On Energy Storage Framework and Tariffs

• Jurisdiction: Barbados
• Court: Fair Trading Commission (Barbados)
• Judgment Date: 28 June 2023
• Docket Number: Document No.: FTCUR/DECEST/2023-03

On Energy Storage Framework and Tariffs

Document No.: FTCUR/DECEST/2023-03

FAIR TRADING COMMISSION

DECISION

TABLE OF CONTENTS

LIST OF ABBREVIATIONS	4
Section 1 Summary	5
Section 2 Introduction	9
Background	9
Energy Storage Tariff (“EST”)	11
Considerations for EST	12
Section 3 Legislative Framework	15
Section 4 Submissions From Respondents	18
Suitability of Proposed Considerations	18
Mitigation Measures to Manage Risks	21
Community-based Energy Storage Initiatives	23
Pilot Project Roll-out	24
Appropriateness of Overall Capacity Payments for Stacked Services	25
Expected Rate of Return	27
Contract Period of EST and Timeframe to Recover Investment	29
EST Guarantee Period	30
EST Review	30
Degression Schedule	31
Capacity Bands	31
EST Levy	32
Responsibility for Dispatch	32
Metered Storage	33
Tariff Methodology	34
Section 5 EST Framework Design and Assumptions	36
Section 6 Determination	42

LIST OF ABBREVIATIONS

ACRONYMN	TERMS
BESS	Battery Energy Storage Systems
BLPC	Barbados Light & Power Company Limited
BNEF	BloombergNEF
BNEP	Barbados National Energy Policy
BCESEP	Barbados Clean Energy Storage and EV Policy
CAPEX	Capital expenditure
EMS	Energy Management System
EPC	Engineering, Procurement and Construction
EST	Energy Storage Tariff
ELPA	Electric Light and Power Act, 2013–21
FCA	Fuel Clause Adjustment
FTCA 2020	Fair Trading Commission Act, CAP. 326B, as amended
GoB	Government of Barbados
IPPs	Independent Power Producers
IRR	Internal Rate of Return
IRRP	Integrated Resource and Resiliency Plan
LCOS	Levelised Cost of Storage
MEB	Ministry of Energy and Business
PCS	Power Control System
PPA	Power Purchase Agreement
PV	Photovoltaic
RE	Renewable Energy
RPPA	Renewable Power Purchase Adjustment
RTE	Round trip efficiency
The Commission	The Fair Trading Commission
URA 2020	Utilities Regulation Act CAP. 282, as amended
VRE	Variable renewable energy
WACC	Weighted Average Cost of Capital

Section 1 Summary

The Government of Barbados (GoB) has set the country on a path to transition to an economy powered by 100% RE by 2030. There are indeed challenges to achieving this goal, as it requires the steady integration of RE resources into the electricity grid. So far, the Barbados energy sector has seen the installation of predominantly VRE resources, mainly solar PV. This and other intermittent resources such as wind power tend to introduce stability and sustainability issues into the operation of the grid, leading to the need for mitigation measures to be implemented. As a result, the GoB has identified energy storage as an appropriate means of mitigating the effects of these intermittent resources.

The Commission is empowered by its underpinning legislation to develop and implement reasonable, fair and transparent rates. The GoB's recommendations for energy storage point to the need to maximise a number of benefits inherent in the available technologies, such as enhanced grid resilience, reliability, and reduced greenhouse gas emissions. To effectively implement policy as required, the Commission has developed an EST framework for storage that utilizes a four (4) year pilot project aimed at gathering relevant data on the functioning of storage systems and their ability to provide services on the Barbados electricity grid. The pilot project will focus on the use of BESS of four (4), three (3) and two (2) hour durations, with a total allocated capacity of 50MW.

The Commission held a period of consultation from March 31 2023, to April 21 2023 and as customary, issued a consultation paper that sought comments from stakeholders, interested parties and the public in general on the most appropriate structure and quantum of tariffs for energy storage systems. Responses to the consultation are outlined and addressed in this Decision.

