Sustainable Energy Framework For Barbados - Barbados Underground

GTGas TurbineHCPVHigh Concentration PhotovoltaicHFOHeavy Fuel OilIDBInter-American Development BankIPPIndependent Power ProducerLCDLiquid Crystal DisplayLCPVLow Concentration PhotovoltaicLEDLight Emitting DiodeLSDLow Speed DieselMEPSMinimum Energy Performance StandardMFIEMinistry of Finance, Investment, Telecommunications and EnergyMMBTUMillion British Thermal UnitsMMscfdMillion of standard cubic feet per dayMSDMedium Speed DieselMTBEMethyl Tertiary Butyl EtherN/ANot ApplicableNPCNational Petroleum CorporationO&MOperation and MaintenanceOLADEOrganización Latinoamericana de Energía (Latin America EnergyOrganization)OTECOcean Thermal Energy ConversionPBLPolicy-Based LoanPPAPower Purchase AgreementPVPhotovoltaicRERenewable EnergySEFSustainable Energy FrameworkSSASanitation Services AuthoritySWHSolar Water HeaterTATechnical AssistanceTCDPOTown and Country Development Planning OfficeTORsTerms of Reference for the SEF assignmentTTBSTrinidad and Tobago Bureau of StandardsUS United States Dollars

Sustainable Energy Framework for BarbadosExecutive SummaryThe Inter-American Bank (IDB) hired Castalia and Stantec to help the Government ofBarbados (the Government) prepare a ‘Sustainable Energy Framework for Barbados’ (SEF).This Final Report presents:The objectives of the Sustainable Energy Framework—the SEF should unlockviable investments in renewables and energy efficiency to reduce energy costs,improve energy security, and enhance environmental sustainabilityBarbados’ Sustainable Energy Matrix—electricity generation in Barbados couldinclude more renewable energy technologies, and consumption of electricity couldbe lower thanks to energy efficiency technologies, because most of thesetechnologies are economically viable and could reduce energy costs. However,there are barriers that block these technologies, and that make the potentially‘sustainable’ matrix different from the ‘current’ oneOur recommendations for promoting renewable energy and energy efficiency—these form the core of the Sustainable Energy Framework for Barbados, andinclude proposed policy principles, regulatory changes, financial instruments,technical measures, and strengthening of institutional capabilitiesProjected costs and benefits of the SEF—by promoting renewable energy andenergy efficiency technologies that are economically viable, Barbados can reach itsSustainable Energy Matrix in the next twenty years, and therefore reduceelectricity generation costs, electricity consumption, CO2 emissions, anddependency on fossil fuels.Objectives of the Sustainable Energy FrameworkWe suggest formulating the objectives of the SEF as follows:To unlock economically viable investments in Renewable Energy and Energy Efficiencythat will reduce Barbados’ dependency on fossil fuels, and thusreduce energy costs,improve energy security, andenhance environmental sustainability.In Section 1 we discuss the bases for the SEF objectives, and we explain the tradeoffsbetween these objectives. In Section 2 we provide the background—current policy,regulation, institutions, electricity demand and supply, generation costs, tariffs, and existingprograms for renewable energy and energy efficiency—necessary to understand the analysisand recommendations for the SEF.Barbados’ Sustainable Energy MatrixFigure ES 1 shows the Sustainable Energy Matrix for Barbados. This is a snapshot of whatBarbados’ generation and consumption of electricity could look like with increased use ofrenewable energy and energy efficiency technologies. The Sustainable Energy Matrix isi

different from the current one—this is because currently there is low uptake of renewableenergy and energy efficiency technologies in Barbados, despite the fact that most of thesetechnologies are economically viable. In Section 3, we compare Barbados’ SustainableEnergy Matrix (the potential) with its Current Energy Matrix (the present situation).Figure ES 1: A Sustainable Energy Matrix for Barbados (GWh)Source: Castalia and Stantec estimates and calculations.Under the Sustainable Energy Matrix:Renewable energy would account for 29 percent of electricity consumption; theremaining 71 percent would come from conventional fossil fuel-based resourcesEnergy efficiency technologies would account for an overall 22 percentreduction in electricity consumption compared to a ‘business as usual’ scenario(different sectors would have different energy efficiency potential—estimated at24 percent for the residential sector; 22 percent for the tourism and commercialsectors; 12 percent for the industrial and public sectors; and 48 percent for streetlighting).Barbados could reach the Sustainable Energy Matrix over the next 20 years by implementingeconomically viable renewable energy and energy efficiency technologies. By ‘economicallyviable’ we mean those technologies that reduce the country’s energy costs—renewableenergy and energy efficiency technologies that have an annualized cost of implementationover their lifetime (US per kWh) lower than the cost of conventional generation (US perkWh, calculated with oil prices of US 100 per barrel, which is about the current price of 10year oil futures). We use different conventional generation benchmarks, because differentii

