The Utility Regulation and Competition Office will be conducting a “rigorous” analysis of the process that led to the contract for Cayman’s first commercial-scale renewable energy plant.
The 5-megawatt solar farm opened in east Bodden Town on June 20, six years after the Caribbean Utilities Company first issued a request for expressions of interest in the project.
J. Paul Morgan, chief executive officer of OfReg, said in a press release Wednesday that his team hopes to ascertain what the process got right and what can be improved, and he wants to streamline the process of Cayman attempting to fulfill the government’s National Energy Policy goal of achieving 70 percent renewable energy in the public electricity supply by 2037.
“This has been a long journey that began six years ago when [Caribbean Utilities Company] issued its Request for Expressions of Interest,” Mr. Morgan said in an official statement. “Despite a number of setbacks over the years, the process and negotiations continued to the point where our predecessor – the Electricity Regulatory Authority (ERA) – was able to approve the Power Purchase Agreement (PPA) and Interconnection Agreement that was signed by CUC and Entropy in 2015.
“Now, as the regulator, it is our responsibility to do a postmortem on how we got to this point in anticipation of the next round of solicitations, and also to ensure that consumers’ benefits and welfare are maximized.”
Mr. Morgan suggested that one option may have been to cancel the procurement when the process seemed to be taking too long. That is one element that will be looked at during the “postmortem,” he said.
He said that he had received many expressions of concern over the contracted price of US$0.17 per kilowatt hour that CUC will be paying Entropy for the energy delivered from the solar plant. That price, he said, is due to the fact that Cayman is experimenting with a new form of renewable energy.
“We cannot compare Cayman to the U.S. or any other country for that matter, even other islands in the Caribbean,” he said. “There are significant costs to doing business in the Cayman Islands. From legal fees to shipping costs to the price of land; all these factors impact the bottom line and would have been taken into consideration when setting the price.
“However, we don’t expect this price to remain fixed, and part of the analysis we are going to do involves determining how we can continue to bring the price down to a point that will satisfy both the consumer and the provider.”
When Cayman reached its deal regulating the price of solar energy, Mr. Morgan said, the Jamaica utilities regulator had recently concluded a similar price for its renewable energy facility. Grenada, meanwhile, was paying between US$0.21 and US$0.44 per kilowatt hour for its own experiment with solar energy.
Jamaica has since announced a new deal at US$0.084 per kilowatt hour and the island of Kauai in Hawaii is trading at US$0.11 per kilowatt hour, albeit with significant subsidies factored into the price.
“While we must be careful to always compare apples with apples, the lessons from this, as well as the reality, is that the costs of renewables, in particular solar, are falling rapidly,” said Mr. Morgan.
“The falling costs of batteries as storage is also redefining the renewables landscape and proposition as a provider of firm capacity. At the same time, generation from wind is increasingly proving to be competitive with conventional fossil fuels. This means there is room for growth in the industry here in Cayman and clearly for more competitive pricing.”