On Feed-in-Tariffs for Renewable Energy Technologies up to and Including 1 MW

• Jurisdiction: Barbados
• Court: Fair Trading Commission (Barbados)
• Judgment Date: 24 September 2019
• Docket Number: Document No.: FTCUR/DECFIT/2019-04

On Feed-in-Tariffs for Renewable Energy Technologies up to and Including 1 MW

Document No.: FTCUR/DECFIT/2019-04

FAIR TRADING COMMISSION

DECISION AND ORDER

TABLE OF CONTENTS

SECTION 1 SUMMARY	4
SECTION 2 INTRODUCTION	9
2.0 Background	10
2.1 Legislative Framework	15
SECTION 3 FEED-IN-TARIFF DESIGN AND ASSUMPTIONS	16
SECTION 4 THE DETERMINATION	32
APPENDIX 1	37

LIST OF ABBREVIATIONS

BL&P	Barbados Light & Power Company Limited
BNEP	Barbados National Energy Policy
BRA	Barbados Revenue Authority
BREA	Barbados Renewable Energy Association
COD	Commercial Operation Date
ELPA	Electric Light and Power Act, 2013–21
FCA	Fuel Clause Adjustment
FIT	Feed-in-Tariff
FTCA	The Fair Trading Commission Act CAP. 326B
GDP	Gross Domestic Product
GoB	Government of Barbados
IDC	Interest During Construction
IPP	Independent Power Producer
IRP	Integrated Resource Plan
IRR	Internal Rate of Return
LCOE	Levelised Cost of Energy
MEWR	Ministry of Energy and Water Resources
MSBEC	Ministry of Small Business, Entrepreneurship and Commerce
NREL	National Renewable Energy Laboratory
O&M	Operations and Maintenance
PV	Photovoltaic
RE	Renewable Energy
REC	Renewable Energy Credit
REFCA	Renewable Energy Fuel Clause Adjust
RER	Renewable Energy Rider
ROR	Rate of Return
TOR	Terms of Reference
The Commission	The Fair Trading Commission
URA	Utilities Regulation Act CAP. 282
The Consultant	Ostrander Consulting
VAT	Value Added Tax
WACC	Weighted Average Cost of Capital

SECTION 1 SUMMARY

The GoB in the BNEP 2019 – 2030 has outlined a roadmap for transitioning the country from a fossil fuel dependent nation to one that is 100% RE based and carbon neutral. As a consequence, the Commission has undertaken to determine a pricing framework for RE technologies for installations sized up to and including 1 MW. The FIT was identified as the methodology for arriving at the rates applicable to the framework. This was agreed to by industry stakeholders in November 2018.

FITs are a highly effective instrument in the promotion of RE goals as they guarantee investors access to the grid and the opportunity to sell 100% of project output at a specified price for a known duration. The FIT programme determined in this Decision was based on a multi-criteria approach, seeking to achieve a number of the objectives outlined in the BNEP including, inter alia, encouraging a level of RE deployment commensurate with the attainment of the 100% RE goal, technology and size differentiation and facilitating effective competition in the market. Consideration was also given to the potential impact of the FIT on the consumer, basing the analysis on the full 625 MW of projected RE deployment over the period 2019 to 2030. Costs to customers are anticipated to be less than the expected effect of maintaining the current status quo of continuing to use fossil fuels as the main energy source. Expected cost savings over this timeframe is BDS$52.5M in nominal terms, based on the avoided cost of fuel. Noticeably, this does not even consider the cost of the BL&P replacing most of its existing aged fossil-fuel driven plant with new similar fossil-fuel driven plant, which would be a necessity. It must be noted that this Decision speaks only to a subset of the overall capacity requirement and as such, the direct impact of this iteration of the FIT on the consumer is not immediately measurable.

International experience with the implementation of FIT programmes and the associated increase in RE deployment has shown that a number of social and economic benefits accrue. These include:

• • A cleaner environment;

• • Increased job creation;

• • Reductions in foreign exchange outflow;

• • Energy security and independence; and

• • Broad participation in the energy sector.

In view of the foregoing, the Commission has determined the following:

• I The effective start date for the FIT programme shall be October 1, 2019. The applicable categories, rates and capacity allocations shall be as set out at paragraph IV hereof and shall remain in effect until December 31, 2021 or until such time as the expiration of the existing capacity, stated herein, whichever comes first. Thereafter the rates shall be reviewed annually. New rates shall be announced three (3) months prior to the end of each review period.

• II All terms shall remain constant for the duration of the 20-year contract. New or revised terms, conditions and tariff prices shall only be applicable to new projects entering the market in future programme years.

• III The FIT shall be based on a 20-year fixed tariff with no front loading and differentiated by technology and size. The tariff is based on the LCOE, using a multi-criteria approach according to the guidelines espoused in the BNEP.

