Baseline Study of Energy Policies & Legislation in Selected Caribbean Countries, July 2009

CARIBEAN RENEWABLE ENERGY DEVELOPMENT PROGRAMME
Baseline Study of Energy Policies & Legislation in Selected Caribbean Countries

Draft Final Report
Prepared by: Cedric Wilson 7/31/2009
DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION
TABLE OF CONTENTS 1. Introduction ................................................................................ 10 1.1 Objectives ......................................................................................................................... 11 1.2 Organization of Report ..................................................................................................... 12 2. Renewable Energy PERSPECTIVE........................................................ 12 2.1 Global Renewable Energy Utilization ............................................................................... 13 2.2 Growth of Renewable Capacity ..................................................................................... 2 3. energy status of selected countries ...................................................... 4 3.1 Bahamas ............................................................................................................................. 4 3.1.1 3.1.2 3.1.3 3.1.4 3.1.5 3.1.6 Background ................................................................................................................ 5 The Energy Sector........................................................................................................... 6 The Electricity Sector ...................................................................................................... 7 Legal & Regulatory Framework .......................................................................... 8 Renewable Energy ........................................................................................................ 10 Conclusion .................................................................................................................... 11
3.2 Barbados........................................................................................................................... 12 3.2.1 3.2.2 3.2.3 3.2.4 3.2.5 3.2.6 3.2.7 3.2.8 3.2.9 Background .................................................................................................................. 13 Energy Sector ............................................................................................................... 13 Electricity Sector ........................................................................................................... 15 Demand Side Management ......................................................................................... 16 Financial Performance of Electricity Sector.................................................................. 16 Expansion Plan ............................................................................................................. 18 Legal & Regulatory Framework ................................................................................... 19 Renewable Energy................................................................................................. 23 Conclusion .................................................................................................................... 25
3.3 Belize ................................................................................................................................ 26 3.3.1 3.3.2 3.3.3 3.3.4 Background .................................................................................................................. 27 Energy Sources ............................................................................................................. 28 The Electricity Sector .................................................................................................... 29 Demand Side Management ......................................................................................... 31
Caribbean Renewable Energy Development Programme Baseline Study of Energy Policy (July 31, 2009)
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3.3.5 3.3.6 3.3.7 3.3.8 3.3.9
Financial Performance of Electricity Sector.................................................................. 32 The Petroleum Sector ................................................................................................... 34 Legal & Regulatory Framework ................................................................................... 35 Renewable Energy................................................................................................. 39 Conclusion .................................................................................................................... 41
3.4 Guyana.............................................................................................................................. 42 3.4.1 3.4.2 3.4.3 3.4.4 3.4.5 3.4.6 3.4.7 3.4.8 3.4.9 Background .................................................................................................................. 43 Energy Sector ............................................................................................................... 43 Electricity Sector ........................................................................................................... 46 Financial Performance of Electricity Sector.................................................................. 47 Expansion Plan ............................................................................................................. 49 Legal & Regulatory Framework ................................................................................... 53 Renewable Energy................................................................................................. 58 Demand Side Management ......................................................................................... 60 Conclusion .................................................................................................................... 61
3.5 St. Kitts & Nevis ................................................................................................................ 62 3.5.1 3.5.2 3.5.3 3.5.4 3.5.5 3.5.6 Background .................................................................................................................. 63 Energy Sector ............................................................................................................... 64 Electricity Sector ........................................................................................................... 64 Financial Performance of Electricity Sector.................................................................. 65 Legal & Regulatory Framework ................................................................................... 68 Renewable Energy................................................................................................. 73
The Federation of St. Kitts-Nevis is a part of the Global Sustainable Island Initiative (GSEII) in the eastern Caribbean which includes St. Lucia, Grenada and Dominica. In 2007 a Sustainable Energy Plan funded by the Organization American States (OAS) was developed. ................... 73 Biomass ..................................................................................................................................... 73 3.5.7 3.5.8 Demand Side Management ............................................................................... 74 Conclusion ................................................................................................................ 74 Background .............................................................................................................. 77 Energy Sources ............................................................................................................. 78
3.6 Suriname .......................................................................................................................... 76 3.6.1 3.6.2
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3.6.3 3.6.4 3.6.5 3.6.6 3.6.7 3.6.8
The Electricity Sector .................................................................................................... 78 The Petroleum Sector ................................................................................................... 80 Legal & Regulatory Framework ................................................................................... 81 Renewable Energy ........................................................................................................ 81 Demand Side Management ......................................................................................... 82 Conclusion .................................................................................................................... 83
3.7 Trinidad and Tobago......................................................................................................... 84 3.7.1 3.7.2 3.7.3 3.7.4 3.7.5 3.7.6 3.7.7 4. Background .................................................................................................................. 85 Energy Sector ............................................................................................................... 86 Electricity Sector ........................................................................................................... 87 Financial Performance of Electricity Sector.................................................................. 88 Legal & Regulatory Framework ................................................................................... 90 Renewable Energy ........................................................................................................ 94 Conclusion .................................................................................................................... 94
Comparative Analysis ..................................................................... 94 Conclusion ................................................................................................................................. 99
5. CASE STUDY: The Effect of Rising Oil Prices on the Transportation & other Key sectors in Guyana .............................................................................. 100 6. 7. The PetroCaribe Agreement ............................................................ 104 CARICOM ENERGY POLICY REVIEW ..................................................... 106 7.1 Background..................................................................................................................... 106 7.2 Objectives of the CARICOM Energy Policy ..................................................................... 106 7.3 Development & Diversification of Energy Source (Ch. 2)............................................... 107 7.4 Renewable Energy Sources (Ch.3) ................................................................................. 108 7.5 Electricity Sector (Ch. 4) ................................................................................................. 108 7.6 Energy Conservation & Efficiency (Ch. 5) ....................................................................... 108 7.7 Energy Investment (Ch. 6) .............................................................................................. 109 7.8 Intra-Community Trade In Petroleum (Ch. 7) ................................................................ 109 7.9 Energy & the Environment (Ch. 8).................................................................................. 109 7.10 7.11 Enhancement of Human & Institutional Capacity (Ch. 9) .......................................... 110 CONCLUSIONS AND RECOMMENDATIONS ................................................................ 110
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8.
Renewable policies and best practices ............................................... 113 8.1 Background..................................................................................................................... 113 8.2 Categorisation of Policy Instruments ............................................................................. 113 8.3 Description of Main Promotional Strategies .................................................................. 117 8.4 Assessment of Promotional Schemes ............................................................................ 122 8.5 Criteria for Measuring Success ....................................................................................... 123 8.6 Key Characteristics of Successful Policy Measures ........................................................ 124 8.7 Evaluation of Promotional Schemes .............................................................................. 125 8.8 Country Specific Results ................................................................................................. 134 8.9 Electricity Market Conditions in the Caribbean ............................................................. 138 8.10 8.11 Indicative Assessment of Relevant Barriers ............................................................... 139 Recommended Promotional Schemes to apply in the Caribbean ............................. 140
APPENDICES ..................................................................................... 141 APPENDIX 1: 1. RENEWABLE ENERGY TECHNOLOGY ........................................... 142 renewable energy technologies ........................................................ 143 1.1 Wind Energy ................................................................................................................... 143 1.1.1 1.1.2 1.1.3 1.1.4 The Conversion of Wind Energy ................................................................................. 143 Cost............................................................................................................................. 144 Assessment of Wind Energy Systems ......................................................................... 145 The Global Status of Wind Power .............................................................................. 145
1.2 Hydropower .................................................................................................................. 147 1.2.1 1.2.2 1.2.3 Potential of Hydropower Systems .............................................................................. 148 Assessment of Hydropower Systems .......................................................................... 148 The Global Status of Hydropower ........................................................................ 149
1.3 Bio-energy (Biomass)...................................................................................................... 150 1.3.1 1.3.2 1.3.3 1.3.4 Biomass Energy Conversion Systems ......................................................................... 150 Potential of Biomass Systems .................................................................................... 152 Assessment of Biomass Energy Systems .................................................................... 152 The Global Status of Biomass Energy ......................................................................... 155
1.4 Solar Energy .................................................................................................................... 155 1.4.1 Solar Energy Conversion............................................................................................. 156
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1.4.2 1.4.3 1.4.4 2.
The Potential of Solar Systems ................................................................................... 158 An Assessment of Solar Energy Technologies ............................................................ 159 The Status of Solar Energy Technologies ................................................................... 160 RENEWABLE ENERGY IN ELECTRICITY GENERATION ............. 163
APPENDIX 2:
renewable energy IN Electricity GENERATION ...................................... 164 2.1 Renewable Energy in Power Generation ....................................................................... 164 2.2 Renewable Energy Characteristics and Cost .................................................................. 165
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Abbreviations
AC BEC BEL BNE BELCO BGEC BLP CARICOM CARILEC CDB CDE CO CO2 CREDP CRNM DC DSM EBS EC EJ ESBI FIT FT GBP GDP GEA GEC GEF GHG Alternating Current Bahamas Electricity Corporation Belize Electricity Limited Belize Natural Energy Limited Belize Electricity Company Limited British Guyana Electric Company Barbados Light & Power Company Limited Caribbean Community Association of Caribbean Electric Utilities Caribbean Development Bank Centre for the Development of Enterprise Carbon Monoxide Carbon Dioxide Caribbean Renewable Energy Development Programme Caribbean Regional Negotiating Machinery Direct Current Demand Side Management Energiebedrijven Suriname Eastern Caribbean (Currency) Exa Joule Electricity Supply Board International Feed-in Tariff Fischer-Tropsch Grand Bahama Power Gross Domestic Product Guyana Electricity Authority Guyana Electricity Company Global Environment Facility Greenhouse Gas Emissions Page 7
BELCOGEN Belize Cogeneration Company
GPL GSEII GTZ GBP GWEC GWh HAWT HEI HFO HML IEA IMF IPP kWh LNG MW MWh NEP NEVLEC NPC OAS OECS O&M OUR PPA PCJ PUC PV REP RES RET RIC R&D RPS
Guyana Power and Light Inc Global Sustainable Energy Islands Initiative Deutsche Gesellschaft fr Technische Zusammenarbeit Grand Bahama Power Global Wind Energy Council Gigawatt hour Horizontal Axis Wind Turbine High Energy Input Heavy Fuel Oil Hydro Maya Limited International Energy Agency International Monetary Fund Independent Power Producer kilowatt hour Liquid Natural Gas Megawatt Megawatt hour National Energy Policy Nevis Electricity Company Limited National Petroleum Corporation Organisation of American States Organisation of Eastern Caribbean States Operation and Maintenance Office of Utilities Regulations Power Purchase Agreement Petroleum Corporation of Jamaica Public Utilities Commission Photovoltaic Rural Electrification Programme Renewable Energy Sources Renewable Energy Technologies Regulated Industries Commission Research & Development Renewable Portfolio Standards Page 8
SEP SICA SKED TGC TNA TOU T&TEC TWh UK UN UNCED UNDP UNFCCC US USAID US EIA UWI
Sustainable Energy Plan Central American Integration System St Kitts Electricity Department Tradable Green Certificate Technical Needs Assessment Time of Use Trinidad and Tobago Electricity Commission Tera-watt hour United Kingdom United Nations United Nations Conference on Environment and Development United Nations Development Programme United Nations Framework Convention on Climate Change United States US Agency for International Development US Energy Information Administration University of the West Indies
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1.
INTRODUCTION
Arising from a growing concern with regard to the threat of climate change and the potential consequences for small island states and costal zones, CARICOM established the Caribbean Renewable Energy Programme (CREDP) with a strong mandate to: 1. Support the implementation of policies, legislation and regulations that create an enabling environment for renewable energy development; 2. Demonstrate innovative financing mechanisms for renewable energy projects; 3. Build capacity of stakeholders in renewable energy field; and 4. Improve regional information network on renewable energy. It is in this context that CREDP commissioned Baseline Study of Energy Policies and Legislation in Selected CARICOM and Caribbean Countries at the end of February 2008. The study is intended to complement a previous study1 done in five other CARICOM states2. For this study the focus would be on seven countries:
Bahamas Barbados Belize Guyana St. Kitts & Nevis Suriname Trinidad & Tobago
According to the Terms of Reference for the Study, the project is intended to contribute to:
1 2
an increase in the percentage of RE-based electricity generation. reduction in green house gas (GHG) emissions.
The Status of Energy Policy in Selected Caribbean Countries (April 2004; updated February 2005) Dominica, Grenada, Jamaica, St. Lucia and St. Vincent and the Grenadines.
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reduction of the dependence on imported fossil fuels. the creation of jobs in the energy sector (manufacturing, supply, installation and after-sales services). the mobilization of financing from local commercial and regional development banks which are not yet involved in RE financing.
It is therefore with this in mind that this Draft Final Report is presented.
1.1
Objectives
The experience with respect to the data gathering exercise for this study varied from country to country in terms of the type and quality of the information available. While the information was patchy in some places and quite good in others, the evidence suggests that there was a genuine effort on the part of stakeholders to assist. Nevertheless, in some instances the data had gaps because: 1. no records are kept on the variable(s) requested 2. the information available was dated 3. the information was considered confidential 4. the contact was dependent on other sources that failed to deliver Although there are varying degrees of gaps in data, there was adequate information to available for the study. The aim of this Report is to examine the current status of the energy sector in the seven selected countries and to provide analyses of the policies and legislations with respect to renewable energy. The objectives off this report are therefore as follows: To provide a review of trends in relation to renewable energy technologies. To provide a review of the status of the energy sector and the legal and regulatory framework in the selected countries. To identify the measures that can be taken in each of the selected country to accelerate the implementation of renewable technologies. To provide a comparative analysis of demand side management strategies ad renewable energy policies across the countries studied.
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To review the draft CARICOM Energy Policy To examine some of the best practices used globally to encourage the development of renewable technology.
1.2
Organization of Report
The remainder of the report is organised as follows: The next section will provide a definition of renewable energy and examine and provide a perspective on the global utilization of renewable energy technologies. Section 3 will review the status of the energy sector in the selected country. It will also assess the legal and regulatory frame work with respect to renewable energy. Section 4 will provide a comparative analysis of the seven Caribbean countries in this Study. Section 5 reviews the Draft CARICOM Energy Policy. Section 6 looks at best practices global in regards to accelerating the implementation of renewable technologies.
2.
RENEWABLE ENERGY PERSPECTIVE
There is no universally accepted definition of renewable energy and national and international agencies use a variety of definitions, some of which include specific technologies such as large hydro, geothermal, municipal and industrial waste and traditional biomass, while others exclude them. The broad definition set down by the Renewable Energy Working Party of the International Energy Agency (IEA) will be adopted in this report. The definition is given as follows: Renewable Energy is derived from natural processes that are replenished constantly. In its various forms, it derives directly or indirectly from the sun, or from heat generated deep within the earth. Included in the definition is energy generated from solar, wind, biomass, geothermal, hydropower and ocean resources, and bio-fuels and hydrogen derived from renewable resources. Renewable energy technologies (RET) are special devices used to convert energy from its natural form to a primary energy form which is directly useable or, to an intermediate energy form or by-product which may later be converted to a directly useable form. Compared to conventional energy sources (including gas, oil, coal and nuclear), most RETs have just recently become widely available commercially. There are some RETs such as off-shore wind turbines and wave energy that are in still in either the development or demonstration phase. Table 2.1 represents a categorisation of the main renewable energy technologies which will be reviewed in this report and provides an indication of life-cycle status.
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2.1
Global Renewable Energy Utilization
Renewable energies are utilised in the following sectors3: Power Generation Hot water and space heating Transport fuels Rural (off-grid) energy
Figure 2.1 and Figure 2.2 show the 2006 renewable energy share of global final energy consumption and share of global electricity production respectively. The figures show that renewable energies including bio-fuels, biomass, large hydropower, small hydropower, wind, solar and geothermal accounted for 18% of the worlds final energy consumption and 18.4% of electricity generation. Of the 18% final energy consumption, 13% was due to traditional biomass which was primarily used for cooking and heating.
Much of the data for this section is taken from the Renewables 2009 Global Status Report which st 3 was prepared by the Renewable Energy Policy Network for the 21 century and the 2008 IEA Renewable Energy Status Report.
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Technology
TABLE 2.1 : CATEGORIES OF RENEWABLE ENERGY CONVERSION TECHNOLOGIES Energy Product Application
Heat (Cooking and space heating) Process heat, steam, electricity Electricity, Heat (CHP) Hydrocarbons, methanol, H2 Ethanol Bio-oils Charcoal Biodiesel Biogas Movement, power Electricity Electricity Electricity Heat, steam, electricity Heat (water and space heating, cooking, drying) and cool Heat, cool, light ventilation H2 or hydrogen rich fuels Power, electricity Heat, steam, electricity Electricity Electricity Electricity Heat, electricity Electricity Fuels Widely applied; improved technologies available Widely applied; potential for improvement Demonstration Phase Development Phase Commercially applied for sugar/starch crops, production from wood is under development Pilot phase, some technical barriers Widely applied; wide range of efficiencies Applied; relatively expensive Commercially applied Small wind machines, widely applied Widely applied commercially Developmental phase Widely applied; rather expensive; further development needed Demonstrated, further development needed Solar collectors commercially applied; solar cookers widely applied in some regions; solar drying demonstrated and applied Demonstration and applications; no active parts Fundamental and applied research Commercially applied; small and large scale applications Commercially applied Applied; relatively expensive Research, development and demonstration phase Research and development phase Research, development and demonstration phase Theoretical option Research and development phase
Biomass Energy Combustion (domestic scale) Combustion (industrial scale) Gasification/power production Gasification/fuel production Hydrolysis and Fermentation Pyrolysis/production of liquid fuels Pyrolysis/production of solid fuels Extraction Digestion Wind Energy Water pumping and battery charging Onshore wind turbines Offshore wind turbines Solar Energy Photovoltaic energy conversion Solar thermal electricity Low temperature solar energy use Passive solar energy use Artificial photosynthesis Hydropower Geothermal Energy Marine Energy Tidal energy Wave energy Current energy Ocean thermal energy conversion Salinity gradient/osmotic energy Marine biomass production
Source: (ref chapter 7)
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FIGURE 2.2: RENEWABLE ENERGY SHARE OF FINAL ENERGY CONSUMPTION, 2006

Biofuels, 0.3 Hot Water / Heating, 1.3 Large Hydropower, 3 Power Generation, 0.8 Renewables, 18.4 Traditional Biomass, 13
Nuclear, 3
Fossil Fuels, 79
FIGURE 2.3: SHARE OF GLOBAL ELECTRICITY FROM RENEWABLE ENERGY, 2006
Nuclear, 14 Large Hydropower, 15
Fossil Fuels, 67 New Renewables, 3.4
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The growth of traditional biomass however is slowing and is even in decline in some areas. Large hydropower accounts for 3% of the final energy consumption and was growing modestly, primarily in developed countries. The new renewable energy sources (wind, solar, small hydro, bio-fuels and geothermal) represent only 2.4% of the renewable energy consumption but saw rapid growth in developed countries and a few developing countries. The new renewable technologies only accounted for 3.4% of the global electricity production and approximately 5% of power generating capacity. The more mature large hydropower technology still represents the bulk of the renewable energy portfolio at 15% of global power production. Solar, biomass and geothermal were primarily used in hot water, and space heating for homes and industry. Bio-fuels are increasingly being used in transport especially in Brazil, where ethanol displaced over 40% of the countries gasoline consumption.
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2.2
Growth of Renewable Capacity
Between 2002 and 2006, grid-connected solar photovoltaic capacity grew at an average annual rate of approximately 60% and (by 70% in 2008) representing the fastest growing RET.
FIGURE 2.4 : AVERAGE RENEWABLES GROWTH RATES, 2002-2006
FIGURE 2.5 : TOP SIX COUNTRIES FOR RENEWABLE ENERGY TECHNOLOGIES
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Bio-fuels experienced the next fastest growth rate during the period at a 40% annual average for biodiesel and 15% for ethanol. Slower global growth rates of between 35% was experienced for large hydropower, biomass and geothermal technologies even though the growth in some countries far exceeded the global average. In general, new renewable energy technologies grew at rates of 15-30% as shown in Figure 2.3 which compares with growth in fossil fuels technology of 2-4%. The Caribbean is one of the low growth regions in respect of renewable energy technology; consequently the issues which inhibit its development must be understood to bring about the required changes.
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3.
3.1
ENERGY STATUS OF SELECTED COUNTRIES

Bahamas
Map of Bahamas
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3.1.1
Background
The Commonwealth of the Bahamas extends 760 miles from the coast of Florida on the north-west almost to Haiti on the south-east. The group consists of 700 islands and 2,400 cays with an area of 13,878 sq. km (5,358 sq. miles). However, only thirty of the islands are inhabited. Latest estimates put the population at 335,000 and the GDP per Capita of US$4,3184. The Bahamas is ranked 49th of 177 country in terms of human development5. The Service contributes 90% of the GDP, manufacturing 8% and agriculture a mere 2%. The economy is heavily dependent on tourism which accounts for two-thirds of the value added in the service sector and directly employs one half of the countrys labour force. The Financial service sector is the second most important contributor to the economy. It accounts for 15% of the GDP.
Fig. 3.1.
Source: Department of Statistic Bahamas (2006)
Over the period 2003 to 2005 the economy grew at an average annual rate of 2.5%. The last five years have seen tourism growing at an estimated rate of 2% annually and a boom in the construction sector which has registered an estimated annual growth of 17%.
4 5
IMF Statistical Database The 2007/2008 Human Development Report (UNDP)
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Fig. 3.2
Source: IMF
3.1.2
The Energy Sector
The principal source of energy in the Bahamas is imported fossil fuels which accounts for virtually all its energy production. There are no sources of fossil fuel energy and all energy sources are imported. In 2008 the Bahamas consumed 6,055 barrels of fuel. Of this amount, 45% was diesel fuel and 21% Heavy Fuel oil (HFO or Bunker C) which was mainly used in electricity generation. Gasoline used predominantly in the transportation sector accounted for 28%.
Fig. 3.3
Source: Central Bank of the Bahamas (2008)
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3.1.3
The Electricity Sector
Electricity service is provided in the Commonwealth of the Bahamas by two companies, the Bahamas Electricity Corporation (BEC) and Grand Bahama Power. BEC is a wholly government-owned company. It accounts for 80% of the electricity generation in the Bahamas and serves the capital, New Providence, and the Family Islands. Grand Bahama Power Company supplies electricity exclusively to the island of Grand Bahama, the fourth largest island in the commonwealth. The company is main shareholders are Marubeni and Dubai Power.
Table 3.1 Net Installed MW Capacity by Plant Type 2008
Steam SS Diesel MS Diesel Gas Turbine Total
GBP 55.3 26.0 18.5 35.0 134.8
BEC 22 171 102 155 450
Total 77.3 197 120.5 190 584.8
Share 13.2% 33.7% 20.6% 32.5% 100.0%
Source: BEC & Grand Bahama Power
Fig. 3.4
Source: BEC & Grand Bahama Power
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Currently, all the electricity generation in the Bahamas comes from fossil fuel plants. The total net installed capacity is 584.8MW, of which BEC owns 77% and the GBP the remaining 23%. The generating capacity in the Bahamas is dominated by diesel plants and gas turbine for electricity production. Steam plants account for only 13% of the total capacity and of this amount 70% is owned by Grand Bahama Power. The highest non-coincident peak demand registered in the Bahamas was 325 MW. Primarily because of the construction boom, the average annual rate of growth (3.1%) in generation has outstripped the growth in the real economy (see Fig. 3.4). With the Bahamas close to total dependence on imported fuel this has contributed to a widening of the countrys current account deficit. System losses in the Bahamas are currently 12.3% with BEC registering losses of 15% and Grand Bahama Power 8.9%. Most of the losses are of a technical nature and are associated with the BEC transmission and distribution network. 3.1.4 Legal & Regulatory Framework
The main legislative framework for the energy sector: 1. 2. 3. Electricity Act of (1959) Public Utility Commission (1993) Hawksbill Creek Agreement (1955)
The important players in the sector are: 1. 2. 3. 4. The Bahamas Electricity Corporation The Public Utilities Commission The Grand Bahama Port Authority Limited Ministry of Energy & Environment
The electric utility, the Bahamas Electricity Corporation, is a Government-owned corporation which was established in 1959 by the Electricity Act of the Bahamas. The Act provides for the establishment of a corporation for the exercise and performance by the Corporation of functions relating to the supply of electricity and certain other matters; for the transfer to the Corporation of electrical installations owned by the Government of The Bahamas; to amend and consolidate the law relating to electrical installations and the generation, supply and use of electricity and for purposes connected with the matters aforesaid. To facilitate development of the sector the Electricity Act 1959, by its Third Schedule, specifically exempted certain equipment and machinery from taxes and duties. While the Act, when it was framed, could not have anticipated the current
Caribbean Renewable Energy Development Programme Baseline Study of Energy Policy (July 31, 2009) Page 8
interest in renewable technologies it provides a gateway for the use of clean technologies free of taxes by BEC. However, additional legislation which allows tax-free status for renewable technology purchased by entities other than BEC could provide a meaningful fiscal incentive for the further development of renewable technology. The Public Utilities Commission Act was enacted in 1993. This was before the regulatory agency was established. The Act was amended in December 1999. The Act provided for the establishment of a Public Utilities Commission for the purpose of regulating 'controlled public utilities' this encompasses the suppliers of electricity, telecommunications, water and sewerage, and propane gas services. The Public Utilities Commission (PUC) in the Bahamas was established in March 2000, but is authorized to regulate telecommunications services only. The scope of the PUCs regulatory oversight will be extended to other services based on the determination of the Minister with portfolio responsibility for the relevant service. Under Section 58 of the Electricity Act, 1959 the duty of the Minister with respect to making rules to govern the Corporation is specifically set out. The Act also allows for some level of self-regulation by the Corporation subject to the approval of the Minister. As such, Section 60 of the Act provides for the Corporation, subject to ministerial approval, to regulate aspects of its operations including its tariffs. Therefore, presently, the PUC does not regulate the electricity sector. In the absence of an independent regulator for the electricity sector, the regulatory framework does not provide an effective environment for the development of renewable energy technology. Regulatory oversight responsibility of the electricity sector should be extended to the PUC since an independent agency tends to bring greater expertise, transparency and accountability to the regulatory process which is important for the setting and monitoring of renewable targets. This legal framework should therefore be reviewed by the authorities with a view of extending the oversight responsibility of the PUC as it relates to the existing status of the electric utility. In addition, there is a need to create an appropriate mix of incentives to encourage the development of renewable technologies. The Ministry of Energy & Environment was established in 2006. It has regulatory responsibility for electricity services (provided by Bahamas Electricity Corporation) as well as for the petroleum sector. The Ministry has been mandated to develop a national energy policy addressing the issues related to the more efficient usage of traditional sources of energy as well as charting a process by which commercial applications of RE will be facilitated. A draft National Energy Policy has been developed by a committee, however, it was not available to the Consultant at the time this Study was being prepared because it had not yet been approved by the
Cabinet. Indications are that the draft Policy will emphasize solar and wind technologies as the primary sources of renewable energy6. The Hawksbill Creek Agreement (1955) as amended in 1960 and 1966 grants the Grand Bahama Port Authority the power and responsibility for the economic development of the island of Grand Bahama. The agreement between the government and the Port authority provides for: 1. the lease 50,000 acres of Crown Land to the Grand Bahama Port Authority or development; 2. the exemption from Customs Duties on imports (except consumable stores) and exports to and from the area for 99 years (until 2054); In addition, the authority to grant licences to conduct business on the island falls within the domain of the Port Authorities. Grand Bahama Power7, was originally owned by the Port Authority. In 1993, 50 percent of the shares of the utility were acquired by Southern Company's International (now Mirant) which took management control of the utility. Since then the ownership structure has changed with Marubeni Caribbean Power Holdings and Dubai Power controlling 55% of the shares as well as the management of the company. Under this arrangement the Grand Bahama Port Authority is effectively the Regulator for the electric utility and is responsible for approving applications for rate adjustments. 3.1.5 Renewable Energy
Wind Energy and Biomass There is very little happening in the Bahamas in relation to renewable energy technologies. The main initiative in this area is associated with two projects developed by the Grand Bahama Power Company. The first project is a Wind Resource Assessment Project which was launched in April 2009. The project which is estimated to cost approximately US$263,600 will see the installation of wind towers at seven sites on the Grand Bahama. The project involves a partnership with Emera, a US energy company and minor shareholder in Grand Bahama Power. If the feasibility study shows promise the electricity company plans to install up to 15MW of wind capacity in 2012.
6
Based on a statement made by Minister of State for Public Utilities, Phenton Neymour, and reported in the Bahamas Journal on May 31, 2008 7 Originally Freeport Power Company
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The second project is a landfill gas to energy assessment. Early in 2008 the company had discussions with Veolia Environmental Services, the fourth largest waste services firm in the US, with respect to the strategic approach to the project. Preliminary assessment suggests that 1MW capacity of landfill gas to energy may exist on the island. Solar Water Heaters & Photovoltaic (PV) Solar electric system In Nassau there are two main Energy Service Companies whose primary focus is on solar systems water heaters and PV systems. They are: 1. Solar Power Concepts Ltd 2. Nassau Hotel & Restaurant Ltd (an agent of Solar Dynamics in Barbados) In 2008 the government lowered and simplified import tax on solar equipment which is expected to boost the use of the renewable technology. While no statistics was available on solar penetration, the evidence suggests that it is very low with the hotel sector showing the greatest interest in solar devices. 3.1.6 Conclusion
Bahamas is extremely dependent on fossil fuel to meet its energy needs. In addition, it has a relatively high Per Capita consumption of electricity. While there seems to be a thrust in the Grand Bahama to find renewable energy solutions this drive is, at best, tepid in the rest of the Bahamas. There is an incipient solar energy services industry in Nassau but apart from the hotel sector, the demand for solar devices is weak. The Ministry of the Environment is currently fashioning an Energy Policy, but it is not clear when it will be published. While in 2008 the government provided a small incentive on the importation of solar equipment much more needs to be done. The development of renewable energy sources will only accelerate with a well conceived energy policy, the strengthening of the regulatory body, greater public awareness and timely fiscal incentives. In addition, the multi-sector regulatory body, the PUC, ought to play a more active role in the regulation of the electricity sector as this is critical to the financial health of the government owned electric utility as well as to the effective monitoring of renewable energy targets when a policy is in place.
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3.2
Barbados
Map of Barbados
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3.2.1
Background
Barbados is the most easterly island in the Caribbean archipelago. The island covers 432 sq. km (166 sq. miles). The population of the country is approximately 270,000. The Barbados economy which is predominantly service-based, has experienced sustained real GDP growth, averaging 3.5% from 2003-2008, moving from Bb$0.977 billion to Bb$1.158 billion8. The countrys per capita income is approximately US$13,700; enough for it to be classified as a middle income developing country.
Fig. 3.5
Source: IMF
Barbados currently enjoys a life expectancy of 77 years and an adult literacy rate of 97%. Since independence from British rule the country has attempted to diversify its productive base. Sugar manufactured from sugar cane is no longer its most significant export product. This shift began during the 1970s, when manufacturing and tourism emerged as major foreign exchange earners. A stable economic climate has provided an attractive environment for foreign investment and a vibrant services industry. 3.2.2 Energy Sector
Barbados energy sector is produces approximately 1,100 barrels of crude per day, total crude reserves is estimated at 2 - 3 million barrels. It also has natural gas reserve is estimated at 5 to 6 billion cubic feet.
8
In real Barbados $ at 2000 prices
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Barbados, like most other regional territories, is heavily dependent on the importation and use of fossil fuels for energy and transportation requirements. Therefore while the country produces 1,100 barrels per day, crude oil consumption is said to be in the region of 9,400 barrels per day. Additionally, the countrys requirements of other fossil fuel derivatives (kerosene, gasoline, diesel and Liquefied Petroleum Gas) are all imported. The island energy sector is highly regulated; with central government exercising control over the pricing of all petroleum products (gasoline, diesel, kerosene, and liquefied petroleum gas). Electricity and natural gas pricing are regulated by the Fair Trading Commission. The distributive petroleum sub-sector is dominated by four companies while the retail sub-sector is comprised of independent dealers who operate under franchise and licensing arrangements.
Fig. 3.6
The country has been experiencing steady growth in its GDP over the past two decades. Coincident with this growth in GDP is a similar growth in the countrys per capita energy consumption. The average energy consumption has increased from 7,100 barrels per day in 2004 to 9,400 barrel in 2008 (source US EIA). This growth in demand along with spiraling world market prices have significantly increased the cost of fuel imports; placing considerable strain on the countrys foreign exchange earnings.
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3.2.3
Electricity Sector
Electricity production and distribution started in Barbados in 1911 when the first diesel generating units were installed at the Garrison and a distribution network was established in the environs. Since then, the transmission & distribution systems have been expanded to cover the entire island. Barbados electricity sector remains a virtual monopoly, with the Barbados Light and Power Co. Ltd (BL&P) controlling the majority of generation and all the distribution and transmission of electricity on the island. The sugar industry and a small number of manufacturers generate electricity for their own consumption. Privately installed generating capacity is estimated to be about 3 Megawatts or 1 percent of the islands total installed capacity. The Island enjoys an electricity penetration rate of 100 percent. Fossil Fuel (fuel oil) accounts for 100% of the BL&Ps energy generation. Low speed diesel engines burning heavy fuel oil accounts for 90% of the fuel consumed. Diesel fuel accounts for 7.5% with the remaining 2.5% being natural gas. The natural gas requirement is supplied by National Petroleum Corporation (NPC) on an interruptible basis. Over the past 5 years the BL&P has experienced an average growth in demand of 3.2%; increasing from 806 GWh in 2003 to 944 GWh in 2008. This demand is satisfied by a total installed generating capacity of 239.1 MW with peak demand of 164 MW and a base load factor of approximately 74%. Sixty-four percent of total installed generating capacity employs Low Speed Diesel engines or Steam Turbines. The remaining 36 percent is supplied from Gas Turbines burning Diesel fuel.
Table 3.2 BLP Installed Generating Capacity by Plant Type 2008 PLANT TYPE Low Speed Diesel Gas Turbines Steam Turbines TOTAL CAPACITY (MW) 113.1 86.0 40.0 239.1 % TOTAL CAPACITY 47 36 17 100 FUEL TYPE Heavy Fuel Oil Jet A1/Diesel Heavy Fuel Oil
During 2007 total energy sales was 940.8 GWh, of which the companys 97,800 residential customers accounted for 300 GWh or 32 percent. The remaining 640.8 GWh or 68 percent was consumed by the companys 18,857 commercial customers. Average system losses during 2008 was 6.3%, this is 0.4 percentage points below the average for the period 2004 2008.
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3.2.4
Demand Side Management
With respect to demand side management, BL&P provides brochures at its commercial offices which provide tips to residential customers on how to use electricity efficiently. It also will do energy audits upon request by large customers. In its May 2009 Rate Application BL&P proposed a Time-of-Use (TOU) rate pilot for a 3-year period for a maximum of 30 large customers. During the peak-demand period (10 a.m. 9 p.m.) the generation cost is significantly higher than the off-peak period. If the pilot is successful it could slow the growth in demand and lower the countrys overall fuel bill. 3.2.5 Financial Performance of Electricity Sector
Revenues and Sales Between 2004 and 2008 Barbados Light & Power recorded steady growth in energy sales and revenues. Energy sales in 2004 were 831,305 MWh and recorded an annual average growth of 3.2% reaching 944,036 MWh in 2008. System losses over the same period were relatively flat averaging 6.7%, ranging from a low of 5.9% in 2007 to a high of 7.2% in 2006.
Fig. 3.7
BLP Energy Sales & Revenues

