OfReg to investigate CUC’s solar deal

| 29/06/2017 | 8 Comments
CNS Business

Solar farm in Bodden Town

(CNS Business): With the price of solar energy now falling rapidly and the increase competitive pricing of other alternative fuels, Cayman’s utilities regulator, OfReg, has announced its intention to investigate the process around Cayman’s first commercial-scale renewable energy plant, which opened last week. The regulator said it wants to ensure that lessons are learned to ensure future projects meet government’s sustainable energy targets and cut the price of power.

OfReg CEO J. Paul Morgan said the Utility Regulation and Competition Office would begin a “rigorous analysis of the process that led to the contracting” of CUC’s solar farm in Bodden Town to see what was “done right, and more importantly what was done wrong or could have been done better”.

This will assist the regulator in its role in helping deliver the National Energy Policy (NEP) goal of 70% renewable energy by 2037. The report will be made public and is expected to take three months to complete.

Morgan said it had been a long journey to this point and now it was OfReg’s responsibility to “do a post mortem” of the process, which began some six years ago, with an eye on future solicitations for power providers.

He said that that there had been concerns about the contracted price of US$0.17 per kilowatt hour that CUC will be paying Entropy for the energy delivered. He explained that there was no point of reference in Cayman for renewable energy, and because this is the country’s first solar farm, there had been a “huge learning curve with associated costs” that he did not expect to be a factor in future projects.

“We cannot compare Cayman to the US or any other country for that matter, even other islands in the Caribbean,” he said. “There are significant costs to doing business in the Cayman Islands, from legal fees to shipping costs to the price of land; all these factors impact the bottom line and would have been taken into consideration when setting the price. However, we don’t expect this price to remain fixed, and part of the analysis we are going to do involves determining how we can continue to bring the price down to a point that will satisfy both the consumer and the provider.”

A year before the deal was finally struck, the Jamaican utilities regulator had concluded a deal for US$0.17 per kilowatt hour for a 35MW facility, while solar was being reported in Grenada at between US$0.21 and US$0.44 per kilowatt hour, the regulator boss said.

Since then Jamaica has announced a new deal at US$0.084 per kilowatt hour, and the island of Kauai in Hawaii is trading as low as US$0.11 per kilowatt hour, though that is supported by subsidies.

“While we must be careful to always compare apples with apples, the lessons from this, as well as the reality, is that the costs of renewables, in particular solar, are falling rapidly. The falling costs of batteries as storage is also redefining the renewables landscape and proposition as a provider of firm capacity. At the same time, generation from wind is increasingly proving to be competitive with conventional fossil fuels,” said Morgan. “This means there is room for growth in the industry here in Cayman and clearly for more competitive pricing.”

Morgan suggested that his post mortem will look at all of these issues as well as some of the concerns over the specifics of the CUC-Entropy deal, including whether the procurement process should have been stopped when it “seemed to be taking too long”.

Whatever the outcome, the introduction of 5MW of energy from solar into Cayman’s national grid is a signal to the world that the country is prepared to promote and invest in innovation, the regulator chief suggested.  

It also demonstrates that Cayman is a serious partner to investors in renewable and emerging technologies. He said OfReg would try to ensure that consumers and the economy generally realise the positive benefits that must accrue from these partnerships.

For more information about regulation of the electricity sector, contact Louis Boucher on [email protected] or 946-4282.

CNS Business

This chart shows the impact that the 5MW plant has on bringing the average cost of solar down in Cayman (CUC’s CORE + Entropy). The price lowers the cost of solar on Grand Cayman, which is in alignment with the goals of the NEP.

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Category: Alternative Energy, Local Business, Technology, Utilities

Comments (8)

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  1. Anonymous says:

    The OfReg CEO says "analysis of the process" to learn from this initial project. CNS reports "investigate" which gives a totally different interpretation. I do hope the analysis provides improvements in these endeavours for the future. I doubt any investigation would turn up anything untoward.
    Persons complaining about the wholesale vs retail pricing should simply put up their millions to create a solar farm. Take the risks and reap the reward.

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  2. Harauguer says:

    Let's be clear here, that plant is producing power at 4 cents/kilowatt and they are selling it to CUC at 17 cents/kilowatt
    We are been screwed.
    The people who have allowed that to happen should be put in jail!

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    • Anonymous says:

      Hopefully OfReg will inform the public who the local partners are. Should be interesting.

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    • Kadafe says:

      yes and then CUC gladly hikes it up to the price of diesel generated electricity and sells it to us! Win for solar farm company, win for CUC. Another day getting robbed for the people!

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      • The big question that should be asked to politicians and by the Caymanian public is the following:
        According to the U.S. Department of Energy diesel prices were in March 2014 $4.01 USD per gallon and in March 2017 $2.55 USD per gallon. By now there should be significant reductions in our CUC bills. As diesel fuel is the main input for the generators why has the CUC cost savings not been passed on to the consumers?

        Windfall profits for CUC?

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        • Anonymous says:

          The fuel cost on our bills is a direct pass through based on the price paid to the supplier. So your windfall profit would actually go to them not CUC. However, my electric bill has reduced quite significantly in those 3 years.

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          • 9:49 Are we living on the same island? Your bill has been reduced significantly in the past 3 years? You must work for CUC or have solar on your roof and feeding back into the grid. Electric bills are NOT LESS now than 3 years ago.

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    • They will not be put in jail because Caymanian government politicians are major shareholders in CUC getting splendid returns each year.

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