The CORE energy issue
A CNS reader writes: CUC recently announced, with the approval of the Electricity Regulatory Authority (ERA), the extension of the Consumer Owned Renewable Energy (CORE) programme. The 2MW expansion, to be split evenly between commercial and residential customers, carried an expected decrease in purchasing price, and also introduced a tiered structure reflecting the diminishing cost per watt installed for larger renewable energy systems.
The new agreement also doubled the monthly infrastructure fee as most systems require an additional electrical meter to be installed and read by CUC. Despite these changes, CORE still represents a viable economic choice for residential and commercial customers, providing a fairly stable return on investment (ROI) for alternative energy installation on their property.
However, a massive change from the previous series of CORE agreements – and one largely glossed over in regards to coverage of the expansion – is the way in which CUC will now handle excess production by CORE customers. In previous agreements, net credits would be refunded to the customer on a quarterly basis.
So for example, if a residence had a 4kW PV solar system, they might produce around 635kW in an average month (assuming 20% overall energy loss, 6.5 hours of true solar output/day, and an average of 30.4 days/month). If over the course of a quarter they hypothetically consumed 720kW (guests came to visit), 635kW (typical month), and 500kW (took a vacation) each month, they would have a net production of 50kW, and be credited $16.00 under the 2015 CORE agreement (less facilities charges).
That seems fair, given they produced more electricity than they used during that period, which CUC then “sold” to other customers. Milking the system was discouraged because a customer’s assessed peak usage rate would be used to cap their allowable installed generation capacity.
As CORE output represented just a little over 1% of CUC’s general output from 2015, and any excess production would be a fraction of that, the effect on CUC’s bottom line and/or the cost passed through to other customers would be negligible. Under the new agreement, however, net credits are allowed to roll over until the end of the year, at which point they will be absorbed by CUC and applied to the fuel factor charged to all customers. This, in my opinion, is not in the public interest.
CUC is a business and has every right and responsibility to enact policies to maximise revenues and protect shareholder interests. However, by approving this change, the ERA and, by extension, the government of the day has essentially determined that lowering the average price of electricity by a miniscule amount matters much more than enacting policies to encourage further growth of renewable energy sources, reducing the nation’s carbon footprint and promoting longer-term price stability and price reduction.
Despite the (now outdated) goalposts of the National Energy Policy and the popular movement toward a more ambitious expansion of alternative energy production as a percentage of overall electrical generation, new CORE customers will potentially subsidize the price of diesel fuel as a source of electrical generation. The policy change will also discourage new CORE customers from ever lowering their electrical consumption habits throughout the contract period, as they have no economic incentive to do so.
If the price of electricity produced by diesel fuel is artificially lowered (and arguably it already is as the externalities of diesel combustion are not reflected in the import duty), it will gain additional competitive advantage over alternative energy sources and discourage the national expansion of renewable energy.
And on an individual level, as technologies for more energy-efficient appliances, lighting, insulation, etc. continue to improve, CORE customers locked in to a 25-year contract under the new terms will have no incentive to lower their effective electrical consumption once they reach equilibrium where their renewable production equals the value of their overall electrical use.
The ERA has made it clear this change seeks to discourage CORE customers from over-sizing their systems and becoming regular net-producers, or purposefully diminishing their consumption to achieve the same. If an individual CORE customer receives quarterly cheques from CUC with their excess credits paid above retail electricity rates, the cost must be passed on to all customers.
By eliminating the actual payment of credit balances, CUC can very slightly reduce the overall cost of electrical production to the general public. However, as stated above, this assumes that lowering the cost of (diesel-generated) electricity now, by a very marginal amount, should be the overriding objective of the ERA in regards to the electrical market, and potentially ignores the hidden costs and ramifications.
The electricity produced by CORE customers represents a tiny percentage of the overall electricity sold by CUC. Of that, net positive electricity produced – which, again, is already capped by the limitations on individual production capacity allowed – represents an even tinier amount of overall electrical production.
Therefore, the increased electricity cost to the general public from net-positive CORE production is ultimately miniscule. But from the standpoint of an individual or business considering the addition of renewable energy production to their property, the effect of the new clause is far more profound.
