Economics and Barriers to Solar Photovoltaic Applications in Barbados

Transcription

1 Economics and Barriers to Solar Photovoltaic Applications in Barbados Roland R Clarke PhD Clarke Energy Associates clarkeenergy@aol.com Presented to Alternative Energy: Pathways to a Sustainable Future in Barbados, Lloyd Erskine Sandiford Centre, Barbados September 2010 Roland Clarke PhD 1

2 Objective of this Presentation 1. To introduce Clarke Energy Inc DBA Clarke Energy Associates 2. To identify the benefits of solar PV s and RE to Barbados 3. To review solar PV applications 4. To illustrate the economics of Solar PV s 5. To examine pricing under BLPC s Feed in Tariff (FIT) 6. To propose a better pricing strategy for the FIT 7. To review the barriers to the widespread deployment of PV s and other RE 8. To suggest a way forward Roland Clarke PhD 2

3 About Clarke Energy Inc. DBA Clarke Energy Associates Our Value Added Services / Consulting include Project management, energy audits, load analysis, system sizing, site analysis, procurement, shipping, installation Power Purchase Agreements (PPA) support Policy and regulatory advocacy Due diligence, feasibility studies Our Training Services include Project Analysis using RETScreen Economic, financial, risk, sensitivity and GHG Roland Clarke PhD 3

4 About Clarke Energy Inc. Clarke Energy Inc. is a Barbados based value added reseller of: Solar photovoltaic (PV) panels Wind turbines, and BOS components e.g. inverters, charge controllers, racks Markets include Residential Commercial/Industrial Public Hotel Roland Clarke PhD 4

5 Benefits of PV s to Customers Purchase of 20 years supply of electricity up front Tax rebate available for residential energy audits $2,000 Tax rebate available for cost of the system at $5,000 per year, for each of 5 years Acquisition of an asset, rather than paying electricity bills to BLPC that money and foreign exchange being lost forever Increases the value of property but also taxes Roland Clarke PhD 5

6 Benefits of PV s to Customers May be configured to be off grid or grid tied or both May be configured to supply power safely to a customer s property during power outages If grid tied, will be compensated at 1.8 x Fuel Clause Adjustment currently approx. 1.8 x 30.7 cents = 55.3 cents per kwh, under the pilot Feed In Tariff program This compares with current domestic cost for a customer using 375 kwh per month, of $215 = 57.3 cents per kwh NB: The domestic costs comprises of a fixed residential charge of $10, plus energy charges of 176 cents per kwh, plus FCA of 30.7 cents per kwh, plus 15% VAT Roland Clarke PhD 6

7 Benefits to BLPC Ownership of the RE system by BLPC, will permit the company to earn a return on the fuel portion of the bill for the very time in its history At present, the fuel portion of the bill is a straight pass though to customers under the FCA no returns permitted by regulation With ownership, BLPC will be able to include the cost of RE into its rate base, and earn even more regulated returns Good stewardship of the environment Good public relations benefits to continuation of a Feed In Tariff programme after the pilot stage, provided all goes well Roland Clarke PhD 7

8 Benefits to Barbados One time up front purchase of energy for the next 20 years, one customer at a time Enhanced security of energy supply Foreign exchange savings on imported fuel for the next 20 years Foreign exchange expenditure on system cost limited to upfront purchase, with limited periodic costs about every 10 years Enhanced ability of Barbados to withstand international upheavals in the world economy, and oil prices Roland Clarke PhD 8

9 Benefits to Barbados of a 25% Market Penetration of PV According to BLPC Annual Report, in 2009 BLPC spent 49 cents of every dollar on imported fuel comprising about 93% Bunker C BDS $236.5 million spent on fuel in 2009 down from $297.6 million in 2008 Total energy sales 952.2GWhof which domestic customers accounted for GWh (32.3%), and commercial customers GWh (67.7%) Target of 25% savings = 238 GWh or $59.1 million saved or avoided Roland Clarke PhD 9

10 Benefits to Barbados of a 25% Market Penetration of PV Assuming 15% net profit below the bottom line of any enterprise in Barbados, revenue would have to be BDS $59.1 million divided by 0.15 = $394.1 million In other words, the tourism enterprise or the real estate enterprise of Barbados would have to add $394.1 million dollars in revenue, in order to have the same impact of the saving that may be incurred by solar PV It is more realistic to undertake solar PV, than to expand the enterprise of Barbados Everybody wins Customers, BLPC, Entrepreneurs, & Barbados Roland Clarke PhD 10