960.0 920.0 280.0 240.0 200.0
GWh
160.0 120.0 80.0
840.0 800.0 760.0
40.0 0.0
2004
2005
2006
2007
2008
Energy Sales
Revenues
Source: Annual report Light & Power Holdings
Total revenues grew from US$150.8M in 2004 to US$236.7M in 2008, an increase of US$85.9M. This translates to an annual average revenue growth of approximately 12%. Average growth in MWh sold of 3.23%, contributed approximately US$20.4M to the growth in revenues. The movement in average tariff from US18.14 cents/kWh
US$M
880.0
in 2004 to US 25.07 cents/kWh in 2008, consistent with changes in fuel cost, contributed US$65.5M. Profitability and Return During the period 2004 2008 Barbados Light & Power (BL&P) has proven itself to be a financially stable power producing and distributing entity. The average return on shareholders investment during this period was 6.1%, ranging from a high of 10.93% in 2007 to a low of 2.8% in 2003. The main factors contributing to the 2007 high were; (i) a four percent reduction in non-fuel operating cost when compared to 2006 and (ii) a write back of deferred taxes as a consequence of a reduction in the companys effective tax rate. These factors were not repeated in 2008 and consequently the company was only able to generate a return on equity of 5.6%, which was more in line with the norm. Financing and Investment Over the five year period the company invested a total of US $164.7M in the upgrading and expansion of its plant facilities. The major portion of this investment was financed by the reinvestment of internally generated resources. Consequently, net borrowing over this same period amounted to only US$6.6M. While additional capital from equity injection amounted to only US$16.1M. Of the US$164.7M in capital expenditure over the period, approximately US$70M went into the procurement of additional generating capacity. This expansion in generating capacity is represented by the two 30 MW Slow Speed Diesel engines commissioned in 2005. BL&P has also done very well in containing non-fuel operating cost. Although energy sales have been growing at an average annual rate of 3.2%, the growth in non fuel operating cost was 2.2%. This means that the company was able to improve its operational efficiency over the period. This improvement is demonstrated in the reduction in non-fuel operating cost from US7.8 cents/kWh to US7.5 cents/kWh between 2004 and 2008. The utility has also done very well in the management of its receivables. Between 2004 and 2008 the average receivable days outstanding was 38. This is fairly good by utility standards. BL&P is a financially, fairly well managed utility and the company has been able to maintain good financial health, despite not having an increase in base tariffs for over quarter century.
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Table 3.3 BLP Selected Operating & Financial Statistics 2008 Energy Sales MWh 944,036 2007 940,845 2006 903,398 2005 884,708 2004 831,305
Total Revenues Operating Expenses Operating Income Net Finance Cost Taxes - US$000's Net Income US$000s
US$000's US$000's US$000's US$000's US$000's US$000's
236,655 219,631 17,024 ($1,092) 540 16,473
198,818 175,323 23,496 ($681) 7,458 30,273
180,827 163,098 17,729 ($890) (256) 16,583
169,616 157,405 12,211 ($3,127) (1,390) 7,695
150,797 139,310 11,487 ($1,725) 3,646 13,408
Capital Expenditure Net Borrowing Flows
US$000's US$000's
26,433 (6,364)
32,098 6,293
31,238 (6,921)
21,437 (5,751)
53,480 19,354
Current Ratio Total Debt To Equity Receivable Outstanding Return On Equity Days %
2.82 0.38 41 5.6
2.38 0.45 44 10.9
2.80 0.45 36 6.2
2.15 0.45 32 2.8
1.93 0.47 36 5.2
3.2.6
Expansion Plan
Barbados did not provide an expansion plan, however the average annual demand growth between 2009 and 2013 is forecasted at 2.3%, with lower growth rates in the earlier years.
Table 3.4 Barbados Forecasted Demand 2009 2013 Projected Demand Peak Demand Year Sales Growth MWh MW % 2009 2.0 962,916 167.3 2010 2.0 982,175 170.6 2011 2.5 1,006,729 174.9 2012 2013 2.5 2.5 1,031,897 1,057,695 179.3 183.7
Barbados current installed Generating capacity is 239.1MW. The projected peak demand in 2012 will be in the region of 179.3MW. If Barbados is to maintain a minimum reserve margin of 25%, the country will need to add 15-20 MW of firm generating capacity by the end of 2012.
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3.2.7
Legal & Regulatory Framework
The legal instruments under which electricity services are provided in Barbados are: 1. Electric Light and Power Act (1899) 2. Fair Trading Commission Act (2001) 3. Financial legislations such as Fiscal Incentive Act (1974); Income Tax Act (1969) & Customs Act (1963) 4. Utilities Regulation Act, Cap. 2000-30 5. Barbados National Energy Policy, 2007 The legislative instruments that regulate the energy sector are listed above with primary importance assigned to (1) the Electric Light and Power Act (1899) and (2) the Utilities Regulation Act (2001), and (3) the Fair Trading Commission Act (2001) which most directly affects the electricity industry, the dominant user of fossil fuel. The Third Schedule of the Electricity Act gives the Barbados Light and Power Co. the exclusive right to sell electricity for public and private purposes for a period of 42 years from 1986. The current regulations do not specifically provide for power generation by independent companies because BLP has been awarded monopoly rights to commercial generation, transmission and distribution of electricity. While the law does allow auto generation, i.e. the generation of electricity for inhouse consumption, it prohibits sales by such private generators to other consumers or injection into the grid without specific agreement with BLP for purchase of the energy supplied. Electricity tariffs are determined by the Fair Trading Commission and are set in accordance with the provisions of the Utilities Regulation Act (2001). The law defines the principles underlying tariff determinations as well as consumer service standards. Energy Division Ministry of Energy The Energy Division of the Ministry of Finance, Economic Affairs and Energy was established in 1978 and is responsible for overseeing development of natural resources; renewable energy portfolios; the Barbados National Oil Company Ltd; the Barbados National Terminal Company Ltd; and the National Petroleum Corporation. Its website proposes its vision for the energy sector in Barbados as placing emphasis on principles, policies and strategies which encourage development, but
recognize the strengths, weaknesses and opportunities which characterize the Barbadian economy. National Energy Policy The Ministry of Energy & the Environment has prepared a soon-to-be implemented National Energy Policy, for Barbados. In the policy the government sets itself the ambitious goal of increasing the input of renewable energy (RE) sources to contribute more than 10% of the islands primary energy requirements by 2012 and 20% by 2026. The specific objectives of the policy are to: 1. Provide adequate and affordable energy to all sectors of society; 2. Enable the maximization of the efficiency of energy use in production, storage, distribution and end-use. 3. Make renewable energy technology a primary source of energy, thereby reducing dependence on traditional fossil fuels; 4. Promote competition, and the best industrial and petroleum practices in the electricity and petroleum sectors, using a mix of regulation, economic and market-oriented approaches to achieve this objective. 5. Promote research and development in energy efficiency, oil and gas exploration and renewable energy technology. 6. Increase private participation and encourage the inputs of the major stakeholders in ensuring that the objectives of policy and the expected benefits will be recognized by all. The Government in promoting its so-called vision of "Green Economics" focuses its attention on energy conservation and efficiency in all sectors of the economy. The objectives include: a) Minimizing solid waste; b) Promoting separation and recycling of solid waste components; c) Promoting "Green" building techniques and standards; d) Using RE resources wherever feasible; e) Encouraging energy conservation in the public sector.
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The National Energy Policy also requires that Renewable Energy Legislation should be enacted to facilitate the development and sustainability of renewable energy projects. It is recognized that success of the Policy will require the Government to commit to certain specific actions, such as: 1. Creation of a Renewable Energy Investment Fund: In its 2006 budget the Government announced that it will encourage and contribute to such a fund to be used to provide economic incentives for investment in RE systems. 2. Establishment of a Renewable Energy Centre staffed by public and private sector individuals, and will mandate to review renewable energy policies and programs. 3. Strengthening the Energy Division, which will have responsibility for recommending and reviewing the effectiveness of economic instruments. 4. Extending the franchise to sell electricity to economically viable renewable energy producers - connection to the grid being allowed at the source of the RE generator. 5. Guaranteeing that RE electricity will contribute up to 10% of total electricity consumption, if the associated costs are within an acceptable range. 6. Mobilizing the funding needed for research and development with the objective of leveraging investments in renewable energy. 7. Imposing a Carbon Tax on companies which emit green house gases. The tax will be proportional to the global value of the emission traded under the Kyoto Protocol and other mechanisms. 8. Introducing Green Power Investment Deductions, a form of tax-relief to be extended to companies which invest in government-sanctioned renewable energy projects. 9. Establishing a Renewable Energy Investment Fund: In its 2006 budget the Government announced that it will contribute to a renewable energy investment fund to be used to provide economic incentives for investment in RE systems. 10. Establishing a Renewable Energy Centre. The push by the Government of Barbados to increase exploitation of RE resources is based on sound economics and the proven success of earlier initiatives. The solar water heater industry in Barbados is one of the best examples of legislation facilitating exploitation of a RE technology in the Caribbean. As a reaction to the oil
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crisis of the 1970s, the Government of Barbados passed the Fiscal Incentive Act (1974) which allowed manufacturers to benefit from import duty preferences and tax holidays. The solar water heater industry was encouraged by allowing companies in the business to: (a) Benefit from import preferences and tax holidays on the imported components for the manufacturing of solar collectors. Raw materials used in the manufacture of solar water heaters were exempted from the import duties which would otherwise have been applied; (b) Imposing a 30% consumption tax on electric water heaters, to improve the competitiveness of the solar water heater; (c) Offering tax concessions (in the 1984 Income Tax Amendment Act) for the installation of solar water heaters whereby the purchaser of such a system is allowed to fully deduct the associated cost from his/her income tax liabilities, up to a maximum of three thousand five hundred Barbados dollars (BB$3,500) equivalent to about US$1,730. As a result of these incentive schemes Barbados has the largest market penetration (40%) of solar water heaters in the Caribbean. In 2006/2007 the government extended incentives to energy efficiency improvement devices other than solar water heaters by waiving the import duty payable. These incentives are now applicable to RE systems such as:

Wind turbines Solar Photovoltaic installations Bio-fuel installations
Prior to this exemption the components associated with these systems were not shown as separate categories under the Customs Act (1963) and therefore enjoyed no reduction in the taxes which would normally have applied. The Fiscal Incentive Act (1974) and the tax breaks it afforded, the 1984 Income Tax Amendment and the tax exemptions granted on import duties are examples of successful enabling legislation in Barbados benefiting proliferation of RE technologies.
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Energy Regulation The energy sector is regulated under the Fair Trading Commission Act (2001) and the Utilities Regulation Act, also promulgated in 2001. The Fair Trading Commission Act (2001) established the Fair Trading Commission which was thereby entrusted with responsibility for regulating the provision of utility services in Barbados, inclusive of electricity services. Section 4 of that Act is intended to ensure that regulated power utilities such as BLP comply with the provisions of the Utilities Regulations Act (2001). Under the existing legal and regulatory framework there is no provision for independent power producers to sell electricity to the grid. Given the fact that the maximum demand is currently less than 170 MW, the advantage of lowering electricity cost by way of economies of scale might be lost with the introduction of a competitive generation market. However, it is important that regulator creates the condition in which the utility operates efficiently and the benefits are shared with consumers. Notwithstanding, the feed-in of excess energy generated from renewable sources is likely to encourage the growth RE technology if reasonably priced. In this respect the existing legislation should be examined with a view of making the necessary amendments to facilitate the feed-in of renewable energy to the grid. 3.2.8 Renewable Energy
Solar Water Heaters More than any other CARICOM member state Barbados has been successful in the roll out of solar water heaters. While the no current statistics are available on the number of solar water heater installations in 2000 it was estimated at 32,000. It is estimated that solar water heaters installation accounts for electricity reduction 128 GWh annually which translated to fuel savings of approximately US$10 million. The popularity of solar water heaters in Barbados is largely explained by the early presence of Energy Service Companies, Solar Dynamics and Sun Power, in the country. Both companies have been active in Barbados since the early 1970s. In addition, the government created an enabling environment for the development of solar energy early in the game with the Fiscal Incentive Act of 1974. The Act allowed the solar water heater manufacturers to benefit from a preferential import and tax regime. An additional incentive was introduced in 1980 which allowed home owners to receive tax rebates for solar water heater purchases. Photovoltaic (PV) Solar electric system In 2000 BLP commissioned a photovoltaic (PV) solar electric system at the Seawell Generating Station. It was essentially an experiment to gain insight into the
operation and maintenance of such systems, as well as to evaluate the potential for solar electric power in Barbados.
Fig. 3.8
Photovoltaic Panels on the roof at Seawell Generating Station
The system fed power into the grid and produces 2kW on a normal day and more than 2.5kW on clear sunny days. The experiment was considered successful however the relatively high investment cost did not favour an expansion of the project. In addition, Barbados has about 37 KW of PV systems installed at various sites. These include9:

1.1kW at the University of the West Indies (UWI) for solar cooling. 17.3kW at Harrison's Cave for running the lights. 3.0kW at Combermere School for operating a computer laboratory. 11.1kW at the Skeete's Bay fishing complex
Wind Power BLP has plans to develop a wind farm at Lamberts, St. Lucy. This arises out of a feasibility study at Lamberts site conducted by Renewable Energy Systems of the
Centre for Resource Management and Environmental Studies, UWI Cave Hill Campus - Barbados Renewable Energy Scenario Current Status and Projections to 2010
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UK. The study was partially funded by a grant from the Centre for the Development of Enterprise (CDE) in Brussels. The investment will require approximately US$ 15 million. It should have a capacity of 10 MW using and is expected to create three (3) new jobs. Based upon the feasibility study it should generate approximately 32 GWh per year. This means annual fuel savings of around US$2.5 million and a reduction in Carbon Dioxide emissions of about 20,000 tonnes per year. The plan is now before the regulators for approval. Other Renewable Sources Given the size of the rivers in Barbados there is no scope for hydro power. It is believed however to have the potential for 10MW waste to energy plant. Renewable Energy Rider In its May 2009 Rate Application, BL&P proposed a Renewable Energy Rider which involves the introduction a 3-year pilot which would allow for the supply of energy to the grid by small customers with their own renewable energy sources. BL&P has proposed that the purchase price be set at a level that reflects the avoided cost of energy supplied from the grid and the cost of the metering cost. 3.2.9 Conclusion
Barbados is unique among the selected countries, since it is the only one which has an Energy Policy, albeit, it has not yet been implemented. In addition, the solar water heater business is fairly active in the country. It is estimated that one in every three residents has solar installations. Studies have shown that it also has the potential for wind energy. While Barbados produces approximately 1,000 barrels of oil per day, it consumes over 9,000. As such it is still highly dependent on imported fuel. As such the proposed introduction of a TOU rate pilot and a Renewable Energy Rider should be encouraged. In addition, the government should move quickly to implement the policy as well as examine further fiscal incentives that may accelerate the use of renewable sources. It is also important that the legislation be revisited with a view to facilitating the expansion
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3.3
Belize
Map of Belize
Page 26
3.3.1
Background
Belize is the only CARICOM member state in Central America. It has a total land area of 22,972 sq. Km (8,867 sq. miles) and is bounded to the east by the Caribbean Sea, to the west and south by Guatemala and to the north by Mexico. Belizes population is estimated at 311,50010 with a GDP per Capita of US$4,31811. The level of human development achieved in the country was ranked 80 out 177 countries in the 2007-2008 Human Development Report. As far back as 1992 Belize signed the United Nations Framework Convention on Climate Change (UNFCCC) at the United Nations Conference on Environment and Development (UNCED) in Rio de Janeiro. It ratified the Convention in 1994. Belize is also a signatory to the Kyoto Protocol.12 In addition, as a member of both CARICOM and Central American Integration System (SICA) it is party to the May 2007 Agreement which includes cooperation in energy security through the diversification of energy sources as well as energy conservation.
Fig. 3.9
Source: Statistical Institute of Statistic of Belize
Over the period 2003 -2008, the economy grew at an average annual rate of 3.5%. Approximately, two-thirds of the economic activity in the country is attributable to the service sector, while the manufacturing and the agricultural sectors accounts for 20% and 13% respectively.
10 11
Abstract of Statistics Belize 2008 produced by Statistical Institute of Statistic of Belize IMF Statistical Database 12 Belize signed the Kyoto Protocol on September 26, 2003
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Over the four-year period 2003 -2007 the countrys agricultural sector declined at an average annual rate of 4.4%. However, the economy experienced rapid expansion in the manufacturing sector, a boom in the real estate and financial services and growth in the tourism sector at a rate of 4.2% annually. The growth in the economy experienced over the last five years has resulted in unemployment fall from 12.9% in 2003 to 8.5% in 2007.
Fig. 3.10
Source: Statistical Institute of Statistic of Belize
3.3.2
Energy Sources
It is estimated that approximately 71% of Belizes energy requirement is imported fuel and although the country has recently started to produce oil, all of its fossil fuel requirements are met through import. Approximately, 29% of Belizes energy needs are satisfied by three indigenous sources. Hydropower employed for electricity generation, bagasse used for cogeneration in the sugar industry and wood mainly used for cooking in poor communities.
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Fig. 3.11
Source: PUC Energy Policy Recommendations
3.3.3
The Electricity Sector
The Belize Electricity Limited (BEL) is the sole distributor of electricity to the national grid and currently provides service to over 74,000 customers. Prior to 1992, the company (then called Belize Electricity Board) was completely government-owned. Approximately 70% of the interest in the company is privately-owned, by Fortis Inc. of Canada. Another 27% of the shares are held by the Social Security Board and the remaining owned by a number of small shareholders. BEL now operates under its second 15-year licence; the first expired in January 2008.
Table 3.5 Company BEL CFE BELCO Hydro Maya Ltd. Total
Source: BEL
Plant Type
Diesel & GT Diesel Hydro Hydro
BEL Capacity & Net Generation (2003 -2008) 2003 2004 2005 2006 2007 Capacity Net Generation (MWh) (MW)
27.0 50.0 29.8 3.0 109.8 97,889 188,714 61,154 347,757 78,850 235,796 63,215 377,861 81,553 253,995 68,275 403,823 30,136 209,814 177,733 417,683 36,078 225,227 166,727 10,676 438,708
2008
10,704 248,396 191,589 12,898 463,587
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While BEL presently commands 109.8 MW of capacity, it only owns 27 MW. The rest is contracted through independent power purchase agreements (IPPs). Comision Federal de Electridad of Mexico provides 50 MW of capacity. The Belize Electricity Company (BECOL), a subsidiary also owned by Fortis provides 25.2 MW of hydro capacity from its plant at Mollejon and another 7.3 MW of hydro capacity from Chalillo, both in the western district of Cayo. Hydro Maya Limited (HML) in the district of Toledo in the south accounts for approximately 3 MW of capacity. Electricity generation over the period 2003 2008 has grown at an average annual rate of 5.9% outpacing the 3.5% growth registered by the economy. However, the proportion of renewable generation in the mix has also grown. Hydro plants accounted for 44% of the total generation in 2008, while in 2003 it represented 18% (see Fig.4.10). This is largely attributable to the commissioning of the hydro dam at Chalillo in 2005 and the introduction of HML in 2007.
Fig. 3.12
Source: BEL
There are also small pockets of self-generation, not connected to the national grid, in Belize. These include: The Farmers Light Cooperative(3.75 MW Diesel capacity): which supplies power exclusively to the Mennonite community at Spanish Lookout; The Citrus Company of Belize at Stann Creek The Five Sisters Lodge (Resort) in San Ignacio which operates a run of the river mini-hydro plant.
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Of significance, is the fact that electricity consumption has grown at virtually the same average annual rate of generation over the last five years, with peak demand climbing from 57.4 MW in 2003 to 74.3 MW in 2008. In keeping with the dynamism of the economy, Commercial and industrial consumption has increased at an average annual rate of 7.8% over the period with the residential growth lagging behind at 5%. Electricity penetration is currently estimated to be 90%. Total line losses in 2008 were 12.2%. Non-technical losses account for a mere 1.5 to 2% of total losses. The high level of technical losses is attributable to the movement of imported power over long distances from Mexico to the load centers in Belize.
Fig. 3.13
Source: BEL
3.3.4
In 2006 and 2007, the Government of Belize benefited from a gift of florescent lamps under a special programme sponsored by the Cuban Government. Under the programme thousand florescent bulbs were distributed to households to replace the less energy efficient incandescent bulbs, free of cost. This is an effective approach to demand side and theoretically should have shaved off same amount of the electricity lighting load. Both BEL and the PUC have independently engaged in public awareness initiatives through the distribution of brochures promoting energy conservation methods and habits.
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3.3.5
Financial Performance of Electricity Sector
Revenues and Sales Between 2004 and 2007 the Belize Electric Limited (BEL) recorded steady growth in revenues and profitability. Revenues in 2004 were US$52.8M and recorded an average annual growth of 14.8% reaching US$79.8M in 2007. However, between 2007 and 2008 there was a 11.9% decline in the companys revenues moving from the US$79.8M generated in 2007 to US$70.3M in 2008. This decline in revenues comes against the background of a 6.6% growth in sales volume, moving from 381,759 MWh in 2007 to 406,985 MWh in 2008. This decline is a direct consequence of a decision by the Public Utilities commission (PUC) of Belize which effectively forced BEL to surrender US$18.1M in revenues. Between 2004 and 2008 BEL electricity tariffs average 18.44 US cents/kWh, ranging from a low of 15.99 US cents/kWh in 2004 to a high of 20.90 US cents/kWh in 2007. The 2008 average tariff was distorted by the provision created pursuant to the PUCs decision.
Fig. 3.14
BEL Energy Sales and Revenues