When considering any type of capital investment, the smartest course of action is to consider whether your ROI provides a reasonable timeline compared to other options in investing your money. A big part of the consideration in installing solar PV panels, for example, is whether the payback will occur within the expected lifetime of the panels and, if so, whether the net gain is greater than the expected return on some other investment. There are also, at that individual level, non-monetary considerations of some value, such as happiness gained from utilizing renewable energy or, for a business, demonstrating corporate social responsibility.
The new CORE agreement, in essence, allows CUC to take from a CORE producer, for free, any excess credits of energy produced on an annualized basis. This can alter the expected ROI and ultimately make a homeowner/business less likely to enter the program, stifling investment in smaller scale renewable energy. A longer ROI would also make it more difficult for less wealthy individuals and smaller businesses to invest in renewable energy installations.
Those with more savings and high income/business earning power can afford a longer ROI, so the policy change has further tailored the market toward wealthier individuals and bigger businesses, narrowing the opportunity for overall growth of renewable energy production.
While the scope of the eventual effect of this policy change remains to be seen, it specifically works against the interest of promoting renewable energy production by subsidizing (by no matter how small an amount) diesel fuel. The inherent negative effect on renewable energy investment is likely to outweigh any small immediate decrease on overall energy pricing for the general public.
There are other ways CUC and the ERA could have dealt with “net producers” under the CORE program that would have represented a more fair and positive outcome to CORE customers while still protecting the interests of CUC and the general public. For example, net credits could have been purchased by CUC at a lower rate (for example the prevailing mass production rate, which is well below the CORE rate, but still a lot better than $0.00) for a more neutral impact on prices paid by other customers.
Alternatively, the total net credits from all CORE customers could have been retained in a segregated fund to invest in utility-scale renewable energy generation projects. Or, a list of registered charitable organisations could have been drawn up and CORE customers with any annual credit balance could assign that balance to a specific charity to reduce their future electricity bills (either on a dollar-to-dollar basis or at some agreed ratio to ensure a neutral impact on the average price of electricity).
There are obviously myriad ways in which CORE can address the issue of “net producers”, many of which would have better outcomes than utilizing annualized net credits to subsidize diesel fuel costs.
It is unfortunate that the discussions leading up to these changes to CORE were not conducted with general public input or with any attempt to understand whether residents value policies that would encourage increasing production of electricity from renewable sources and how that balances against general electricity prices.
I am unsure whether the new CORE agreement can be revised by the ERA at this point. If not, I certainly hope that the next expansion (assuming there will be one), will find a way to ensure net credits are used for something of significantly more societal benefit than subsidizing diesel fuel.
Category: Science & Nature, Viewpoint
Let me get this straight. If I spend the money to install a system based on what CUC says is my peak usage, and, I then reduce the amount of electricity I consume through paying out more for more efficient equipment, lighting and appliances (perhaps a solar water heater as well), the discounted value of the energy I then give to CUC, will be used to buy more DIESAL, the thing I am trying to get rid of?
In addition to this subsidy to buy diesel, CUC will also sell my energy at their normal rates to other customers in the island and pocket the profit?
Can the ERA and CUC remind me again, what is the incentive for me to lay out all this cash?
Am I an idiot if I say, “to hell with the environmental” as my hard earned money spent to produce in excess of what I need for my house, will only be used to buy more diesel to pollute further.
Should it ever get to the place where individuals who go green make up a significant % of our energy supply, guess what, the “green” customers will be subsidizing the people who rely solely on electricity generated by the use of diesel.
If the cost of diesel generated electricity goes down, because of this subsidy, those that rely solely on it will use more, producing more hydrocarbons than I am saving…………. what is the use?
Sounds like a pollutant’s catch 22 to me.
Here in lies the problem with the ERA and CUC…. Quoted from prior ‘anonymous’ poster…
“The issue is not one of CUC trying to obstruct anyone. It is an issue of fairness to all concerned. CORE participants are being paid a premium (by other customers, not CUC) for their production today and the ERA is seeking to cap that subsidized cost by restricting the number and size of CORE participants.”