11 Benefits to Barbados of a 25% Market Penetration of PV At a levalised cost of 50 cents per kwh, total solar PV costs = 238 GWh x 1,000,000 = 238 million kwh 238 million kwh x $0.60 per kwh = $143 million This solar PV investment of $143 million is significantly less than the $394 million of additional revenue from enterprise in Barbados Further, not all of the PV investment is foreign exchange Next we will examine typical PV systems and costs Roland Clarke PhD 11

12 Stand Alone PV Systems for AC Loads Roland Clarke PhD 12

13 Utility Interactive PV Systems Roland Clarke PhD 13

14 Hybrid Systems e.g. PV/Wind Roland Clarke PhD 14

15 Bimodal System Roland Clarke PhD 15

16 Electricity Exporting Roland Clarke PhD 16

17 System Costs for 3.57 kw PV Self vs Turnkey Supplier US$ Self US $7,500 per kw Supplier $10,500 per kw Roland Clarke PhD 17

18 Revenue to Customers under BLPC Pilot Feed In Tariff The Context Solar and Wind The Barbados Light and Power Company has recently proposed a Feed In Tariff or Renewable Energy Rider to the Fair Trading Commission (FTC) of FCA x 1.8 = BDS $0.30 x 1.8 = BDS $0.54 per kwh approximately at today s oil prices & FCA Where FCA = Fuel Clause Adjustment Minimum or floor of BDS $0.16 per kwh Technologies limited to solar PV and wind < 50 kw, up to a maximum total of 1.5 MW over 3 years Roland Clarke PhD 18

19 Pricing of RE Electricity under BLPC Feed in Tariff vs Cost (Source BLPC) BDS $/kwh Tariff = $0.57/kWh $0.55/kWh hrs Roland Clarke PhD 19

20 Pricing of RE Electricity under BLPC Feed in Tariff vs Cost (Source BLPC) BDS $/kwh CAD $ $0.54/kWh hrs Roland Clarke PhD 20

21 Proposal by Clarke Time of Day (TOU) Feed in Tariff BDS $/kwh $0.30/kWh $0.80/kWh $0.50/kWh Roland Clarke PhD 21

22 Scenario A: Cumulative Cash Flow for 2.45 kw PV Feed In $0.54 No tax incentive 20 yrs Roland Clarke PhD 22

23 Scenario B: Cumulative Cash Flow 2.45 kw PV Feed In $0.80 No Incentives 13 yrs payback Roland Clarke PhD 23

24 Scenario C: Cumulative Cash Flow 2.45 kw PV Feed In $0.54 Tax Incentive = $5,000 x (1 0.36) for 5 yrs plus $2,000 x (1 0.36) Energy Audit 8 yrs Payback Roland Clarke PhD 24

25 Barriers First Cost Barriers to Solar and Wind First Cost The installed (retail) price of Solar PV and small wind systems is approximately BDS $20,000 per peak kw This compares to $4,000 per kw for a small Gensets using diesel oil However this compares well to $5,000 for large utility scale wind energy systems (> 10 MW) Unfortunately, no economies of scale for solar PV However, retail PV module prices have been dropping in recent times (See Figure following) Roland Clarke PhD 25

26 Current PV Module Prices Roland Clarke PhD 26

27 Barriers Lack of customer finance schemes e.g. should be similar to and as ubiquitous as car loans Lack of vendor or supplier finance schemes only few companies have the financial wherewithal e.g. BLPC Lack of confidence in local suppliers local content should be encouraged and perhaps mandated Lack of awareness among customers, bankers and public decision makers Lack of skilled designers, installers and financial analysts 35% of all residential roof tops already have solar hot water In the rental market, occupants do not have same incentive as building owners. i.e. split incentives Roland Clarke PhD 27

28 Way Forward The Central Bank and other relevant authorities should quantify the barriers to RE First costs, awareness information, human capacity, split incentives etc The Central Bank should facilitate the BPLC Feed In Tariff by introducing customer and vendor financing mechanisms Central Bank should actively engage in the FIT programme to ensure its continuation after the pilot Roland Clarke PhD 28

29 Summary This presentation reviews The benefits of solar PV and RE for Barbados The technology, pricing and economics of solar PV s under the BLPC s Feed In Tariff, and suggests a more appropriate pricing strategy The barriers to the wide spread deployment of PV s and RE in Barbados, and to suggest a way forward The view expressed here in are solely those of the Author and are intended to be a contribution to the debate Clarke Energy wishes to express appreciation to the Central Bank for the opportunity to make this presentation. Roland Clarke PhD 29

30 Advertisement You may contact us by at for a free estimate on a PV system for your home or business Visit us and enquire about our advisory and training services at Roland Clarke PhD 30

31 Thank you THANK YOU For more information contact Roland Clarke PhD Clarke Energy Associates Roland Clarke PhD 31