450 400 350 300 250 200 150 100 50 0 2004 2005 2006 2007 2008 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 -
Sales Volum e
Sales Revenues
Source : BEL Annual Reports
Profitability and Returns Between 2004 and 2007 BEL demonstrated a fair amount of financial stability and was able to generate fairly consistent returns on its shareholders investment. The average return on equity (including capital contributions) over this period was 11.29%, ranging from a low of 10.49% in 2004 to a high 11.96% in 2006. However, this fairly reasonable financial performance dramatically changed in 2008 when the company recorded an after tax loss of US$5.4M; earning a negative return of 4% on stock holders equity. The primary contributors to this loss were (a) the PUCs decision to have the company rebate US$18.1M to customers and (b) the failure of
US$M
GWh
the company to secure a tariff adjustment to meet the growing cost of energy purchases and other operating expenses. Investment and Financing Over the five year period 2004 2008 BEL non operating cash inflows amounted to US$82.8M. Proceeds from the issue of common shares, US$42.4M and borrowings from external sources, US$37.7M were the primary sources from which this nonoperating inflows originated. Cash surplus generated from operations was US$91.0M. This means that total free cash flows available for non-operating activities was US$173.8M.
Table 3.6 BEL Selected Operating & Financial Statistics 2008 Energy Sales Total Revenues Operating Expenses Operating Income Net Finance Cost Taxes Net Income Capital Expenditure Proceeds From Borrowing Current Ratio Total Debt To Equity Receivable Outstanding Return On Equity Days % MWh US$000's US$000's US$000's US$000's US$000's US$000's US$000's US$000's 406,985 74,312 74,968 (657) $3,327 1,436 (5,419) 20,826 7,103 2007 381,759 83,597 64,402 19,196 $2,829 1,435 14,932 23,560 5,404 2006 359,593 78,061 59,988 18,073 $3,685 1,346 13,042 16,023 3,692 2005 349,726 62,681 47,544 15,137 $4,652 1,044 9,442 12,602 15,867 2004 329,977 55,084 42,156 12,928 $4,265 752 7,911 12,756 5,600
0.72 0.65 63 -4.01
1.33 0.55 49 11.05
1.90 0.56 53 11.96
0.47 1.15 73 11.65
0.66 1.30 84 10.49
Of the US$173.8M available the company invested US$85.8M, approximately 49% in the expansion and improving of its plant facilities. Another US$64.3M was employed in the redemption of debentures and repayment of debt.
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Fig. 3.15 BEL Sources & Use of Financing (2004 -08)
Prior to 2008 BEL operated as a financially stable electric utility generating a reasonable rate of return for its shareholders while meeting the demand of creditors and customers. The company demonstrated steady financial progress over the fiveyear period and has moved away from a reliance on short-term credit and overdraft facilities to more long-term financing. At the end of 2005 the entity had on its books bank-overdraft totaling US$3.7M. With the aid of a tariff adjustment and a shift to more long-term financing the company was able to turn around this situation and by the end of 2006 had cash and near cash investment totaling US$7.1M. At the end of 2008 this figure stood at US$4.5M. This improvement in cash position resulted in a 42% reduction in finance charges between 2004 and 2007. This improved financial performance over the period is further evidenced by a current ratio of 1.33 in 2007 as compared to 0.66 in 2004. Between 2004 and 2007 BEL recorded continuous annual financial improvement; however, this performance has been negatively impacted by the 2008 decisions of the PUC. If the 2008 performance is not quickly reversed the company will be experiencing serious financial challenges in 2009 and beyond. 3.3.6 The Petroleum Sector
For years oil explorations were done throughout Belize. However, it was not until 2005 that deposits were discovered in commercially viable quantities by the Belize Natural Energy Ltd. (BNE) at Iguana Creek, Cayo District. BNE is owned by Irish nationals and its parent company is registered in St. Kitts. It currently produces close to 4,000 barrels of oil per day. BNE expects its output to reach 5,000 barrels per day in 2009.
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Belizes oil output is 38-degree API13 or sweet crude and it commands an attractive price on the global market. At present Belize has no refinery, as such all the oil produced is sold to refineries in Costa Rica, Panama, El Salvador and Corpus Christi, Texas. Belize therefore continues to import all its oil as it presently consumes approximately 7,000 barrels per day. BNE plans to construct a 1.4 MW Gas Turbine power plant in 2009 and employ the methane produced from its oil wells to fire the plant. It intends to get into an agreement with BEL which will allow it to sell the excess generation to the grid. 3.3.7 Legal & Regulatory Framework
The principal legislative instruments under which the Belizean energy sector operates are: 1. Electricity Act, (1992) 2. Petroleum Act, (rev. 2000), 3. Public Utilities Commission Act, (1999), 4. Electricity License granted to BEL (2000) 5. Electricity License granted to Belizean Aquaculture Limited (2008) The Electricity Act of 1992 reformed and restructured the electricity industry. It made provisions for private participation and competitiveness in the sector; the regulation of electricity services and established the mechanism for the granting of licenses to providers of electricity services. BEL is the only privately-owned bundled supplier of electricity in Belize, required by law to provide transmission services to any independent generator under contractual arrangements with specified payment terms. It is the only company authorized to provide the full range of transmission, distribution and supply of commercial electricity in the country. BEL was granted an exclusive licence to supply electricity services in 2000 and unless revoked, will remain in force until June 30, 2015. Thereafter, the Licence will be granted for a consecutive period of ten (10) years unless either the Commission or the Licensee serves upon the other not less than one year's written notice indicating an intention to have the license terminated. Under the terms of the license, at the expiry in 2015, BEL will have the right of first refusal of the grant of any subsequent licence.
13
See the CRNM Assessment of the Energy Services Sector in the Caribbean (2008)
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The Licence provides under Condition 3: Economic Purchasing and Efficient Use that, The Licensee shall purchase electricity and assets and services in connection with the carrying on of its Generation Business, Transmission Business and Supply Business at the best effective prices reasonably obtainable having regard to the sources available. In determining the effective prices at which electricity and such assets and services are purchased by the Licensee, regard shall be had to market conditions. In the discharge of its obligations, the Licensee may additionally have regard to any considerations liable to affect its ability to discharge its obligations under this Condition in the future, including the future security, reliability and diversity of sources of electricity, assets and services available for purchase. This provision mandates the Licensee (the Licensee shall...) in its delivery of electricity services to give due regard to market conditions, which would include fuel prices, fuel security, and economic security. As such there is nothing in the Licences that bars the Licensee from pursuing renewable options provided that it is consistent with the best effective prices reasonably obtainable having regard to the sources available. In addition, the Licensee has discretion under the Licence to consider issues of RE applications in the diversity of its sources of electricity (...may additionally) with regard to its ability to discharge its obligations in the future, considering security, reliability and diversity of sources of electricity supply. Belizes natural environmental attributes and available natural resources provide a high level of RE potential, ranging from hydro-electricity (including micro-hydro), through bagasse co-generation and wind farms. Off-grid RE for rural areas could be supplied from wind and photovoltaic systems for electricity as well as solar panels for water heating. However, renewable energy sources tend to have higher per unit energy costs than conventional sources and therefore mainstreaming them into the energy mix in Belize will require policy support premised on sound sustainable development objectives. The Public Utilities Commission Section 3(2) of the PUC Act stipulates that The Commission shall be an autonomous institution governed by the provisions of this Act and any other law, and may exercise any powers and functions entrusted to or conferred upon it by or in accordance with the provisions of this Act or any other law, and such other duties incidental or ancillary to, or consequential upon, the performance of its functions. The PUC is a multi-sector regulator with responsibility for the setting of rates and the maintenance of quality of service delivered in the electricity, water and telecommunication sectors.
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Section 22(2) of the PUC Act states that the Commission has a duty to take into account, in exercising those functions, the effect on the physical environment of activities connected with the supply of utility services. As such, it provides for the monitoring of RET targets by the Commission. BAL Licences The Licence issued to Belize Aquaculture Limited (BAL) which took effect on July 1, 2008 provides for the supply of electricity by the company to BEL. The Licence expires in 2024. It is expected that commencing 2009 BAL will provide10MW of diesel capacity to the grid. This Licence is interesting for two reasons. Firstly, although it is a fossil fuel plant it will augment Belizes energy security by reducing the countrys dependence on imported electricity from Mexico. Secondly, it demonstrates that similar supply arrangements may be achieved with RE technologies. In 2002, the Government of Belize produced a paper with the assistance of the UNDP entitled Formulation of National Energy Plan for Belize. The paper provided the justification for the Policy and identified (a) the project components (b) the Output Targets and (c) the Indicative Project Activities. One year, a study entitled Energy for Sustainable Development Toward a National Energy Strategy for Belize Energy Sector Diagnostic was published under the auspices of the United Nations Development Programme (UNDP). The study noted that despite the encouraging technical prognosis for RET development, there are also significant barriers that could limit the widespread use of RE in Belize.14 It highlighted three of the barriers: 1. The Lack of a National Energy Policy: which promotes the use of RE as opposed to continued use of fossil fuels. 2. Financial Constraints caused by the cross-subsidization of electricity prices which reduces the countrys capacity to generate internal funds for the development of RET. In addition, it negates the attractiveness of investing in RET by the private sector. 3. Insufficient Capacity; in that Belize does not have adequate human and institutional capacity to promote RETs. A National Energy Plan for Belize (Sector Diagnostic and Policy Recommendations) was proposed. The UNDP sought to assist Belize in developing policy initiatives, with the joint objectives of amalgamating environmental
14
Energy for Sustainable Development Toward a National Energy Strategy for Belize Energy Sector Diagnostic, p.9
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management and poverty reduction. It was stated that developing sustainable energy technologies and promoting sustainable energy practices were critical to achieving sustainable development in Belize. In 2007 a Technical Needs Assessment (TNA) was conducted in Belize. The objective of the TNA was to identify measures within the energy sector potentially applicable for mitigation of greenhouse gas emissions and to prioritize these measures using criteria such as multiple application, cost benefit analysis, and best practices. One of the findings of this 2007 Study was that Belize does not have a clear National Energy Plan that defines, plans, regulates and manages the security and cost-effectiveness of energy supplies. That was by far the most critical finding of the report. The report expressed the view that Belize seemed determined to rely heavily on imported fossil fuels and (to a lesser extent) electricity, both of which when imported are not subject to the countrys direct control in terms of both cost and supply. The report urged the development of plans to decrease this dependency on fossil fuel and to move towards RE technologies. Despite several recommendations over the years for a National Energy Policy, this has not yet been formulated. Although the legal and regulatory framework does not hinder the development of RET there is an apparent lack of governmental will to develop a formal policy to guide the process. While it is recognized that meaningful steps have recently been taken to increase power generation from hydroelectric and sugar-cane bagasse resources, there is also a need for a comprehensive national energy plan, which would work in tandem with the National Energy Policy. The result should be a national energy plan that presents and documents viable, innovative and integrated policy options for these issues. It needs to be a cohesive plan which clearly sets out objectives, the strategies to be used to achieve its goals, and the timeline to get there. This policy should project future energy requirements, identify potential energy sources, technologies, timescales, and estimates of the investments required. It would then serve as the basis on which all energy-related project proposals would be based. Decisions can be guided by the results of field and secondary research which have already been carried out by a number of international agencies, including the World Bank. Financial incentives programmes can be used to energize development and investment in RE technologies, as has been done in Barbados. The active involvement of all stakeholders in developing and implementing the policy is strongly recommended. Stakeholders from the public and private sectors should be involved in all aspects of the process which should be one of open dialogue if it is to be effective, productive and sustainable.
3.3.8
Renewable Energy
Hydro and Bagasse Generation Renewable energy for accounts for 44% of Belizes electricity generation and this is expected to increase to 74% in 2010 with: the addition of a 13.5 MW cogeneration plant by BELCOGEN in October 2009. The plant is to be fueled by bagasse produced by the Belize Sugar Industry Ltd; the addition of the 19 MW Vaca hydro plant by BELCO on the Macal River in 2010.
With these capacity additions the countrys energy security should improve significantly. Currently, Belize depends on Mexico to meet 54% its electricity generation needs however with the planned addition it is expected that by 2010 it should be reduced to 12%. In addition, these renewable energy sources have the potential of reducing the average price of electricity. Studies have shown that there exists hydro potential totaling another 22 MW in Belize. However, the investment cost may not make some of them feasible. Biomass The potential also exists for electricity generation from biomass sources: by employing Methane emissions from the Western Corridor Waste Landfill. This could provide about 0.2MW of capacity in 2012 and 1.1MW of capacity in 201715; by reviving its logging industry which was hard hit by the Southern Pine Bark Beetle. The wood shaving from the industry could serve as fuel.
Solar Heaters While there is no statistics available on the extent of solar heating installations in Belize the evidence suggests that it is not significance. Consequently, there is enormous scope for the substitution of solar energy for electricity as it relates to heating.
15
Progress Report on Enabling Activities for the Preparation of the Second National Communication to the Conference of the Parties of the United Nations Framework Convention on Climate Change (March 2008)
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Photovoltaic (PV) Solar electric system PV systems were employed in a rural electrification project in 2004 and the results, based on a survey conducted in 2008, are favourable. This solar photo-voltaic cell project in San Benito Poite village was funded primarily by an Italian donor, with the governments of Cuba and Belize as joint partners. The San Benito Poite Village is a small remote community without access to the electricity grid. The village economy is primarily based on agriculture and small scale logging. The project resulted in the installation of panels free-of-cost to the villagers in 85 homes, one school, 4 churches and the community centre. In addition, 5 streetlights were installed. The installation of the panels was coupled with an education programme about the use of the system. Before the project kerosene lanterns and, to a lesser extent, candles were the main source of lighting. The 2008 survey revealed that while the system is used all day, peak usage occurs between 5 a.m. to 6 a.m. and from 6 p.m. to 9 pm. While 52% of households use the system solely for lighting, 48% also used the power for other devices such as radios, fans, televisions and DVD players. Some 90% of the villagers indicate that the project has had its biggest impact on education. After 4 years, 13% of the inverters in household systems failed and only two of the five the streetlights were still functioning. There are a number of lessons that may be leant from the project: the main benefit of the project is social and can be replicated in remote communities without electricity; educating the villagers on the proper use of the system is essential for its success; Villagers will maintain their own systems; Government should be committed to the maintenance of common facilities (or public goods) such as streetlights or ultimately they will fail.
Solar Water Heaters There are preliminary indications that at least 20 MW of electricity can developed in the Baldy Beacon eco-region of Belize. It has fairly consistent winds achieving an average per year wind speed of 7 m/s. In addition, it is expected that the social impact would be inconsequential because the site currently does not have human settlements. There may be other sites in Belize that may be suitable for Wind power.
However, there is a need for a wind mapping study in Belize to facilitate a proper assessment of the potential for development of wind energy 3.3.9 Conclusion
Although 44% of the electricity generation Belize is from hydro generation, more than half of the overall fossil fuel generation is imported from Mexico. This makes the country extremely vulnerable to disruptions in electricity from its suppliers to the north. BEL has indicated that in the past its supply from Mexico has been abruptly cut for extended periods causing severe economic dislocation. Belize has impressive hydro potential and considerable scope for other renewable technologies such as wind and co-generation (with bagasse). What however is lacking is a proper energy policy. Interestingly, Belize is one of the CARICOM member state in which renewable energy is most studied. Nevertheless, for reasons unexplained it has failed to lift its endeavours to the level of a formal energy policy. It is imperative that an energy policy is fashioned and it should be visionary enough to effectively integrate the benefits of the new oil producing sector with its latent renewable resources.
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3.4
Guyana
Map of Guyana
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3.4.1
Background
Guyana is situated on the northern coast of South America, east of Venezuela, west of Suriname, and north of Brazil. Eighty percent of the country is covered in Tropical forest. Guyana has total area of 83,000 square miles (214,970 sq km) of which land is approximately 76,004 square miles (196,850 sq km). Two percent of the total land area is said to be arable. The country has a population of 771,000 with an average life expectancy of 66.4 years. Between 2003 and 2008 Guyana experienced average real GDP growth of 8.8%; moving from Gy$5.51 billion to Gy$6.36 billion16. At the end of 2008 the countrys per capita GDP was US$1,484. A large percent of the population is engaged in agriculture (sugarcane, rice, wheat, vegetable oils, beef, pork, poultry, dairy products, fish, shrimp). Industries such as bauxite, sugar, rice milling, timber, textiles, gold mining are also significant contributors to Guyanas economy.
Fig. 3.16
Source: IMF
3.4.2
Energy Sector
Guyana, like most other territories of the Caribbean, relies heavily on imported petroleum products for its energy requirements. Since the 1950s the country has undertaken intensive petroleum exploration, however, there has never been any commercial exploitation of this resource. In addition to imported petroleum products, Guyana also depends on bagasse and other minor sources such as rice husk, fuel wood and charcoal to supplement its total energy requirements
16
GDP in Guyanese $ at 2000 prices
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Fig. 3.17
Source: GEA
Between 2004 and 2008 Guyana imported 18.3 million barrels of petroleum products at a total cost of US$1.4 Billion. The primary users of this imported energy in are: electricity, industry/mining, transportation, and residential. Table 3.7 Imported Petroleum Products
Year 2004 2005 2006 2007 2008 TOTAL Bbls 000s 3,902 3,546 3,180 3,910 3,727 18,265 US$ 000s 185,702 240,663 251,594 325,462 410,442 1,413,863
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Table 3.8 Petroleum Consumption by Sector

SECTOR Electricity Generation Transportation Agriculture/Mining Industry including sugar Residential Other Units
(000s Bbl) (000s Bbl) (000s Bbl) (000s Bbl) (000s Bbl) (000s Bbl) (000s Bbl)
2004 1,717 972 371 471 229 232
2005 1,517 947 329 344 224 198
2006 1,139 884 347 378 245 226
2007 1,471 891 504 419 244 296
Total
3,992
3,558
3,219
3,825
Fig. 3.18
Source: GEA
Bagasse is heavily used in the cogeneration process, producing steam and electricity for each of the countrys 8 sugar estates. During 2008 the estimated total Bagasse yield was 1.01 million tons, of which a significant portion was consumed in electricity production. Rice husk is used as a fuel source by rice mills to dry paddy, parboiling and a few mills use the husk for electricity generation. Production estimates for 2008 is approximately 97 million kilogram.
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3.4.3
Electricity Sector
Currently, the Guyana Power and Light Inc. (GPL) is the main supplier of electricity to the Guyanese public, with its franchise area encompassing the entire three counties of Demerara, Berbice and Essequibo. Prior to independence in 1966, the main electricity supplier in Guyana was the British Guyana Electric Company (BGEC). After Independence in May 1966, the BGEC was nationalized and the Guyana Electricity Company (GEC) was established as a wholly-owned state monopoly. This structure continued until 1999 when the Government of Guyana divested 50 percent of its ownership and control. The purchaser was a UK-based consortium comprising the Electricity Supply Board International (ESBI) and the Commonwealth Development Corporation (CDC). The company was then renamed Guyana Power & Light Inc. (GPL). This divesture failed and the company reverted to 100% state ownership in May 2003. Table 3.9 Guyana Installed Capacity & Energy Output (2008)
PLANT CAPACITY (MW) 132.0 18.0 24.7 54.0 10.4 2.0 3.1 70.0 314.1 ENERGY OUTPUT (GWh) 566.0 70.9 21.3 37.0 16.0 5.1 2.8 100.0 819.1 CAPACITY (%) 42.0 5.7 7.9 17.2 3.3 0.6 1.0 22.3 100.0 ENERGY (%) 69.1 8.7 2.6 4.5 2.0 0.6 0.3 12.2 100.0
Guyana Power & Light Inc Linden Electricity Co. Inc Guyana Sugar Corporation Guyana Sugar Corporation Aroaima Kwakwani Other Suppliers Estimated Self Generators Estimated TOTAL
Although GPL is the main player in Guyanas electricity sector, there are a number of other small independent, isolated electric utility operations that supply electricity to various regions of the Country. The sugar industry, although not distributing to the public, is also a major producer of electricity in Guyana and currently accounts for 25% of the countrys total installed generating capacity. Also, it is further estimated that there is an added 70 MW of privately-installed generating capacity. Currently, total installed generating capacity is estimated at 314.1 MW. Total electricity output for 2008 is estimated at 819.1 GWh. Approximately 85% of the Guyanese population has access the electricity.
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3.4.4
Financial Performance of Electricity Sector
Revenues and Sales Between 2004 and 2008 Guyana Power & Light (GPL) recorded an average growth in MWh sales of 5.1%, growing from 292,160 MWh in 2004 to 355,882 MWh in 2008. Approximately 40% (24,879 MWh) of this growth can be attributed to the reduction in system losses from 38.8% in 2004 to 34.2% in 2008.
Fig. 3.19
GPL Energy Sales and Revenues
400.0 350.0 300.0 250.0 200.0 150.0 100.0 50.0 2004 2005 2006 2007 2008 Revenues
140.0 120.0 100.0 80.0 60.0 40.0 20.0 -
Energy Sales
Source : GPL
Accompanying the positive trends in energy sales was an average annual growth in revenues of 11.5%, increasing from US$74.4M in 2004 to US$114.9M in 2008. Over this same period the average price of electricity moved from 25.5 US cents/kWh to 32.3 US cents/kWh, a 27% increase over the four year period Of The US$40.5M increase in revenues between 2004 and 2008; increase in average tariffs contributed US$19.9M. Demand growth and loss reduction US$12.5M and US$8.0M respectively.
US$M
GWH
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Fig. 3.20
GPL Relative Contribution to Revenue Grow th 2004 - 2008 Loss Reduction 20%
Tariff Inc 49%
Dem and Grow th 31%
Profitability and Returns Between 2004 and 2008 GPL recorded accumulated losses, before giving effect to corporation and other taxes, of approximately US$ 31.5M. While the accumulated loss over the period was US$31.5M, The entity actually recorded a profit of US$ 1.8M in 2004 registering a steady decline cumulating in a loss of US$ 14.5M in 2008. This significant deterioration in financial performance between 2004 and 2008 can be attributed to failure of the companys operating revenues to keep pace with the growth in fuel component of generation cost. In fact, GPL has done extremely well in improving its operational efficiency over the period. This improvement is demonstrated by the relative growths in operating cost and energy output. Between 2004 and 2008 energy production increased by 10% while non fuel operating cost moved from US$37.4M in 2004 to US$38.5M in 2008, a mere 3.1% change. Between 2004 and 2008 total generating cost increased from US$46.3M to US$104.9M a 127% increases. This growth in generation cost is almost totally attributed to movements in the cost of fuel, which increased by US$56.6M, moving from US$35.8M in 2004 to US$92.4M in 2008. Over the same period the companys total revenues increased by only US$40.5M. This means that the entity has not been able to recover the full effect of rising fuel cost. This, together with an average system loss of 37%, is the main factor impacting on the financial viability of the GPL. Investment and Financing Between 2004 and 2008 GPL invested US$45.2M in the expansion and improvements of its generating, transmission, distribution and administrative facilities. Additionally, the company also experienced continuous annual decline in net operational cash inflows, culminating in negative net flows of US$8.6M in 2008.
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This operating deficit, along with the companys capital expenditure programme, is mainly financed through a series of grants and advances. Between 2004 and 2008 non refundable grants from the Government of Guyana, Inter-American Development Bank and Private Customers that went into the expansion of plant facilities amounted to US$28.3M. Additionally, the Guyana Government, on several occasions injects various amounts into the entity to assist with operational and investment funding requirements. For example, in 2008 government advanced US$16.4M in repayable fuel subsidy to the company.
Table 3.10 GPL Selected Operating & Financial Statistics 2008 2007 Energy Sales MWh Total Revenues Operating Expenses Operating Income Net Finance Cost Taxes Net Income Capital Expenditure Grants & Customer Financing Current Ratio Total Debt To Equity Receivable Outstanding Return On Equity - % Days % US$000's US$000's US$000's US$000's US$000's US$000's US$000's US$000's 355,882 117,247 130,955 (13,708) 781 4,791 (9,697) 15,483 6,841 1.32 2.93 48 -6.71 350,922 100,908 111,770 (10,862) 949 3,910 (7,900) 6,987 6,342 1.97 1.27 44 -4.40 2006 314,102 90,286 97,270 (6,984) 922 2,527 (5,379) 11,694 10,203 3.35 0.77 49 -2.61 2005 301,139 83,532 81,599 1,934 1,037 (565) 332 6,722 3,370 4.54 0.53 59 0.15 2004 292,160 76,163 73,159 3,004 1,188 (933) 883 4,356 1,534 4.33 0.47 66 0.43
GPL is a 100% publicly owned utility, as a result the companys tariffs and by extension its revenues will largely be influenced by government policy. Therefore, although the company is operating at a loss this may not be significant. Since the Government of Guyana seems to have committed itself to providing the financial support necessary to ensure that GPL continues to meet the expectation of its customers and creditors. 3.4.5 Expansion Plan
Over the ensuing five years beginning in 2009 and ending in 2013 Guyana Power & Light (GPL) plans to spend approximately US$159.7M on the improvement and expansion of its electric infrastructure and support services.
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Table 3.11 Guyana Power & Light Capital Expenditure Programme 2009-13
Unit Generation Transmission Lines Substation Loss Reduction Other Total

Source: GPL
2009 32,465 4,194 4,667 4,883 5,647 51,856
2010 40,045 9,697 16,377 13,140 4,492 83,751
2011 2,250 3,228 6,768 1,492 13,738
2012
2013
Total 72,510 16,141 24,272 31,286 15,502 159,711
US$000 US$000 US$000 US$000 US$000 US$000
3,095 2,953 6,048
3,400 918 4,318
The greater portion, approximately US$72.5M or 45% of this expenditure will be expended on the expansion of Generating Capacity. Another US$57.32M will be expended on the improvement and expansion of the Transmission & Distribution network.
Fig. 3.21 GPL Projected Capital Expenditure (US$M): 2009 - 2013
Source: GPL Expansion Programme 2009 2013
Generation Guyanas forecasted annual normal growth in electricity demand between 2009 and 2013 is 3.5% - 6.2%. The planned expansion in generation capacity not only aims to satisfy growing demand but also has as one of its primary focus the need to reduce dependence on expensive imported fossil fuels. Currently, approximately 36% of GPL energy generation is from diesel fired technology. The short to medium-term expectation is to totally eliminate the employment of this technology for base-load support.
It is primarily to fulfill the multiple objectives of: satisfying growing demand, diversifying electric energy sources, improve system reliability and lowering the cost of energy that Guyana will be expending US$72.5M over the ensuing five years on the expansion of its Generation Capacity. Additionally, the country will be seeking to secure additional capacity via Private Power Agreements. To accomplish these objects the GPL has targeted three main projects for development over the short to medium-term: Medium Speed Plants GPL has planned for 2009/2010 the installation of 30 MW of medium speed generating facilities burning Heavy Fuel Oil in the Demerara region. This capacity is to be added in two tranches 20 MW in 2009 and expanded by another 10 MW in 2010. Although the programme is behind schedule the GPL is committed to the project and is expected to be commissioned in the short-term. Hope Beach Wind Farm (IPP) In March 2007 GPL and Delta Caribbean signed an MOU for the development of a 13.5 MW wind farm at Hope Beach on the East Coast of Demerara. Changes in the international financial markets and also changes in the market for components of wind technology have necessitated a revisiting of the project. However, a commission date sometime during the last quarter of 2010 is now still being targeted. Although the capacity of the wind farm is forecasted at 13.5 MW, for planning purposes a firm capacity of 4 MW was assumed. The developers of the project will supply energy to the public grid under a Power Purchase Agreement (PPA). Amaila Falls Hydropower Project (IPP) It is in the production of Hydro Power that Guyana has the greatest renewable energy potential. The Guyana Energy Agency has identified 67 sites in seven regions across the country as having hydro potential. The five largest sites (see Table 3.12), located in four regions, are said to have a potential of over 2,800 MW. The country is about to realize some of this hydro potential with fairly well advanced plans for the development of Amaila Falls Hydropower Project. This project involves the construction of 100 -150 MW of Hydro Power Capacity. This energy will be supplied to the national grid under an Independent Power Producer (IPP) Contract. The 2009 2013 expansion programme anticipates that this capacity will be commissioned by the end of 2012; this schedule is now being revised and current projections estimate a 2014 commissioning.
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The implementation of the Amaila Falls Hydro project at a possible 150 MW will result in the major portion of Guyanas energy needs being supplied by renewable sources supplemented by technology burning Heavy Fuel Oil; thereby relegating its diesel burning capacity to being used for reserves purposes only. Based on normal demand growth, the 150 MW appears to be substantially more than the required capacity at this time. However, it is reasonably anticipated that with the increase in reliability and the reduction in average tariff brought about as a result of the addition of new, more reliable and less expensive power producing technology a number of self-generators will be attracted to the public grid. This migration to the public grid is expected to create a spike in demand sometime in 2013/2014 of about 26%. Transmission and Distribution Between 2009 and 2013 GPL expects to spend approximately US$57.32M on the expansion and upgrade of its Transmission and Distribution facilities. The greater portion of this expenditure, US$43.41M will be spent on the improvement of the Transmission network and another US$13.91M on Distribution. The primary goals of these expenditures are: Greater System Integration The transmission of power from new and expanded generation capacity Improvement in reliability of T&D system Construction of new substation Reduction in technical losses Frequency upgrade/standardisation Re-design of sections of the distribution network
Loss Reduction During 2008 GPL recorded energy losses of 34%; this level of loss has serious implication for the financial viability of GPL. In recognition of this fact GPL will be expending US$31M on loss reduction programmes over the next five years beginning 2009. The targets for this programme of expenditure is to reduce technical losses from the current level of 11.4% to approximately 8.05% in 2013 and to reduce non-technical losses to 12.7% down from the current estimate of 21.6%. Sources of Financing The expected sources of financing for the total expenditure of US$159.7M are: Debt: US$102.22M IPP: US$30.35M GPL: US$17.57M Grants: US$ 9.58M or 64% or 19% or 11% or 6%
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The accomplishment of the five-year expansion programme as outlined in its Development and Expansion Programme for 2009 to 2013 will see Guyana employing a significant portion of renewable capacity in its generation mix. The increased utilisation of this indigenous technology would also improve energy security and sustainability with less dependence on the price-volatile imported fossil fuel. 3.4.6 Legal & Regulatory Framework
The major pieces of legislation and/or policy document governing the energy sector in Guyana are: 1. The Electricity Sector Reform Act (1999) 2. The Public Utilities Commission Act (1999) 3. The Guyana Energy Agency Act (1997) as amended 2004 and 2005; 4. The Hydro Electric Power Act (1956) as amended by the Energy Sector (Harmonization of Laws) Act (2002) 5. The Petroleum (Exploration and Production) Act (1986); and 6. The Licence granted to Guyana Power and Light Inc (issued 1999) The Government of Guyana through the provisions of Electricity Sector Reform Act, the Public Utilities Commission Act, the Guyana Energy Agency Act and the Licence to Supply Electricity issued to Guyana Power and Light in October 1999, established a regulatory framework to govern the power sector. Of these, the Licence is of major relevance to the electricity sector, the primary industry in the energy sector and in many instances the provisions of its sections take precedence over both the Electricity Sector Reform Act 1999 and the Public Utilities Commission Act (1999). The Licence granted to the Guyana Power and Light Inc impacts the operations of the energy sector. It is noted that under Section 35 of the Licence it is stated that in the event of conflict or inconsistency between the terms of the Licence or any other law or regulation of Guyana, the terms of the Licence will prevail. This is a far-reaching and questionable statement of law and curtails the authority of the Public Utilities Commission. Further, Section 15 of the Licence authorizes the utility company to purchase electricity from independent power producers on the proviso that the terms must be approved by the Public Utilities Commission. Section
15 (e) of the Licence further allows the licensee to enter into power purchase agreement with independent power producers who generate electricity from renewable energy resources. In such instances the terms of the agreement must be approved by the Commission. However, the section further provides that the agreement for electricity from renewable source must reflect the principle that the purchase price payable by the licensee to the independent provider shall not be greater than the licensees marginal cost of electrical energy. This is an institutional barrier to the development and sustainable growth of renewable energy sources in the generation of power. The cap on the price to be paid ignores the fact that electricity from small-scale renewable sources may be more expensive than that from traditional/conventional source of energy. Amendment is recommended to the Licence to remove this cap and further financial legislation is recommended providing fiscal incentive that could be used to enhance the development of renewable technology. Such amendment and legislation would be a major step towards independence from fossil-based resources. Legislation which, for example, introduces tax credits would create and bolster the domestic renewable industry while providing clean, affordable, carbon-free energy. There is in place renewable specific legislation in the form of The Hydro Electric Power Act (1956) which was enacted to make provisions for the grant of licences authorizing the utilization of water for the purpose of generating electrical energy and matters connected therewith. By virtue of Section 6 thereto, the government may grant Licence to any person on such terms and conditions .and in the manner prescribed authorizing him (a) to divert, store and use for the purpose of generating electrical energy such quantity of waters of any rivers as may be specified in the Licence.. This piece of specific legislation in the area of renewable energy should have ensured that hydro/renewable technologies play a significant part of the countrys energy sector. By introducing legislation the government would have set the groundwork for giving the energy sector and the hydro-renewable technology in particular 'policy certainty' that should have attracted investment, expand manufacturing and lower the cost of energy to consumers. But there is still a dependence on fossil fuels in Guyana energy sector and the main obstacle in this regard appears to be the high investment cost associated with hydro projects. The Petroleum (Exploration and Production) Act (1986) creates the framework for making of regulations to provide for the prospecting or production of petroleum, including the carrying out of all operations and the execution of all works for the
purposes and provides income to the government through royalty payments as established under Section 45 of the said Act. Major market players in the energy industry are: 1. Guyana Power and Light Inc. 2. The Office of the Prime Minister 3. Public Utilities Commission. 4. Guyana Energy Agency
Office of the Prime Minister Authority for granting licences is centralized in the Office of the Prime Minister. This Office also has principal policy-making and regulatory responsibility for the sector. All licences to public utilities and independent power producers and approval of development and expansion plans must be done through the Office of the Prime Minister. The minister also has the responsibility for establishing operating standards and performance targets for Guyana Power & Light. Public Utilities Commission The Public Utilities Commission (Commission) as established by The Public Utilities Commission Act (1999) is responsible for monitoring and enforcing operators' compliance with commitments emanating from licences and standard terms and conditions for operations. Generally the Act provides the framework within which the Commission discharges its assigned functions and which incorporates safeguards to ensure the probity in its discharge of those functions. These include operating standards and performance targets and development of expansion plans; handling consumers' complaints; and advising the Office of the Prime Minister on these issues. The Commission is also responsible for determining and approving tariffs charged by public suppliers. However, the Guyana Power & Light tariffs are determined by a rate-setting formula incorporated in their Licence and takes precedence over the Public Utilities Commission Act (1999) and the Electricity Sector Reform Act. The current legal and regulatory framework is not conducive to an effective regulatory environment and in fact acts as a barrier to the renewable energy sector. The functions assigned to the Commission under the Act are generally in keeping with those normally accepted by international standards as appropriate for an independent autonomous regulator but in many instances is undermined either by being subject to the license granted to the Guyana Power and Light Inc. or the function has been transferred to the Minister with portfolio responsibility for the
industry. For example, the review and approval of the utilitys investment plan or quality of service standards - is transferred to the Minister. Further, the Public Utilities Commission Act (1999) is subjected in many instances to the terms of the Licence granted to the State-operated Guyana Power and Light Inc., and as such the degree to which this Act is subject to the terms of the said Licence establishes that Guyana Power and Light Inc is in many instances not subject to the regulations of the Commission. This has the effect of diminishing the regulatory role of the Commission. This legal framework should be carefully reviewed by the authorities and amended as necessary to provide effective powers as are normally/internationally recognized as appropriate for an independent, autonomous regulatory body. High investment cost is associated with renewable projects. To attract international/private investments in renewable technologies and decrease the countrys dependence on fossil fuels in the energy sector (notwithstanding and in addition to fiscal incentives), the amendment is recommended as private investors/international investors are more likely to consider effective and independent regulation to be more objective and stable rather than one whose role is diminished by the duplicate role of the Minister and who is effectively subject to the terms and conditions of the electricity Licence. Guyana Energy Agency The Guyana Energy Agency has a mandate To ensure the rational and efficient use of imported petroleum-based energy sources, while encouraging, where economically feasible and environmentally acceptable, increased utilization of indigenous new and renewable sources of energy." Under Section 5 (1) of the GEA Act the agency has the responsibility to make recommendations to the Minster regarding any measures necessary to secure the efficient management of energy and the source of energy in the public interest and to develop and encourage the development and utilization of sources of energy, other than sources presently in use. Under Section 5 (2) of the GEA Act the agency has the authority to: upon the request of the Minister to develop and implement, either directly or indirectly, a national energy plan; undertake research into all resources presently used in the generation of electricity in Guyana; disseminate information regarding the efficient use of energy and the development and use of renewable energy.
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The Guyana Energy Agency has a wide-ranging mandate and considerable powers. Consequently, it has a key role to play in the development of a new national energy plan, as well the acceleration in the use of RE technology in Guyana. National Energy Policy Guyana had formulated a National Energy Policy (NEP) in 1994 in which the basic core idea is the substitution of imported fossil fuels through the promotion and increased use of renewable sources of energy. It provided: Future Outlook 1994 2004 The objectives of the National Energy Policy are: I. II. III. IV. To provide stable, reliable and economic supply of energy To reduce dependency on imported fuels To promote where possible the increased utilization of domestic resources To ensure energy is used in an environmentally sound and sustainable manner.
The various activities and time-frame envisaged for the achievement of the objectives of the National Energy Policy were included in the implementation schedule. However, given the growing awareness of the serious consequences of global warming and the availability of more information on the countrys resources it is imperative that the policy be updated. Other Legislations The other two pieces of legislations that are important to the energy sector are The Petroleum (Exploration and Production) Act (1986) and the Hydro Electric Power Act (1956). The Petroleum (Exploration and Production) Act (1986) creates the framework for the making of regulations to provide for the prospecting or production of petroleum, including the carrying out of all operations and the execution of all works for the purposes and provides income to the government through royalty payments as established under Section 45 of the said Act. While Guyana is not presently an oilproducing country their probability of a successful oil strike is reasonable. As such, the act lays the foundation for the country to benefit from such an eventuality. The Hydro Electric Power Act (1956) which was enacted to make provisions for the grant of licences authorizing the utilization of water for the purpose of generating
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electrical energy and matters connected therewith. By virtue of Section 6 thereto, the government may grant Licence. to any person on such terms and conditions .and in the manner prescribed authorizing him (a) to divert store and use for the purpose of generating electrical energy such quantity of waters of any rivers as may be specified in the Licence.. This piece of specific legislation in the area of renewable energy should have ensured that hydro/renewable technologies play a significant part of the countrys energy sector. 3.4.7 Hydro The potential hydroelectric capacity in Guyana is more than the existing total fossil fuel generating capacity in all of the CARICOM member states. Yet, paradoxically, most of the countrys energy requirements are met by imported fossil fuel and the reliability of electricity supply is below the level that exists in most CARICOM member states. The Guyana Energy Agency has identified 67 sites in seven regions across the country. The five largest sites, located in four regions, have a potential of over 2,800 MW (see Table 3.9). Table 3.12 Potential Hydro Capacity at Guyanas Largest Sites
Region
7 7 10 7 8
Renewable Energy
Site
Upper Mazaruni Diversion Scheme Sand Landing Takwari Turtruba Kaieteur Total
Rivers
Merune Mazaruni Essequibo Mazaruni Pataro
Capacity (MW)
1,320 650 346 320 216 2,852
The main obstacles to the development of hydro-plants are: a) the high investment cost associated with the projects; b) the investment environment in Guyana is sometimes not perceived positively by foreign investors; c) the remoteness of many of the sights causing them to require additional infrastructural development to transport the electricity to commercial and residential centers;
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d) the social and environmental impact in some cases are undesirable. Presently, there are activities among a number of key stakeholders in the energy sector, such as the Guyana Energy Agency and the National Industrial & Commercial Investment Ltd which appear to be in the vanguard of a new approach to energy management. This new drive is being coordinated at the level of the Prime Ministers office which suggests political commitment. The government is almost on the verge of signing an Independent Power Purchase contract which is being negotiated and which could see development of 150 MW of capacity at the Amaila Falls. The project has already been approved by the Environmental Protection Agency and the additional capacity should come on line in 2014. Solar Heaters & Photovoltaic (PV) Solar electric system Like other countries in the region, Guyana has an abundance of sunshine but there is very little happening in relation to solar heaters. However, interest in PV systems has been rising in Guyana. During 2007 and 2008 a number of communities benefited from PV systems. Based on information from the GEA, this included some 32 PV systems which were installed at 12 locations. Most of the installations were done at public facilities such as schools and health centers in remote, isolated communities. In addition, every household in four villages had PV systems installed in their homes. Installations were also done on communal buildings in these villages. The four villages are: Yarakita Region 1 Capoey Region 2 Kurukubaru Region 8 Muritario Region 10
More than 338 PV installations were done in the villages. As a part of its Rural Electrification Programme the government plans to install 1,000 PV systems in households in the hinterland over the period 2009 -2010. Wind Energy The potential for electricity generation powered by wind exists in Guyana. Early in 2007, the government entered into an MOU (Memorandum of Understanding) with DELTA Caribbean for the construction a Wind Farm at Hope Beach. The project is expected to deliver 13.5 MW of non-dependable capacity to the electricity grid in 2010. There is, however, the need for a wind mapping study to assess the real potential for wind energy in the country.
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Biomass Already biomass accounts for more than a quarter of Guyanas primary energy requirement. This is attributable largely to the use of bagasse in the Sugar Industry and rice husk in the Rice Industry. There is also the capacity within Guyana for biomass renewable technology based on: landfill gas to energy based on population that lives in the capital, Georgetown; the use of wood shavings from the lumber industry. However, given Guyanas enormous hydroelectric potential this area of renewable energy is not a priority. Notwithstanding, it should still be the subject of a study. 3.4.8 Demand Side Management
Over the period January 2006 February 2007 approximately 446,800 florescent lamps, costing about US$750,000 were distributed at no-charge to 110,000 households across Guyana. The bulbs were a gift from the Cuban government and represented an effective approach to the reduction of residential demand. The GEA embarked upon an energy conservation programme in the middle of 2009. The programme which is essentially a public-awareness campaign has four areas of focus: Electrical appliances Energy efficient lighting Building designs Motor vehicle efficiency
In conducting the campaign the GEA plans to employ two approaches: 1. Targeting consumers through brochures offering tips 2. Targeting consumers via television The GPL does not currently have a programme in place that addresses energy audits for large electricity consumers.
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3.4.9
Conclusion
One of the challenges that Guyana faces is related to the high electricity losses partly due to theft and partly to the inefficiencies of its transmission and distribution system. This has a negative impact on the financial health of the utility and puts a drain on government resources. Like other continental countries in CARICOM, Guyana has considerable renewable energy potential, particularly as it relates to hydro electricity. However, the locations of these renewable sources are in areas remote to the main population centres. This has negative implications for investment cost required for the transportation of power. The challenge, therefore, is to create adequate economic activities in the locale of the hydro sources. If that can be done it would augur well for the countrys economic development and reduce the share of imported fuel in its overall fuel bill. In the governments bid to privatize electric utility, the PUC Act was amended in 1999 to create an atmosphere attractive to investors. However, in doing so the power of the regulator has been seriously diluted. Consequently, it has little or no role with respect to energy planning. Guyana currently has no energy policy, which is paradoxical, since it has an agency (GEA) responsible for coordinating the various activities of all entities involved in the sector. It is critical that a policy is developed to provide long term focus to the sector. In addition, the legal and regulatory framework must be strengthened in order that an enabling environment may be created for the reduction of fossil fuel dependence.
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3.5
St. Kitts & Nevis