technologies displace different costs of generation—fuel only, or all-in generation costs. (Forexample, a wind farm can provide intermittent electricity that can replace generation from athermal plant, thus displacing fuel cost, but cannot replace the need to have that thermalplant; on the other hand, a biomass cogeneration plant can provide baseload capacity thatcan replace a thermal plant—therefore avoiding its all-in cost.)Technologies are ‘commercially viable’ when those who implement them save money—thesetechnologies have an annualized cost of implementation over their lifetime (US per kWh)lower than the applicable tariff (US per kWh, also calculated with a Fuel Clause Adjustmentat oil prices of US 100 per barrel). Some technologies are commercially viable, but noteconomically viable—they make sense to the individual because they save money, but theyend up raising the country’s cost of generation.It is important to note that the increased levels of renewable energy and energy efficiencyshown in the Sustainable Energy Matrix should be indicative targets, with the purpose ofguiding policy and project implementation based on the economic viability of the underlyingtechnologies. They should not be fixed targets to be achieved at any cost—this would becounter to the objectives of the Sustainable Energy Framework. Figure ES 2 shows analternative Sustainable Energy Matrix including more generation with natural gas.Figure ES 2: Alternative Sustainable Energy Matrix including Natural Gas (GWh)Source: Castalia and Stantec, based on preliminary information on the expansion of natural gas in Barbados.Note: This is a conservative estimate—if possible, all thermal generation should be converted to natural gasbecause this would be the lowest-cost generation option for Barbados, and it would allow maximizingthe investment for the Eastern Caribbean Gas Pipeline.iii

An Eastern Caribbean Gas Pipeline (ECGP) is currently being considered, and wouldprovide low-cost natural gas to Barbados from Trinidad (perhaps as low as US 7 perMMBTU, based on a preliminary estimate provided to us by the Government). If the ECGPis implemented, electricity generation with natural gas would be the cheapest option forBarbados—likely cheaper than any renewable energy technology (although there would stillbe scope for some renewables, in particular for improving energy security). BL&P isconsidering investing in dual fuel generators which could run on Heavy Fuel Oil (HFO) ornatural gas—these would likely be Low Speed Diesel (LSD) plants.Many renewable energy technologies are viable, but are not being usedThe Sustainable Energy Matrix includes electricity generation from the followingeconomically viable renewable energy technologies—Figure ES 3 shows that their generationcost (a horizontal bar) is lower than each technology’s conventional generation benchmark(continuous vertical lines):Solar water heaters, for homes. The cost per kWh for a residential solar waterheater is around US 0.09 /kWh. This is considerably lower than the fuel cost ofeven the most efficient conventional plant (US 0.14 per kWh)Wind at utility scale (on-shore and off-shore), is estimated to cost US 0.11 perkWh (on-shore) and US 0.13 per kWh (off-shore). Again, both costs come inunder the fuel cost of the most efficient conventional plant (US 0.14 per kWh)Biomass cogeneration, on a large scale operated by the utility. This is estimated tocost US 0.11 per kWh. The biomass plant can provide firm power at less than theall-in cost of low speed diesel plant (US 0.19 per kWh)Hybrid PV/thermal systems, on a small scale. These systems are estimated tohave a cost of US 0.13 per kWh, again lower than the fuel cost of the mostefficient conventional plant (US 0.14 per kWh)Municipal Solid Waste to Energy, on a large scale operated by the utility. Thistechnology can provide firm power at an estimated cost of US 0.18 per kWh,which is slightly less than the all-in cost of low speed diesel plant (US 0.19 perkWh)Seawater Air Conditioning, on a commercial scale, is also economically viable andcommercially proven, and can provide cooling power at US 0.18 per kWh, effectivelyreplacing conventional generation that costs US 0.19 per kWh. However, its realization islikely to be hampered by planning and approval difficulties, and for this we did not include itin the Sustainable Energy Matrix.The Sustainable Energy Matrix also includes a few renewable energy technologies that arecommercially viable—Figure ES 3 shows that their generation cost is lower than the tariff (adotted vertical line)—and that we expect will become economically viable in the near future.We expect this to happen because the cost of these technologies has been fallingconsistently, and is projected to continue falling. These technologies include the followingdistributed scale technologies (‘distributed scale technologies’ are those located at customerpremises, in close proximity to the load being served):iv

