CUC to pay for green power
(CNS): The country’s power company will be paying people who are generating renewable energy 37 cents per kWh for the electricity they send back to the grid under a new programme launched this month. Following agreement with the electricity regulator, CUC has revised its Consumer Owned Renewable Energy programme (CORE) and introduced a Feed-in Tariffs structure (FIT). The firm said this provides significant incentives to consumers generating energy from renewable sources and will allow local customers to connect small scale solar systems or wind turbines to CUC’s distribution system and to reduce their monthly energy bills while connected to the CUC grid.
Managing Director of the Electricity Regulatory Authority of the Cayman Islands, Philip Thomas, said the development of renewable energy systems is critical to reducing Cayman’s dependence on diesel. “The FIT program is consistent with ERA policies and that of the recently formed Government National Energy Policy Committee,” he added following the approval of CUC’s programme.
To begin with FIT will run as a pilot programme for a year or until the quota of 1MW of capacity has been filled on a first come first serve basis at 37 cents per kiloWatt hour, CUC has said. Applicants will be able to start exporting energy to the grid within 30 days of completion of the application to CUC, subject to approval by the Central Planning Authority. The FIT contract agreement will be for a term of 20 years to allow owners a reasonable return on their investment in renewable energy.
According to CUC, customers will be billed monthly at the normal retail rate, currently at 30 cents per kWh, for their total energy consumption and then will be credited monthly at the FIT rate of 37 cents. At the end of each calendar quarter, CUC will make a payment to CORE customers for the credit balance on their accounts.
President and Chief Executive Officer of CUC, Richard Hew, said the firm was pleased to introduce the Feed In Tariffs to both existing and new CORE customers. He said they would be able to generate energy through renewable means while connected with and benefitting from CUC’s reliable electricity distribution system.
“We look forward to an increase in the amount of renewable energy available to our system as we introduce some diversification of energy sources and displace fossil fuel used and its associated emissions,” Hew said of the this first step towards greener future for the island
The minister responsible for power, Juliana O’Connor-Connolly, said government wholeheartedly supported the FIT programme. “It dovetails into the National Energy Policy, as a means of encouraging consumers to reduce their utility bills while doing a small but important part in becoming more environmentally conscious.”
CUC officials said the maximum permitted size of the individual renewable energy systems will be the lesser of the CORE customer’s peak demand for existing systems measured over a period of up to twelve months, where that information is available, or estimated peak demand for new connections, with a maximum of 20 kW for residential systems and 50 kW for commercial systems.
There is no difference between the residential FIT rate and the commercial FIT rate, but to provide opportunities for everyone under the pilot, commercial customers will be limited to 70 percent of the 1 MW capacity, leaving the rest for residential customers.
This programme is at least a baby step towards protecting the environment. “By utilizing renewable energy instead of fossil fuels to generate electricity, CUC and its customers will be able to reduce exhaust gas emissions, reduce the use of non-renewable natural resources and contribute to the overall protection of the environment both in Grand Cayman and globally,” the firm said of the move.
At a recent press briefing, Hew said that CUC was working hard on finding reliable renewable energy resources but he said that it would be a long time before alternative energy sources could generate anything more than a fraction of the power needed to keep Grand Cayman plugged in. He said the focus was still on wind power, which he said was the most promising for Cayman in the immediate future as solar panels were still not yet cost effective. The challenge, however, for the wind project was finding a suitable location for the number of turbines needed.
Last year the power firm lost out on its preferred location for a wind farm in East End to the government’s weather radar system.“We are still committed to generating power through wind but we either have to find a way to co-exist with the radar or find another location,” Hew said.
Further details on and how to sign up are available at CUC’s Customer Service Department at 949-4300 or log on to www.cuc.ky. An agreement between the consumer and CUC will set out the terms under which services, connectivity, metering and billing credits will be governed.
On Cayman Brac in February 2007, the Earl of Wessex broke ground for the Cayman Brac Power & Light Company’s Wind Power Project at Stake Bay Point on the Bluff but this project appears to have stalled.
Category: Headline News
Let the cost of fuel go up and up, it will drive us all to the cleaner sources and reduce this islands oil dependance.
The money saved by going to solar could educate your nation.
It is no doubt progress that CUC is allowing token green power generation on Cayman
However, the method being used is more complicated, cumbersome, and costly, then necessary.