Map of St. Kitts and Nevis
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3.5.1
Background
The Federation of St. Kitts and Nevis consists of two islands located in the northern part of the Lesser Antilles chain of islands in the Eastern Caribbean. The larger of the two islands, St. Kitts extends over an area of 176 square kilometers (68 sq. miles.) Its highest point, Mount Liamuiga is 3,792 ft (1,156 m) high. Nevis has an area of 93 square kilometers (36 sq. miles), with a length of 12.3 kilometers (7.64 miles) and a width of 9.6 kilometers (5.96 miles) at its widest point. At their closest point the two islands are separated by a channel which is only 3 kilometers (2 miles) wide. A volcanic mountain chain dominates the center of both islands. There has been strong sentiment on Nevis for independence from the larger, more populous St. Kitts, and in a 1998 referendum more than 60% of Nevisian voters voted for separation; a two-thirds majority, however, was required. The current population of the Federation is approximately 44,000, approximately 33,000 (75%) residing in St. Kitts and 11,000 in Nevis. with
Agriculture, tourism, manufacturing, and a growing offshore financial industry are the main economic activity. The agriculture only accounts for a mere 3% of the countrys economy while the service sector and industry contributes 71% and 26% respectively. The United States is the main trading partner. Between 2003 and 2008 St. Kitts and Nevis recorded real GDP growth of 5.1%, moving from EC$668M in 2003 to EC$855M17 in 2008. At the end of 2008 the people of the federation enjoyed a per capita income of US$10,560.
Fig. 3.22
Source: IMF
17
In GDP in 2000 prices
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Seventeen percent of the electricity fed into the grid in Nevis does not translate into revenues for NEVLEC. This level of losses is attributed to both technical and nontechnical factors. Line losses in St. Kitts are indeterminable; as a significant proportion of customers served by the utility have no metering facility.
Fig. 3.23
Source: The World Bank Data & Statistics (2006)
3.5.2
Energy Sector
There is no production of primary or secondary fossil fuels derivatives in St. Kitts and Nevis. However, secondary liquid fuels including: natural gas liquids, gasoline, jet, kerosene, gas oil/diesel, and LPG are imported for local consumption. Small quantities of: bitumen, lubricants and other (shale) oil are also imported. During 2007 St. Kitts and Nevis consumed approximately 980 barrels of oil per day (US EIA). 3.5.3 Electricity Sector
The electric energy sector in the Federation is controlled by two utilities: St. Kitts Electricity Department (SKED), the state-owned utility, in the island of St. Kitts, and Nevis Electricity Company Ltd. (NEVLEC), a fully-owned subsidiary of the Nevis Island Administration. Both utilities operate as monopolies; exclusively controlling the production, transmission and distribution of electricity on their respective island. In St. Kitts the utility operates as a department of the government; there is no direct corporate accountability. As a consequence of this unique structure, state enterprises and state-owned facilities are not metered for electricity consumption. This makes it impossible to measure total electricity consumption on the island or total system losses. Another consequence of this unique mode of operation is that financial performance of the utility is not measured and recorded. St. Kitts relies on an installed generating capacity of 37.4 MW to meet the electricity requirements of the populace while Nevis currently has installed 13.4 megawatts.
For each of the islands, the capacity is derived from diesel-fueled generators. Almost 30% of Nevis energy generating capacity is demanded by one customer, Four Seasons Hotel. Currently, the hotel is closed for refurbishing and as a consequence the system capacity factor is only 43%. Seventeen percent of the electricity fed into the grid in Nevis does not translate into revenues for NEVLEC. This level of losses is attributed to both technical and nontechnical factors. Line losses in St. Kitts are indeterminable, as a significant proportion of customers served by the utility have no metering facility. 3.5.4 Financial Performance of Electricity Sector
Financial data was only available for NEVLEC. SKED is a department of the government and there is no clear separation between tax revenues and electricity revenue inflows. As such, the analysis of the financial performance of St. Kitts and Nevis only focuses on NEVLEC. Revenues and Sales Between 2004 and 2008 the Nevis Electric Company Limited (NEVLEC) recorded steady growth in revenues from sale of electricity. Revenues in 2004 were US$7.9M. This figure grew annual by 5.1% reaching US$9.7M in 2008. Between 2006 and 2008 average electricity tariffs in Nevis was US 21 cents/kWh with a 2008 average of US 22 cents/kWh. Kilowatt hour sales between 2006 and 2008 (period for which data is available) also registered a relatively significant average annual growth rate of 4.6%; moving from 40,893 MWh in 2006 to 44,742 MWh in 2008. It is important to note that although the average annual growth rate was 4.6%, between 2007 and 2008 there was an actual decline in megawatt hours sold of 2.1%. This decline was due to a 6.1% decline in sales to commercial customers.
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Fig. 3.24
NEVLEC Total Revenues

10,000 9,500
US$000'S
9,000 8,500 8,000 7,500 7,000 2004 2005 2006 2007 2008
Source : NEVLEC Annual Report
Profitability and Returns Between 2004 and 2008 NEVLEC was only able to record a marginal profit in 2007. The companys inability to generate a profit is fundamentally due to the inadequacy of current tariff levels. During 2007 the company benefited significantly from the operation of the fuel surcharge provisions. While fuel cost went up by US$0.266M, fuel surcharge revenues went up by US$1.23M. This disproportionate increase in net fuel revenues when compared to net fuel cost was largely responsible for the profits recorded in 2007. However, when fuel cost went up by US4.6M in 2008 fuel surcharge revenues went up by only US$3.9M thereby restoring the usual relationship and consequently returning the company to its loss making position. NEVLECs average return on equity between 2004 and 2008 was negative 11.1%, ranging from a low of negative 27% in 2005 to a high of 1% in 2007. This poor performance is expected to continue until the company is able to charge a tariff that reflects the cost of providing the service.
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Table 3.13 NEVLEC Selected Operating & Financial Statistics 2008 Energy Sales MWh 44,742 2007 45,687 2006 40,893 2005 2004
Total Revenues Operating Expenses Operating Income Amortisation of Grant Net Income
US$ US$ US$ US$ US$
9,843,258 10,013,574 (170,316) 0 (170,316)
9,407,691 9,389,270 18,421 37,037 55,458
9,310,393 10,680,841 (1,370,449) 37,037 (1,333,412)
8,482,947 10,677,654 (2,194,707) 37,037 2,157,670)
8,256,742 8,801,276 (544,533) 37,037 (507,496)
Capital Expenditure Proceeds From Borrowing Debt Repayments
US$ US$ US$
220,749 63,078 551,934
338,191 255,471 374,960
355,692 140,567
219,260 129,207
1,082,069 200,000 331,709
Current Ratio Total Debt To Equity Receivable Outstanding Return On Equity Days %
1.64 1.68 170 -2.95
1.97 1.44 115 0.98
1.48 1.63 89 -21.20
2.10 1.17 65 -26.73
3.80 0.85 58 -5.54
Investment and Financing Between 2004 and 2008 NEVLEC invested US$2.2M in the expansion and improvement of its generation, transmission, distribution and administrative facilities. During this same period the company also expended US$1.5M on debt retirement. Despite these levels of expenditure new borrowings amounted to a mere US$0.5M. These outflows were largely financed from slowdown in payment to suppliers. At the end of 2004 the utility had on its books accounts payable and accrual of US$0.704M; at the end of 2008 this figure was US$3.7M a 424% increase while cash-related operating expenditure increased by only 3.6%.
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Fig. 3.25 NEVLEC Sources & Use of Financing (2004 -08)
3.5.5
Legal Structure is predicated on State-run monopoly utilities that control generation, transmission and distribution of electricity in the twin islands. The primary legislative and regulatory framework is found in: 1. 2. 3. 4. The Electricity Act (1993) (Saint Christopher & Nevis) The Electricity Ordinance (1998) (for Nevis) Nevis Geothermal Resources Development Ordinance (2008) The Sustainable Energy Plan, 2007
The Electricity Act (1993) establishes the authority of the Minister for issuing licences with respect to the supply of electricity. Section 3 of the Act states that no company or person shall supply electricity in any area except under the Act or a Licence granted under this Act. The Electricity Ordinance (1998) of Nevis essentially restates the provisions for the issuing of electricity supply licence stipulated in the Electricity Act (1993). However, under Section 3(2) (a) and (b) it provides for self-generation by wind and photovoltaic sources without a licence from the Minister. Given that the two utilities in the federation are extensions of the government and presently operate without explicit electricity licences, there is nothing within the existing legal framework that prohibits the introduction of independent power producers, provided a licence is granted by the Minister.
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Nevis Geothermal Resources Development Ordinance (2008) St Kitts & Nevis like most of the Eastern Caribbean countries are volcanic in origin and therefore may have the potential for geothermal power generation. Geothermal power offers the only base-load renewable energy alternative in the eastern Caribbean. In 2008, a very relevant legislation was proclaimed - Nevis Geothermal Resources Development Ordinance, 2008. This is probably by far the most comprehensive piece of legislation existing in the countries under study that deals with renewable energy. The Geothermal Resources Development Ordinance provides for reconnaissance, exploration, drilling, production and use of geothermal resources and for vesting of this resource. This lays the foundation for maximizing the geothermal capacity of St Kitts and Nevis. The Sustainable Energy Plan, 2007 The Federation of St. Kitts and Nevis with assistance from the Organisation of American States (OAS) has developed a Sustainable Energy Plan. While the Consultant was not privy to the entire plan, he was able to review the summary of the draft plan. The summary delineates the seven goals of the plan, which are: 1. To ensure adequate energy supplies to sustain economic development. 2. To outline an energy policy that focuses on energy supply while promoting increased use of renewable energy. 3. To provide for stable and reliable electricity supplies for all customers. 4. To enhance the security of energy supply and use for all sectors of the economy. 5. To allow for reasonable incomes for businesses in the energy sector, while attracting international investment where appropriate. 6. To promote energy efficiency and conservation at all levels of the economy in order to achieve optimum economic use of renewable and non-renewable sources of energy. 7. To maximize the use of renewable energy and energy-efficiency alternatives in order to protect the environment. Except in one instance18 the summary of the plan provides no targets nor identifies a timetable for achieving its goals. As such, the summary reveals the strategies but
18
See Action 27 of St. Kitts & Nevis Sustainable Energy Plan
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does not unveil the plan. This may well have been addressed in the section of the report not seen by the consultant. Consequently, the summary is essentially an examination of the strategies that will be employed to achieve the goals. The summary outlines five main strategies that are predicated on 22 sub-strategies which call for a set of 34 specific actions. The five main strategies are:
1. STRATEGY A: Market Potential Assessment 2. STRATEGY B: Grid-Tied Renewable Energy Initiatives 3. STRATEGY C: Independent Solar Energy Initiatives 4. STRATEGY D: Energy Efficiency Initiatives 5. STRATEGY E: Transport Sector Energy Initiatives
The sub-strategies and the associated actions are outlined in Tables 3.14 to 3.17 below. Table 3.14 STRATEGY A: Market Potential Assessment Sub-Strategy Action
1. Assessment of Resource Supply and Energy Demand: To expand the use of renewable energy and energyefficiency measures, it will be critical to ascertain, at least in broad terms, where key project opportunities exist. Action 1: Conduct renewable energy resources assessments for wind, biomass, geothermal, hydro, and solar energy to create a single RE Database and promote RE investments. Action 2: Conduct a Bio-energy assessment of the biomass energy of different waste-to-energy technology options, including ethanol and electricity production that will serve as a guideline to the Government. Action 3: Conduct an analysis of the electricity market potential for energy efficiency to design of appropriate energy-efficiency measures and attract energy savings investments.
Table 3.15 STRATEGY B: Grid-Tied Renewable Energy Initiatives
Sub-Strategy
2. Realignment of Electricity Generation Mix: To shift current generation profile from a totally dieselpowered operation to a more diverse mix. 3. Adoption of Policies to encourage Private Power Development
Action
Action 4: Determine, based on an analysis of the electricity generation the approach that is most suitable RE and fossil fuel energy mix for the energy sector.
4. Creation of a set RE Capacity and Awareness-Building Initiatives: To develop the capacity of key decision-
Action 5: Explore other electricity market structure options such as provisions of IPPs that sell electricity to the utility. Action 6: Explore concessions that may be given to facilitate the establishment of RE businesses. Action 7: Reduce import duties on renewable energy equipment and ancillaries required for the construction of renewable energy facilities. Action 8: Establish a comprehensive RE training initiative to increasing the human RE capacity among the utility staff and potential project developers. This effort is to be
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makers, technicians, utility officials and engineers and build public awareness of RE options.
5. Establishment of an RE Feasibility and Project Investment Fund: To overcome the barriers to investments in renewable energy facilities. 6. Establishment of Policies to Encourage and Enable SelfGeneration and Co-Generation 7. Establishment of Comprehensive RE Regulations
conducted with cooperation with CARILEC and assistance of other countries and agencies (such as CREDP) within the region. Action 9: Initiate a national renewable energy education and awareness programme aimed at all sectors of civil society. Action 10: Government commitment to playing the lead role in the creation of an RE fund to provide concessional financing for renewable energy project feasibility studies and for project investment. Action 11: Government should consider the establishment of policies that permit companies to self-generate and sell excess to the grid. Action 12: The setting up of electricity regulations and an independent regulator to govern the generation and use of private power and RET.
Table 3.15 STRATEGY C: Independent Solar Energy Initiatives
Sub-Strategy
8. Creation of a National Solar Water Heating Initiative
Action
Action 13: The removal of import duties on system components and equipment for the fabrication and/or manufacture of solar water heating systems. Action 14: The granting of concession for the establishment of solar water heater businesses for a period of no less than 5 years. Action 15: Establish national solar water heating system awareness initiative to target both the residential and the commercial sectors. Action 16: Identify and deploy solar PV systems on a variety of installations, both connected and unconnected to the grid.
9. Support of the use of Solar Photovoltaic Systems in Widespread Installations
Table 3.16 STRATEGY D: Energy Efficiency Initiatives
Sub-Strategy
10. Implementation of a Comprehensive Energy Analysis: to determine the energy uses and identify inefficiencies in the system.
Action
Action 17: Conduct a study of energy end-use practices in all sectors (public, commercial, residential, industrial, etc.) of the economy. Action 18: Conduct a study of energy generation and system losses for the utilities in all stages of distribution and transmission. Action 19: Participate as an active member country in the newly launched Caribbean Energy Efficiency Development Project. Action 20: Implement a comprehensive energy-efficiency training program for utility personnel, hotel developers and engineers, architects, potential entrepreneurs, and other relevant persons. Action 21: Implement an energy efficiency Standards and
11. Support the establishment of and participation in the Caribbean Energy Efficiency Development Project 12. Development of a Comprehensive Capacity-Building Initiative among key Stakeholders and Organizations 13. Establishment of a Standards
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and Labels Program for Energy Efficiency
14. Introduction of fiscal measures to facilitate efficiency improvement activities. 15. Introduction of an Incentive Plan for the Importation and Manufacturing of Energy Efficiency Equipment and Implementation of Energy Efficiency Projects 16. Support and assist in the establishment of Energy Service Companies (ESCOs) 17. Launch a National Demand-Side Management (DSM) Initiative aimed at Residential Energy Consumption 18. Launch a National Demand-Side Management (DSM) Initiative aimed at Commercial and Industrial Energy Consumption
Labels program to ensure that standards are set to reduce energy consumption. Action 22: Implement an energy efficiency Standards and Labels program to facilitate the labeling of energy-efficient appliances and equipment. Action 23: Assess the feasibility of implementing a subsidy or taxation strategy for energy efficiency improvements. Action 24: Decrease the import duty on equipment that meets energy efficiency standards. Action 25: Increase the import duty on equipment that has higher energy requirements or is less efficient than the set energy efficiency standards. Action 26: Catalyze the creation of ESCOs through the assessment of the business potential and joint investment with private entrepreneurs. Action 27: Implement a residential Demand-Side Management (DSM) program intended to reduce consumption and peak demand in the residential sector by 20% by the year 2010. Action 28: Establish regulations setting energy efficiency standards for new construction and industrial and/or factory operations. Action 29: Establish a concession, for a one-year period, to commercial and industrial consumers to undertake retrofitting with more energy efficient equipment. Action 30: Assess the potential for energy efficiency practices in all Government buildings and develop a standards manual to guide energy behaviour and practices in these buildings.
19. Establish Guidelines for Energy Efficient and Savings Practices in all Government Buildings
Table 3.17 STRATEGY E: Transport Sector Energy Initiatives
Sub-Strategy
20. Demonstration of a fleet of Alternative Fueled Vehicles 21. Establish Regulations Requiring, or Provide Incentives for, the Purchase of higher efficiency vehicles 22. Improvements in Public Transportation Fleet
Action
Action 31: Investigate options for the deployment of a demonstration fleet of alternative fueled vehicles (such as electric, bio-fuel, CNG, hybrid). Action 32: Analyze potential alternatives for improving the fuel efficiency and reducing harmful emissions of the countrys vehicle fleet Action 33: Provide duty concessions for vehicles used as taxis and for public transport that are energy efficient. Action 34: Initiate a national education and awareness programme to promote efficient energy use in the transportation sector.
The strategies outlined encompass the electricity sector as well as the transport sector; they examine fiscal incentives as well as capacity building; they address private sector participation as well as public sector initiatives. As such, the strategies are comprehensive and provided that the Sustainable Energy Plan addresses crucial targets and important timelines in a realistic manner, with government commitment, it should be an effective blueprint to sustainable development.
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3.5.6
Renewable Energy
The Federation of St. Kitts-Nevis is a part of the Global Sustainable Island Initiative (GSEII)19 in the eastern Caribbean which includes St. Lucia, Grenada and Dominica. In 2007 a Sustainable Energy Plan20 funded by the Organization American States (OAS) was developed. The GSEII Sustainable Energy Plan has indicated three main areas of renewable energy from which St. Kitts-Nevis can benefit: 1. Biomass to energy on St. Kitts 2. Wind energy 3. Solar Energy In addition, there is considerable potential for geothermal energy on Nevis. Biomass After experiencing consistent financial losses over two decades, the government closed down the sugar cane industry. However, the growing importance of bio-fuels may present an opportunity for the revival of the industry. The Energy Plan proposes that the revival of a financially viable the sugar industry should be based on two distinct activities: a) the production of ethanol from sugarcane to be used in powering transportation on the islands of St. Kitts and Nevis; b) the use of bagasse for other energy production or cogeneration. However, it is critical for the Government to conduct further studies into the feasibility of this project. Wind Energy Preliminary assessments have indicated that the average wind speeds on St. Kitts is 6.18 meters per second (m/s) and 7.89 m/s on Nevis. During 2008, when global oil price21 was at record level the average price (without fuel subsidy) of electricity in St. Kitts & Nevis was close to 40 US cents/kWh. This makes wind
19
GSEII is a consortium of international non-governmental organizations (NGOs) and multi-lateral institutions that have been collaboration Alliance of Small Island States (AOSIS) nations to mitigate barriers and transform their energy systems from fossil-fuel-based to sustainable energy systems.
20 21
The full content of the Sustainable Energy Plan not available to the Consulting team The nominal price of crude oil averaged US$122.64 in June 2008
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energy relatively attractive. However, there is a need for a wind mapping study and site specific feasibility studies to make this possible. Solar Energy When the abundance of sunlight in St. Kitts and Nevis is juxtaposed against the high price of electricity it is evident that there is enormous scope for the use of solar water heaters and PV installations as a source of energy. However, as is the case in other parts of the Caribbean, this requires strong fiscal incentives to make it happen. Geothermal Energy Following a successful geothermal exploration in Nevis, NEVLEC entered into an Independent Power Purchase (IPP) Agreement with West Indies Power (WIP) for the supply of 10 MW capacity of geothermal energy. This capacity addition which is to be brought into operation in 2010, represents 77% of NEVLECs existing capacity and the purchase price is approximately 9.25 US cents/kWh. The new capacity will allow for the sale of power to the larger island of St. Kitts by way of submarine cables connecting the electricity grids on the two islands. It is estimated that Nevis has a potential geothermal capacity of 200 to 300 MW, which if exploited, could allow it to export electricity to other islands in the Caribbean. 3.5.7 Demand Side Management
The biggest Demand Side Management initiative in St. Kitts and Nevis occurred in 2007 when some 140,000 incandescent bulbs were replaced by fluorescent light bulbs under the Cuban Light Bulb programme on the two islands. Apart from that there is the ongoing public awareness programme in Nevis. This involves the distribution of brochures with energy conservation tips to NEVLEC customers. No such programme exists in St. Kitts and energy audits are not carried out by any of the two utilities in the Federation. 3.5.8 Conclusion
While the value of a private ownership of an electric utility is debatable, the manner in which the St. Kitts Electricity Department is managed leaves much to be desired, both in terms of operations and planning. It is doubtful whether the reorganization of the utility along more efficient lines can be achieved while it remains a department of government. Privatization might therefore be the answer. The expected 10MW capacity addition of geo-thermal energy will certainly be in excess of Nevis needs. Therefore the plan to supply power via submarine cables to St. Kitts will contribute significantly to the reduction of the countrys green house gasses. Consideration should also be given to the merging of the two utilities in the
two islands. St. Kitts Electricity Department stands to gain from the superior organization which exists in its sister island. St. Kitts & Nevis has a Sustainable Energy Plan, but it is puzzling that the plan is not accessible by the public. Transparency and public awareness are crucial ingredients in the development of renewable energy. The country, however, has no energy policy. There appears to be the potential for the development of wind and solar energy in St. Kitts & Nevis but like elsewhere in the region - political commitment, a properly conceived policy and enhanced public awareness is essential if the renewable agenda is to be advanced.
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3.6
Suriname
Map of Suriname
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3.6.1
Background
Suriname is the only CARICOM member state for which Dutch is the official language. The country is sandwiched by Guyana to the west and French Guiana to the east. Brazil lies on its southern border and the Atlantic Ocean is to the north. It has a total area of 163,270 sq. Km (63,039 sq. miles) and the current population is estimated at approximately 500,000. Despite the relatively large land area occupied by the country, approximately four-fifth of the population lives in the capital, Paramaribo. The other one-fifth resides in scattered settlements in the hinterland. The GDP per Capita of Suriname is US$5,59922. According to the 2007-2008 Human Development Report the country is considered a country with medium human development levels and is ranked 85 out 177. Suriname is a signatory to the Kyoto Protocol23.
Fig. 3.26
Source: The World Bank Data & Statistics (2006)
Over the last five years, ending in 2008, the economy grew impressively at an average annual rate of 5.9%. Only 5% of GDP comes from agriculture, while the manufacturing and service sectors account for 36% and 59% respectively. Between 2000 and 2006 the agricultural sectors share in GDP shrunk by roughly one half, while the manufacturing contribution grew from 25% to 36%. The bauxite/alumina industry is the mainstay of the Suriname economy. It accounts for about 15% of GDP and 70% of export. The country also has oil reserves and can produce up to 16,000 barrels per day.
22 23
IMF Statistical Database Suriname signed the Kyoto Protocol on September 25, 2006
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During the global commodity boom in the middle of the decade, Suriname reversed its current account deficit, registering surpluses ranging from 1.3% to 2.9% of GDP since 200524. Tourism is now a fledgling industry in the country and with some 12% of the land area in lakes and national parks the potential for the eco-variety of the business is promising.
Fig. 3.27
Source: IMF
3.6.2
Energy Sources
During 2008 it was estimated that the average daily consumption of fossil fuel was 18,800 barrels of oil equivalent (boe) per day. Almost half of the amount is from heavy fuel oil (HFO) used in power generation and industry. In addition, some 25% of the total fuel consumption was used for transportation. LPG and kerosene, used essentially for cooking, together contribute 6% of overall hydro-carbon consumption. While hydro-carbons are used for electricity production most of the electricity comes from hydro-power. 3.6.3 The Electricity Sector
In contrast with most island states in CARICOM, Suriname does not have an integrated national grid for the distribution of electricity. The electricity system consists of a main grid serving Paramaribo and surrounding areas and a number of power systems scattered throughout the country. Some of these smaller power systems operate in total isolation to the larger grid serving Paramaribo.
24
The World Bank Data & Statistics
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Table 3.18 Surinames Installed Capacity, Peak Demand & Consumption (2008)
Operator Installed Capacity (MW) 115.0 189.0 89.0 15.0 19.0 408.0 162.8 118,000 994,019 Peak Demand (MW) 143.8 Consumption (MWh) 876,019
EBS Suralco-Afobaco Suralco-Paranam Staatsolie IAMGOLD Total
The total generating capacity in Suriname is 408 MW. Currently, IAMGOLD, the gold mining company, is EBSs largest single customer. It has a peak demand of 19 MW. The total non-coincident demand in Suriname is 162.8 MW, a mere 40% of the installed capacity.
Fig. 3.28
Source: Ministry of Natural Resources-Suriname
The wide gap between installed capacity and peak demand is largely explained by the closure of Suralcos aluminum smelting plant in 1999. With all of this, the capacity once used for smelting was made available to EBS for other ends. In addition, in recent times good rainfall has allowed the hydro plants to meet 95% of the energy supplied by EBS (see Fig. 3.26) enabling Suriname to be marginally dependent on fossil fuels for electricity generation.
Fig. 3.29
Source: Ministry of Natural Resources-Suriname
In keeping with rapid growth of the economy, electricity generation over the period 2003 to 2008 grew at an average annual rate of 5.1%. On the other hand, consumption increased at the average rate of 7.0%. Interestingly, total system losses fell from 15% to 7.3% over the period. The reduction in system losses is largely attributable to gains from technical losses accruing from adjustments made to the transmission and distribution system. 3.6.4 The Petroleum Sector
Staatsolie, the Government-owned oil company has been in existence since 1980. The company is responsible for oil exploration, production and refinery in Suriname. In 2005 and 2006 Surinames output reached 12,000 barrels per day. Oil production currently takes place at the Saramacca, Tambaredjo and Calcutta fields. Staatsolie plans by way of further onshore exploration to expand production of its current oil producing capacity. Since 1992, Suriname has been able to refine up 7,000 barrels of crude oil per day at its Tout Lui Faut Refinery. Staatsolie is presently capable of meeting all the HFO and diesel fuel need for domestic electricity generation. Given the forecasted electricity demand trajectory the state oil corporation anticipates that it will be able to continue to meet the countrys diesel and HFO power generation requirements up until 2020 and 2012 respectively.
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3.6.5
Suriname has no formally documented energy policy. The electricity company, EBS, was granted a 50-year concession in 1972 to operate as the sole supplier electricity. The Petroleum Law of 1990 gives Staatsolie, the State-owned oil company, the mandate to: a) Ensure that the State makes maximum use of its petroleum resources; b) Encourage the transfer of petroleum-related technology to Suriname; c) Encourage the training of Suriname experts in petroleum activities. As such, Staatsolie has the dual role of being both an oil production company and a regulator over the petroleum sector. There are potential conflicts of interest that this situation creates, though the argument can also be made that within a small country with limited technical resources it is best to concentrate these into one body. The absence of a formally documented energy policy means that there are no clear overall guidelines that will facilitate the sharing or exchange of information between the various players in the energy sector. Strategic guidelines that will guide, support and coordinate their actions are urgently needed. The absence of strategic policy guidelines makes it difficult to create the environment to successfully optimize its energy resources. Suriname ratified the Kyoto protocol in September 2006. As such it is committed to the reduction of green house gases. However, this process can be accelerated through the development of the legal and regulatory framework for the energy sector. If Suriname is to create a stable and successful renewable energy environment, the government (especially the Ministry of Natural Resources) will have to play a lead role. However, this should be in the capacity of facilitator as it may be necessary to create the framework for an independent energy sector regulator. 3.6.6 Renewable Energy
Hydroelectricity The extremely high proportion of hydro capacity in Suriames generation mix has allowed it to have the lowest green house gas emissions among CARICOM member states. It is interesting to note that even though the latest non-coincidence forecast (base case) indicates that demand should grow from 216MW in 2008 to 503MW in
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2023 the country has enough hydro resources to meet it exclusively with hydro plants. The two sources from which this demand could be met are: 1. the Jai Tapanahoni Hydro plan 2. the Western Hydro project The Jai Tapanahoni Hydro Plan involves the diversion of flow from Tapanahoni River and Jaikreek River into Brokopondo reservoir. This would see the addition of another 188 MW of capacity to the grid. The project would require an investment cost of about US$400 million. The second project would involve the Corantijn River on the Countrys western border with Guyana. Although feasibility studies are yet to be done, preliminary indications are that it could yield some 500MW of capacity which would be ideal for aluminum smelting. The drawbacks are the high investment costs, the social and environmental concerns associated with such a project and the border issues that would arise with Guyana. Bio-diesel Owing to the fact that there are isolated hinterland communities in Suriname, approximately 21% of the population is without access to the electricity grid. The government provides limited electricity services to approximately a third of these communities through its Rural Electrification Programme. This involves the transportation of diesel fuel to remote areas by truck to allow four hours of electricity (6 p.m-10 p.m.) by way of diesel plants daily. The average cost, which is not passed on to the consumers, is approximately 62.0 US cents/kWh. This compares with the average price of 7 US cents/kWh for consumers with access to the electricity grid. There is currently a proposal that the Jatropha plant be grown by the villagers to be processed within the community for the production of bio-diesel. The bio-diesel would be substituted for fossil fuel in the generation of electricity. The Jatropha plant is of such that it could be grown along with other cash crops produced by the villagers and bio-diesel could be a source of employment to some community members. 3.6.7
Suriname was a beneficiary of the Cuban Light Bulb programme in 2007. The programme which was based on a gift of bulbs from the Cuban Government saw the replacement of thousands of less energy efficient bulbs by florescent bulbs in households throughout the country. The programme was expected to result in energy savings of up to 10% for some households.
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3.6.8
Conclusion
Currently, the average electricity rate is 7 US cents/kWh in Suriname, which is largely attributable to the use of hydroelectric energy. The country has a significant amount of untapped hydro-power resources, which will ensure that it will have the lowest green house gas (GHG) emission among CARICOM countries, in the foreseeable future. The Consultant is not in a position to assess the financial health of the electric utility due to the absence of the financial statements. Notwithstanding, there is need for the strengthening of the regulatory framework to ensure that EBS operates efficiently. The Ministry of Natural Resources presently regulates the electricity sector; however Suriname should seek to put in place the legal framework for an independent regulator. Rural Electrification in Suriname is expensive - the average cost of providing the service to the consumers is approximately 62.0 US cents/kWh. As such there is a need for the government to find a less costly approach to Rural Electrification with special consideration given to the use of renewable energy sources. In this respect consideration should be given to the use of photo-voltaic systems as well as a pilot project should be introduced to explore the use of Jatropha as biodiesel fuel.
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3.7
Trinidad and Tobago
Map of Trinidad and Tobago
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3.7.1
Background
Trinidad and Tobago (T&T) lie in the Caribbean Sea off the northeast coast of Venezuela. Trinidad, the larger of the two land masses comprising the twin island republic has a total area of 1,864 square miles (4,828 sq km). Trinidad is mainly flat and rolling, with mountains in the north that reach a height of 3,085 ft (940 m) at Mount Aripo. Tobago, at just 116 square miles (300 sq km), is heavily forested with hardwood. Fifteen percent of the total land area of T&T is described as arable. The main agricultural products are: cocoa, rice, citrus, coffee, vegetables and poultry. Main industries are: petroleum, chemicals, tourism, food processing, cement, beverage, textiles. The Republics natural resources consist mainly of petroleum, natural gas and asphalt. The Pitch Lake, in the southwest, is the world's largest (114 acres/46 hectares) basin of natural asphalt. The current population of T&T is estimated at 1,056,608 with a declining growth rate of 0.9% and a life expectancy of 67 years. The labor force is estimated at 615,00025. The most important exports are petroleum and petroleum products, natural gas, chemicals, steel products, and fertilizer. Trinidad possesses sizable oil and gas reserves, and its prosperity is linked directly to the production of petroleum and petrochemicals. A peaking of petroleum production in the late 1970s and the decline in worldwide petroleum prices in the 1980s caused economic problems. However, increased exploitation of the country's natural gas reserves since the 1990s, as well as rising prices for oil, petrochemicals, and liquefied natural gas, has caused an economic boom. The islands also have a significant tourist industry. Agriculture still employs a relatively small proportion of the population; agricultural products include cocoa, rice, coffee, citrus fruit, and flowers. Between 2003 and 2008 T&T experienced average real GDP growth of 7.3% moving from TT$66.3 billion to TT$94.2 billion26. At the end of 2008 the countrys per capita GDP was US$18,864.39.
25 26
See www.infoplease.com GDP in TT$ at 2000 prices
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Fig. 3.30
Source:
3.7.2
Energy Sector
Trinidad and Tobago is the only island in the Caribbean Basin which is a net exporter of energy. Currently, the country is said to have proven crude oil reserves of 0.730 billion barrels. The bulk of the oil production in T&T occurs off shore, concentrated off the southeastern and southwestern coasts. In 2008 the average daily oil output was 168,110 barrels of which 117,000 was crude oil; the remainder was largely natural gas liquids. The estimated average daily domestic consumption for 2008 was 41,000 barrels or 24% of daily production.
Fig. 3.31
T & T Oil Production and Consum ption
200
000'S of bbls/day
150 100 50 0 2003 2004 2005 2006 2007 2008
Production
Consumption
Source: US EIA
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In addition to crude, T&T also possesses substantial natural gas reserves, current proven deposit of this resource is said to be in the region of 18,770 billion cubic feet. In 2007 total natural gas production was 1,377.3 billion cubic feet of which 736.6 billion cubic feet, 53% was consumed locally. 3.7.3 Electricity Sector
The Trinidad and Tobago Electricity Commission (T&TEC) was established in 1946 to generate and distribute electricity in Trinidad and Tobago excluding the city of Port of Spain and the town of San Fernando. T&TEC began generating and distributing electricity in Tobago in September 1952 when the first power station was commissioned. In 1961 T&TEC acquired the rights to transmit and distribute electricity within the city of Port of Spain and the town of San Fernando. These acquisitions effectively ensured that T&TEC was the single national entity with the authority to generate, transmit and distribute electricity throughout the twin island republic. This structure of a 100% Government-owned vertically integrated utility operating as a monopoly continued until December 1994. On 24th December, 1994, T&TEC established a fully-owned subsidiary; the Power Generation Company of Trinidad and Tobago (PowerGen). All the generating assets except that located in Tobago were then vested in PowerGen. Forty-nine percent of the equity in PowerGen was then divested to a consortium. This consortium was led by Southern Electric International, later Mirant Corporation, (39%) with the other party being Amoco (10%), T&TEC retained the remaining 51%. The commission also retained its 100% ownerships in the Republics Transmission and Distribution facilities as well as the Tobago generating facilities.
Fig. 3.32
Source: T&TEC
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Following the 49% divestment, T&TEC entered into a Power Purchase Agreement (PPA) with PowerGen. Since then, all generation expansion has been by way of PPAs. Currently, T&TEC procures 1,808 megawatts of electricity under three distinct PPAs; two with PowerGen and the third with Trinity Power. In addition to the 21 MW installed in Tobago, there is a 33 KV cable extending for approximately 42 kilometres linking the two islands, thereby ensuring that an additional 40 MW of electricity is available to Tobago. Fossil Fuel accounts for 100% of the T&T current energy generation. Gas Turbines burning natural gas account for 83% with the remaining 17% coming from heavy fuel oil. Over the past 5 years the T&TEC has experienced an average growth in demand of 4.4%, increasing from 6,088.1 GWh in 2003 to 7,544.6 GWh in 2008. Of the total sales in 2008, the companys 39,481 commercial and industrial customers account for 69% with the remaining 31% being consumed by the companys 356,258 residential customers. This demand is satisfied by a total installed generating capacity of 1,829 MW with peak demand of 1,121 MW. 3.7.4 Financial Performance of Electricity Sector
Revenues and Sales Between 2003 and 2007 the Trinidad and Tobago Electricity Commission (T&TEC) experienced average growth in energy sales of 5%, growing from 6,088,093 MWh in 2003 and reaching 7,399,509 MWh in 2007.
Fig. 3.33
T&TEC Energy Sales and Revenues