  Fit Policy Design

  FIT Policy Element	RE Systems up to 1 MW
  Proposed Effective Date	1/10/2019
  Rate: Fixed, Tiered or Variable Options	Fixed
  Rate: Differentiated by Technology & Size	Yes
  Tariff Duration	20 years
  Administratively-Determined or Competitively-Bid	Administratively-Determined
  Presumed Off-taker	BL&P
  Quantity Covered by FIT	100% of output
  Periodic Review of Rates and MW Allocation	27 months initially, thereafter, annually

  FITs Differentiated by Technology and Size (Up to and including 1 MW)

  Technology Category	Size Category
  Solar	Up to 10 kW
  Solar	Above 10 kW to 100 kW
  Solar	Above 100 kW to 250 kW
  Solar	Above 250 kW to 500 kW
  Solar	Above 500 kW to 1 MW
  Land-Based Wind	Up to 10 kW
  Land-Based Wind	Above 10 kW to 1 MW
  Anaerobic Digestion	Up to 1 MW
  Solid Biomass	Up to 1 MW

• IV The applicable categories, rates and capacity allocation shall be as outlined below:

  Technology, Size Category	Oct. 1, 2019 – Dec. 31, 2021 FIT (BDScents/kWh)	Oct. 1, 2019 – Dec. 31, 2021 Allocation (MW)
  Solar, Up to 10 kW	42.75	5
  Solar, Above 10 kW to 100 kW	44.75
  Solar, Above 100 kW to 250 kW	41.75	8
  Solar, Above 250 kW to 500 kW	38.25
  Solar, Above 500 kW to 1 MW	36.25	12.7
  Land-Based Wind, up to 10 kW	39.75	3
  Land-Based Wind, Above 10 kW to 1 MW	38.25
  Anaerobic Digestion, Up to 1 MW	44.25	2
  Solid Biomass, Up to 1 MW	52.25	2
  Total Allocation	32.7

• V Capacity shall be allocated on a first come first served basis.

• VI The total MW to be allocated for the period October 1, 2019 to December 31, 2021 of the FIT programme is 32.7 MW, with the addition of any roll-over from the transition period (capacity allocated prior to September 27, 2019). Any un-utilised capacity shall rollover from one (1) iteration of the FIT to the next.

• VII Current RER customers will be grandfathered and maintain their existing arrangements for the period of twenty (20) years commencing from the system's original commissioning date.

• VIII Under the FIT programme, systems of 3 kW or less shall utilise the “sale of excess” billing arrangement at the appropriate rate, while those above 3 kW and up to 1 MW shall use the “buy all/sell all” mechanism.

• IX A multiplier of 10% in the first iteration of the FIT programme shall apply to all Community – Shared RE Projects. The criteria for Community – Shared RE Projects shall be: 1) a minimum of fifteen (15) residential customer investors, and 2) no single entity owning more than 50% of a single project.

• X The maximum allowed duration between project licensing and COD is determined according to technology as follows:

  • ○ Solar up to 1 MW: 12 months

  • ○ Wind up to 1 MW: 12 months

  • ○ Anaerobic Digestion: 36 months

  • ○ Solid Biomass: 36 months

  One (1) 6-month extension is allowed for solar and wind up to 1 MW, with no security, and no opportunity for further extension. For anaerobic digestion and solid biomass up to 1 MW one (1) 12-month extension is allowed, with no security, and no opportunity for further extension.

• XI Only one (1) FIT project per parcel of land is allowed.

• XII The FIT includes the purchase by the BL&P of all present and future commodities and/or environmental attributes generated by the project — including energy capacity, RECs or other commodities that may exist now or in the future. All rights, titles and interests in RECs shall be affirmatively purchased as part of the FIT and retained/retired so as to be counted towards the achievement of Barbados' RE goals. Further, the resale of RECs by the BL&P to fulfill any other claims or commitments, or for financial gain in international markets is not allowed.

• XIII At the end of the 20-year FIT contract period, a new contract would need to be negotiated based on the existing value of the assets, the avoided cost of fuel or such other factors as may be determined by the Commission, in its sole discretion, at that time.

SECTION 2 INTRODUCTION

A FIT may be defined as a rate which is paid to producers of RE by an electric utility or government agency for energy produced, usually over a guaranteed period. It is an effective policy instrument for the promotion of RE objectives. As such, it is usually set at a level that encourages individuals and businesses to invest in RE projects. FITs are customarily vital in enabling the march towards energy independence, which in turn catalyzes further benefits, such as enhancement of security and stability in energy supply, greater economic competitiveness, and greater environmental sustainability.

Given its mandate as set out in Section 4(3) (a) of the FTCA and Section 3(1) of the URA, of the Laws of Barbados, the Commission is tasked with establishing principles for arriving at the rates to be charged by service providers, as...