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Economics and Barriers to Solar Photovoltaic Applications in
Barbados ©Roland R Clarke PhD
Clarke Energy [email protected]
Presented toAlternative Energy: Pathways to a Sustainable Future in Barbados,
Lloyd Erskine Sandiford Centre, Barbados06‐07 September 2010
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Objective of this Presentation1. To introduce Clarke Energy Inc DBA Clarke Energy
Associates2. To identify the benefits of solar PV’s and RE to Barbados3. To review solar PV applications4. To illustrate the economics of Solar PV’s5. To examine pricing under BLPC’s Feed‐in Tariff (FIT)6. To propose a better pricing strategy for the FIT7. To review the barriers to the widespread deployment of
PV’s and other RE8. To suggest a way forward
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About Clarke Energy Inc. ‐ DBAClarke Energy Associates
Our Value Added Services / Consulting ‐ include Project management, energy audits, load analysis, system sizing, site analysis, procurement, shipping, installationPower Purchase Agreements (PPA) supportPolicy and regulatory advocacyDue diligence, feasibility studies
Our Training Services include –Project Analysis using RETScreenEconomic, financial, risk, sensitivity and GHG
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About Clarke Energy Inc.Clarke Energy Inc. is a Barbados based value added reseller of:
Solar photovoltaic (PV) panels Wind turbines, andBOS components e.g. inverters, charge controllers, racks
Markets includeResidential Commercial/IndustrialPublicHotel
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Benefits of PV’s to CustomersPurchase of 20 years’ supply of electricity up frontTax rebate available for residential energy audits $2,000Tax rebate available for cost of the system at $5,000 per year, for each of 5 years Acquisition of an asset, rather than paying electricity bills to BLPC – that money and foreign exchange being lost foreverIncreases the value of property – but also taxes
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Benefits of PV’s to CustomersMay be configured to be off‐grid or grid tied or bothMay be configured to supply power safely to a customer’s property during power outagesIf grid‐tied, will be compensated at 1.8 x Fuel Clause Adjustment – currently approx. 1.8 x 30.7 cents = 55.3cents per kWh, under the pilot Feed‐In Tariff program
This compares with current domestic cost for a customer using 375 kWh per month, of $215 = 57.3 cents per kWhNB: The domestic costs comprises of a fixed residential charge of $10, plus energy charges of 176 cents per kWh, plus FCA of 30.7 cents per kWh, plus 15% VAT
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Benefits to BLPCOwnership of the RE system by BLPC, will permit the company to earn a return on the “fuel portion” of the bill for the very time in its historyAt present, the fuel portion of the bill is a straight pass though to customers under the FCA – no returns permitted by regulationWith ownership, BLPC will be able to include the cost of RE into its rate base, and earn even more regulated returns Good stewardship of the environmentGood public relations benefits to continuation of a Feed‐In Tariff programme after the pilot stage, provided all goes well
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Benefits to BarbadosOne time up‐front purchase of energy for the next 20 years, one customer at a timeEnhanced security of energy supplyForeign exchange savings on imported fuel for the next 20 yearsForeign exchange expenditure on system cost limited to upfront purchase, with limited periodic costs about every 10 yearsEnhanced ability of Barbados to withstand international upheavals in the world economy, and oil prices
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Benefits to Barbados of a 25% Market Penetration of PV
According to BLPC Annual Report, in 2009BLPC spent 49 cents of every dollar on imported fuel – comprising about 93% Bunker CBDS $236.5 million spent on fuel in 2009 – down from $297.6 million in 2008Total energy sales – 952.2 GWh of which domestic customers accounted for 308.1 GWh (32.3%), and commercial customers 644.1 GWh (67.7%)Target of 25% savings = 238 GWh or $59.1 million saved or avoided
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Benefits to Barbados of a 25% Market Penetration of PV
Assuming 15% net profit below the bottom line of any enterprise in Barbados, revenue would have to be BDS $59.1 million divided by 0.15 = $394.1 millionIn other words, the tourism enterprise or the real estate enterprise of Barbados would have to add $394.1 million dollars in revenue, in order to have the same impact of the saving that may be incurred by solar PVIt is more realistic to undertake solar PV, than to expand the enterprise of BarbadosEverybody wins – Customers, BLPC, Entrepreneurs, & Barbados
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Benefits to Barbados of a 25% Market Penetration of PV