8,000.0 7,000.0 6,000.0 5,000.0 4,000.0 3,000.0 2,000.0 1,000.0 2003 2004 2005 2006 2007 360.0 320.0 280.0 240.0 200.0 160.0 120.0 80.0 40.0 0.0
Energy Sales
Revenues
Source: T&TEC
US$M
GWh
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This growth in energy sales was accompanied by a 9.7% growth in revenues. Revenues in 2007 were US$331.0M growing from US$228.5M in 2003. Average tariffs over this same period increased by US 0.72 cents or 19%, moving from US3.75 cents/kWh in 2003 to US 4.47 cents/kWh in 2007. Profitability and Returns T&TEC financial performance for the period 2002 2007 was severely affected by the companys failure to adjust tariffs in line with changes in the cost of providing electricity service to its customers. Over the five-year period the companys average return on total investment was 6%, which is fair for a publicly owned utility. However, although the average return was 6% the annual return ranges from a high of 16% in 2003 when the company generated a net surplus of US$49.3M to a low of negative 2.2% in 2006 when net loss amounted to US$40.9M. This fluctuation in financial performance is a consequence of the significant time- lag between changes in cost of providing electricity service and adjustments in tariff. As a result, T&TEC has not been able to consistently generate the resources it requires to meet its operational and investment needs. Also affecting profitability was a significant growth in non-generating operational expenses. Although the average growth in energy sales over the period was 5%, the average growth in nongenerating expenses was 15.3%. It is important to note however that the major component of this growth was a 214% increase in depreciation in 2005 when compared to 2004. Investment and Financing Over the five-year period the company invested a total of US$287M in the upgrading and expansion of its plant facilities. In addition the T&TEC also experienced net borrowing outflows of US$205.3M. The major portion of these flows was financed by a buildup in trade payables. Over the five-year period, 2003 to 2007, T&TEC cashrelated operating expenses increased by only US$15.6M. However, the entity experienced a buildup in trade payables of US$279M. The inability to generate adequate cash resources from its operations has caused the T&TEC to seek alternative means of financing. The slowing of payments to suppliers, who are willing to extend credit, is one means of financing which the company has been able to employ successfully. The Commission now relies heavily on this source to meet is operating and capital flow requirements. Another important area of financing for T&TEC is that of capital contributions. This occurs where customers are required to contribute towards the expansion of transmission and distribution facilities in order to secure or to improve electricity service. Between 2003 and 2007 T&TEC collected US$141.6M in capital contributions. This represents 49% of total capital expenditure over the period. Other important sources of financing over the period were an inflow of US$86.1M in
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dividends from its investment in POWERGEN and US$115.1M in Government advances.

Table 3.19 T&TEC Selected Operating & Financial Statistics Units Energy Sales
MWh
2007 7,399,509
2006 6,654,768
2005 6,542,256
2004 5,864,110
2003 6,088,093
Electric Revenues Operating Expenses Operating Income Other Income Less Net Finance Cost Change in Retirement Benefit Obligation Net Income US$000,s
US$000s US$000s US$000s US$000s US$000s US$000s US$000s
331,002 287,585 43,416 30,947 33,264 (8,894) 32,205
269,599 269,940 (340) 30,241 24,865 (45,968) (40,933)
251,933 252,547 (614) 24,258 30,735 42,721 35,630
229,910 263,158 (33,248) 24,188 18,957 8,392 (19,625)
228,490 242,998 (14,508) 25,589 15,360 53,531 49,252
Capital Expenditure Net Loan Repayments
US$000s US$000s
123,591 65,463
74,288 62,720
34,156 56,489
29,653 5,598
25,387 14,992
Current Ratio Total Debt To Equity Receivable Outstanding Return On Equity Return On Total Assets
Days % %
0.64 4.18 82 19.97 6.32
0.71 4.78 84 (35.33) -2.20
0.80 5.12 69 29.57 9.82
0.65 2.04 78 (14.06) -0.16
1.09 1.77 98 13.25 15.98
Like all the other publicly-owned utilities reviewed under this study, T&TEC has not been able to consistently generate the resource it requires for normal operation. Consequently, the utility relies heavily on the public sector for direct and indirect financial support. 3.7.5 Legal & Regulatory Framework
The main pieces of legislation and policy documents governing the energy sector in Trinidad and Tobago are: 1) Trinidad & Tobago Electricity Commission Act; (1946) 2) Regulated Industries Commission Act; (1998) 3) Petroleum Act (1969) & Petroleum Regulations (1970) made there-under
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Regulated Industries Commission Regulated Industries Commission (RIC) was established by an Act of the same name in1998, but actually came into effect in 2001. The RIC which is a multi-sector regulatory body has the responsibility of ensuring that good quality and efficient utility services are provided at fair and reasonable costs in Trinidad and Tobago. Under the RIC Act, the Commission, among other things, is responsible for making recommendations with respect to the awarding of licences in the electricity sector; facilitating competition among service providers (where possible), as well as monitoring and enforcing compliance with licence conditions. The Act under Section 6(3) implicitly gives responsibility to the Commission for the monitoring of renewable targets when it asserts, among other things, that the Commission shall have regard to the public interest and in particular- . . . (e) current national environmental policy. As such, the regulatory framework exists for the engendering of competition and the monitoring of a renewable energy policy when one is put place. Trinidad and Tobago Electricity Commission Act T&TEC was established by the Trinidad and Tobago Electricity Commission Act in 1946. The Act provides for the appointment of officers (commissioners) at the highest tier of the Commission by the Government and sets out the duties of the Commission, which includes: a) the management and operation of the company; b) the promotion of the use of energy consistent with the economic development of the country; c) advising the Government on all matters relating to the generation, transmission, distribution and use of energy. Section 31(2)(a) of the Act gives T&TEC the right to generate, transmit, transform, distribute and sell energy to consumers in any part of Trinidad and Tobago. The Act also makes provision for the purchase of power from Independent Power Producers. Under Section 31(2)(ac) the Act states that the Commission with the consent of the Minister, purchase energy from an approved generator of electricity T&TEC is not financially independent of the Government and needs the approval of the Government to engage in certain transaction. Under Section 31(4) the Act stipulates: Notwithstanding any power of the Commission conferred by this Act, where the Commission intends to embark upon any programme for expanding its facilities and
services that will involve borrowing moneys upon the credit of Trinidad and Tobago, or that will require a longer period than one year to complete, the Commission shall obtain the approval of the President before incurring any liability in respect thereof. Section 25.(1) allows for the setting of general electricity rates by the T&TEC The prices to be charged by the Commission for the supply of energy and services shall be in accordance with such tariffs as may, from time to time, be fixed under section 53. Section 53 of the Act further states: 1) Subject to section 25(3), the Commission may prescribe a tariff of prices to be paid by consumers for energy supplied to them by the Commission. 2) In fixing tariffs of prices to be paid by consumers, the Commission shall ensure that rates are adequate to provide sufficient revenue a) to cover operating expenses, including taxes, if any, and to provide adequate maintenance and depreciation, and interest payments on borrowings; b) to meet periodic repayments on long-term indebtedness to the extent that any such repayments exceed the provisions for depreciation; c) to create reserves to finance a reasonable part of the cost of future expansion. In practice T&TEC rates are set by the Regulated Industry Commission, consistent with the Regulated Industry Commission Act. However, T&TEC traditionally has sought the approval of Government before implementing new tariffs. By virtue of the Trinidad & Tobago Electricity Commission Act, T&TEC plays a key role in the direction and expansion of the electricity system in Trinidad and Tobago. As such, it is pivotal to the development of renewable energy in the country. Petroleum Legislations There are three pieces of legislations that governs the petroleum sector: the Petroleum Act (1969), the Petroleum Regulations (1970) made thereunder, and the Petroleum Taxes Act (1974) Ministry of Energy and Energy Industries derives the authority to regulate and provide general directions to the petroleum industry from the Petroleum Act (1969) and the Petroleum Regulations (1970).
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The Petroleum Act establishes the framework under which licences/contracts are granted for petroleum operations on land and in submarine areas underlying the country's territorial waters. The determination of the areas available for petroleum is the responsibility of the Minister of Energy and Energy Industries. Provision is made under the Act for the Minister to invite applicants to submit bids by way of a competitive process for the exploration and production of petroleum. The Ministry of Energy and Energy Industries is responsible for regulating the domestic market for petroleum products and natural gas as well as the industries involved in the manufacture of petrochemical. It is also responsible for implementation of policy initiatives and the long-term development of the petroleum sector. Under the Petroleum Taxes Act the Board of Inland Revenue is designated as the agency responsible for the administration of the system of taxation for companies engaged in petroleum operations. Petroleum Taxes Act while recognizing that the same person or entity may be engaged in different aspects of the petroleum industry, for the purpose of the Act it makes a distinction between three types of businesses: a. exploration and production operations; b. refining operations; c. marketing operations The Petroleum Taxes Act sets out the general scheme of petroleum profit tax, the basis for assessment and the rules associated with the computation of profit. The existing petroleum taxation system in Trinidad and Tobago reflects revisions made in 1992 aimed at enhancing competition, encouraging new investors and a modification to the tax structure that takes the oil price volatility into account. The petroleum taxation system includes:

A Royalty charged at a rate of 12.5% of all petroleum produced. A Production Levy of up to 3% of gross income from crude oil. A Supplemental Petroleum Tax (S.P.T.) charged on production of crude oil and based on an oil price sensitive rate structure.
Together, the petroleum legislations are aimed at promoting the exploitation of the countrys petroleum resources while ensuring that the country by way of the fiscal regime in place, benefits from the industry.
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3.7.6
Renewable Energy
Consistent with its location in the southern Caribbean the Republic of Trinidad and Tobago has considerable sunlight and wind of exploitable speed on the eastern side of Trinidad. However, the countrys vast reserve of oil and natural gas, which has made the price of energy inexpensive, has effectively erected a barrier to any serious assessment of renewable energy. Currently, Trinidad and Tobago has no energy policy; however, the government has appointed a committee comprising key stakeholders in the sector to prepare policy. The Terms of Reference includes an examination of solar, wind, wave and biofuel projects. A formal report from the committee is due in August 2008. 3.7.7 Conclusion
Trinidad and Tobagos abundant oil and natural gas endowment has allowed it to supply electricity at an average rate of 3.8 US cents/kWh, the lowest in CARICOM. Consequently, there is no real economic incentive to consider renewable energy technologies. Therefore given the opportunity cost associated with foregoing fossil fuel consumption the fiscal incentives required of necessity must be significant to change a pattern that is deeply entrenched. The preparation and implementation of a proper energy policy is therefore crucial for Trinidad and Tobago. Interestingly, there is also a need for the strengthening of the regulatory body. At present the RIC may approve changes to the electricity prices but it cannot enforce the implementation. It is the government who ultimately signals T&TEC when to implement the price change. If the regulatory body is to play a pivotal role in energy planning with an emphasis on relatively more expensive renewable technologies it is critical that it be given greater authority.
4.
COMPARATIVE ANALYSIS
Strategies aimed at reducing green house gas (GHG) may be deployed on two fronts supply side and the demand side. The study has focused on the supply with respect to the potential sources in selected countries and the policy framework to facilitate the use of renewable energy technology. Nevertheless the demand side is also important, it has implication in the Caribbean for the cost of imported fossil fuels as well as the investment cost associated with the installation of additional generating capacity. Demand Side Management Demand side management (DSM) therefore relates to the efficient use of energy by consumers. There are two fundamental approaches to demand side management:
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a) the price signal b) promotion With respect to the use of the price signal, the two main mechanisms for encouraging customers to adjust their consumption patterns are: 1. the inclining energy block in the electricity tariff 2. Time-of-Use electricity pricing
Table 4.1 DSM Indicators Country Bahamas Inclining 2Blocks/Flat27 Barbados Inclining -3Blocks Belize Inclining -3Blocks Guyana Inclining -2Blocks St. Kitts & Nevis Inclining -3Blocks Suriname Flat Trinidad & Tobago Inclining -3Blocks x x x x x x Residential Tariff Structure TOU Rates DSM Promotion Energy Audits x x x x x x
In all of the selected countries except Suriname and the island of Grand Bahama in the Bahamas, the energy rate is based on inclining block structures. In every case, except Guyana and the Bahamas, the energy rates are based on three blocks. The GPL and BEC have dual block structures. While the flat rate structure is plausible in Suriname given that there is very little need for expensive gas turbine generation to meet peak demand, the same cannot be said of Grand Bahama Power as generation is totally powered by fossil fuel plants. Time-of-Use (TOU) rate is another effective means of encouraging changes in customers consumption pattern. The idea is to charge more expensive rates during peak consumption periods and relatively lower rates during off-peak periods. This tends to be more effective among business customers. In all of the seven countries, peak demand occurs between 6:00 p.m. -10 p.m. This is explained by two factors:
27
BEC has an inclining block structure and the Grand Bahama Power has a flat rate
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1. Residential consumers tend to use more at that time 2. Tourism entertainment generally occurs at that time Only in Suriname is there TOU tariff (for industrial/commercial customers). More creativity in tariff designs should be attempted, although given the factors driving peak demand, it is doubtful if TOU tariffs would have the desired effect. The promotion of energy conservation by way of brochures is done in all the selected countries. Interestingly, in Trinidad and Tobago it is done by the regulatory body. T&TEC have indicated that it occasionally provides conservation tips over the electronic media. A more dynamic way of promoting demand side management is through energy audits. This tends to be more effective among industrial and commercial consumers. In Belize, Guyana, Suriname and the Federation of St. Kitts & Nevis a programme involving the issuing of free florescent bulbs was implemented over the period 2006 - 2007. In all of these instances the bulbs were gifts from the Cuban government. In general, there needs to be greater emphasis on demand side management in the region. Electricity Prices The average electricity prices during 2008 varied from 3.78 US c/kWh in Trinidad & Tobago to 32.94 US c/kWh in Guyana. In general, the electricity prices were high in 2008 reflecting record high global oil prices. In some countries, such as St. Kitts and the Bahamas the government intervened by providing a subsidy. The relative price of electricity in most of the selected countries is relatively high enough to make renewable energy options relatively more attractive than in other parts of the world.
Fig. 4.1
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Energy Policy & Plan Given the considerable hydro resources existing in Belize and Suriname, renewable energy accounts for 44% and 95% of their respective electricity generation. All the other countries are totally, or nearly completely dependent on fossil fuel sources for electricity production. It is interesting to note that although Guyana has more hydroelectricity potential than all the other CARICOM member states combined, it has made little use of its resources and has the highest electricity rate in the countries studied.
Table 4.2 Renewable Energy Framework
Country Bahamas Barbados Belize Guyana St. Kitts & Nevis Suriname Trinidad & Tobago Petrcaribe Membership x x
28
Kyoto Protocol Member Ratification Apr 9, 1999 Jun 20, 2000 Sep 26, 2003 Aug 5, 2003 Apr 8, 2008 Sep 25, 2006 Jan 28, 1999
National Energy Policy Completed x x x x x x Status Draft Being prepared
Sustainable Energy Plan x x x x x x
Regulator
Govt. Independent Independent Independent Govt. Govt. Independent
Barbados is the only country among those studied that has an energy policy. The Bahamas and Trinidad and Tobago are in the process of developing their policy. Suriname has expressed an intention to commence working on a policy soon. All the other countries are without policies (or up to date policies) and have not initiated the process to get it done. While for most countries a sustainable plan usually follows the energy policy, in St. Kitts and Nevis a sustainable energy plan has been developed without an energy policy.
28
Key: x- no & = yes
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Table 4.3 Electricity Market
29
Legal Authority
IPP Allowed
Country
Utility
Licence / Act
Total Capacity (MW)
Peak Demand (MW)
Expire
RE Share of Generation (%)
Energy Sales (GWh)
Electricity Penetration (%)
GBP Bahamas BEC Barbados Belize Guyana St. Kitts & Nevis Suriname Trinidad & Tobago BL&P BEL GPL SKED NEVLEC EBS T&TEC
Licence Act Licence Licence Licence Act Act Act Act
? ? 2015 2024 -
x x
135 450 239 110 314 37 13 408 1,829
73.9* 234 164 74.3 ? ? ? 162.8 1,121
0 0 0 44 0 0 0 95 0
369* 1,536 944 407 819
100 99 99 90 90 ?
45 994 7,545
? 79 95
Regulations It is only in Suriname and St. Kitts-Nevis that the electricity sector is not under the oversight of an independent regulator. This has affected how the utilities in these countries are managed, particularly as it relates to accountability. For instance, in St. Kitts the utility has no record of total electricity consumption or revenues, while annual reports have not been prepared for the utility in Suriname since 2002. In the case of Guyana the regulatory framework does not provide enough authority to the regulator for the effective monitoring of the utility. This could impair the pace at which renewable energy technology is implemented. On the other hand, the legal framework gives the Public Utilities Commission in the Bahamas enough authority to regulate the electricity sector; however, over the years the government has continued to be the de facto regulator. Rural Electrification In all the island states examined, electricity penetration is at least 95%; therefore the need for Rural Electrification Programmes (REP) is less important in these countries.
29
Key: x- no & = yes
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On the other hand, the countries of Belize, Guyana and Suriname all have segments of the population living in the hinterlands. There are essentially two approaches to REP. In the case of Suriname, diesel fuel is transported to remote communities to facilitate the limited daily provision of electricity service by way of small diesel generators. This approach is very costly as it amounts to about 8 to 9 times the average cost of electricity in Suriname. The second approach, which is practiced in Guyana and, at least in one instance in Belize, is the use of photo-voltaic systems primarily for lighting. This is both cheaper and more environmentally friendly.
Conclusion
Five of the seven countries in this study are practically totally dependent on fossil fuel to meet the demand for electricity. It is in this context, that renewable energy technologies can no longer be seen as alternatives in the Caribbean. They are now essential for reducing the dependency on foreign oil and for maintaining a secure energy supply. Renewable energy is being used in the Caribbean but currently, the main barriers to effective deployment are the lack of effective regulatory, financial and legal frameworks; the general lack of public awareness; and the high capital cost of renewable energy technologies. However, these issues will be explored in the Final Report.
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5.
CASE STUDY: THE EFFECT OF RISING OIL PRICES ON THE TRANSPORTATION & OTHER KEY SECTORS IN GUYANA
Since 2002 the crude oil price internationally increased unrelentingly until the global economic slump in 2008. Between 2005 and 2007 the average price of crude oil doubled, reaching US$99.65 before falling to US$64.20 in 2008.
Fig. 5.1
Source: www.Inflationdata.com & Bureau of Transportation Statistics
The effect of soaring oil prices on various sectors of the Guyanese economy may be difficult to assess since the period largely represents a time of global economic expansion and the rapid growth of international trade. In addition, in real terms the Guyanese economy grew at an average annual rate of 2.9% over the period30. The analysis in this Case Study is therefore a little less than robust. A proper assessment of the impact of oil prices on different sectors within the economy would have to be the subject of a special study which draws on more sophisticated analytical tools and a wider data set. Such an analysis is beyond the scope of this review. Tourism Sector Tourism tends to be influenced by airline ticket prices, global economic conditions and other factors such as destination substitutions, the fear of terrorism, the crime level, the threat of global pandemics and special entertainment events31 may be also
30 31
The period 2003-2008 International sport events and cultural festivals tend to boost tourist numbers.
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be important. It should be noted that air fares do not adjust instantaneously to oil prices. There tends to be a lag in the adjustment of air fares which is also impacted by other factors that influence demand and supply. Therefore, in 2008 although international oil prices fell, the average air fare increased. Table 5.1 Stop-over Tourist Arrivals in Guyana & Jamaica (2003-08) Stop-over Tourist Arrivals in Guyana & Jamaica (2003-08)
2003 Guyana Jamaica 100,911 1,350,285 2004 121,989 1,414,786 2005 116,596 1,478,663 2006 113,274 1,678,905 2007 134,057 1,700,785 2008 129,595 1,767,271
Source: Bureau of Statistics, Guyana & the Jamaica Tourist Board
Unlike other Caribbean destinations such as Jamaica which saw annual growth in tourist arrivals over the period 2003-08, Guyana experienced declines in arrivals for most of the period. It therefore may be argued that a global economic boom might not necessarily translate to higher tourist arrivals for Guyana. However, the rising price of air fares may have been a contributor to the decline in tourist arrivals over the period 2004-07. Interestingly, in 2007 the country saw an 18.3% jump in visitor arrivals even though air fares remained flat relative to the previous year (see Fig.5.1). In addition, even though it declined by 3.3% in 2008, it remained above the pre-2007 level. The higher levels of tourist arrivals registered in 2007 and 2008, are largely explained by the countrys hosting of Cricket World Cup (CWC) and the Caribbean Festival of Arts (CARIFESTA) respectively. Naturally, CWC being an international event pulled more people to Guyana in 2007 than CARIFESTA, a regional cultural festival event did in 2008. Therefore it would appear that Guyanas capacity to host special events have a greater influence on the countrys tourism than oil prices. Engineering & Construction Sector It is clear that the expansion of the Guyanese economy over the last five years provided the stimulus for the growth in the engineering and construction sector. The sector grew between 2003 and 2008 at an average annual rate of 8%. Therefore, it appears that the negative effect of rising oil prices on disposable income might have been offset by the overall growth in the economy. Transportation Sector Apart from the electricity sector, no other sector is more directly impacted by fuel prices than the transportation sector. In 2008 some 65% of the vehicles registered were for public transportation purposes32. Currently, Guyana does not have a
32
As opposed to agricultural or commercial uses.
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government-operated a public bus system. The transportation system is comprised mainly of mini-buses, but there are also by taxis, large buses and personal vehicles. There is a Guyana Minibus Association which is involved in the setting of prices for its members. Despite persistent rising fuel prices for most of the last five years, the importation of motor vehicles grew at an average rate of 18.8% annually. In 2008 the value of motor vehicle imports was US$69.8 million or 5.4% of total imports. Like other consumer durables, the demand for motor vehicle tends to be income elastic. Therefore with the growth in national income over the period it is not surprising that the importation of motor vehicles has increased even in the context of soaring fuel prices.
Fig. 5.2
Source: Bureau of Statistics, Guyana
It is interesting to note that even though the importation and registrations of motor vehicles trended upwards over the period, the volume of gasoline imported fell by 2.5% in 2005 and by a further 1.2% in 2006. This reduction in import may be attributable to availability of cheaper fuel on the black market. Gasoline prices are subsidized in Venezuela and are significantly lower than those in Guyana, particularly in light of the fact that the tax33 on petroleum products is relatively high. This creates a powerful incentive for the illegal movement of gasoline from neighbouring Venezuela for sale in Guyana. The illegal sales of gasoline have the potential of depriving the government of considerable amount of tax revenues.
33
In May 2008 the tax on gasoline and diesel fuel were 50% and 30% respectively.
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Fig. 5.3
Source: Guyana Energy Agency
In November 2003, the government of Guyana established a Fuel Marking Division, under the management of the Guyana Energy Association. This anti-fuel smuggling division had the responsibility of adding a marking chemical at a predetermined concentration level to gasoline, diesel and kerosene at all legitimate import points. This allowed for the testing of fuel at various sites across the country to determine the legality of the product. Vendors of fuels without the correct concentration of the marker can be arrested. Interestingly, there was an 8% jump in gasoline imports in 2007 followed by a 2.5% increase in the following year. This seems to be explained by the success of counter-fuel smuggling efforts. The conclusion that might be drawn from the effect of higher oil prices on the transportation sector are: 1. If the status quo remains, transportation import will be influenced to a greater degree by economic growth than fuel prices. 2. There seems to be a higher propensity towards buying fuel on the black market as oil prices rise. 3. The level of gasoline import not only depends on number of vehicles registered but also on the success of the Guyanese government in combating fuel smuggling. In terms of the high import bill Guyana currently pays for fuel, there are three ways in which it may be reduced while mitigating the effects of green house gasses. Firstly, consideration should be given to a government-operated public bus system in the capital where the population density is sufficiently high. With such a system there would be greater rationalization of the transportation system and the mass
movement of people could be achieved in a more efficient manner. The biggest drawback to such a system is the initial capital required to get it started. Secondly, given the existence of the sugar industry the production of ethanol to be used as a bio-fuel could lead to the import substitution of a portion of its fuel needs while lowering net green house gas emissions. Thirdly, since specific fuel consumption varies with engine size, the introduction of fiscal incentives that encourages the use of vehicles with smaller engines might be beneficial. One approach would be to make tax rate on vehicles vary in proportion to engine size.
6.
THE PETROCARIBE AGREEMENT
PetroCaribe is an alliance between Venezuela and seventeen Caribbean states based on a preferential oil payment agreement. The agreement was launched in June 2005, against the background of rising oil prices which was becoming increasingly burdensome on small non-oil producing Caribbean states. It has been lauded as a paradigm of cooperation between developing countries. At the outset, the agreement was signed on September 7, 2005 by 12 members34 of CARICOM plus Cuba and the Dominican Republic. Trinidad and Tobago and Barbados were the only two CARICOM members that did not sign the agreement. Since then the agreement has been signed by Haiti (April 2006) and two other nonCARICOM countries; Honduras in December 2007 and Nicaragua in July 2008. PetroCaribe is comprised of a two sets of agreements. The first is a framework accord, the Energy Co-operation Agreement, which was signed by most of the present seventeen members of the alliance in June 2005. The second is the bilateral energy agreements between the government of each country and the government of Venezuela. The PetroCaribe Agreement comes with several advantages: 1. By providing a part of the oil purchased as a long term loan to be paid at a concessionary interest rate of one or two percent, it provides considerable balance of payment support to dependent Caribbean economies that are extremely vulnerable to oil price volatility.
34
The 12 CARICOM countries that signed in September 2005 are Antigua and Barbuda, the Bahamas, Belize, Cuba, Dominica, the Dominican Republic, Grenada, Guyana, Jamaica, Nicaragua, Suriname, St Lucia, St. Kitts and Nevis, and St. Vincent and the Grenadines
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2. By virtue of the fact that that the agreement only allows for state oil-owned entities to be engaged in the trade of oil, it eliminates all intermediaries. In this respect, economies of scale might be achieved via the coordination and direct transportation of oil to participating countries. In addition, eliminating intermediaries it reduces the length of the supply chain thus minimizing the potential for mark-ups to end-users. As such, the agreement mitigates the effect of cost-push inflation in participating countries. 3. The provision of funding for social and economic programmes, if properly harnessed by member countries, could contribute to poverty alleviation and human development. 4. By creating a fund for renewable energy project the agreement has taken into account the finite nature of fossil fuel exploitation and is facilitating an orientation towards more sustainable energy development. 5. The trade of agriculture products as part payment for oil under the agreement could provide a needed stimulus to the shrinking agricultural sector in many participating countries. From the perspective of renewable energy, the PetroCaribe may be criticized for: 1. making fuel payments easier for participating countries and this could encourage complacency in addressing the pressing issue of increasing renewable energy generation. 2. failing to put specific renewable energy targets in the agreement, to add urgency to the development of renewable resources and reinforce the importance of the Energy Fund created for renewable projects. However, it may be argued that the benefits of PetroCaribe outweigh the cost. Ultimately, the development of renewable energy sources will depend on the commitment of Governments to develop suitable policies and the effectiveness of the stakeholders in their implementation.
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7.
7.1
CARICOM ENERGY POLICY REVIEW