– Fairness to all concerned is a typical utility mantra. What isn’t said is that CUC is already participating in unfair competition in a plethora of ways versus their only true competition, which is renewables. This of course being done with the approval (and ignorance) of the ERA. So there is not a level playing field to start with and policies which help to increase the adoption of renewables are constantly diminished. CUCs reason are obvious, protect profits. The ERAs tend to be based on a mindset of ignorance which at its core (no pun intended) does not accept that renewables are fundamentally the only way forward.
– CORE being paid a premium and the ERA trying to limit that is again further ignorance on their part. The anount of subsidy being given to renewables remains minuscule, literally pennies to consumers. Meanwhile CUC continues to make record profits and consumers continue to subsidize them in various ways (see defacto grid insurance, etc). The era should en doing proper cost benefit analysis looking at the economic, social and environmental benefits to determine the value of core but they are not, indeed the poster
Is correct the ERAs only concern is simply to limit the adoption and this comes directly from their leadership. The ERA CHOSE a feed in tariff, we could have had net metering or other methods but they set it up to be system paid by consumers and then have complained about this Non-stop as if they weren’t the architects of this very system. In 7+ years they haven’t achieved more than 1% renewable energy integration so the idea that they need to limit it because the adoption levels have grown too high or completely nonsense.
– The ERA relies on CUC to give them reports and studies, this is a gross conflict of interest and these reports are never going to be produced in a way that is negative to CUC shareholders. The ERA excuses this by saying their consultants review it as well, the same consultants that have advised them poorly to date with these constant anti-renewable policies and who have ties to Fortis, CUCs parent company. This is important because the ERA limits renewables based on this “supposed” 16MW limit that the CUC report has claimed. It should also be noted Fortis in Turks and Caicos produced a similar report that has now being discredited.
– it comes down not this, the era are seeking to reduce core subsidy even though we have achieved very little given the time we spent pursuing renewables. On top of that the ERA has NO PLAN and NO ACCEPTANCE (amongst its leadership) that renewables are the future…even if they did they have very little clue on how to pursue this which makes the calls that they are currently not fit for purpose one to explore.
Mr J Perhaps if you are on the receiving end of the subsidy as a distributed solar installer you would characterise it as pennies when it is going into the millions of dollars a year. Millions would sound good to you but not to the majority of electricity rate payers who are paying for it.
Raisin Cain misses the point. Renewable energy can be generated from multiple sources, including utility scale solar farms, CUC have done too little too late even though they now admit that the solar farm at Bodden Town is cheaper than diesel.
And what about the environment. Doesn’t he care about that?
Perhaps CUC got the timing right. Why would the buy years ago and get locked into prices that were higher than diesel? For the same reason CUC should not lock into high cost distributed solar today when it can get the utility scale much cheaper.
CUC is certainly in business to make a profit. But so too are the folks selling solar systems! Take each side’s arguments with a grain of salt.
Bottom line, the more energy we put on the grid from low-cost sources, the lower we can push the overall price of electricity for everyone. So far, only wealthy customers have been able to afford solar systems. Subsidizing the rates paid to CORE customers is hardly fair the rest of us.
And, why are those solar systems so expensive? Don’t they get import duty concessions? Isn’t the cost of solar panels dropping every year? Is it perhaps because the solar equipment sales people are greedy? The same folks who accuse CUC of being money-grubbing monopolists?
Hmmmm… pass the salt, please.
It is clear that CUC in conjunction with the ERA want to do whatever they can to limit the scope and incentive to use the CORE program.This latest limit of 6MW is less than 1.9% of our electricity consumption
ERA have used a CUC report to agree that the max the grid can absorb from any source of renewable energy is 16MW. This is a conflict of interest and totally indefensible.
If you support the drive to make Cayman 100% renewable you should join CREA (Cayman Renewable Energy Association) the only alternative voice on energy in Cayman. Come to our meetings and make your voice heard, and you wil learn a lot too. http://www.crea-cayman.com
The reality is that over the past decade CUC (who are obviously driven by shareholder considerations) have done everything they can to rubbish and obstruct any move that takes any element of electricity generation away from them.
