On Feed-in-Tariffs for Renewable Energy Technologies above 1MW and up to 10 MW

• Jurisdiction: Barbados
• Court: Fair Trading Commission (Barbados)
• Judgment Date: 30 September 2020
• Docket Number: Document No.: FTCUR/DECFIT/2020-01

On Feed-in-Tariffs for Renewable Energy Technologies above 1MW and up to 10 MW

Document No.: FTCUR/DECFIT/2020-01

FAIR TRADING COMMISSION

DECISION

TABLE OF CONTENTS

SECTION 1 DECISION SUMMARY	5
SECTION 2 INCENTIVISING RE DEPLOYMENT	8
2.1 INTRODUCTION	8
2.2 ROLE OF ECONOMIC REGULATOR	9
2.3 Submission of RE Project Information to the Commission	10
2.4 Legislative Framework	11
SECTION 3 FEED-IN-TARIFF DESIGN AND ASSUMPTIONS	14
3.1 Conceptualization of Tariffs	14
3.2 FIT Policy Design Features	15
3.3 Land Use Policy and RE Projects	16
3.4 Counterparty and Obligation to Purchase	16
3.5 Billing and Compensation Framework for RE Projects	17
3.6 Interconnection Agreement	17
3.7 The Impact of the FIT on Customer Rates	18
3.8 FIT Model Assumptions	18
SECTION 4 THE DETERMINATION	24
APPENDIX 1	28

LIST OF ABBREVIATIONS

AC	Alternating Current
BL&P	Barbados Light & Power Company Limited
BNEP	Barbados National Energy Policy
COD	Commercial Operation Date
ELPA	Electric Light and Power Act, 2013–21
FIT	Feed-in-Tariff
FTCA	The Fair Trading Commission Act CAP. 326B
GoB	Government of Barbados
IDB	Inter-American Development Bank
IRENA	International Renewable Energy Association
LCOE	Levelised Cost of Energy
MEWR	Ministry of Energy and Water Resources
PPA	Power Purchase Agreement
PV	Photovoltaic
RE	Renewable Energy
REC	Renewable Energy Credit
The Commission	The Fair Trading Commission
URA	Utilities Regulation Act CAP. 282
The Consultant	Ostrander Consulting
WACC	Weighted Average Cost of Capital

SECTION 1 DECISION SUMMARY

1 The GoB, through the BNEP, has plotted the course towards a goal of 100% RE by 2030. To facilitate this undertaking, a stable pricing framework is necessary. On August 24, 2019, the Commission issued its Decision on FITs for systems up to and including 1 MW. Given the urgent need to spur further economic activity in the RE sector the Commission has determined that for systems above 1 MW and up to and including 10 MW, a FIT mechanism shall be the accepted methodology employed for establishing stable prices, until otherwise determined. To this end, the Commission has established the following extension of the FIT mechanism, according to the guidelines outlined in the BNEP:

• I The effective start date for this extension of the FIT programme shall be October 1, 2020. The applicable categories, rates and capacity allocations shall be as set out at paragraph IV hereof. The rates to be applied to all new projects sized over 1MW up to 5 MW shall remain applicable for eighteen (18) months until March 31, 2022. However, should there be a material change in the market, such as the exhaustion of capacity, a review may be undertaken earlier. The rates for all new projects sized over 5 MW up to 10 MW shall remain applicable for seven (7) months until March 31, 2021 or until such time as a competitive procurement framework is established.

• II All terms of all FITs procured under this decision shall remain constant for the duration of the 20-year contract.

• 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. See Table below.

  Fit Policy Design

  FIT Policy Element	RE Systems above 1 MW up to and including 10 MW
  Proposed Effective Date	October 1, 2020
  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

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

  Technology, Size Category	October 1, 2020 – March 31, 2022 FIT (BDS cents/kWh)	October 1, 2020 – March 31, 2022 Allocation (MW)
  Solar PV, above 1 MW and up to 5 MW	23.25	30
  Land-based Wind, above 1 MW and up to 5 MW	22.25	10
  Total Allocation	40

  Technology, Size Category	October 1, 2020 – March 31, 2021 (BDS cents/kWh)	October 1, 2020 – March 31, 2021 Allocation (MW)
  Solar PV, above 5 MW and up to 10 MW	21.75	25
  Land-based Wind, above 5 MW and up to 10 MW	20.25	10
  Total Allocation	35

• V The capacity refers to AC current. Any unutilised capacity shall be transferred from one technology to the other, where applicable.