Background
The majority of the member countries of the Caribbean Community (CARICOM) are dependent on imported petroleum products for satisfaction of their commercial energy needs. Trinidad, with relatively large resources of petroleum and natural gas which have been exploited over several decades is an exception, while Belize and Suriname have relatively recently begun exploiting their own, relatively modest petroleum reserves. Hydropower satisfies a significant percentage of the electricity demand in Belize, Dominica, St. Vincent, Suriname and, to a much more limited extent, Jamaica. The volatility of petroleum prices in the recent past has significantly impacted the economic development plans of all CARICOM member countries. Since petroleum reserves world-wide are limited and declining, and a very large percentage of these reserves are subject to manipulation for political objectives, petroleum prices are likely to remain volatile for the foreseeable future. This reality and growing awareness of the adverse environmental impact of the escalating energy intensity of modern economic activity alerted the governments of the region to investigate the advantages which could be achieved through coordination of their policies on administration of the energy sector in their respective countries. In 2003 CARICOM Heads of Government at their meeting in Trinidad decided to establish a task force to develop recommendations for a Regional Energy Policy. The Task Force comprised representatives from Barbados, Grenada, Guyana, Jamaica, Suriname and Trinidad and Tobago and was charged with developing recommendations for a Regional Energy Policy. In January 2007 the Task Force published the document CARICOM Energy Policy. This review seeks to examine the policy critically with a view that it will shape any future revision of the instrument.
7.2
Objectives of the CARICOM Energy Policy
Under the policy developed by the Task Force the Community will pursue the following objectives: (a) ensure the security and sustainability of energy supplies for and within the Community; accelerate development and restructuring of sources of energy supplies; sustain expansion of intra-Community trade in energy; enhance energy conservation and efficiency, and cleaner production in the Community;
(b) (c) (d)
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(e)
increase investment in production, transformation and distribution of viable energy resources; strengthen and enhance human and institutional capacity in the Communitys energy sector; programme expansion of electricity generation, transmission and trade; improve access to affordable energy by the poor and vulnerable; increase use of renewable energy; and establish and facilitate an institutional framework for financing mechanisms for the development of viable energy resources.
(f)
(g) (h) (i) (j)
The actions to be taken in order to achieve the objectives listed above are addressed in the Task Forces CARICOM Energy Policy document. The three fundamental dimensions of any sustainable energy policy are economics, security of supply and the environment. In stating the objectives the CARICOM policy captures all three dimensions. It should be pointed out that the Policy defines35 Security of Supply as the availability of, and timely access by Member States to energy resources of an acceptable quality, and at prices that are both affordable for customers and reasonable for producers. This suggests that security of supply is linked to the price of energy commodities without making any reference to price stability. There is an abundance of evidence that price volatility presents a threat to energy security and as such price stability should be included in the definition for completeness.
7.3
Development & Diversification of Energy Source (Ch. 2)
The actions recommended by the Energy Policy document list almost exclusively actions to be taken by individual states, with no indication of the need for or desirability of coordination of such actions within the Community as a whole. The only obvious exception to this observation is in paragraph 24 of Chapter 2 addressing transportation issues and which recommends that states establish regional control of appropriate shipping services, but which does not suggest how this control is to be achieved, or what priority it ought to be given in the Communitys programme of actions. Natural gas is stated to be cheaper and cleaner than other fossil fuels and the gas resources within the Community are projected as probably being able to satisfy the demand for gas of all its member states. That the cost of natural gas is lower than the alternatives and that it is widely available has not been the experience of most
35
See CARICOM Energy policy Ch1. Paragraph 1
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CARICOM member states. It is therefore questionable whether the recommendation at the end of Chapter 2 that Member States concentrate on establishing natural gas as the fuel of choice without evaluation of the concomitant economic viability ought to form part of the Communitys energy policy.
7.4
Renewable Energy Sources (Ch.3)
This chapter proposes a number of actions to be taken and policies to be established to promote use of commercial renewable energy resources. The proposals focus primarily on policies to be developed and implemented by individual member states even to the extent of establishing South-South cooperation programs, an activity which would probably be most effectively pursued by CARICOM itself in accordance with an official, well designed policy. Other than a renewable energy target of 10% of primary energy source by 2010, the Policy does not set out any target for other energy sources or provides any indicative figures of the energy mix for the region that Caricom is seeking to achieve. In addition, the renewable energy target of 10% of primary source by 2010 for member states seems very aggressive given the initial 2007 state of renewables deployment in the Caribbean.
7.5
Electricity Sector (Ch. 4)
This chapter focuses on technical and economic initiatives by which the cost and reliability of electricity supplies in Member States could be improved. It also advocates the establishment of independent regulatory agencies by individual member states but explores neither the possibility of a role for CARICOM Headquarters in implementing the recommendations, nor the policies which would guide such central interventions. The Policy also fails to indicate whether in the long term a more competitive energy market structure will be explored at a regional level. Although it does mention that it will set policies to promote competition in power generation, it does not consider further energy market reforms. The Policy also did not suggest a regional approach to future negotiations of electrical licences for investors in utility companies.
7.6
Energy Conservation & Efficiency (Ch. 5)
This chapter is effectively a list of recognized initiatives to be pursued by individual Member States in order to improve the economic efficiency with which electricity is generated and distributed. Again the focus is on actions to be taken by each country with little or no attention being given to formulation of a CARICOM Energy policy which would address the issues and reduce the financial and manpower burdens which would be experienced if each country had to develop and manage its own energy efficiency programmes.
The Policy does recommend36 that a CARICOM charter on energy efficiency be developed, but assigns that responsibility to the Member States rather than to a group within the CARICOM Secretariat.
7.7
Energy Investment (Ch. 6)
There is very little in the way of concrete recommendations in Chapter 6. It recognizes that energy projects are capital intensive and consequently require Member States to provide the requisite policy, legislative and regulatory frameworks with appropriate incentives to encourage investments in energy-related projects. Interestingly, coal was not mentioned as one of the primary energy sources although it is an abundant resource in many countries adjacent to the Caribbean region. Given the need to balance the three dimensions of a sustainable energy policy (economics, security of supply and the environment) consideration should be given to this source of fuel. The proposal is also made for the establishment of organizational units to promote investment in energy and to identify regional or international agencies as potential sources of funds for renewable or other energy projects. No specific role has been assigned to CARICOMs Secretariat.
7.8
Intra-Community Trade In Petroleum (Ch. 7)
This chapter imposes onerous and probably unrealistic responsibilities on the individual Member States such as requiring them to identify and implement more efficient means to transport natural gas; expand the transportation and trade network within the CARICOM region; increase energy supplies from all viable energy sources; establish regional control over access to appropriate shipping, etc. No specific role is identified for the CARICOM Secretariat.
7.9
Energy & the Environment (Ch. 8)
In keeping with the global trend to bring environmental performance to the centre of energy policies, the Policy provides some details on how compliance with national, regional and international environmental standards is to be achieved. However does not go far enough, since no long or medium term targets for CO2 (and other pollutants) reduction was set. In addition, the sectors that will be targeted for compliance with environmental regulations were not mentioned, for example, the report did not mention whether motor vehicle standards will be overhauled or whether industries outside the energy sector will be required to enact measures to reduce emissions.
36
Ibid; see Ch 5, clause 33
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With one exception, there is no difference in the approach of this chapter. The exception in this case is the requirement for Member States to introduce programs for self-regulation of energy producers and suppliers. In all the other instances, the role of the CARICOM headquarters in the development of policy initiatives is not clearly identified.
7.10
Enhancement of Human & Institutional Capacity (Ch. 9)
In general, there is nothing striking about this chapter, in fact as it fails to pay adequate recognition to the realities of the region. Once again the role of the CARICOMs Secretariat in what is captioned as the CARICOM Policy is not clearly identified. Included as sub-titles under Enhancement of Human and Institutional Capacity are Research and Development and Energy and Poverty Alleviation. Research and development includes issues such as identifying sources of financing to advance practical applications of solar fuels and other renewable resources. Under Energy and Poverty Alleviation Member States will be required to establish and expand programs to provide affordable energy to the poor and vulnerable in the Community. Given physical size and limited financial resources of many of the Caribbean countries such policies are probably difficult to implement in most member states, although they may already be nominally committed to them. As such it might be more prudent to set up a regional Energy Studies Institute that would allow for the spreading of infrastructural cost and the pooling of other resources to achieve a common set of regional goals.
7.11
CONCLUSIONS AND RECOMMENDATIONS
The Draft Energy Policy has the basic ingredients for a sustainable energy policy since it seeks to address the three aspects of energy sustainability referred to earlier. It also tries to foster a holistic approach to energy policy development by bringing together various strands of the energy sector, however it does not in reality represent an effective guide for CARICOM Member States in planning and administering their energy sectors. There are numerous listings of issues to be addressed by the individual member states but without any indication of the priorities to be assigned to each and without consideration of the human, financial and other resources available to each Member State. A more useful document would probably have been produced if the Task Force had selected and prioritized the issues considered to be the most urgent and prepared draft policies for review by the individual Member States before publishing the Policy.
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Although the Policy recognizes that the PETROCARIBE Agreement will affect the Caribbean energy sector significantly, no effort has been made to consider the probable impact and effectiveness of the Agreement and how that impact should affect the energy policies of the various Member States. Some issues do not appear to have received the attention they deserve. These include: The feasibility of establishing an organizational unit within the CARICOM Secretariat to define and prioritize the regional energy issues and draft policy statements for review and approval by the appropriate authorities in each Member State. Some of the work involved could be undertaken by agencies stationed outside of CARICOM Secretariat but equipped with the appropriate technical background and experience. These persons should preferably be already in the employ of their country of residence and their services should be provided without cost to CARICOM. However, this suggestion is not intended to exclude engagement of persons with particular skills from being employed as specialist consultants to CARICOM. A Secretariat-based unit would be better able to obtain information and assistance, including financial, from international, public and private agencies. Adapt policies already in force in other jurisdictions which might not require too much fine-tuning. A possible instance could be The World Banks standards for emissions from thermal power plants. Consideration of coal as a possible fuel for power generation in the region. consideration of establishing regulatory agencies and standards institutes to serve CARICOM Member State. This could yield significant economies of scale and foster greater regional cooperation. Coordinated approaches to international agencies for assistance in research and development in areas of potential significant benefit to the region as a whole. Another area in which centrally coordinated application procedures would be beneficial is the process by which countries obtain carbon credits for generation of electricity from renewable energy resources. The possibility of a regional Energy Studies Institute for the cost effective development of the human capital required for the expansion of the use of renewable energy in the region.
The efficiency of the energy sectors in the various CARICOM Member States is of critical importance to the economic and social wellbeing of the region. However, while the Policy represents an important first step it does not go far enough in
addressing some issues that are key to a sustainable approach to energy in the region. Further development of a carefully considered and critically reviewed CARICOM Energy Policy would be of strategic assistance in achieving that objective.
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8.
8.1
RENEWABLE POLICIES AND BEST PRACTICES

Background
The underlying policy objectives in instituting a renewable electricity promotional strategy typically consist of the following three elements: 1. Environmental considerations; 2. Security of supply issues; and 3. Economic and industrial policy imperatives. Environmental considerations relate to the requirement to reduce green house gas (GHG) emissions, which contribute to global warming, and other adverse impacts of conventional electricity generation. Enhancing the security of energy supply is a key policy consideration, which relates to the diversification of the electricity supply portfolio and the increase in domestic energy supply to reduce reliance on imported energy. Wider economic and industrial policy issues, while often subsidiary to the first two objectives, represent another key factor to renewable energy promotional strategies. The aim is to create new industries and jobs in the renewable electricity supply chain, in addition to driving technological innovations in the arena. The successful deployment of renewable electricity sources (RES-E) in the Caribbean is contingent on the establishment of effective and economically efficient policy strategies. To facilitate the expansion of RES-E in the Caribbean, the economic, institutional, social, political and legislative barriers will have to be identified and evaluated. Thus, in particular, the report will seek to address the objectives which should be set for the successful design of policies and will describe the risk management measures to be included to create a sound and secure investment climate for investors while mitigating or transferring risks.
8.2
Categorisation of Policy Instruments
This section outlines and categorises the main promotional strategies for RES-E applied in North America, Europe and Latin America. Table 8.1 below presents the classification of the various RES-E promotional instruments. The table shows that besides regulatory instruments, there are also voluntary approaches to the promotion of RES-E. The voluntary approaches are mainly based on consumers willingness to pay premium rates for electricity from renewable sources and financing of RES-E projects by environmentally conscious investors. Governments can however influence voluntary initiatives by creating a beneficial legislative and
regulatory environment, in addition to enacting measures to enhance the general, social acceptance of green energy. Regulatory promotional strategies may be broadly classified as either direct or indirect. The direct policies aim to immediately stimulate the growth of RES-E, while the indirect approaches target the removal of barriers and the general improvement of long-term framework conditions. Examples of indirect strategies include implementing GHG emission trading, the removal of subsidies given to fossil fuel based generation by, for example, internalising their associated environmental degradation costs (internalising the externalities). RES-E promotional strategies may also be classified as investment focussed or generation (production) based depending on how the support is structured. If the support is determined by the level of production from RES-E plants (for example, a fixed rate per kWh of electricity produced), then the strategy is production based, otherwise it is investment focused.
Table 8.1: Categorisation of Promotional Strategies Direct Quantity Driven Indirect
Price Driven Regulatory Investment focussed Generation based
Investment Subsidies Tax Credits Feed-in Tariffs Net Metering Rate-based incentives
Tendering System Tendering System Quota Obligation base on Tradable Green Certificate (TGC)
Environmental Taxes
Voluntary
Investment focussed
Generation based
Shareholder programs Contribution programs Green tariffs
Voluntary Agreements
The direct policy measures may be further subdivided into financial (price-driven) and non-financial (quantity-driven) measures. The financial measures provide financial incentives to market parties to increase their role in the renewable energy sector while the non-financial strategies aim to reach the market through agreements with important stakeholders or through imposing obligations. Obligations and/or agreements may be enforced by penalties. Table 8.2 provides more details on the various types of direct promotional strategies.
It is also possible to categorise policy instruments according to whether they impact on the supply of, or on the demand for, RES-E. Supply driven (market push) policy incentives are generally geared towards reducing the investment and/or production cost of renewable electricity technologies by, for example, providing subsidies to improve their economics relative to traditional technologies. On the other hand, demand driven (market pull) policies stimulate demand for renewable electricity by, for example, reducing electricity taxes to end users who buy their electricity from retailers37 who source significant amounts of their electricity from RES-E producers. Since, as established earlier, instruments targeting supply and demand may be categorised as price or quantity driven, the possible market stimulation methods can be divided into the following four (4) groups: 1. 2. Stimulating the supply by pricing mechanisms as the main support scheme. Stimulating the demand by price related incentives as the main support scheme. Stimulating the supply by quantity related measures as the main support scheme. Stimulating the demand by quantity related measures as the main support scheme.
3.
4.
37
In liberalised electricity markets where there is retail competition, consumers are able to change their retailers (also called suppliers).
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Table 8.2: Direct Promotional Strategies Financial Measures (Price driven) Non-financial Measures (Quota driven)
Research and Development (R&D)
Fixed government R&D subsidies Grants for demonstration, development, test facilities etc. Zero (or low) interest loans (soft loans) for R&D
Investments
Fixed Government investment subsidy Bidding system on the investment subsidy/grant Subsidy on switching to renewable energy production or on the replacement of old renewable energy installations Soft loans Tax advantage for renewable energy investments
Negotiated agreements between stakeholders and government
Production
Feed-in tariffs at fixed levels set by the regulatory authorities Net Metering Bidding system on feed-in tariffs necessary to operate on a profitable base Tax advantage on the income generated by renewable energy
Quota obligation on production
Consumption
Tax advantage on the consumption of renewable energy
Quota obligation on consumption
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8.3
8.3.1
Description of Main Promotional Strategies

Feed-in Tariffs
A feed-in tariff (FIT), which is a generation-based, price-driven, market-push incentive, is a guaranteed payment to a RES-E generator for the electricity it produces. This is usually accompanied by the requirement for the electricity grid to accept the electricity generated. A FIT can be paid to RES-E generators as an overall remuneration (the fixed tariff) or alternatively as a premium that is paid on top of the electricity market price38 (the premium tariff, also called a green bonus). Since the cost of electricity from conventional power generation technologies has traditionally been lower than their renewable counterparts, the overall support to RES-E plants per unit electricity are typically greater than the wholesale market price of electricity, to enable the plants to operate economically. The extra cost (the subsidy) to implement a feed-in tariff (difference between tariff and market price of electricity) scheme is typically borne by electricity end-users. A feed-in tariff is defined by several design parameters, including the tariff level. The initial tariff level for a specific RES-E plant is typically established to encapsulate the specific cost of generating electricity from that plant plus a reasonable return, equal to a standard investor hurdle rate. Feed-in tariffs are applied extensively across Europe and have in general achieved significant success (most notably in Germany and Spain), though the level of success varies widely, as it depends on the particular design of the FIT and other exogenous factors (eg. social barriers, etc.). Figure below shows that FITs are the most prevalent RES-E support instrument applied across Europe - nineteen (19) of the EU-27 countries use FIT, six (6) countries have implemented quota obligation with tradable green certificates (TGC), while only two (2) countries have opted for tax incentives and investment grants as their main RES-E support mechanism.
38
Here, we refer to the wholesale market price of electricity generation.
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Figure 8.1: Main policies for support of renewable electricity across Europe in 2008
Source: Fraunhofer ISI and EEG
FITs can allow for the promotion of specific renewable technologies, for example, by restricting eligibility to only those technologies. Apart from the level of the tariff, there are a number of design choices (parameters) to be made in setting up a successful FIT. The primary parameters are:
1.
Choice of fixed versus premium tariff: Under a premium tariff RES-E plants are paid a premium on top of the electricity market price for the electricity they deliver to the grid. In the fixed tariff scheme, a fixed remuneration, which is independent of the electricity market price, is paid to RES-E plants per unit of electricity they deliver to the grid. Choice of stepped or flat tariff: The level of remuneration paid in a stepped tariff structure is differentiated according to specific cost dependent characteristics such as technology type, local conditions (e.g. quality of renewable energy resource) and scale. Flat tariffs, on the other hand, pay the same level of remuneration regardless of the specific plants costs. Choice of including tariff degression: Degression refers to the reduction in the feed-in tariff levels over time to facilitate technology improvement and cost reductions of the RES-E plants. Tariff review period: The timeframe between subsequent revisions of the tariff.
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2.
3.
4.
In general, the success of a FIT scheme is dependent on the achievement of favourable investment climate which includes low administrative cost, low regulatory barrier, and high cost efficiency and investor certainty. These conditions will be elaborated on later on in the report. 8.3.2 Quota Obligations based on Tradable Green Certificates (TGC)
Quota obligations (also known as Renewable Portfolio Standards (RPS) or Renewable Obligations) based on Tradable Green Certificates are generation based, quantity driven, market push incentives. A green certificate is used to represent a unit of renewable electricity, allowing the unit to be divided into two parts: the physical electricity and its associated greenness. This is the main support mechanism applied in the US and the UK for bulk renewable electricity. In a quota obligation support scheme, an obligation is placed on an electricity supply company to source a specific fraction of its electricity from renewable energy sources, and a penalty is applied for failure to meet the obligation. In essence, this mechanism acts to create a market for renewable electricity, allowing competition amongst different RES-E plants to meet the obligation. The underlying design principle is that competition in the market will drive down the costs of supplying renewable electricity and thus minimises the costs to end users for meeting renewable energy targets. Unlike FITs, RPS is generally not geared at promoting specific renewable technologies.39 The two parts can thus be traded in two separate markets. If a market exists for the trading of green certificates as a separate entity from the physical electricity, then the green certificate becomes a tradable green certificate (TGC). The green certificate is a document that proves that a unit of electricity has been produced by a renewable energy source. Since the electricity from a renewable generator is physically indistinguishable from other sources, the green certificate acts as an accounting system to verify whether obligations are being met. The quota obligation can be placed at any point in the electricity supply chain with the obvious points being: production, transmission, distribution, supply and consumption. In the UK, the obligation is placed on suppliers 40 (electricity supply companies). The suppliers are obligated to provide an amount of green certificates equal to their quota to an accredited body at agreed times. A supplier may achieve this by buying green certificates which can be used to prove that it has met its obligations. Failure to meet an obligation would result in a penalty. A number of functions and institutions are required to implement a successful TGC system. These include:
1. 2.
39 40
A body to issue certificates A verification/accreditation body whose role is to verify the issuing process
The technologies which are closer to the market (most economically attractive) will normally be exploited. In the UK, a supplier refers to a company that performs electricity retail services.
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3. 4. 5. 6.
A registration body to register the certificates An exchange market An accounting body A body responsible for withdrawing of certificates from circulation
In addition, other actors in the market must interact. In the case of the UK, the main actors are the renewable energy generators and the suppliers. 8.3.3 Net-Metering
Net metering is a consumer-based RES-E incentive. That is, it is a support geared at electricity consumers with their own renewable electricity facilities, which is generally small. Net, in the context of net metering, refers to the difference between the electricity outflow from a customers RES-E plant and metered electricity inflow from the grid. Traditionally, jurisdictions implementing net metering have made it available to residential customers only. However, a large percentage of jurisdictions are opening it up to commercial and industrial customers. This type of support mechanism is generally not applied in Europe but has been applied extensively in Canada and the US, though the specific net metering protocols (rules) vary between states. The US Energy Policy Act of 2005, for example, sets the provision for all public electricity utilities to make available upon request net metering to their customers. While there are several different variations, under net metering, participating customers receive retail credit for at least a portion of the electricity they generate.41 In the US electricity markets, four variants of the net metering process are observed, where net excess generation on a monthly basis is either:
1. 2.
Credited to the customers next bill at retail rate; or Credited to the customers next bill at retail rate related to applicable time of use (ToU) charges; or Bought by the utility at the utilitys avoided generation cost; or Granted to the utility
3. 4.
Apart from these four variants in the US, other variations include:
41
The portion is equivalent to the magnitude of the customers internal electricity demand, which is met from the RES-E supply.
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1.
Carrying the excess over to the customers bill for the next period (applied in Ontario Canada); Crediting the excess to low-income electricity customers; Crediting the excess at a percentage discount of retail rate; and Crediting the excess at the average hourly incremental cost over a period.
2. 3. 4.
Obviously, the most attractive variant to RES-E investors is for their excess electricity to be credited at retail rates42, particularly based on ToU tariffs if they are able to deliver substantial excess electricity during system peak periods. Similarly to FITs, net metering can support specific RES-E technologies. Net metering usually supports a wide range of technologies. However, wind and solar photovoltaic systems are by far the most prevalent technologies included in net metering programs. 8.3.4 Tendering/Bidding
Tendering systems allow potential investors to compete for investment support, production support, or other limited rights (such as sites for wind energy) through a competitive bidding system. The criteria for judgement of the bids are set before each bidding round. Generally, the most cost effective bidder will be selected to receive the benefits and thus, the mechanism leads to the lowest cost options. The desired level of electricity from each renewable source, the growth rate and the level of long-term price security offered to RES-E generators over-time are set by the government. The bidding is accompanied by an obligation on the part of electricity providers to supply a specified amount of electricity from renewable sources. The premium for renewables (i.e. the difference between the RES-E generation cost and market price of electricity) is typically reimbursed to the electricity provider from a government levy. The bidding may be differentiated in bands of RES-E technologies and RES-E sources so as to maintain a differentiation in RES-E supply. This allows like technologies to compete with each other, for example, wind projects will compete with other wind projects but not against biomass. Tendering systems are used in Ireland and in France for wind farms larger than 12 MW. It was formerly used in the UK. The key parameters of the competitive tendering system are:
1.
42
The desired level of electricity
Retails rates are usually more than twice the wholesale market price for electricity generation.
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2. 3.
Length of Power Purchase Agreement Premium Rate Level Investment Support
8.3.5
In a nascent market, investment subsidies can increase market penetration by offsetting the high initial investment cost of RES-E. Investment subsidies may take many forms such as rebates on general energy taxes, rebates from special emission taxes, lower VAT rates, tax exemption and depreciation schemes. Investment subsidies are useful in supporting emerging technologies, but it is best practice to either supplement them with, or replace them by, other incentives which are based on production (kWh generated) as soon as possible. This is because RES-E plants investors will have little incentives to keep their plants operational once they are commissioned if they have already recouped most of their upfront investment outlay. Incentives which are based on production will provide incentives for RES-E investors to deliver electricity to the grid from their plants, which is the main objective of all RES-E support instruments. 8.3.6 Research and Development (R&D) Support
Research and development support is used to stimulate the growth of new technologies that are far from commercial implementation. The development of technology impacts the market indirectly through decreased investment or production costs. R&D encourages the diffusion of immature and less competitive technologies - evidence suggests that learning and scale economics lead to future cost reductions and more competitive portfolio of RES-E technologies. Generally the support for R&D is through national programs. 8.3.7 Stimulation of RE Consumption by Price Reduction
In the EU, taxes form a substantial part of the energy prices for consumers. Generally, these taxes are higher than the cost differential between non-renewable and renewable energy sources and thus, a reduction in taxes for renewable energy sources can improve the relative attractiveness of RES-E technologies. This is an effective price driven measure to stimulate demand.
8.4
Assessment of Promotional Schemes
The success of the various policy instruments discussed for promoting renewable electricity will be analysed in this section. The section will begin by describing the criteria that have been used in the literature for determining the success of promotional instruments and will then proceed to provide an assessment of the
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various promotional instruments based on these criteria. Finally, quantitative or qualitative country specific results will be presented.
8.5
Criteria for Measuring Success
Success of a promotional scheme can be broadly measured by the impact on the sustainable growth of RES-E, however, this is a vague definition. IEA43 suggests that success be benchmarked against a set of criteria relating to volume of implementation and sustainability of the impacts. These are discussed below. 8.5.1 Effectiveness
In general, effectiveness refers to the degree of achievement of objectives or goals. In the context of renewable electricity deployment, effectiveness refers to the extent of the increase in the amount of renewable electricity produced, achieved through increasing the installed RES-E capacity. IEA indicates that the absolute amount of RES-E capacity added or its percentage growth rate are not very useful indicator of effectiveness since it does not consider the country size, the achievable RES-E potential or the development status of RES-E in the country. For example, if the current level of RES-E deployment is very low then any appreciable capacity addition will indicate a very high percentage growth rate, similarly a large country, such as Germany, will generally have higher absolute RES-E growth than a much smaller country, such as Jamaica. To overcome the aforementioned limitations, IEA suggests a definition of effectiveness based on countries specific realisable RES-E potential. This is represented in equation 1 below:
i i Gn Gn1 E i POTai Gn1 i n
(Eq. 1)
Where,
i En
is the effectiveness indicator for RES technology i for the year n
i Gn is the electricity generation by RES technology i in year n
the total generation potential of RES technology i in some benchmark future year (eg. 2020) From the investors point of view, effectiveness of a support strategy refers to the profitability that it allows for RES-E projects investments. The effectiveness from the investors perspective can be represented by the levelised profit per unit of electricity generated. This is defined as follows:
POTai is
43
Deploying Renewables: Principles for Effective Policies, IEA, 2008
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n 1 n ( I t Et ) 1 i i Q t 0 1 i t 1 i n 1
(Eq. 2)
where A Levelised profit per unit electricity generated Cash Inflow (revenues) in time (t) It Cash Outflows (expenses) in t Et Q Total amount of electricity generated i Interest rate n Lifetime 8.5.2 Cost Efficiency
For the government or the regulatory body implementing the support mechanism, the cost efficiency of a promotional strategy refers to the extent to which policy objectives are achieved relative to the support outlay. The cost efficiency of a promotional strategy can therefore be expressed as the increase in installed RES-E capacity per unit dollar spent (kW/$) or increase in RES-E production per unit dollar spent (kWh/$). It is important to note that the policy spend is not equal to the overall remuneration to RES-E plants, but rather is the difference between this figure and the wholesale market price of electricity, which would have been incurred irrespectively. An important characteristic of a successful RES-E promotional strategy is to achieve high effectiveness at minimal cost of deployment. This means reducing the cost to end users, who ultimately have to foot the implementation cost, in addition to guarding against exorbitant profits for RES-E investors. In line with this principle, it is usually a policy imperative to encourage the exploitation of the most cost effective renewable resources and technologies first. However, as mentioned earlier, it is important to also encourage the diffusion of immature and less competitive technologies, as evidence suggests that learning and scale economics lead to future cost reductions and more competitive portfolio of RES-E technologies.
8.6
Key Characteristics of Successful Policy Measures
In addition to the metrics defined in the previous sub-sections, it is possible to gauge a RES-E promotional strategy potential for delivering on its objective based on its conformity with a set of key characteristics common to successful strategies. These are set out and discussed below:
8.6.1.1 High Certainty to Investors
The risks involved in a renewable energy project are often higher than for conventional energy investments and thus, policy instruments must ease the burden of the risks for investors. Those instruments which are able to ease the uncertainty of financial support throughout the projects life-cycle are likely to attract more
investors. Policy support is necessary to ensure that RES-E investors are able to cover the power generation costs of the respective RES-E technologies, inclusive of return expectations. Appropriate levels of IRR should be achievable across the different investor groups and RES-E technologies. In general, a stable and predictable support framework will enhance investors confidence and lead to greater investment security.
8.6.1.2 Low Transaction and Administrative barriers (costs)
There are a number of transactions and administrative costs associated with RES-E support mechanisms. These can be broadly categorised as market costs and institutional transaction costs. The administrative barrier of an RES-E support instrument relates to its degree of sophistication and clarity. In general, the simpler and more transparent a support mechanism is the greater will be investors confidence and, consequently, the higher the investment security. The converse is also true, meaning that support mechanisms which are administratively more complex and less transparent will generally increase the perceived risks to investors, and reduce investment security. The institutional transaction barriers refer to regulatory costs. Conformity and compatibility with current market and policy arrangements improve the effectiveness of policy instruments, as this reduces the relevant transaction costs for RES-E investors. Obviously, it is important that these costs are kept as low as possible but the costs are highly dependent on the type of policy instruments being utilised, as well as on the specific design of a particular type.
8.7
8.7.1
Evaluation of Promotional Schemes