Net metering, as used in the US, is the easiest to install and use, requiring no extra meters and no extra interconnects.
Power injected on the other side of your existing meter merely slows down by according to the amount injected. If more power is injected than what is being used, the meter simply reverses.
CUC’s concern about a customer generating more power than he uses is automatically handled simply by not paying the customer for it, as shown by comparing meter readings from month to month. Any excess power generated thus be free to CUC, meaning no one is likely to any excess power.
The equipment used in net metering is already certified, is mass produced, and is available off the shelf.
So what is the true purpose in requiring every green power generator to buy and install a second meter, a second disconnect switch, and additional interface equipment?
The ERA and CUC have clearly made the wrong decision in their design, and the Country will regret this down the road. It is unnecessarily cumbersome, complicated, and expensive to install and operate..
If government wants to subsidize green energy, which is clearly the purpose of the agreed purchase price of CI 37 cents per kwh, there are myriad far better ways to do that.
Just wondering about this payback rate by CUC. My last electricity bill indicates I consumed 1937 KWH of electricity so I am assuming had I produced that amount of electricity and sold it to CUC I would have received 1937 x .37 cents for a total of $716.69. My last electric bill was for CI$611.09 for the 1937 KWH that I consumed. Am I not getting something right here?
No you are correct, under this new tariff they are paying you more for your generated electricity than they charge you (37c vs 30c), I beleive it is to try and offset some of the very large up front costs associated with setting up solar/wind systems.
It’s similiar to what Germany have done, they buy green electricity at 0.50 c (EUR) from customers and charge 0.20 c -which is why every man and his dog have a solar panel.
Ok whose idiot idea was it to put a doppler radar system in the middle of the contry that is going to prevent us from using wind power to provide electricity. This is a horrible idea that is going to cost the people of this contry millions of dollars in payments to Saudi Arabia for oil. Stupid stupid stupid stupid !!!
But it (the doppler) was free and if we didn’t accept it the money would have gone to somebody else!!!!
Penny wise pound foolish.
There are few places on earth better suited to renewable energy schemes. Steady breeze and flat surface, sunshine a plenty means you can rely on a large portion of your fuel bill to dissapear. This is doubly important because the importation of oil to a small island is always expensive.
Yes this is good news, but you have to ask why the obvious thing, large wind and solar farms have taken so long, and actually are still not planned. This small change is just to ALLOW (and persuade) individuals to put in mini schemes.
The reason is of course the manner in which CUC has a stranglehold on energy production which enables them to make a guaranteed return on capital, the very worst incentive to efficient and green energy production. Ask yourself why the politicians allow this situation to continue!
As has been pointed out, there is NO energy policy, and unless your minister finds some useful tract in the good book, I dont suppose there will be one anytime soon!
As the article states CUC is in support of a wind farm. The reason renewables have not caught more quickly is that they are more expensive than conventional power and whereas everyone likes the concept of green energy few are willing to pay more for it.
Sorry but you are wrong on two counts. CUC has not been in favour of renewables, if it was, why the policy of effectively charging people who at their own expense put power into the grid would never have happened. They were trying to protect the absurdity of the contract Government signed up to and even extended for 20 years, which was that their profit was guaranteed, the more capital they put in, the greater their charge to you!
The other slight innacuracy is that the expense of renewables is largely up front, thereafter you win. With solar, the prices are coming down from a high start.
What you will always need is a back up, but you have that in the CUC plant. In addition, you need what is called a “smart grid” ie an automated way of raising and lowering CUC supply to supplement the varying renewables. Smart is something your Minister is not famous for.
And another thing, why are you not using solar water heating, used in all other warm countries, cheap, efficient, and for a long time banned by order of CUC!
“They were trying to protect the absurdity of the contract Government signed up to and even extended for 20 years, which was that their profit was guaranteed, the more capital they put in, the greater their charge to you!”
And you are wrong on that count. The new licence is not a mere extension of the old licence and does not operate in the same way. There is no guaranteed level of profit. Increases in rates are governed by a price cap mechanism in which any increases are determined by inflation. Last year CPI did not increase therefore there was no rate increase regardless of how much capital was increased. They are now regulated.