At a levalised cost of 50 cents per kWh, total solar PV costs =238 GWh x 1,000,000 = 238 million kWh238 million kWh x $0.60 per kwh = $143 millionThis solar PV investment of $143 million is significantly less than the $394 million of additional revenue from enterprise in BarbadosFurther, not all of the PV investment is foreign exchangeNext we will examine typical PV systems and costs
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Stand Alone PV Systems for AC Loads
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Utility Interactive PV Systems
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Hybrid Systems e.g. PV/Wind
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Bimodal System
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Electricity Exporting
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System Costs for 3.57 kW PV – Self vs Turnkey Supplier – US$
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Self SupplierUS $7,500 per kW $10,500 per kW
Revenue to Customers under BLPC Pilot Feed‐In Tariff
The Context – Solar and WindThe Barbados Light and Power Company has recently proposed a Feed‐In Tariff or Renewable Energy Rider to the Fair Trading Commission (FTC) of FCA x 1.8 = BDS $0.30 x 1.8 = BDS $0.54 per kWh approximately at today’s oil prices & FCA‐Where FCA = Fuel Clause Adjustment‐Minimum or floor of BDS $0.16 per kWh
Technologies limited to solar PV and wind < 50 kW, up to a maximum total of 1.5 MW over 3 years
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Pricing of RE Electricity under BLPC Feed‐in Tariff vs Cost (Source BLPC)
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0.0
0.8
1.0
0.40.6
0.2
BDS $/kWh
$0.55/kWh
24 hrs
Tariff = $0.57/kWh
Pricing of RE Electricity under BLPC Feed‐in Tariff vs Cost (Source BLPC)
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0.0
0.8
1.0
0.4
0.6
0.2
BDS $/kWh
$0.54/kWh
CAD $ 0.85
24 hrs
Proposal by Clarke Time‐of‐Day (TOU) Feed‐in Tariff
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0.0
0.81.0
0.40.6
0.2
BDS $/kWh
$0.50/kWh$0.30/kWh
$0.80/kWh
Scenario A: Cumulative Cash Flow for 2.45 kW PV – Feed‐In $0.54 – No tax incentive
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20 yrs
Scenario B: Cumulative Cash Flow ‐ 2.45 kW PV – Feed In $0.80 – No Incentives
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13 yrs payback
Scenario C: Cumulative Cash Flow ‐ – 2.45 kW PV – Feed In $0.54 – Tax Incentive = $5,000 x (1‐
0.36) for 5 yrs plus $2,000 x (1‐0.36) Energy Audit
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8 yrs Payback
Barriers – First CostBarriers to Solar and Wind – First Cost
The installed (retail) price of Solar PV and small wind systems is approximately BDS $20,000 per peak kWThis compares to $4,000 per kW for a small Gensetsusing diesel oilHowever this compares well to $5,000 for large utility scale wind energy systems (> 10 MW)Unfortunately, no economies of scale for solar PVHowever, retail PV module prices have been dropping in recent times (See Figure following)
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Current PV Module Prices
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BarriersLack of customer finance schemes e.g. should be similar to and as ubiquitous as car loansLack of vendor or supplier finance schemes – only few companies have the financial wherewithal e.g. BLPCLack of confidence in local suppliers – local content should be encouraged and perhaps mandatedLack of awareness among customers, bankers and public decision makersLack of skilled designers, installers and financial analysts35% of all residential roof tops already have solar hot waterIn the rental market, occupants do not have same incentive as building owners. i.e. split incentives
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Way Forward
The Central Bank and other relevant authorities should quantify the barriers to RE
First costs, awareness information, human capacity, split incentives etc
The Central Bank should facilitate the BPLC Feed‐In Tariff by introducing customer and vendor financing mechanismsCentral Bank should actively engage in the FITprogramme to ensure its continuation after the pilot
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SummaryThis presentation reviews
The benefits of solar PV and RE for BarbadosThe technology, pricing and economics of solar PV’s under the BLPC’s Feed‐In Tariff, and suggests a more appropriate pricing strategyThe barriers to the wide spread deployment of PV’s and RE in Barbados, and to suggest a way forward
The view expressed here‐in are solely those of the Author and are intended to be a contribution to the debateClarke Energy wishes to express appreciation to the Central Bank for the opportunity to make this presentation.
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AdvertisementYou may contact us by email at [email protected] for a freeestimate on a PV system for your home or business Visit us and enquire about our advisory and training services at www.clarkeenergyassociates.com
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THANK YOU
Thank youFor more information contact
Roland Clarke PhDClarke Energy [email protected]
www.clarkeenergyassociates.com
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