Feed-in Tariff versus Quota Obligation with TGC
As mentioned earlier, obligation/TGC systems act to create a market for renewable electricity, allowing competition amongst different RES-E plants to meet the obligation. Since economic principles tell us that competition should result in cost minimisation, in theory obligation/TGC systems should be more effective and cost efficient than feed-in tariff schemes. However, practice has shown well-designed feed-in tariffs to be superior to obligation mechanisms and other support schemes in terms of effectiveness and cost-efficiency. Competition can introduce uncertainties, in terms of volume44 and price45, which increases the risks to RES-E plants and raises their costs of capital and, consequently, their overall costs. To put it differently, the additional risks and their related costs associated with obligation mechanisms are often sufficient to outweigh the benefits from competition inherent
44 45
No guarantee to sell all electricity produced, due to competition. Depend on the market for both electricity and tradable certificates.
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in the mechanism. The Stern Review: The Economics of Climate Change (2006) p.366, for example, made the following assertion: "Both sets of instruments have proved effective but existing experience favours price-based support mechanisms. Comparisons between deployment support through tradable quotas and feed-in tariff price support suggest that feed-in mechanisms achieve larger deployment at lower costs. Central to this is the assurance of long-term price guarantees. The German scheme...provides legally guaranteed revenue streams for up to twenty years if the technology remains functional. Whilst recognising the importance of planning regimes for both PV and wind, the levels of deployment are much greater in the German scheme and the prices are lower than comparable tradable support mechanisms (though greater deployment increases the total cost in terms of the premium paid by consumers). Contrary to criticisms of the feed-in tariff, analysis suggests that competition is greater than in the UK Renewable Obligation Certificate scheme. These benefits are logical as the technologies are already prone to considerable price uncertainties and the price uncertainty of tradable deployment support mechanisms amplifies this uncertainty. Uncertainty discourages investment and increases the cost of capital as the risks associated with the uncertain rewards require greater rewards. Other sources make references to many other advantages of FITs over a quota system, including: increased certainty to investors; greater transparency; greater flexibility; and being able to promote a diverse range of RES-E technologies. Tables 6.3 and 6.4 below summarize the respective pros and cons of an obligation mechanism and a FIT scheme.
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Table 8.3: Pros and cons of a FIT scheme

Pros Cons
Lower risks for investors: RES-E plants are Market prioritization: There is interference guaranteed fixed prices for fixed periods, with market operation due to the fact that thus reducing volume and price risks. the outputs from RES-E plants are guaranteed. RES-E plants are typically not subjected to balancing risk and network companies are Network balancing: Network operators are usually compelled to take all electricity. compelled to accept all electricity from RES-E plants, regardless of the electricity demand, which can lead to network management problems and increased grid operation costs. Since different technologies develop at different rates, application of technology specific tariffs could encourage those far from the market to move closer. The balance of evidence suggests that this provides long term benefits in terms of developing more competitive technologies. The level of RES-E capacity exploitation is subject to the market, that is, it depends on investors response to tariff signals. It is very difficult to predict the number and scale of investments that will be attracted by the available prices; hence it is challenging to predict the overall costs of the mechanism in either the short or long term. Potential for excessive margins for developers: The fixed price over time implies that it is difficult to pass on the benefits of increased technological efficiency to consumers. Tariff degression, is one way to address this. However, there is no guarantee that reductions will match the actual improvements in the technology.
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Table 8.3: Pros and cons of an obligation mechanism

Pros Cons
In theory, should be more effective and costefficient as competition is an inherent feature of the mechanism.
There are significant risks on volume (no guarantee to sell all electricity produced, due to competition) and price (dependent on the market for both electricity and tradable certificates). In practice, increased risk and related additional costs are sufficient to outdo benefits from competition inherent in system. Mechanism tends to support only the technologies that fit the market situation when they are introduced. Technologies outside the mechanism are likely to become less and less competitive, and thus are never developed. Technological innovation is therefore effectively penalized.
It has been suggested that quota based schemes are more efficient in achieving specific goals for renewable energy capacity.
8.7.2
Net Metering
To illustrate the pros and cons of net metering, the argument can be made that net metering can be considered as a special case of feed-in tariffs. As outlined in above, in a premium feed-in tariff, the applicable RES-E generators receive a premium (also referred to as the green bonus) on top of the wholesale electricity market price for the electricity they deliver to the grid. This premium can be of two forms: 1. 2. a set absolute figure; or a set percentage of the wholesale electricity market price.
A net metering arrangement, where excess generation, for example, is credited at the retail rate46, can be considered as a form of premium FIT with a set absolute premium. In order to understand this argument, it is important to first comprehend that the retail rate is traditionally designed to recover the generation cost (i.e. wholesale market price) plus other costs relating to the transmission, distribution, administration and retail of electricity.47 These costs are categorically referred to as the Rate Base of the electricity utility.
46
This implies that the entire generation from the RES-E plant is effectively valued at the retail rate, since the electricity that is internally supplied from the RES-E plant avoids paying the retail rate. 47 These costs include fixed and variable components. However, the variable components are usually capitalised and recovered over extended periods. Also, a return is applied on the total costs.
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In the net metering arrangement described above, a generator effectively receives the market price of electricity generation, plus the additional costs listed above, which can be considered as the set absolute premium.
8.7.2.1 Pros and cons
The main strengths and weaknesses of a net metering support approach are as follows: On the plus side, similarly to a FIT scheme, the remuneration under a net metering scheme is guaranteed, which provides investors confidence and investment security. Furthermore, since generation costs typically account for about 3/8 of the retail price of electricity, it means that the support to a RES-E plant under a net metering arrangement, where excess generation is credited at the retail rate, is extremely generous (i.e. the incentive is very strong). Another benefit of net metering is that it encourages generation facilities to be sited at the load centres, which in theory should reduce system network losses. The major drawback of the approach is that it reduces a utilitys revenue base and the tax revenue from energy sales, which could result in the utility being unable to cover its costs. This effect, which increases with the proliferation of RES-E take up under the scheme, arises because the utility has to build its facilities 48 to be able to meet the entire demands of the system, and the retail rate is typically designed to spread the recovery of the associated investment costs over the entire system energy requirements. It therefore follows that substantial penetration of net metering would result in revenue losses for the utility or the requirement for higher rates from remaining customers to cover the utilitys fixed costs. To mitigate against this, some jurisdictions have introduced fixed fees for customers participating in the net metering arrangement in an attempt to recoup the fixed costs, and thus reduce the burden for the customers who do not participate. However, this has the effect of reducing the attractiveness of the net metering approach. Another disadvantage of net metering is related to the fact that the generation price component in the retail rate is typically extremely volatile 49, hence the level of support, though it may be guaranteed by policy, can be volatile. This introduces an element of risk in the approach. However, this is offset by the high level of support the scheme offers.
48 49
This includes transmission and distribution capacities etc. This is in turn due to fossil fuel prices being very volatile.
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8.7.3
Summary of the Evaluation of the Main Promotional Schemes against Benchmark Key Success Characteristics
Table 8.5 provides an evaluation of the major promotional schemes based on the key success characteristics/criteria described earlier. For the most part, the analysis reflects the findings from a 2002 EU study entitled, Support Schemes for Renewable Energy: A Comparative Analysis of Payment mechanisms in the EU. In the aforementioned study, a consortium of research organisations carried out a survey to evaluate support schemes in the EU. The survey was conducted by designing a questionnaire and answers to questions were sought from 500 experts within the energy industry and RES-E field. The survey50 indicated that investor confidence/market certainty is the most important criterion for the success of a promotional scheme. Effectiveness in attaining policy targets was found to be the second most important criterion. The respondents of the survey also indicated that feed-in tariffs was the preferred support scheme. Investment subsidies got the second highest ranking while the tendering procedures got the lowest score.
50
Net metering was not covered in this survey because it is generally not applied in the EU.
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Table 8.5: Analysis of Promotional Schemes based on Success Criteria
Policy Instrument
Feed-in Tariff
Effectiveness
No guarantee for attaining policy targets deployment based on investors response to tariff signals. Can lead to large amounts of renewable energy in a short-time if properly designed
Cost Efficiency to Customers

Feed-in tariffs are relatively non-cost efficient as there is no strong incentive for product cost minimisation Can be more cost efficient if stepped tariffs (i.e., support differentiated based on plants cost drivers) are used and degression is applied (reduction in tariff over time to account for technological learning)
Certainty to Investors
Provides almost absolute market certainty with respect to tariff and revenue stream for fixed feed-in tariffs Less certainty for premium feed-in tariffs since support is based on market price Long term tariff support is essential to providing certainty
Transaction and Administrative costs

Fixed feed-in tariffs are less compatible with a liberalised market, hence there can be high transaction costs Premium feed-in tariffs conform with market operation, hence lower transaction costs Administrative costs can range widely depending on the specifics of scheme. However, usually low compared to other schemes Scheme extremely compatible with market operation, which minimises transaction costs. Administrative cost can be high due to complicated trading systems
Quota Obligations
Theoretically, it is most effective at meeting policy targets because it places clear obligations on actors in the electricity chain to deliver the target Effectiveness depends strongly on the strength of the penalty Typically, does not stimulate investments above those necessary to meet the quota
If the additional risks due to competition are small compared to the benefits of competition, it has the potential of being cost efficient If there is scarcity of supply, the market price is determined by the penalty rather than by competition
Fluctuations in market price creates uncertainty for investors Uncertainties are partly determined by the design of the trading system which can be minimised Other uncertainties are market driven (e.g., the outcome of competition)
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Competitive Bidding
Provides only the quantity of RES-E established by the process
Can be cost efficient due to competitive nature (especially if there is a provision to refuse all bids if too high) Since it does not create competition among market players, it does not form an incentive to reduce cost
Low levels of certainty since bidding procedures creates uncertainties and the government does not commit itself to future tenders Both technical and market risks are reduced Uncertainty is however commonly high because schemes are prone to adaptations Uncertainty is commonly high because schemes are prone to adaptations
Transaction and administrative costs can vary widely. Usually high compared to other schemes
Investment Support
effectiveness cannot be guaranteed Total effect on volume depends on level of support
Compared to other schemes, the transaction and administrative cost are low
Fiscal Measures
Same as for investment support
Whether investors or consumers are given tax incentives, it is not an incentive for reducing costs
Compared to other schemes, the transaction and administrative cost are low
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8.8
Country Specific Results
Table below highlights the major promotional schemes used in EU-15 up to 2002. Table 8.6: Promotional Strategies for RES-E in EU-15
Country
Austria
Main Promotional Strategy

Feed-in Tariffs
Additional Instruments
Quota Obligation, investment subsidies Rebates, investment based tax deductions Tax relief eg. CO2 tax, income tax exemptions Investment subsidies Investment subsidies for Photovoltaic in rural areas Soft loans, investment subsidies at local level, Green Tariffs Investment subsidies and tax deductions Tax incentives
Belgium
Feed-in Tariffs
Denmark
Feed-in Tariffs
Finland France
Tax Relief Tendering (wind), Feed-in Tariff (other RES-E)
Germany
Feed-in Tariffs
Greece
Feed-in Tariffs
Ireland Italy Luxembourg Portugal Spain
Tendering Feed-in Tariffs Fixed Premiums Feed-in Tariffs Feed-in Tariffs (including fixed premiums)
Investment subsidies
Investment subsidies at provincial level Feed-in tariffs for small generators Complex strategy (green tariffs, tax refunds and Feed-in tariffs) Renewables Obligation Certificates (TGCs) since 2002
Sweden
Rebates and Tax Relief
The Netherlands
Quota Obligation
UK
Tendering
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In Resch et al (2005), the primary criterion used for measuring success was effectiveness where effectiveness is defined as the increase in installed capacity of renewable electricity sources. Country size is taken into consideration by measuring the increase in capacity per capita. Figures 8.2 to 8.4 show the results obtained using this criterion.
Figure 8.2: Increase in new RES-E capacities (excl. hydro) in the period 1997 to 2001 in the EU-15 countries
350
Feed-in tariff Tendering System
Capacity increase per capita [W/cap.]
300
Quota Obligation Rebates and Tax incentives
250
200
150
100
50
0 AT BE DK FI FR DE GR IE IT LU NL PT ES SE UK
Source: Eurostat
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Figure 8.3: Increase in wind plant capacities in the period 1997 to 2001 in the EU-15 countries
450 400
Feed-in tariff Tendering System Quota Obligation Rebates and Tax incentives
350 300 250 200 150 100 50 0 AT BE DK FI FR DE GR IE IT LU NL PT ES SE UK
Source: Eurostat
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Figure 8.4: Increase in PV capacities in the period 1997 to 2001 in the EU-15 countries
2000 1800
Feed-in tariff Tendering System Quota Obligation Rebates and Tax incentives
1600 1400 1200 1000 800 600 400 200 0 AT BE DK FI FR DE GR IE IT LU NL PT ES SE UK
Source: Eurostat
In computing the effectiveness, Held et al (2006) further takes into consideration the additional potential of RES generation by computing an effectiveness indicator as described previously in Equation 1. The results that were obtained for the EU-15 countries using this indicator are indicated in Figure 6.5.
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Figure 8.5: Effectiveness indicator for (on-shore) Wind energy in the period 19982005 in the EU-15 countries
Average Effectiveness Indicator 1998-2005: Wind On-shore
12
Feed-in tariff Tendering System Quota Obligation
10
Rebates and Tax incentives
0 AT BE DK FI FR DE GR IE IT LU NL PT ES SE UK
The results in Figure 6.5 indicate that Denmark, Spain and Germany where the most successful countries as far as effectiveness is concerned. Feed-in tariffs were the dominant promotional strategies applied in these countries. The high level of security as well as low administrative barriers might have been the determining factor in the strong and continuous growth in wind energy in these countries.
8.9
Electricity Market Conditions in the Caribbean
Due to size and other factors, the electricity markets in the English speaking Caribbean islands have not gone through liberalisation to fully competitive markets, as is the trend in electricity markets around the world.51 In the Caribbean, electricity is typically supplied by a single vertically integrated company. In some cases, there is horizontal unbundling of the generation market and the introduction of competition from Independent Power Producers (IPPs); however electricity supply remains a monopolistic market. In recent times, most of the Caribbean islands have established regulatory bodies to regulate their electricity sectors, however, in general, the experiences of these regulatory organisations in treating with renewable electricity issues is limited. For illustrative purposes, a synopsis of the specific conditions existing in Jamaica is described below:
51
It is interesting to note that some countries in Latin America (e.g. Chile, Argentina and Bolivia) were among the first countries to begin the restructuring and deregulation process.
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8.9.1
Jamaicas Electricity Sector
In the case of Jamaica, the main power company is Jamaica Public Service Limited (JPS) which operates under an All-Island Electricity Licence which was signed in 2001. The licence gives the company a monopoly on the supply of electricity which is slated to last for twenty years. As a result, JPS owns and operates the entire transmission and distribution networks. The generation market has however been unbundled with Independent Power Producers generating about 30% of the islands electricity. The All-Island Electricity Licence sets the provision for the addition of all generating plants over 15 MW to the system after 2004 to be based on a competitive bidding process. Generators must obtain a licence from the Office of Utilities Regulation before they are allowed to install plants on the electricity grid.
8.10
Indicative Assessment of Relevant Barriers
For any policy measures to be successful, it is often necessary to overcome several barriers, including social, legal, financial, political and regulatory barriers. A sound legal and regulatory framework is essential for the successful advancement of renewable energy electricity sources in the Caribbean. It has been argued, for example, that appropriate policy framework is more important than the endowment of renewable energy resources (wind speeds, sunshine days per year, etc.) in determining successful RES-E deployment. It is believed that tremendous progress has already been made in the regulatory, legal and political frameworks of most Caribbean countries. The barriers discussed below are perhaps the reverse-salients. 8.10.1 Social Barrier In general, the social barrier to RES-E deployment appears to be low in the Caribbean. In other words, the social acceptance seems to be high. However, this may not in fact be true. The apparent illusion arises from the fact that the majority of the population, including a lot of the policy makers, have the misunderstanding that electricity from RES-E technologies are cheaper than that from traditional fossil fuel based technologies. As was highlighted earlier, this is not the case. It is important to note however that in recent times, the economic attractiveness of RES-E plants have been improving relative to fossil fuel based plants. This is as a result of the compounding of two factors: Firstly, the cost of electricity from RES-E plants has declined dramatically over the last few decades due to technological innovations and learning (e.g. in manufacturing techniques). Secondly, the price of fossil fuels on the world market has reached all-time high figures in recent times although the subsequent fall in fossil fuel prices as a result of the financial crisis has reversed some of this improvement.
In line with the assertion above, it is not believed that the general electricity end users in the Caribbean would be willing to pay higher prices for electricity solely because of its environmental credential. In the final analysis however, it is only by
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conducting surveys that the level of social acceptance can be scientifically be established. Surveys can provide valuable insights into measures that may be implemented to enhance its social acceptance. 8.10.2 Financial Barrier The financial barrier in the Caribbean region is also estimated to be high. This is in line with the view that there are not sufficient financing opportunities available at interest rates which are lower than the expected returns from RES-E investments to provide positive IRRs. To address this issue, the Government could make available soft loans, which have been effective in lowering the financial barriers in a number of jurisdictions.
8.11
Recommended Promotional Schemes to apply in the Caribbean
The monopolistic nature of the electricity markets in the Caribbean prevent the use of promotional policy instruments which function best in liberalised electricity markets. Quota obligations based on tradable green certificates (TGC) systems is one such scheme which functions best in liberalised electricity markets. In addition, this support instrument usually requires that a market be set up for tradable green certificates - the quota obligation system can function without TGC, but without trade the cost efficiency of the scheme would be lessened. It is therefore concluded that quota obligation support mechanisms are currently, and in the foreseeable future, inapplicable in the Caribbean region. All the other promotional strategies discussed may be applied in the Caribbean. As Table .6 shows it is common for jurisdictions to supplement their main policy instruments with a combination of other support mechanisms. Also, as the evidence from the investigation highlights, feed-in tariffs have been most effective and cost-efficient in delivering policy objectives in several jurisdictions Germany and Spain being most notable. Recent data shows that Germany and Spain are the world leaders in wind and solar PV deployment. As a corollary, a recommendation of report is for CREDP to further investigate the FIT schemes in these countries if it decides to institute feed-in tariffs for the region. Earlier it was noted that the success of FIT schemes varies widely depending on their specific design features. While it is believed that a system of feed-in tariffs would be much more cost-efficient than the net metering approach, it is possible that the barriers to entry from the investors perspective may be less in the case of net metering. For example, in the net metering approach, more than one meter is not required this can be crucial for investors of small RES-E plants of the order of say 50kW. Furthermore, given the high retail rates in the Caribbean, net metering would be very attractive to investors and could spur extensive deployment. However, the limitations of net metering, as identified earlier in the report, should be carefully considered and mitigated.
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APPENDICES
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APPENDIX 1: RENEWABLE ENERGY TECHNOLOGY
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1.
RENEWABLE ENERGY TECHNOLOGIES
This section describes the fundamentals of the main commercially available renewable energy technologies. The economics, potential, current status and the common technical and non-technical barriers which hinder the deployment of each RET will also be discussed. The information is provided with the main objective of explaining the basics of each technology so that their strengths and weaknesses can be appreciated and hence a better understanding of the benefits from, and the barrier faced by these technologies can be garnered.
1.1
Wind Energy
Wind resources can be utilised for power and electricity production in regions where the wind power density is 400 watts per square meter at 30 meters above the ground or 500 watts per square meter at 50 meters above ground but technical advances are expected to open up new areas of development. Coastal areas and Great Plains seem to be the most favourable sites onshore. The greatest potential however can be found offshore (water depth greater than 20m) but offshore wind power generation is still in its earliest phases. 1.1.1 The Conversion of Wind Energy
The kinetic energy produced by wind may be converted to mechanical energy by a wind turbine. The mechanical energy may be used within a generator to produce electricity or may be used directly to drive equipment such as mill machines or water pumps. Table 3.1 shows the major wind power applications. Typically there are two market ranges for wind turbines: small units rated at a few hundred watts up to 50-80 kW in capacity and used mainly for rural and stand-alone power systems (that is, systems that are not connected to an electric grid); and large units which range from 150 kW 5 MW (currently the largest size turbine is 6 MW) which are usually connected to an electric grid. Wind turbines may be classified based on construction design into two basic types: the horizontal axis wind turbine (HAWT) and the vertical axis wind turbine depending on the axis in which the turbine rotates. Horizontal axis wind turbines are the most commonly used types and almost all wind turbines used to generate electricity are of this type. Turbines used in wind farms for commercial production of electric power are usually three-bladed and pointed into the wind by computer-controlled motors. The blades are usually colored light gray to blend in with the clouds and for large turbines, range in length from 20 to 40 metres (65 to 130 ft) or more while the tubular steel towers range from 200 to 300 feet (60 to 90 metres) tall. The capacity factor of modern wind turbines usually ranges between 0.2 and 0.3.
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TABLE A1.1: WIND POWER SYSTEM TYPES AND APPLICATIONS Technology Type System Application (electrical, mechanical)
Wind power electrical Wind power electrical Grid connected Stand-alone: used for battery charging. The battery will then be used to supply electricity Supplementing mains supply Small home systems Small commercial/community systems Water pumping Telecommunications Navigation aids Commercial systems Remote Settlements Mini-grid systems Drinking water supply Irrigation pumping Sea salt production Dewatering Milling grain Agricultural machines
Wind power electrical
Wind power mechanical
Stand alone: used in conjunction with an autonomous diesel generator which acts as backup for the wind generator. Water pumping
Wind power mechanical
Other
1.1.2
Cost
The power production costs of wind generated electricity have fallen steadily with the development of the technology. The average cost of wind energy per unit of production is dependent on the cost of capital, perceived investors risks, siting and years of assumed service. The cost of capital (discount or interest rate) is a crucial factor since wind power is very capital intensive and requires an upfront cost which is typically 75% of total lifetime costs. Once constructed, the marginal cost of wind energy is typically low. Table 3.2 shows the cost structure of a typical 2 MW wind turbine installed in Europe. The European Wind Energy Association (2009) estimates that in Europe the cost of large-scale onshore wind power in 2006 ranges from approximately 0.05-0.06 euro/kWh at sites with very good wind speeds to 0.07-0.1 euro/kWh at sites with low wind speeds and 0.07 euro/kWh for sites with average wind speed. This calculation assumes a medium-sized turbine of 1.5-2 MW capacity, investment costs ranging from 1,100 to 1,400 euro/kW, O&M costs averaging 0.0145 Euro/kWh over a lifetime of 20 years, and a discount rate of 7.5 per cent per annum with a 5-10% range for sensitivity analysis.
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TABLE A1.2: COST STRUCTURE OF A TYPICAL 2 MW WIND TURBINE INSTALLED Investment (1000/MW) Share of total Cost Turbine (ex works) 928 75.6 Grid Connection 109 8.9 Foundation 80 6.5 Land Rent 48 3.9 Electric Installation 18 1.5 Consultancy 15 1.2 Financial Costs 15 1.2 Road Construction 11 0.9 Control Systems 4 0.3 Total 1,227 100 Source: European Wind Energy Association (2009)
1.1.3
Assessment of Wind Energy Systems
Wind energy technologies are mature and well developed in developed countries. The modern wind turbines are relatively simple and robust with lifetimes of over 15 years without any major new investments and, compared to conventional energy technologies, the operating cost of wind energy systems are low primarily due to low maintenance cost and no additional cost for fuel or fuel delivery logistics. For environmentalist, its greatest appeal is that its environmental impacts are low compared to fossil based fuel technologies. Wind technologies are however site specific implying that it is only economically feasible to deploy the technology in areas where the wind power density exceeds around 250-300 watts per square meter at 30 feet above the ground. Also, as an intermittent technology, wind power does not provide the same contribution to system reliability as technologies that are operator controlled and dispatched and therefore they may require additional system investment as backup power. Backup may be through: connection to an electricity grid system; incorporating other electricity producing energy systems such as a diesel generator or the use of storage systems such as batteries. Electricity network problems will also increase as the share of wind generated electricity on the grid rises. 1.1.4 The Global Status of Wind Power
The 2008 Global Wind Energy report prepared by the Global Wind Energy Council (GWEC) stated that as of the end of 2008, the global total installed capacity of wind power systems was 121 GW which represents an increase of 29% over 2007. This increase was led by the US (8.3 GW), China (6.3 GW) and India (1.8 GW). The other countries making up the top five for new installed capacity in 2008 were Germany (1.67 GW) and Spain (1.61 GW). In terms of installed capacity, the top
five countries (as of 2008) are: US (25.17 GW), Germany (23.9 GW), Spain (16.74 GW), China (12.21 GW) and India (9.65 GW). Figure 3.2 and Figure 3.3 summarise this information.
FIGURE A1.1: WIND POWER, EXISTING INSTALLED CAPACITY, 1995-2008
Europe remains the leading market for wind energy and new installations represented 33% of the global total. This was the second time in decades that under fifty percent of new installation was outside Europe, the other time was in 2007 when the growth in installed capacity was 43% of the global total. North America increased its wind capacity by 47.6% in 2008 with the vast majority of this increase taking place in the United States, which surpassed Germany as the country with the largest installed capacity for the first time. Africa and the Middle East and Latin America and the Caribbean are the regions with the lowest installed capacity with 669 MW and 631 MW respectively but while Africa and the Middle increased its capacity by 24% in 2008, the latter region only increased its capacity by about 17.8% with Brazil being the only country that added capacity. Asia and the Pacific regions experienced growth in installed capacity of 54.3% and 42% respectively. The electricity that is expected to be generated from the 2008 installed capacity would total 260 TWh and is expected to save 158 million tons of CO2 per annum.
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FIGURE A1.2: LEADERS IN WIND POWER (CAPACITIES IN GW)
Offshore wind capacity reached 1.5 GW in 2008 which is virtually all in Europe with 200 MW added in 2007 and 360 MW added in 2008. The UK was the offshore market leader in 2008. GWEC predicts that by the year 2013, the global wind market will grow by 93% from its 2008 size to reach 332 GW of total installed capacity. This would represent an addition capacity of 112 GW. The US and China are expected to be the main players in this anticipated expansion.
1.2
Hydropower
Hydropower systems can significantly range in size and a classification based on the size of the hydropower system is given in Table 3.3. Whether large, medium or small, hydro power systems use the energy in falling water to produce electricity using a variety of available water turbine types (e.g. Pelton, Francis and Kaplan). The largest hydropower systems can generate thousands of megawatts and may be the major electricity producers on a network grid. The potential energy of water needed to run large to small hydro systems are usually derived from man-made dam systems or large elevated river systems. Mini and micro hydro systems have capacity of up to 1 MW, are most often used in rural and remote areas and are generally run off river systems. The smaller scale (pico) hydro systems generally range in size from 50 W to 5 kW and are commonly used for individual homes or a cluster of households. The water source for this type
of system is usually derived from a river, stream, canal or other water bodies which feed to an elevated small reservoir or intake tank.
TABLE A1.3: CLASSIFICATION OF HYDROPOWER SYSTEMS Size Application
> 100 MW 10 or 20 MW 100 MW 1 MW to 10 MW or 20 MW (different countries uses different definitions) 100 kW to 1 MW 5 kW to 100 kW Feeding into an electricity grid Feeding into an electricity grid Stand alone systems or usually feeding into an electricity grid Stand alone systems or usually feeding into an electricity grid Usually provides power for a small community or rural community in remote areas away from a grid Usually for remote rural communities and individual households. Applications include battery charging or food processing
System Type
Large-hydro Medium-hydro Small-hydro Mini-hydro Micro-hydro
Pico-hydro
50 W to 5 kW
1.2.1
Potential of Hydropower Systems
The technical potential of hydropower is primarily constrained by the availability of suitable sites and will therefore vary considerably across regions. Table 3.5 provides an estimate of the technical potentials of hydropower for the Central American and Caribbean Region. 1.2.2 Assessment of Hydropower Systems
Hydropower technologies have several advantages over conventional energy technologies. Arguably one of the most important advantages is the elimination of fuel costs but other advantages include longer life than fuel-fired generation (typically over 30 years without major new investments) and low operating costs. In general, the cost of power from hydroelectric generators is far less expensive than from fossil fuels and nuclear energy, and it remains the lowest cost renewable energy technology. Unlike wind turbines, the power output from hydropower plants is fairly constant, especially when there is a storage reservoir system and, the plants can typically be regulated to follow power demand.
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Though there are no direct CO2 and GHG emissions from hydropower plants during operation, there is a fairly significant amount of CO2 emissions during the manufacture and construction phase of the project (though this is just a tiny fraction of operating emissions of fossil fuel plants) plus a number of other environmental and social impacts which are non-negligible. Dams supplying large hydropower plants are huge structures which are located near large rivers or lakes, areas which are often also very desirable for human habitation. Dislocation of people living near sites planned for reservoirs therefore is an adverse social impact of hydro electric generation. The February 2008 briefing by the World Commission of Dams estimate that over 40 to 80 million people have been displaced as a result of dam construction. Catastrophic failures of the dam walls are also possible and have occurred in the past killing hundreds of people and leaving several thousands homeless as occurred in California when the Banqiao dam failed. Notable environmental impacts of hydropower include disruption of aquatic ecosystems and degradation of the natural diversity of plants and animals both upstream and downstream of the plant, for example, studies have shown that the salmon populations along the North American coasts where dams are located have been depleted because the dams have prevented access to spawning grounds even though fish ladders were installed. In addition, the fact that water exiting turbines often contain very little suspended sediments, significant scouring of riverbeds and loss of riverbanks can occur. Other adverse environmental impacts that have arisen as a result of hydro plant operations are: large variations in river flow patterns which can lead to erosion of sand bars; changes in the dissolved content of oxygen in rivers; changes to the water temperature which can impact both aquatic flora and fauna populations; and, diversion of rivers at a lower gradient to the reservoir system. The main barrier that impacts the growth in the hydro power sector is the availability of suitable sites. In many countries, the most effective sites have already been exploited. Also, the lead time for the construction of a hydroelectric plant is usually long compared to the time for a fossil fuel plant because numerous hydrological and environmental impact studies have to be conducted. 1.2.3
The Global Status of Hydropower
According to the 2009 Renewable Energy Global Status Report Update prepared by the Renewable Energy Policy Network: in 2008, 25-30 GW of large hydropower capacity was added bringing the total installed capacity to 860 GW and, 6-8 GW of installed capacity of small hydro was added bringing the total to 85 GW.
China (12-15 MW) and India (> 5 MW) were the leaders for additional installed capacity for large hydro and China (4-6 GW) once again was the leader for new
installation of small hydro. Hydropower accounted for approximately 83% of renewable electricity production in 2008 and 18.3% of overall electricity production.
1.3
Bio-energy (Biomass)
Bio-energy refers to renewable energy sources which are either directly or indirectly derived from plants or animals and include wood, wood residues, agricultural crops and residues, animal fats and animal and human waste. Although there are a number of common features in all types of biomass, they exhibit considerable variations in physical and chemical characteristics which influence how they are used as fuels. Biomass energy sources may be categorised based on how the source is produced. These are: Category 1: includes energy crops which are planted on current agricultural lands Category 2: includes biomass which is planted on marginal lands Category 3: these are bio-materials which may come from forest lands Category 4: biomass derived from agricultural residues Category 5: biomass derived from forest residues Category 6: includes animal and human dung Category 7: organic waste Biomass Energy Conversion Systems
1.3.1
There are also a wide variety of energy conversion technologies available to make use of the wide variety of biomass types but these may be placed into two main categories: thermal and chemical conversion processes (See Figure 3.4). Thermal conversion processes include combustion, gasification and pyrolysis. Combustion is the simplest and most widely used process for converting the energy contained in biomass particularly in developing countries and is perhaps one of the earliest forms of energy conversion processes used by humans. The basic process involves the oxidation of mainly the carbon and hydrogen contained in the organic material. The heat produced from the combustion process may be used for cooking, space heating, process heating and for steam production for electricity generation. Gasification is a partial oxidation process whereby an organic source is broken down into carbon monoxide (CO) and hydrogen, plus carbon dioxide and possibly hydrocarbons such as methane. The precise gas mixture produced is dependent on the gasification parameters such as temperature and the type of oxidiser used (air, pure oxygen or steam), for example, high temperature gasification (1200 oC to 1600oC) leads to a mixture which has few hydrocarbons and is rich in CO and hydrogen (the mixture is known as syngas or biosyngas). Syngas may be used to form longer chain hydrocarbons via the Fischer-Tropsch (FT) synthesis process which can produce biodiesel that is completely compatible with fossil diesel used in
diesel engines. If low temperature gasification is used (700oC to 1000oC) the mixture will contain much more hydrocarbons than in the high temperature process and as a result may be burned for heat or electricity generation or used to run an internal combustion engine (with suitable gas clean up). It may also be combined with a combined cycle gas turbine for electricity generation.
FIGURE A1.3: BIOMASS CONVERSION ROUTES
The final type of thermal conversion process is pyrolysis. It involves the thermal decomposition of biomass in the absence of oxygen and is the process used to produce charcoal. The products of pyrolysis are gas, liquid and a solid char. When conducted at lower temperatures (around 400oC), the process will produce more solids (char) whereas a higher temperature (500oC) produce more liquids (bio-oil) once the vapour residence time is kept below one second. The heating value of biooil is about half that of fossil oil and it may be burned directly, co-fired, upgraded to other fuels or gasified. Charcoal is usually produced to facilitate biomass densification for transport or storage. There are three main types of chemical conversion processes. These are anaerobic digestion, fermentation and composting. Anaerobic digestion is the process where organic material is broken down by bacteria in the absence of air producing a biogas which contains methane. It is the process by which sludge is broken down. The methane produced can be used for heat or electricity generation. Composting is similar to anaerobic digestion but it is typically produced on dry material rather than
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slurry. Fermentation is the process in which the sugars and starches contained in crops such as beet and sugarcane is converted to ethanol which may be added to conventional petrols in concentrations of up to 10%. The US and Brazil are the leaders in this technology and ethanol has managed to displace up to 40% of petrol consumption in Brazil. 1.3.2 Potential of Biomass Systems
A number of studies have been conducted to estimate the future technical potential of biomass energy but these studies showed a large range of outcomes that were based on differences with regard to crop yields, available land and estimated production costs. To date there is no conclusive study on the technical or economic potential of biomass energy. Recent studies are beginning to take into consideration all the factors and boundary conditions which could affect the potential of biomass. These include global and regional trends such as land use, food demands, GDP growth and population as well as specific local conditions such as soil type, water availability, possibility of irrigation, agricultural efficiency, and land use planning, taking biodiversity and soil considerations into account. The economic relationship between the demand and supply of biomass has also been shown to be extremely crucial and this is in turn dependent on a number of other economic variables including biomass production costs, changes in land and food prices on a regional and local level, the demand and supply of other energy sources, land availability and energy policies. Moreover, moving to biomass for energy would also impact some of these economic variables and thus, there is a complex linkage. A scenario for the global potential of bio-energy by 2050 developed by Faaij et al (2002) is summarized in Table 3.4. The assumptions on which the estimates were based are also included. This potential ranges from 40 to 1100 EJ for the most pessimistic scenario, with no land available for energy farming, and thus bio-energy will come only from residues to 200 to 7000 EJ for the most optimistic scenario, which considers that intensive agriculture takes place only in the better quality soils, while land of lower quality will be used for energy forestry/crops. 1.3.3 Assessment of Biomass Energy Systems
Biomass energy in its traditional forms (e.g. firewood, charcoal, residues) are the most widely utilised sources of renewable energy particularly in the developing world, however, it is often used very inefficiently and is associated with significant negative environmental impacts. The modern biomass energy sources are however rapidly replacing the traditional forms and the efficiency of these newer technologies are much better than the traditional sources (between 85-80% compared to 2-20%). The wide range of conversion technologies available for biomass conversion implies a wide range of power levels and technology conversion complexities. This also means that biomass energy is accessible to a range of socio-economic groups and can be used throughout the world. While some of the technologies are still too
expensive for many countries in the developing world, the resources are available in almost every country and thus modern biomass technology provides a very attractive alternative to fossil fuels for which only a few countries are endowed with the resources. When biomass is grown sustainably for energy, the level of CO2 emissions and GHG gases is much less than for fossil fuels and thus it can play a significant role in abating the adverse environmental impacts of energy use. In fact, with re-planting, biomass combustion is a carbon-neutral process as the CO2 emitted was previously absorbed by the plants from the atmosphere. There are however many barriers to large scale utilisation of biomass. These include: the increasing destruction of native forests to make way for commercial productions of bio-fuels; the possible deleterious effects of dedicated energy plantations on water resources and biodiversity; the deleterious effects on soil quality; an increase in emissions due to increased transportation of large quantities of biomass; the competition between agricultural land for food and for energy; and the problem of maintaining high productivity sustainably for a long time.
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TABLE A1.4: OVERVIEW OF LONG TERM BIOMASS POTENTIAL