Thank you for that correction, I am delighted to hear that that element of the contract was changed. I stand by all my other points, the snail like movement towards a renewable policy is lamentable, and the active discouragement of private action is awful, but the latest change is to be applauded.
What was, and is, missing is direction, imagination and policy from the political side which could have changed the status quo. Why are we not surprised at this lack of leadership?
I won’t claim to be an expert on CUC’s licences, but I’m not sure you have given the whole picture in this response.
As I understood the old licence and keeping things simple, it did not guarantee a profit, but it allowed rates to be increased if the rate of return on assets employed was less than 15%. Neither GAAP profit nor the return on assets in any year equalled 15% except by coincidence, but in practice the rate base formula meant CUC was guaranteed to make a profit over time roughly equal to 15%.
The new licence ( which you can find on CUC’s website for those interested ), again keeping things simple, has substituted a range ( clause 25.6 of the new T&D licence ) for the15% in the old licence. Maybe I have misunderstood this, but it seems to me that there is still a component of CUC’s pricing that relates to a return on assets and not just, as you suggest, CPI and that this mechanism, like the old one, essentially guarantees profitability over time .
Glad to see you are finally reading the licence. Now let us get on to the understanding part. The RORB range simply determines the multiplier which is applied to CPI but all increases are limited by CPI. Under the old licence if CUC earned 10% RORB it would be entitled to a 5% increase regardless of CPI or whether it had overinvested etc. Under the new licence, if it makes 10% RORB it is entitled to an increase of 80% of the change in CPI. If CPI is zero (as it was last year) then 80% of 0 = 0. Hopefully you can now see that it is not just “like the old one”.
Well strictly the adjustment to current rates is based on something called the Price Level Index ( "PLI"), a combination of CI and US CPI’s. Thanks for the " 80% of 0=0" math lesson, but the reality is that while the PLI may have been zero last year ( in the depths of a serious global recession ) it is extremely unlikely that such a construct will be zero very often. As inflation picks up with the recovering global economy, customers may expect basic rates to rise, with fuel price inflation passed on separately through the fuel cost charge.
In refuting my assertion that a part of CUC’s price adjustment mechanism depends on a return on its assets ( or as you put it " …the understanding part"), you have been a bit economical with the facts. CUC’s own licence states that " the PLI is adjusted by an appropriate factor, which may provide for a rate increase less than, equal to, or greater than the PLI." The adjusting factor is based on return on assets, a feature shared with the old licence. Any return on assets less than 7% and CUC may increase rates by the PLI plus 40%.
I don’t have access to the old licence, but I have a sneaking suspicion that under it there were no automatic rate increases to reflect inflation. The new licence provides for inflationary increases each year if the return on assets is less than 11% and CUC only has to give something back through the PLI mechanism if the return on assets exceeds 13%. In the old licence this would have been, in effect 15%, but 13% tax free is a pretty good return for shareholders anywhere.
As you say, this is not the old licence; the mechanism is different, I’ll concede that, but I’m struggling to see how in it’s practical application that makes much difference.
By “economical with the facts” I hope you mean a concise explanation of the relevant facts.
At least you have acknowledged that increases are now based on inflation.
In your zeal to paint the new licence in a negative light you make misleading and pointless statements like:
“I don’t have access to the old licence, but I have a sneaking suspicion that under it there were no automatic rate increases to reflect inflation”.
Whether is any increase to reflect in inflation will depend on the level of CUC’s RORB. It is not automatic. If RORB is between 11 and 13% there will be no increase at all.
Obviously CUC did not have to worry about inflation under the old licence. It had a guaranteed return of 15% even if there was deflation. It also had the ability to manipulate its return on rate base to maximise rate increases. No one knows the future so let’s take an historical perspective. In every year for the past 10 years we would have been entitled to a substantially larger increase under the old licence than under the new (had it been in effect). That, in a nutshell, is the difference.
I am not seeking to paint the new licence in any light, good or bad. I am simply pointing out that CUC gets to increase it’s rates through a combination of inflation related data ( which may or may not have any relevance to CUC’s financial performance ) and the return on it’s asset base. CUC can earn up to a 13% return on asset base before its rate calculation is negatively impacted. Under the old licence it was 15%. I am of the view that an allowable 13% return is a good deal for shareholders, just one man’s opinion.