The Commission has determined the following tariffs and associated size categories:

Table 1: Size Categories and EST Rates for a two (2) hour battery

Size Category	LCOS(BBD$/kWh)	LCOS(BBD$/kW-month)
Up to 25 kW	0.675	56.78

Table 2: Size Categories and EST Rates for a three (3) hour battery

Size Category	LCOS(BBD$/kWh)	LCOS(BBD$/kW-month)
> 25 kW – 1 MW	0.404	33.95
> 1 MW – 10 MW	0.292	24.61

Table 3: Size Categories and EST Rates for a four (4) hour battery

Size Category	LCOS(BBD$/kWh)	LCOS(BBD$/kW-month)
> 25 kW – 1 MW	0.374	41.95
> 1 MW – 10 MW	0.270	30.34

Additionally, the Commission has determined that the monitoring and administrative framework for the EST shall comprise the following:

• I. The pilot shall be for a duration of four (4) years total. The first two (2) years is expected to see the design, procurement, installation and connection of the BESS equipment. The remaining two (2) years covers the operation of the projects and collection of the relevant data to assess the performance and viability of the projects. Project participants whose applications and/or registrations are verified, shall receive the rate available at the date of verification that is the date at which the MEB communicated to the investor that the application is complete and accepted, upon their connection to the grid for delivery of storage capacity and any associated services as required. The participants who are licensed during the pilot phase of the storage programme shall be eligible to receive associated tariffs for ten (10) years.

• II. In order to receive the EST payment, projects must meet the “used and useful” criteria. This means that the project must be able to provide three (3) or more storage power services and two (2) or more voltage/reactive power services simultaneously or temporally, and actively deliver these services to the grid. These services required are peak shaving with renewables, renewable energy firming & ramping, renewable curtailment reduction, spinning reserve, frequency response, distribution hosting capacity control, voltage control and power factor control.

• III. The BESS systems shall participate in the autonomous grid services or utility dispatch signal which on average, should add up to the power capacity of storage to prove to be “used and useful” or demonstrate that 365 cycles per year are utilized. The kWh capacity of the BESS should not fade more than 50% over ten (10) years and more than 5% per year based on 365 cycles per year of use.

• IV. One key element of this EST pilot programme is the necessity for the framework to set out provisions via which the regulator may assess the performance and feasibility of the projects. This requires that performance monitoring be facilitated by comprehensive data collection and submission on a defined schedule to assess the efficiency and costs of the BESS during the pilot. Consequently, the Commission determines that participants in the pilot shall submit quarterly reports which summarize the data collected and provide insights into the project's progress, challenges, and outcomes. The aforementioned reports shall include, inter alia, operational data including energy storage capacity, discharge rates, metered kilowatt and kilowatt hours, state of charge, throughput, cycles, and time series data using any metrics as is relevant. Additionally, participants shall be required to complete annual duration and power tests. This is where a check is done to ensure that the battery is able to perform as expected during the required operating time.

• V. Where it is found that a battery's capacity has degraded more than 50% over (the ten (10) year contract, or more than 5% in any one given year), there shall be a true-up mechanism where payments made to projects on the basis of full capacity are refunded in proportion to the level of degradation.

• VI. The BLPC and the project owners shall be required to retain all data generated during the pilot project. In addition, the Commission reserves the right to perform random checks on the batteries, as well as perform audits as necessary. The Commission shall prepare a final pilot project report at the end of the pilot, consolidating all the data, findings, and recommendations for stakeholders.

• VII. The EST and associated framework shall be reviewed every two (2) years. However, the Commission reserves the right to conduct reviews on a more frequent basis should market conditions deem it prudent.

Section 2 Introduction

Background

1 Guided by the central theme of “Energy security and affordability through diversity and collaboration: establishing and maintaining a sustainable energy sector for Barbados”, the Barbados' National Energy Policy (“BNEP”) sets a clear trajectory for transforming the country's energy landscape.

2 The BNEP seeks to steer Barbados from a petroleum-dependent economy towards a cleaner and more sustainable future. The ultimate goal is to transition to a renewable energy (“RE”) powered economy by 2030. Recognizing the unique challenges faced by a small island nation like Barbados, the policy emphasizes the crucial role of energy storage in mitigating the intermittency issues associated with variable renewable energy (“VRE”) resources such as wind and solar power.

3 While the development and accessibility of these VRE...