• VI Under this extension of the FIT programme the billing arrangement shall be “Buy all/Sell all”.

• VII. At the end of the 20-year FIT contract period, a new contract will 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 INCENTIVISING RE DEPLOYMENT

2.1 INTRODUCTION

2 The GoB in its BNEP has initiated a move to a position where 100% of the island's electricity will be generated from RE by the year 2030. This is in an effort to reduce the country's dependency on fossil fuel; currently, 95% of electricity generation is from this source. On September 24, 2019, the Commission issued its Decision on Feed-in-Tariffs for Renewable Energy Technologies up to and including 1MW, document no. FTCUR/DECFIT/2019-04 (hereinafter referred to as “previous FIT Decision”). This decision is predicated on the assumptions as stated in the aforementioned previous FIT Decision. The intervenors' submissions made when determining the FIT rates for systems below 1 MW were also taken into consideration here as the consultation at that time considered the application of FITs generally. Given the current climate within the RE sector and the level of investment required to achieve the GoB's goal of 100% RE by 2030, there is need for rates to address systems beyond 1MW. These systems are considered utility scale projects in the Barbados context.

3 The term ‘utility scale RE project’ is qualified by the market that it operates in and the intended function of the project. These projects are connected to operate in parallel with the main utility grid (i.e. in front of the meter) and provides purchased electricity directly to the utility. The definition of utility scale varies across jurisdictions due to investment opportunities in their respective energy markets. As an example, the National Renewable Energy Association (NREL) defines utility scale as project 5 MW or greater 1, the U.S. Energy Information Administration considers generation facilities 1 MW and greater as utility scale 2, whereas projects 10 MW and up is also considered utility scale by the U.S. Energy Department 3. Within the Barbados RE context, given the small size of the electricity market as a whole and the

impact that a single RE project, particularly a variable RE project is expected to have on the grid, projects above 1 MW capacity may be considered utility scale

2.2 ROLE OF ECONOMIC REGULATOR

4 As set out in Section 4(3) (a) and (b) of the FTCA and Section 24B(1)(a) and (c) 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 and RE producers, as well as setting the maximum level of such rates. As was indicated in the previous FIT Decision, the Commission issued a public Consultation Paper dated 29 May, 2019, which solicited and received the views of stakeholders on the various pricing methodologies for RE technologies. The consultative process undertaken in arriving at the previous FIT Decision is the basis on which this determination was made.

5 This Decision outlines the Commission's determination to extend the FIT programme to RE systems above 1 MW and up to and including 10 MW, with a capacity of an additional 75 MW as advised by the Ministry responsible for energy. It is expected to provide a level of price certainty for investors with projects within this size category. Moreover, it is anticipated that this will advance the capacity requirements for meeting the 2030 target and assist in reducing the country's dependence on fossil fuel. This capacity refers to AC current. The Ministry responsible for energy has indicated that this 75 MW capacity allocation of the FIT programme will apply to RE systems above 1MW up to and including 10 MW. The FITs for RE systems above 1MW up to and including 5MW will apply up to March 31, 2022. Should there be a material change in the market, such as the exhaustion of capacity, a review may be undertaken earlier. RE systems above 5MW up to an including 10MW will be included in this 75 MW of the FIT programme up to March 31, 2021 or until a competitive procurement framework is established.

6 The Commission has determined the rates herein using the model outlined in the previous FIT Decision i.e. the FTC FIT Model 2019.

2.3 Submission of RE Project Information to the Commission

7 The Utilities Regulation Act, CAP 282 (URA) was recently amended to confirm the Commission's authority to set RE rates. The determination of appropriate RE rates is influenced by the level of incentive needed to stimulate investment in the sector....