Biomass Category Category I: Energy farming on current Agricultural Land Category II: Biomass production on marginal lands Category III Bio-materials Main Assumptions and Remarks Potential land surplus: 04 global hectares (gha) (more average: 12 gha). A large surplus requires structural adaptation of high energy input (HEI) agricultural production systems. When this is not feasible, the bio-energy potential could be reduced to zero as well. On average higher yields are likely because of better soil quality: 812 dry tonne/ha*year is assumed (*) On a global scale a maximum land surface of 1.7 gha could be involved. Low productivity of 25 dry tonne/ha/year. (*heating value: 19 GJ/tonne dry matter) The supply could be low or zero due to poor economics or competition with food production Range of the land area required to meet the additional global demand for biomaterials: 0.20.8 gha (average productivity: 5 dry tonnes/ha/year*). This demand should come from category I and II if the worlds forests are unable to meet the additional demand. If they are, however, the claim on (agricultural) land could be zero Category IV: Residues from Agriculture Estimates from various studies. Potential depends on yield/ product ratios and the total agricultural land area as well as type of production system: low energy input (LEI) systems require reuse of residues for maintaining soil fertility. HEI systems allow for higher utilization rates of residues Category V: Forest Residues Category VI: Dung Category VII: Organic Wastes The (sustainable) energy potential of the worlds forests is unclear. Part is natural forest (reserves). Range is based on literature data. Low value: figure for sustainable forest Management; high value: technical potential Use of dried dung. Low estimate based on global current use. High estimate: technical potential. Utilization (collection) on longer term is uncertain Estimate on basis of literature values. Strongly dependent on economic development, consumption and the use of Biomaterials. Figures include the organic fraction of MSW and waste wood. Higher values possible by more intensive use of Biomaterials Total Most pessimistic scenario: no land available for energy farming; only utilization of residues. Most optimistic scenario: intensive agriculture concentrated on the better quality soils (between brackets: more average potential in a world aiming for large scale utilization of bioenergy)
Source: Faaij et al (2002).
Potential Bioenergy Supply in 2050 0870 EJ (more average development: 140 - 430 EJ)
(0) 60150 EJ
Minus (0) 40150 EJ
Approx. 15EJ
(0) 14110 EJ
(0) 555 EJ
550 (+) EJ
401100 EJ (200700 EJ)
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With regard to electricity generation, biomass has low conversion efficiencies and feedstock availability and presently, biomass co-firing in modern coal power plants is the most efficient use for biomass in power production. Biomass however has an important role to play in the transportation sector where ethanol and biodiesel have been successfully used to reduce petrol consumption in Europe, Brazil, the US and other countries. 1.3.4 The Global Status of Biomass Energy
Abundant resources and favourable policies are enabling bio-power to expand in Northern Europe (mostly co-generation from wood residues), in the United States and in countries producing sugar cane bagasse (e.g. Brazil). Global biomass power capacity stood at 52 GW at the end of 2008 increasing by 2 GW from 2007. For fuels, biodiesel production capacities increased by 3 billion liters/year in 2008 bringing the total capacity to 12 billion liters/year as of the end of 2008 while ethanol production capacity increased by around 17 billion liters/year (34%) in 2008, bringing the installed capacity to 67 billion liters/year. In 2004, the figure stood at 30 billion liters/year. The largest expansion in the biodiesel and ethanol industries took place in North America (primarily the US) and Latin America (primarily Brazil) and to a lesser extent in Europe. The total ethanol production facility in the US stood at 40 billion liters/year at the end of 2008 and 8 billion liters/year capacity is currently under construction. The US was also the leading producer of ethanol in 2008, producing 34 billion liters in 2008. After remaining stagnant for a while, Brazils ethanol production increased dramatically in 2008 moving from 18 billion liters in 2006 to 27 billion liters in 2008, 15% of which was exported.
1.4
Solar Energy
Solar energy is derived from the Suns radiation which is available at any location on the earths surface. A measure of the strength of solar radiation reaching a surface is the power density which is usually expressed in watts per square meter (W per square meter). Also, the level of solar radiation impinging on a surface over a period of time is generally described by the term insolation, defined as the energy available per unit area per unit of time (such as kWh per square meter per year). Annual insolation varies over the earths surface by a factor of about 3 when measured from the horizontal plane, from 800 kWh per square meter per annum in Scandinavia and Canada to a maximum of 2500 kWh per square meter per annum in some dry desert regions. The annual production pattern of solar energy systems is to a large extent determined by differences in average monthly insolation which between June and December, can vary by up to 25% for countries close to the equator and by a factor of 10 for countries in very northern and southern regions of the globe. The ratio of diffused to total annual insolation largely determines the type of solar technology which may be used in a region. The ratio can vary by 10% for sunny areas to 60% for areas with more moderate climate such as Western Europe.
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1.4.1
Solar Energy Conversion
Solar radiation is converted to either electricity or heat by solar energy technologies that can be divided into two main types: photovoltaic cells and thermal systems. Photovoltaics (PVs) produce electricity directly from solar radiation, using electrically connected arrays (cells) of photodiodes (semiconductors devices). The amount of electricity which a photodiode conducts is dependent on the transduced light energy. A single cell can produce enough electricity to power a telephone thus an array or module of cells which are usually packaged together tightly behind a glass sheet (to protect them from the environment) is usually required to provide a meaningful amount of power. Figure 3.5 shows the structure of a photovoltaic cell. There are two main types of photovoltaic cells: crystalline and thin-film. Crystalline silicon cells are produced by slowly extracting large crystals from a liquid silicon bath. These crystals are sliced into 1/100th-of-an-inch thick slices, or wafers, which are processed into solar cells that are then connected and laminated into solar modules. The production process is expensive but yields highly efficient (10-15%) cells. Thin-film silicon cells are produced by depositing vaporized silicon directly onto a glass or stainless steel substrate. The production process for thin-film cells is less expensive than crystalline silicon cells, however, the efficiencies achieved are lower than with crystalline silicon. Modules from crystalline cells have a lifetime of over twenty years while thin-film modules will last at least ten years. Other PV technologies, such as Gallium-Arsenide or Cadmium Telluride, are also being used. These types are highly efficient, but more expensive at the present time. The current produced by photovoltaics is direct current (DC) and so inverters are required for conversion to alternating current (AC) which is almost universally used in grid power systems. The growth of grid-connected photovoltaic systems has been significant in recent years particularly in Europe.
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FIGURE A1.4: STRUCTURE OF A SOLAR CELL
Solar thermal systems convert solar radiation to heat which may be used for domestic or commercial heating. A solar thermal panel is a flat plate collector consisting of a metal box with a glass or plastic cover and a black absorber plate at the bottom. The black paint at the bottom of the absorber plate is a selective coating which absorbs and retains heat better than ordinary black paint. The absorber plate is usually made of a metal with a high thermal conductivity such as copper or aluminium. In tube collector systems metal absorber strips run down the centre of evacuated tubes. The advantage of the tube collector systems is that convective heat losses can be reduced as a result of the vacuum in the tubes. Solar collectors are typically mounted on the roof of a building and are connected to a circuit containing water. The heated liquid flows around the circuit, either under the action of a pump to warm the main hot water tank, or by a thermo-syphoning action to warm a solar water storage tank that then feeds the hot water tank. Although solar thermal systems are mainly and traditionally used for heating, they can also be used to generate electricity. When used for electricity generation, they are usually designed as complex solar collector concentrating systems using either a central receiver where the solar energy is concentrated to a tower or a parabolic concentrator using lenses or mirrors and a tracking system. The heat generated by these concentrator systems are usually high enough to heat water to steam which can be used to drive steam turbines generating electricity. This technology is still emerging although a solar thermal power plant has been in operation in California since the mid nineteen nineties.
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Parabolic Concentr ating Solar Panel
Solar CSP Tower
FIGURE A1.5: CONCENTRATING SOLAR POWER TECHNOLOGIES
Since solar energy is not available at night, continuous availability of electricity from a solar thermal power plant is only possible with an energy storage system. This is usually done by storing the energy in the form of heat. Storage systems generally use readily available materials with high specific heat capacities such as water and paraffin wax. Solar energy can be stored at high temperatures using molten salts which are effective storage media because of low costs. Off grid PV systems use rechargeable batteries to store electricity. 1.4.2 The Potential of Solar Systems
The theoretical potential of solar energy in a region is dependent on the average monthly insolation in that region. Based on solar insolation patterns (see Figure 3.7), there is an enormous theoretical potential for solar energy. It has been estimated to be on the order of 760,000,000 TWh. The technical potential is however highly dependent on the capacity factors of the units, the availability of raw material for manufacturing and the availability of sites among factors. With regard to its economic potential, the cost of the technology is a limiting factor.
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FIG.A1.6: ANNUAL AVERAGED DIRECT NORMAL RADIATION
1.4.3
An Assessment of Solar Energy Technologies
Photovoltaic systems have been a great success story for the last five years where average global growth rate of installed capacity was over 29%. They have numerous merits and unique advantages over fossil fuel based technologies. First of all, the technology is fully scaleable and can be designed for a variety of applications and operational requirements, and can be used for either centralized or highly distributed power generation. It is excellent for small to medium sized off grid systems and is also a good system for remote and rural applications. The technology is easy to plan and operate and has very low maintenance cost and long lifespan (more than 20 years), chiefly because it has no moving parts. One of its unique advantages is its modularity and the ease at which it can be expanded. Other attractive features include energy independence (no additional fuel costs) and zero environmental pollutions during operation. While they do not cause emissions during operation, PVs cause emissions during manufacturing and possibly on decommissioning, although current research has focussed extensively on reducing the environmental emissions during manufacturing by developing different materials and processes in the manufacture of photovoltaic units, for example, water based paints have been used to replace organic solvents for screen printing. The primary limiting factor for the technology is the high cost of the PV modules and equipment when compared to conventional energy sources. Consequently, the
economic value of PV systems is realized over many years. The surface area requirements for PV arrays may also be a limiting factor. Due to the diffused nature of sunlight and the existing sunlight to electrical energy conversion efficiencies of photovoltaic devices, surface area requirements for PV array installations are on the order of 8 to 12 m2 per kilowatt of installed peak array capacity. There is also a limit to grid share of grid connected PV systems (without storage) since they are nondispatchable. Though there are no short-term supply limitations of the silicon and other materials required for the construction of solar PVs, this may pose a problem at large production levels. Concentrating solar power has a higher efficiency than PVs and is better suited for large scale power generation (multi megawatts), for example, there is a new 50 MW power plant in Spain. When coupled with storage systems they can produce a continuous output even when solar energy is minimal and can have capacity factors of up to 80% which makes them dispatchable. 1.4.4 The Status of Solar Energy Technologies
In 2008, the installed capacity of grid-tied PV dramatically increased by 70% from 7.6 GW to 13 GW (see Figure 3.8). Spain was the clear market leader with 2.6 GW of additional capacity in 2008 which was more than the capacity installed by Germany which installed 1.5 GW. The US (310 MW), South Korea (200-270 MW added), Japan (240 MW) and Italy (200-300 MW) were other major market leaders. Growth continued in markets in Australia, Canada, France, and India. China entered the market for the first time in 2008. At the end of 2008, Germany (5.4 GW), Spain (3.3 GW) and Japan (1.97 GW) had the largest installed capacity of grid connected PVs in the world. Off grid utility scale PV (larger than 200 kW) plants totalled over 3 GW at the end of 2008 which represents a 300% increase in capacity existing at the end of 2007. Spain once again was the market leader, adding 1.9 GW of capacity. It also completed a 60 MW PV plant that is the largest solar PV plant in the world. Czech Republic, France, Germany, Italy, Korea and Portugal also added capacity. New utility scale plants are being planned for some countries in Europe, the US, China, India and Japan. Growth also continued for building integrated PV systems.
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FIG.A1.7: EXISTING GRID CONNECTED PV CAPACITY, 2005-2008
FIG.A1.8: LEADERS IN GRID CONNECTED PV CAPACITY, 2008
For heating, 19 GWth of additional capacity was added in 2008 bringing the global total installed capacity to 145 GWth.
Page 161
Though much less dramatic, growth also continued for the CSP systems and the industry saw many new entrants and new manufacturing facilities. Two new plants came online in 2008, a 50 MW plant in Spain and a 5 MW demonstration plant in California. This is in comparison to three new plants in 2006/2007. A number of projects are slated to come online in 2009. Projects in construction are estimated to provide an additional 6 GW of additional when they come online.
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APPENDIX 2: RENEWABLE ENERGY IN ELECTRICITY GENERATION
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2.
2.1
RENEWABLE ENERGY IN ELECTRICITY GENERATION

Renewable Energy in Power Generation
Overall renewable power capacity reached 280 GW in 2008 excluding large hydro (1,140 GW including large hydro). This is a 75% increase from the 160 GW capacity that was present in 2004. The top six countries were: China (76 GW), the US (40 GW), Germany (34 GW), Spain (22 GW), India (13 GW) and Japan (8 GW). China (wind and small hydro) and India (wind) led the increase in renewable power capacity in the developing world with total installed capacity in the developing world increasing by 119 GW or 43% of the 2007 total. A significant milestone was reached when for the first time in modern history, the additional capacity of renewable energy in the US and the EU exceeded the additional capacity for conventional power. In 2008, wind power capacity increased by over 28.8% (27 GW) compared to 2007 and with installations in over 70 countries, represents the broadest base renewables technology. The growth of power capacity for all the other RETs lagged behind the growth of wind power. Five countries accounted for over 75% of the growth of wind power capacity in 2008. They are the United States (8.36 GW), China (6.3 GW), India (1.8 GW), Germany (1.67 GW) and Spain (1.61 GW). Large hydro supplied 15% of the worlds electricity generation in 2007 and still remains one of the lowest cost energy technologies. China which is the biggest hydro power producer accounted for the largest growth in large hydro capacity with over 8% per annum between 2002 and 2006. Growth of large hydro in many countries was hindered by the availability of sites, resettlement and environmental constraints. In 2008, biomass power capacity increased by 2 GW to 52 GW. Brazil and the Philippines were the leaders in bringing sugar cane-based bagasse power plants online but other countries included Argentina, Columbia, India, Mexico, Nicaragua, Thailand and Uruguay. Growth of biomass power capacity also continued in many EU countries, and China increased power production from biogas derived from livestock farm. The fastest growing power generation capacity in 2008 and 2007 was grid connected solar photovoltaic with a 70% increase in installed capacity in 2008 bringing the total to 13 GW, a six-fold increase over the 2004 level. Annual increase in installed capacity between 2004 and 2008 averaged 5.4 GW. Spain is the obvious market leader with a 2.6 GW increase in installed capacity in 2008 (half of global installed capacity). Germany was next with an increase of 1.5 GW in installed capacity. The United States remain the global leader for the development of geothermal power capacity. Global power capacity from this source reached 10 GW in 2008.
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Significant recent growth was also seen in Australia, El Salvador, Guatemala, Iceland, Indonesia, Kenya, Mexico, Papua New Guinea and Turkey. Figure 2.4 provides an overview of renewable power capacities in the developing world, EU and top six countries for 2008.
2.2
Renewable Energy Characteristics and Cost
The costs of most renewable energy technologies are still higher than conventional fossil based fuels and this along with other market barriers imply that renewables will still require policy support to increase market penetration. However, the costs of RETs have been declining significantly as a result of technology improvements and economies of scale. Market maturity and their future economic competitiveness will be dependent on future conventional energy technologies and fuel costs and environmental requirements among other factors.
TABLE A2.1 LEVELISED COST OF ELECTRICITY U.S. Average Levelised Costs (2007 US$/megawatt hour) for Plants Entering Service in 2016 Capacity Total Factor Levelised Fixed Variable Transmission System (%) Capital O&M O&M Investment Levelised Cost Cost
35.1 33.4 21.7 31.2 90 83 52 85 87 122.7 193.6 376.6 232.1 86.0 71.7 97.2 64.5 23.0 10.3 27.5 6.2 21.3 20.7 8.9 3.3 3.7 1.6 0.0 0.0 0.0 0.0 0.0 23.0 6.1 23.0 55.7 8.5 8.6 12.9 10.3 4.8 3.9 5.6 3.5 3.7 141.5 229.6 395.7 263.7 111.5 107.4 114.1 94.6 83.9
Plant Type
Wind Wind-off shore Solar PV Solar Thermal Geothermal Biomass Hydro Conventional Coal Conventional Combined Cycle Natural gas fired Advanced Nuclear
90
84.2
11.4
8.7
3.0
107.3
The levelised cost52 of electricity generation for the various technologies have been very volatile in recent times due to high increases in plant cost before the recession and subsequent fall afterwards, however, available figures can serve to illustrate the relative costs of the technologies. Table 2.2 above shows the characteristics and costs of the most common renewable energy technologies for new generating plants
52
The levelised cost of electricity which is calculated by dividing the discounted present value of the overall cost of an energy project which includes investment and the fixed and variable operating and maintenance costs, by the annual energy output.
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expected to come on stream in 2016. The figures were obtained from the 2009 Annual Energy Outlook prepared by the Energy Information Administration in the United States. Costs for conventional technologies (fossil based and nuclear) are included for comparison. The table shows that in general the cost of renewable energy technologies is higher than conventional technologies. Solar photovoltaics and solar thermal systems have the highest levelised costs of all the renewable technologies while geothermal, hydro and biomass are the lowest cost alternatives.
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Baseline Study of Energy Policies &amp; Legislation in Selected Caribbean Countries, July 2009

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CARIBEAN RENEWABLE ENERGY DEVELOPMENT PROGRAMME

Baseline Study of Energy Policies & Legislation in Selected Caribbean Countries

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

3.3.5 3.3.6 3.3.7 3.3.8 3.3.9

3.6 Suriname .......................................................................................................................... 76 3.6.1 3.6.2

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

3.6.3 3.6.4 3.6.5 3.6.6 3.6.7 3.6.8

Comparative Analysis ..................................................................... 94 Conclusion ................................................................................................................................. 99

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

1.4.2 1.4.3 1.4.4 2.

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

BELCOGEN Belize Cogeneration Company

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

RENEWABLE ENERGY PERSPECTIVE

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

Global Renewable Energy Utilization

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

Source: (ref chapter 7)

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

FIGURE 2.2: RENEWABLE ENERGY SHARE OF FINAL ENERGY CONSUMPTION, 2006

FIGURE 2.3: SHARE OF GLOBAL ELECTRICITY FROM RENEWABLE ENERGY, 2006

Nuclear, 14 Large Hydropower, 15

Fossil Fuels, 67 New Renewables, 3.4

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

Growth of Renewable Capacity

FIGURE 2.5 : TOP SIX COUNTRIES FOR RENEWABLE ENERGY TECHNOLOGIES

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

ENERGY STATUS OF SELECTED COUNTRIES

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

Source: Department of Statistic Bahamas (2006)

IMF Statistical Database The 2007/2008 Human Development Report (UNDP)

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

The Energy Sector

Source: Central Bank of the Bahamas (2008)

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

The Electricity Sector

Steam SS Diesel MS Diesel Gas Turbine Total

GBP 55.3 26.0 18.5 35.0 134.8

BEC 22 171 102 155 450

Total 77.3 197 120.5 190 584.8

Share 13.2% 33.7% 20.6% 32.5% 100.0%

Source: BEC & Grand Bahama Power

Source: BEC & Grand Bahama Power

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

In real Barbados $ at 2000 prices

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

DRAFT FINAL REPORT ON RENEWABLE ENERGY POLICY & LEGISLATION

Demand Side Management

BLP Energy Sales & Revenues

160.0 120.0 80.0

Baseline Study of Energy Policies & Legislation in Selected Caribbean Countries, July 2009

Baseline Study of Energy Policies & Legislation in Selected Caribbean Countries, July 2009