Why is it I feel I am exchanging comments with CUC’s PR department? Maybe your use of "we" – I’m sure you meant "I". Given this, I am surprised to see you suggest that CUC would ever consider manipulating its return on rate base to maximise rate increases. Surely not!
“Any return on assets less than 7% and CUC may increase rates by the PLI plus 40%.”
Since you believe that there are significant increases in inflation right ahead suppose we say that the PLI increases to 5% and take your scenario of a RORB of less than 7%, say 6%. Would you rather pay 5*140%= 7%, or would you rather the increase under the old licence of 15-6= 9%?.
Unlike the old licence, if CUC manages to earn 13% RORB (which is unlikely given Cayman’s reduced growth rate) it will not have done so by increasing rates (since it will obtain no increases in rates while its returns are in the 11-13% range), so why begrudge them of it?
The trouble with making up examples is that one tends to select the example to fit one’s viewpoint. Let me do the same. Under the old licence, the breakeven point for CUC was 15%, the rate of return on assets at which no rate increase or decrease was required. Under the new licence this is a range, as you say of 11-13%
Let’s assume that CUC under both the old licence and new missed the breakeven point by 0.5%. Under the old licence CUC would be entitled to increase rates by 0.5%. Under the new CUC would be entitled to increase rates ( using your figure of 5% for CPI ) by 5*.08, or 4%. As I said, we could each endlessly pick examples, but really that is not my point.
My point, if you bother to go back to the beginning of this thread is that CUC’s ability to change it’s rate structure is a function of return on assets and that there is still a target return for CUC in the new licence. There are posters on this thread ( maybe its you, I can’t tell ) who seem to be in denial of this fact, presumably because linking rate increases to CPI has fooled them. My interpretation is that the target return is 13%, the point at which CUC’s rates would be decreased. Under the old licence, this point was 15%. I happen to think a 13% return on assets for a monopoly is pretty good going, but that’s just my opinion. You are entitled to yours
The example I used was based on the suggestion you made that CUC’s return fell below 7% and inflation increased. Having realised that it backfired you are now introducing new unrealistic scenarios in a vain effort to prove some negative point against the new licence. But of course your example fails. At 14.5% RORB under the new licence the customer would see a rate reduction of 40% of CPI (2% in your scenario) rather than a rate increase of 4% as you imagine.
I don’t understand the references to “breakeven points”. 15% RORB was not a breakeven point; it was the rate of return to which CUC was contractually entitled. FYI, the target range of return under the new lience is 9-11%, not 13%, but CUC is not contractually entitled to any particular rate of return. You are trying to obfuscate the issues. My point (which you have tried to side step) is that CUC is not entitled to any rate increase at all once it achieves 11% RORB (whereas under the old licence it would have been entitled to a 4% increase at that level). It follows that, in the unlikely event that CUC were to achieve a 13% return, it would not have been on account of an increase in rates but on the basis of its own efficiencies. In that context it is obviously unfair to compare 13% under the new licence with 15% under the old, but I understand that it suits your purpose to do so.
Give it up OReally.
It seems that you are the one who is not understanding the price mechanism. All increases are limited by CPI. The rate of return merely determines what % of CPI. The public complained of a 2.4% increase in rates in 2009 but under the old licence it would have been a 5% increase (if memory serves me correctly). Please compare apples with apples and don’t make stuff up like “breakeven point” and give them your own special definitions (a different one for each licence). That is not valid and you know it. My recollection is that CUC’s old licence never provided for rate reductions.
Since the house I was in in the 1980s had a solar water heater installed from the late 1970s I would question the assertiont hat CUC had ‘outlawed’ them. Perhpas more details could clarify this claim? – As to why we stopped using it? At the time it cost more to maintain it than to just use a regular, electric, water heater. The cost isn’t just in the isntallation (though costs are coming down as diesel price goes up, so it should ablance soon/now.)
Sounds good and a good start by CUC yet why don’t we build wind and solar farms instead of assisting CUC who is a dinosaur in energy. CUC is a oil driven business and it might be time for them to follow suit and start looking at alternative energy sources. Germany has only about 20% sunny days yet have a 80% usage of solar energy compared to Cayman which has 85% sunny days and has 5% max solar consumption. ElectraTech has been pushing for years to have more Solar products yet are constantly shot down, why?