Certain types of solar photovoltaic (PV) systems—50kW thin film PV systemswith fixed mounting, 50kW high concentration PV systems with dual axistracking, and 5kW low concentration PV systems with single axis trackingSolar water heaters for commercial and industrial use.Other types of PV systems, and wind systems not at utility scale, are not economically viableand are not expected to become so in the near future. Therefore, they are not included in theSustainable Energy Matrix.Despite the fact that most of these renewable energy technologies are viable (at least,commercially), their current uptake in Barbados is low—there are no renewable generationplants at utility scale, and very few ones at distributed scale. The barriers that explain this lowuptake are the following:Utility scale renewable technologies are not being used mainly because theregulatory regime under which Barbados Light & Power—BL&P, the country’ssole electricity provider—operates provides no incentives to adopt themDistributed scale renewable technologies are not being used firstly, becausecustomers are not allowed to connect their systems and sell electricity to thegrid—however, the Rider for Renewable Energy, approved by the Fair TradingCommission (FTC) on a pilot basis for a limited number of systems and for aperiod of only two years starting 1 July 2010, is an important step in this direction;secondly, because these technologies have a high upfront cost, and access tocredit by households and businesses is often limited; and thirdly, becausecustomers are unfamiliar with the technologiesFinally, both utility scale and distributed scale renewable technologies are also notbeing used due to an inappropriate permitting and planning process.Figure ES 3 also shows the fuel-only and all-in cost of LSD plants operating with natural gas(these dual fuel plants are the most likely plants that BL&P would invest in for its expansionplan). Under this scenario, biomass cogeneration would be just viable (compared to an all-incost of US 0.11 per kWh). However, utility scale wind could not compete with a fuel-onlycost of US 0.06 per kWh, and other renewable energy technologies would also not be viable.As noted, there would still be some scope for renewables, in particular consideringdiversification of the matrix for energy security purposes—and considering that the naturalgas price assumption this scenario is based on (US 0.07 per MMBTU) is a preliminaryestimate.v

Figure ES 3: Cost of Renewable Generation Technologies, Avoided Cost of Conventional Generation, and Tariffs (US per kWh)LSD/Natural Gas estimated fuel cost(US 0.06/kWh) and all-in cost (US 0.11/kWh)Commercially viableEconomically viableLSD/HFO all-in cost:US 0.19/kWh0.09Solar Water Heater, 2 kW*Solar Water Heater, 70 kW0.10Wind (On-Shore), 10000 kW0.11Biomass Cogeneration, 20000 kW0.11LSD/HFO fuel cost: US 0.14/kWh(utility), US 0.15/kWh (distributed)**0.13Wind (Off-Shore), 30000 kWGas Turbines fuelcost: US 0.21/kWh**0.13Hybrid PV/Thermal, 2 kW0.18Municipal Solid Waste to Energy, 13500 kWResidential tariff:US 0.30/kWh0.18Seawater Air Conditioning, 2000 kWPV Thin Film Fixed, 50 kW0.220.23HCPV Dual Axis Tracking, 50 kWNon-residential tariff:US 0.33/kWh0.25LCPV Single Axis Tracking, 5 kW0.26Wind, 10 kW0.28PV Thin Film Fixed, 2 kW0.29PV High-Efficiency Fixed, 50 kWPV High-Efficiency Fixed, 3 kW0.36HCPV Dual Axis Tracking, 5 kW0.360.41Wind, 1 kW-0.050.100.150.200.250.300.350.400.45US /kWhLSD low speed diesel Other Wind Solar Small Scale Commercial Scale Utility ScaleSource: Castalia and Stantec estimatesNote:* For “Solar water heater, 70kW” the comparator is fuel oil boiler heating (US 0.08 per kWh). ** ‘Fuel costs’ also include variable O&M costs; and are grossed up forlosses (6.6%) for distributed technologies, but not for utility scale technologies. Generation costs and tariffs estimated based on oil prices of US 100 per barrel, andnatural gas prices of US 7 per MMBTU. All-in cost of LSD with natural gas contingent on availability from the planned Eastern Caribbean Gas Pipeline.vi

