day.
Our system gets a little more complicated because the rate that you sell your excess energy at is tied to the fuel clause adjustment (FCA). Therefore, when the oil prices were high, the rate at which you were allowed to sell your electricity was high. However, now that the FCA is lower than most people would have expected, it means the sell rate is now lower than the buy rate.
So today, including value added tax, you are buying your electricity for around 45 cents per KWh and selling your electricity for around 26 cents per KWh. Therefore, if we were to use the same examples above you would see that if you used ten KWh per day and sell ten KWh per day your bill would not be zero.
In fact, if we use a 28-day month you would buy your electricity for $126 and you would sell your electricity for $72.80. Therefore, your bill would be $53.20.
The net metering method measures the difference between what you produce and what you use. This only requires the use of one meter that can support net metering. If you implement net metering with a normal meter, when you are producing more than you are using you would literally see your meter spinning backwards.
If you use ten KWh per day and produce ten KWh per day your bill would be zero, no matter what the selling rate or the buying rate is. If you use five KWh per day and produce ten KWh per day you would be paid for the five KWh excess electricity at the selling rate.
Therefore, in this current environment where the oil prices are low and the selling rate is half the buying rate, once you produce more than you consume you would always get at least a zero bill. Net metering really allows you to sell your excess.
When the Renewable Energy Rider programme started, the “buy all, sell all” was the most favourable method to use because it meant you would get the maximum amount of money once the oil prices were high.
At that point, owners of systems were very happy and no one was anticipating a low oil price. It also meant that it was so favourable that it would not have been sustainable at those rate.
As the penetration became higher and more people began using renewable energy, it would become more uneconomical for the utility to continue paying out money with a reducing number of consumer without systems.
Likewise, net metering would have also become unsustainable for the utility as the penetration became higher because they would be losing lots of revenue, but find themselves renewable system owners for their excess electricity.
What we need now is a method that strikes a balance. A method that allows the utility to survive, but allows system owners to realise a significant reduction in their electricity bill. The middle ground is probably the “buy all, sell all” method with a feed-in tariff. A feed-in tariff is just a rate fixed for some defined period of time that is de-linked from the fuel clause adjustment.
This would allow the system owner to recover their investment in some reasonable time frame while still allowing the utility to be viable to provide service to the many consumers who couldn’t afford a renewable energy system.
The Barbados Renewable Energy Association and the Barbados Light & Power Company have both written the Fair Trading Commission to try to find a rate that can be applied to strike this balance.
It gets a little more complicated because there is now a new category of system introduced by the amendment to the Electrical Light & Power Act. There is now provision for independent power producers. This category is strictly a system to sell electricity to the utility.
The main difference here is that the Renewable Energy Rider was intended to allow the system owners to reduce their electricity bill, while an independent power producer must be allowed to make money just like the utility, but that’s a discussion for another time.
Jerry Franklin is managing director of EnSmart Inc. Franklin is an engineer, energy auditor, equipment tester, and energy solutions provider. Email: jerryfranklin@ensmartinc.com
