Renewable sector ailing
THE RENEWABLE ENERGY SECTOR has gone into cardiac arrest and I am not sure if it should be put on life support or allowed to die. Being a practitioner and an advocate for the sector, I believe I am probably too close to see what’s best for the sector right now.
When this sector was jump-started, it was the result of the perfect alignment of a number of circumstances.
Oil prices were at an all-time high, the cost of renewable energy systems was dropping, Government introduced some incentives to stimulate the sector and the Barbados Light & Power Company introduced the renewable energy rider with attractive rates for the sale of excess electricity.
All of these factors happening at the same time meant that even if you financed a system at 11 per cent it still meant that you could have a system that would pay for itself in seven years, and in some instances five years.
This created a surge in systems being purchased and there were more than 30 companies jumping into the kitchen to take their piece of the pie.
The uptake of systems was so rapid, from 1.6 megawatts (MW) in 2013 to more than nine MW in 2015, that it made a number of people uncomfortable and believed that the sector could overheat and burn itself out.
Then oil prices dropped to an all-time low, which meant that electricity rates decreased significantly. It also meant the rate at which excess electricity was sold for decreased to about half the cost of purchasing the same electricity (this is in contrast to it being more than the purchase cost in the initial stages).
Then Government introduced an amendment to the Electric Light & Power Act with a licence fee for any system over five kilowatts.
It went from the perfect circumstances to the worst and 2016 started with a dramatic drop in solar powered system installations. Companies went out of business and the ones left are struggling to survive.
Government recognised that the sector, which was once seen as one of the growth sectors for the recovery of the economy, has stalled.
So the Fair Trading Commission (FTC) made a ruling that has given a glimmer of hope. It set a fixed rate for the sale of excess electricity and a few other changes that have the potential to start another surge, but in large scale solar instead of small rooftop systems.
This captured the interest of a few foreign companies who are now looking at taking piece of the pie which is already small.
So what happens now? The sector is still growing slowly, because the cost of electricity is still low.
The introduction of a licence fee has discouraged a number of keen homeowners and businesses from investing in a system and the ruling of the FTC still left a few key questions unanswered and has not yet created the expected resurgence of activity in the sector.
Should the Government do something else?
Should they be more incentives? My answer would probably be yes but the real question that remains is: what’s best for Barbados?
There has been a lot of public discourse about the Canadian company that wants to install a 20 MW solar plant. This would give us a big jump forward to meeting our goal of a higher renewable energy penetration, but should any one company be allowed to get 20 MW of capacity instead of allowing hundreds of households and businesses to fill that capacity?
Can we also allow a large amount of foreign exchange to go out of the economy through dividends to the parent company in Canadian?
Is this right for Barbados? Should we allocate a percentage of the installed capacity for local investment?
Should we be moving towards 100 per cent renewable energy with a strong sense of urgency or just leave it to a slow organic growth?
What about the economic growth that renewable energy sector was supposed to bring?
Can we justify a subsidy to stimulate the sector?
Right now, I am probably too close to this to see what’s best for us, but I don’t think doing nothing is an option. If we go back to first principles and contemplate the fundamental reason for doing this, it is still relevant.
Reduce dependency on imported oil. The Barbados Renewable Energy Association has been steadfast as the advocate for this sector and is probably the one constant in the sector.
So what do we do?
Put this sector on life support and allow it to live on or should we just let it die and see who can be resurrected a couple of years from now? Who should decide the fate of this sector?
Ultimately it should be the citizens of Barbados, but most people don’t know or understand what’s going on.
Jerry Franklin is managing director of EnSmart Inc. Franklin is an engineer, energy auditor, equipment tester, and energy solutions provider. He is also vice-president of the Barbados Renewable Energy Association. Email: [email protected]