Proposed solutions to increase the use of viable renewable energy technologiesIn Section 4, we describe the renewable energy technologies, analyze their potential and thebarriers to their uptake, and identify possible solutions to overcome these barriers. Table ES1 below summarizes barriers and proposed solutions for RE.Table ES 1: Barriers to, and proposed solutions for, viable RE technologiesBarrierProposed SolutionNo commercialviabilityNone. Renewable technologies that are not commercially viable are noteconomically viable, and therefore should not be implemented.Limited access tocapitalCreate a consumer finance instrument within the proposed “Smart Fund”,consisting of a subsidized hire purchase scheme for economically viabledistributed renewable generation technologies.IncompleteinformationPromote renewable technologies that are economically viable. Provideinformation on their costs, how to purchase and install them, and theirenvironmental benefits.Planning andPermit problemsDirect the Town and Country Development Planning Office to move to astandardized, technology specific approach for the planning and permittingprocess that streamlines the development of viable renewable energytechnologies.Lack of GridConnection RulesIntroduce new rules that allow electricity consumers to sell excess capacityto the grid, based on the experience that will be gained under the BL&PPilot Program for renewables. These rules will need to cover the technicaland safety aspects of connection to the grid, metering arrangements, andthe price to be paid for power. Provisions also need to be made to preventgrid-stability problems in the face of large amounts of nsRequire BL&P to prove that its choice of generators is the mosteconomically efficient for Barbados. Amend the fuel cost adjustmentmechanism so that it allows for both utility scale and distributed renewabletechnologies to recover their costs provided these are below BL&P’savoided cost. Disaggregate the electricity tariff structure to make it morecost reflective, and thus promote efficient energy efficiency and distributedgeneration investments, while discouraging economically inefficientinvestments. Make incentives under the Tourism Development Actconsistent with the Government’s intention to use tax and customsincentives to favor sustainable energy technologies over conventionalones—particularly solar water heaters over electric ones.vii

Most energy efficiency technologies are viable, but are not being usedThe Sustainable Energy Matrix includes electricity savings from the following economicallyviable energy efficiency technologies—Figure ES 4 shows that their savings cost (ahorizontal bar) is lower than each technology’s conventional generation benchmark (acontinuous vertical line):All lighting technologies for households and businesses—Compact FluorescentLamps (CFLs), T8 Fluorescent Lamps with Occupancy Sensors, T5 High-OutputFluorescent Lamps—and Magnetic Induction Street Lights for public usePower monitors—these devices provide real-time information on energyconsumption and expenditure, and induce behavioral changes that save energyAll mechanical technologies for businesses—Premium Efficiency Motors,Variable Frequency Drives, and Efficient ChillersAll air conditioning (A/C) technologies—systems for window installation mostlyin households, or split systems for businessesLiquid Crystal Display (LCD) monitors for computers—this is the only energyefficient technology that has a significant uptake in Barbados.Refrigerators for households and businesses are commercially viable (they save customersmoney—Figure ES 4 shows that their savings cost is lower than applicable tariffs,represented by dotted lines), but they are not economically viable. This surprising result canbe explained by the fact that imported efficient fridges are designed to perform well underconditions different than those found in Barbados.Light Emitting Diode (LED) lights for street lighting are not economically—orcommercially—viable. Unless their cost drops significantly, they are not a good solution forstreet lighting. Adding a solar PV panel to them will only make them even more expensive—and is not necessary either, since Barbados has virtually complete electricity service coverage.In spite of almost all energy efficiency technologies being viable, their uptake i

1.2 Objectives of the Government for the Energy Sector 1-2 1.2.1 The Government's Energy Sector Objectives 1-2 1.2.2 The Barbados Draft National Energy Policy of 2006 1-4 1.3 Structure of this Report 1-6 2 Background to the Sustainable Energy Framework 2-8 2.1 Institutional Outlines of the Energy Sector 2-8 2.2 Electricity Demand 2-9