In 2007 they proposed using OTEC, a system they knew didn’t work. At the same time they dismissed solar power and wind power because the sun doesn’t shine at night and the wind doesn’t blow 24/7/365. When that was challenged they argued that net metering (the system by which surplus energy is fed back into the grid) was dangerous and there was no properly licensed equipment available for it – an odd claim considering at the time this equipment was already being used throughout the USA, the UK and large areas of Europe. They were backed by the Minister, who went on record as stating that diesel was the only reliable way to generate power in the Cayman Islands.
The only way you are going to move forward is to get rid of CUC’s monopoly. Until that happens they, and their friends in LA, are going to make damn sure that no viable sources of alternative energy are employed in these islands. Right now if I decided to make my property self-sufficient (as 8:52pm has suggested) my understanding is I would be breaking a law that prevents the private generation of electricity except in emergencies. Apparently CUC are so powerful that not even Dart has been allowed to go off grid and that needs to change.
You can go off grid legally, but to do so you cannot have a tie into the grid for emergencies (without being subject to CORE). I assume you would also have to prove to Planning that you can generate sufficient electricity for your assumed load in order to do so.
Not entirely correct either, you can tie into the grid without CORE but will be subject to “Backup Power” rates which to date have not been defined by CUC for residential buildings. If you want to be off grid and are worried about emergencies and down time due to lack of resources, best bet is to install a backup generator to help you run your household and charge the batteries. You will only likely need it a couple days a month.
The issue is not one of CUC trying to obstruct anyone. It is an issue of fairness to all concerned. CORE participants are being paid a premium (by other customers, not CUC) for their production today and the ERA is seeking to cap that subsidized cost by restricting the number and size of CORE participants. Some of the CORE participants are seeking to take advantage of the premium paid and are installing systems that are larger than necessary to supply their own energy needs. The zeroing of credits during the year will discourage the oversizing of systems and will make the limited available capacity accessible to more participants. It should be made clear however that the purchase cost of the CORE energy is passed on to consumers similar to the fuel factor and any CORE credit that is not paid for at the end of the year does not go to CUC, it is credited to the electricity consumers at large who are paying the premium to the CORE producer in the first place.
For your information CUC also proposed wind energy in 2009 which the Government of the day rejected and CUC did not object to net metering for safety reasons, it objected to it for commercial reasons as net metering allows producers to use the grid without paying for it. The experiment with net metering in the US is now ending as regulators realize that the consumers that are not producing are having to pay more than their fair share for the grid. Europe did not go the net metering route, they employed a feed-in tariff system similar to the CORE programme that Grand Cayman has.
And yet Ontario has Net Metering for systems under 500kW for “Any customer of a distributor who produces electricity from a renewable resource primarily for his/her own use”- go figure.
http://www.ontarioenergyboard.ca/oeb/Industry/Rules%20and%20Requirements/Information%20for%20Generators/What%20Initiatives%20are%20Available
The size of the installed system for a CORE customer is already capped in the agreement to never exceed calculated peak consumption by a customer, as determined by CUC. If that wasn’t an intelligent method by which to limit over-sized systems, perhaps a different calculation should be utilized, but that would hypothetically disallow some participants who actually use near peak load on a regular basis from having an adequately sized renewable energy system.
Also, read the new CORE agreement – the credits go specifically to the “Fuel Factor,” not the general electrical rate. It specifically would use those credits to subsidize the pass-through cost of diesel fuel, which is what the Viewpoint takes major issue with. Let any CORE credits go toward investment in future renewable energy sources, instead, and I think it would be far less contentious of a change.
I’m working to go as close to offline as possible as there is no point from an island stand point to promote green. CUC and the ERA are obviously well connected and nothing will change.
I’m looking forward to the day when I can say come and collect your meter.
Your right! It won’t change when we have the powers that be, own shares in CUC and don’t win those shares to drop.
I wish we all could say that to be honest. I started disliking CUC a long time ago when I saw how corporate greed and consecutive governments work to help fatten that cow. Their desire to maintain diesel systems and lack of interest in alternative energies also make me sick.