#BTColumn – No ponzi schemes

Disclaimer: The views and opinions expressed by the author(s) do not represent the official position of Barbados TODAY.

by Khalid Grant

In the interest of providing the public with accurate information, the Barbados Renewable Energy Association (BREA) feels it necessary to correct erroneous information which has been circulated in an article that recently appeared on social media and in several parts of the Press regarding an alleged “energy Ponzi scheme”. This title is very inaccurate and unfortunate In the article, it is claimed that the Feed-in-Tariff (FIT) programme is unsustainable because “as more and more persons invest in these systems, the utility will be collecting less and less revenue, while having to pay out greater and greater FIT returns to these investors.”

The impact as described in the article is only likely to occur if a significant portion of customers were net metered or on sale of excess or if any other mechanism were used, like in Spain, where the utility is not able to recover the majority of the revenue that it has to pay out to the Renewable Energy (RE) provider for producing energy or to recover the loss in revenue they incur from the energy that these systems offset.

Fortunately, when setting up the billing mechanism for renewables in Barbados, the utility and the Fair Trading Commission had the foresight to set up the billing mechanism where today, the vast majority of solar Photovoltaic (PV) capacity is on the “buy all/ sell all” billing arrangement.

This mechanism allows the utility to continue to collect adequate revenue from persons who have systems greater than 3 kW installed on their homes and businesses to help cover the cost of strengthening and maintaining the electricity grid without impacting on other customers.

Set up the way that it is, this mechanism is neutral to the utility as it does not impact on its revenue base and, if the
Feed-in-Tariff (FIT) is set right, it will continue to encourage investment into renewables by allowing persons investing in these systems to earn an adequate return on their investment.

The Fair Trading Commission’s (FTC) Decision for FIT projects up to and including 1MW states in section 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.

The FTC’s Decision for FIT projects above 1MW and up to 10MW states under section VI: “Under this extension of the FIT programme the billing arrangement shall be “Buy all/Sell all”.”

However, since most of these larger systems have little or no internal load that is being offset by the PV system, even the Sale of Excess mechanism could work for these without compromising the utility’s revenue.

It is therefore untrue that, as stated in the article, the “only source of the utility’s income will then be those who are left without PV systems.” As stated above, under “buy all/ sell all”, customers will still be billed for all the electricity they consume regardless of whether they have solar panels or not. What is changing in this RE transition is how electricity is being generated on the island.

The generation side of the utility’s business is changing as more entities generate electricity; however, a utility is more than generation. Once the electricity is generated, whether by the utility or by FIT projects, the transmission and distribution systems are still required to deliver that electricity around the country. The “wires and poles” side of the business will remain an income stream for the utility.

At the moment, few PV installations are less than 3kW which can utilise the “sale of excess” billing. Almost all FIT systems will operate under “buy all/ sell all” which means the customer is billed for all the electricity they consume, and credited for all the electricity generated from the RE system. Any existing RE system owner has utility bills as proof of how “buy all/sell all” works and can attest to this fact.

However, the writer of the article has brought up a good point, letting us know that we have to continue to be cautious in our future decisions with regards to rates and FITs, because if the number of smaller systems increase to significant numbers, as potentially they can under the policy directives such as PV systems on 50,000 homes, this can create problems if left unchecked.

The article also claimed that “an identical situation happened in Spain between 2007 and 2022” and that the “government imposed a “Sun Tax” on every solar panel installed.” The facts are that when the Feed- in tariff mechanism started in Spain, the utility was asked to pay large sums to customers installing systems, way beyond the avoided cost of providing service, and the utility had no way of recovering this cost, which put the utility in a very
difficult financial position.

There were also other impacts of this initial policy and then, in 2012, a seven per cent tax was introduced on all electricity sales in Spain, both conventional and renewable followed by the introduction the commonly called “Sun Tax” in 2015 for systems over 10kW, and installations in some geographical regions were exempt. This absurd “Sun Tax” only ran for three years before it was abolished by a new incoming government in 2018.

Finally, to set the record straight about the FIT framework, this was a decision that was made based on extensive research and consultations conducted among the Utility, the FTC, BREA and other stakeholders prior to and since its introduction in 2010.

The current FIT mechanism was identified as the most appropriate methodology for Barbados and agreed to by industry stakeholders in November 2018.

BREA was one of those stakeholders and we are committed to representing the interest of our members and, by extension, all Barbadians. We will continue to engage with the Ministry of Energy, FTC, BL&P and other stakeholders to implement the best solution for the energy needs of Barbados.

As a result, we cannot sit idly by as misinformation is spread about a mechanism that has been working for Barbados to get us where we are today and, with continued examination and tweaking, will help us to reach a sustainable energy future by 2030.

Khalid Grant is the President, Barbados Renewable Energy Association.