A leading economist has given the thumbs up to yesterday’s power ruling by the Fair Trading Commission (FTC), saying it should help preserve the island’s dwindling foreign reserves and redound to the benefit of the entire country.
Reacting to the decision by the FTC to allow the Barbados Light & Power Company (BL&P) to recoup almost $23 million for its 5MW energy storage device (ESD) through the Fuel Clause Adjustment (FCA), Dr Justin Robinson, dean of the faculty of social sciences at the University of the West Indies, Cave Hill campus, also suggested that the decision was both fair and reasonable.
“I think it is fair that Light and Power has invested in the plant with renewable [energy] so they need to be able to recoup some of their capital investment,” Robinson, a senior lecturer in management, told reporters on the sidelines of a workshop today on risk management in the renewable energy sector.
Given the recent precarious state of the island’s foreign reserves, which stood at a 22-year low of $410 million, or 6.6 weeks of import cover, at the end of December last year – well below the recommended 12 weeks – Robinson also said: “I think the country as a whole benefits because we save the foreign exchange, because we are generating electricity from a domestic resource rather than importing foreign oil and using precious foreign exchange reserves. So I think it is a reasonable decision.”
Recovery of the ESD costs is approved for a period of three years, commencing September 1, 2018, and will be reviewed six months prior to the expiration date to assess the recovery mechanism.
The ESD forms part of the BL&P’s 10MW solar farm 42-acre project in Trents, St Lucy. It is expected that the country will save about $10 million each year as a result of the operations of the $40 million plant, which began operating about two years ago.
In an application to the FTC last August, the power company had said it was seeking to recover $22,947,770, which includes the full cost – $19.5 million – for the ESD, which carries an operational warranty of ten years.
BL&P said it was looking to recoup the cost of capital over the lifetime of the warranty and had also proposed to share a minimum five per cent of the fuel savings with customers each year.
In its decision, the FTC said it had determined that the costs of the ESD were “prudently incurred”; therefore BL&P would be allowed to recover them.
The regulatory body also suggested that there were several benefits to be derived from the use of the ESD, adding that the FCA was “an acceptable mechanism” to recover the ESD costs.