There are mounting fears that the renewable energy sector could face possible collapse as Government’s onerous National Social Responsibility Levy (NSRL) continues to suck life out of the vital sector.
Executive Director of the Barbados Renewable Energy Association (BREA) Meshia Clarke said since the 400 per cent increase in the tax from two per cent to ten per cent last July, as well as the introduction of a two per cent tax on all foreign exchange transactions, operators in the sector have witnessed a dramatic slowdown in sales and in the installation of new renewable energy systems.
She also pointed out that though several companies remained open, they were surviving on existing contracts, adding that BREA would soon be carrying out a study in order to be able to adequately quantify the impact of the NSRL on the sector.
“One of the things we are trying to do is reach out to our members early this year in terms of getting them to share with us what was the impact on some of their businesses . . . but the reality is that a lot of the businesses that are still existing are the ones that would have had things in the pipeline in 2016 that flowed over to 2017,” Clarke said.
“Apart from the companies which won Government contracts, quite a lot of them have been using other envelopes from their other business sectors to support their renewable energy side. The industry has slowed down to the point where nothing is happening. Nothing is happening apart from those existing contracts. Typically, for every one Government contract that you see issued, you really need about five more,” she said.
Following the May 30, 2017 announcement of the increase in the NSRL and introduction of the two per cent tax, which took effect on July 1, 2017, BREA held several meetings with Minister of Finance Chris Sinckler seeking a reprieve from those taxes. However, Government has not budged in terms of those demands.
Earlier it was reported by Barbados TODAY that as a result of the burdensome taxes, Barbadians considering the installation of some systems would have to fork out up to $600 more, as some companies reported cost increases of between eight and 12 per cent.
Overall therefore Clarke said 2017 has been anything but a conventional year for the renewable energy sector.
“For an embryonic sector like that of the renewable energy sector [those taxes] were a massive blow,” she explained, adding that “what we would have hoped for was continuing support from the Government by maintaining an enabling environment for the sector to grow which would have seen specific carve outs like that of the tourism industry”.
Instead, she said, the taxes “significantly” drove up the cost of installation, making companies less competitive and bringing some to the brink of closure.
“Now the installation of the system has obviously gone up as a result of the two per cent levy first and then the increase on the NSRL. That has nothing to do with inflation as well,” the BREA official said, pointing out that most companies were now struggling to compete regionally and internationally in order to keep their doors open and staff employed.
Despite the obstacles and challenges, Clarke said there were several bright sparks throughout 2017, including the introduction of the highly anticipated National Energy Policy, which she said was “an important milestone for the industry in helping to shape a clear strategic path forward”.
“Prior to this, in August 2017 we saw the start of the Government’s Public Sector Smart Energy Programme (PSSEP),” she said, of the project that was designed to retrofit Government buildings with energy efficient products.
“Although these achievements mark some critical next steps made by the Government in facilitating the growth and development of the renewable energy and energy efficiency sector, the Secretariat is anxiously looking to 2018 as a defining year,” Clarke added.
The renewable energy sector executive said industry players were also hoping a recent tariff study by Professor Olac Hohmeyer would be approved and adopted.
“Equally important for the Secretariat is the extension of the licensing period for Power Purchase Agreements (PPA) from the current ten year to a 20 extension period. This will ensure that the installation of renewable energy systems by the general populous becomes more affordable as the economics of the sector has changed,” the BREA official said.
However, she said the likely increase in oil prices was a major area of concern, pledging that “we will be strengthening our lobbying efforts in 2018 to ensure that every effort is made to progress the adoption of renewable energy to mitigate the impact on the economy.
“As the Secretariat looks to 2018 and the future we will be embracing an agenda of energy independence, as this actively supports the creation of affordable alternative energy solutions for Barbadians while diversifying and enhancing new private sector opportunities,” Clarke added.