Cayman has to look to the long term future and quit cutting corners when it comes to the environment. For far too long politics has disrupted good ideas so let’s look at creating more green spaces, bike paths and driving greener ( min 35mpg) vehicles all these measures will cut down energy consumption.
Blessings to all,
Last year the Lighthouse condo’s were told to shut down their windmill because it had produced too much electricity. I’m guessing there was a change in policy for CUC?
I think you will find that you are incorrect on the details in that statemnet. My understadning was that they were not told to shut down but chose to do so, partly because ofbilling issues with the previous CORE plan and partly because they found they didn’t need as much power themselves as they had expected. (CUC can’t make you shut down a windmill on your own property, generating power for your own use.) However, as the owners of the condos can speak for themselves and more accurately than I (and aparently you) can I will leave it at that.
Oh I can think of at least three people on this island who must be smiling from ear to ear right now.
Me, I need to call my architect and start making plans. The first check I get from the CUC, I am blowing up into a wall poster to make me smile… every… single… day.
A little concerned about that cap and not even sure that would stand a legal test but its a big … big step in the right direction.
Now solar panel charge stations for electric cars can now becoame a reality and Grand Cayman will be the first in the universe to offer to green service.
Great news, but what are CB Power & Light doing on the Brac and Little Cayman? So far absolutely NOTHING!!
BS – if you are providing power to CUC – then why in the heck are you still being billed 30 cents per kWh????
Because at some points you are still using CUC current (e.g. at night or when your batteries run low). You could make a profit if you provide more to them $-wise than you use from their grid over a given period.
Phil Thomas retired and left Cayman well before Christmas. Is he still the Managing Director of the Electricity Regulatory Authority?
Here’s a thought…….. Why don’t CUC lead by example and start producing green energy???
Take the insurance cheques from the 3 blown generators and invest in some wind turbines and solar panels.
….Just a thought.
CUC has to keep reliable diesel generators to provided continuous power regardless of whether the sun is shining or the wind blowing. We need both the green energy and the reliable backup.
Ah yes – but CUC can STORE power generated by solar and wind in massive batteries or battery arrays (just as the private consumer can for their own use)! CUC also has the capacity to have huge storage for back up and thereby reduce over time the diesel consumption!
Not really. One of the problems with using solar energy is that a battery has not yet been developed that can reliably store it on the massive scale required for the grid. MIT has developed a prototype liquid battery for that purpose but it may be several years before it is fully developed and achieves commercialdistribution.
http://www.physorg.com/news155569564.html
Fantastic stuff, well done Richie Rich !
This is a good start but if the Cayman Islands government reallywants people to invest in solar panels or wind turbines they should waive the duty on the equipment coming onto the island. To add, the FITs in the rest of the world are much higher than 37 cents per kwh and the normal rate per kwh is much lower (not to mention there is no fuel surcharge added to comsumers bills in addition to the normal rates).
Duty has been waived on renewable energy equipment; solar (pv), wind, solar hot water, geothermal and hydrogen. I believe the press release was back in 2009.
I don’t see any mention of any of these items in the Customs Tariff Law (2010 Revision). In my experience anything that is not specifically mentioned falls into the 22% duty category.
First and foremost, "big up" to CUC and everyone else involved. Now a very big question to our globe-trotting JuJu. WHAT ENERGY POLICY? The minister responsible for power, Juliana O’Connor-Connolly, said government wholeheartedly supported the FIT programme. “It dovetails into the National Energy Policy…. Did you and Paul come up with an energy policy whilst strolling down Las Ramblas? CNS, please ask for a copy of the Energy Policy, or a link to it. I have some really good info on this if you can get the conversation started.
CNS: I’ll have a go but don’t hold your breath.
NO CI energy policy yet. Committee meetings have just begun to discuss creating a draft document. expect it will be at least a year or two before Cayman has a national energy policy.
Yay!!
This is a step in the right direction.
I feel the positive winds of change in Cayman. Every week over the past few months I see new reasons to feel optimistic.
To all the pessimists and naysayers, check the cup again, surely you can see it is a little fuller.
Times are tough but we have much to feel grateful for. I want to say thank you to CUC for doing the right thing for whatever the reason you chose to to do this. If lack of current capacity motivated this change in policy, then it is just more evidence that challenging times are often the best motivator for positive adaptation and the emergence of new opportunities.