The bottlenecks to growing renewable energy in Cayman

The goals to introduce renewables into Cayman’s energy mix are lofty but progress is slow.

In 2019, CUC generated just under 700 gigawatts of energy, but only about 2.6% of that came from renewable sources.

Because of the lower energy usage this year, due to the lockdown and the halt to tourism, the share of renewable energy has increased slightly to 3%.

This is still a far cry from the 240 megawatt capacity of renewable energy projected for the year 2037 by Cayman’s Integrated Resource Plan. This plan, drafted in 2017 by Caribbean Utilities Company and approved by the regulator OfReg, aims to meet both the islands’ energy needs and the climate goals of the National Energy Policy, which called for 70% of Cayman’s energy to come from renewables within 20 years.

The Carribbean Transitional Energy Conference, hosted virtually on 19 Nov. by the Cayman Renewable Energy Association, provided another reminder why growing the share of renewables is taking time.

The electricity provider CUC, regulator OfReg, the government and industry association CREA are locked into a circular argument of sometimes competing interests and objectives.

OfReg seeks to ensure competition in the market, low energy prices, choice and consumer protection.

CUC calls for large-scale solar projects and has submitted its own 20MW solar plant and storage plan to the regulator.

Industry association CREA, in turn, wants more allocated capacity for rooftop solar panels and better programmes than those that are currently offered by CUC under which homeowners and businesses can sell energy to the utility.

And the government wants to quickly achieve its climate change targets, a high share of renewables, more employment for Caymanians in green technology, and cheap energy bills for the consumer – all at the same time.

Sacha Tibbetts, vice president of Customer Service and Technology at CUC, suggested at the event that Cayman as a jurisdiction needs to be clear what it values most with regard to the energy markets.

The advancement of renewable energy, the cost of energy and ensuring competition are, to some extent, competing objectives. At a minimum, the lack of prioritising one over the other will lead to delays.

So far, renewable energy is evenly split between so-called distributed generation, mainly in the form of more than 500 rooftop solar panels, and a 5MW solar farm in Bodden Town.

Another 260 approved rooftop connections will take this type of distributed energy capacity from 8MW up to 10 MW.

Bottleneck 1: Storage

Currently, a quota exists limiting the amount of renewable energy that can be supported by the grid because there needs to be storage in place to manage the intermittent nature of renewable energy, both in terms of reliability and cost.

To increase the quota, battery storage will need to come online, but an initial 20MW battery storage project has not yet been awarded.

According to Louis Boucher, deputy executive director of Energy and Utilities at OfReg, CUC is working through third-party bids to provide 20MW battery storage – a project that is subject to the regulator’s approval.

While the 20MW battery storage is designed to make CUC’s diesel generator’s spinning reserve more efficient, it will also allow to bring an additional 12MW of distributed solar energy onto the grid. This will increase the ability of the grid to support up to 29MW of intermittent resources, like solar panels.

In the future, the battery storage capacity is expected to rise to at least 60MW.

Once larger utility projects and more storage are approved, the need for quotas will go away.

Bottleneck 2: Procurement

“Procurement has been a bit of a challenge,” said Tibbetts.

While there is a clear process in place for the procurement of firm capacity – the amount of energy that is guaranteed to be available at a given time – this is not what is required at this time, he said.

“What’s needed now is to deploy large-scale renewable resources, with supporting storage to provide some of the reserve capacity into the market.”

However, the framework for the procurement of those types of projects is still under development by OfReg and, as a result, no projects are being solicited.

Boucher said OfReg is in the process of finalising a determination on competitive renewable energy solicitation mechanism to pave the way for future utility-scale solar and storage proposals.

The new system would accept renewable projects from CUC and independent power producers, who CUC would have to integrate into the national grid, similar to the existing solar farm in Bodden Town.

Bottleneck 3: Utility-scale vs distributed generation

The debate over whether priority should be given to distributed rooftop solar or larger solar plants is to some extent overshadowing the adoption of renewables as a whole. The discussion pitches speed of deployment and low energy cost against local job creation.

Industrial-scale solar plants can rapidly increase the share of renewables. Because the cost of this type of solar project has dropped by 30% in the past four years, CUC says it can now produce green energy at cheap rates equivalent to those of cheap and dirty diesel-generated power.

The electricity provider is pushing for large-scale utility solar projects as the main way to accelerate the introduction of renewables to meet the ambitious climate change targets.

CUC has submitted to the regulator its own solar energy and storage project. The company’s CEO Richard Hew said this project “offers very cost-effective rates” and, if accepted, could “jumpstart the renewable energy sector, and be completed within two years”.

Hew said, “To stay on track with the IRP, we will need to bring online 90 megawatts of utility scale solar by 2024.”

However, Boucher noted that the IRP is only a guideline and a dynamic document that is set to be updated in the next two years to include new cost estimates and take into account new technologies that have been developed.

With regards to achieving 90MW of renewable capacity by 2024, he said, those are moving targets. “I mean I’m not saying let’s not do it, but let’s be reasonable, and look at the cost as well.”

The rooftop-solar companies and CREA, on the other hand, have lobbied for the extension and upgrades of the programmes available to sell more distributed energy to CUC.

Distributed solar will create more local jobs in green technology, according to CREA, whose membership is largely composed of businesses that install rooftop solar panels.

The problem from CUC’s point of view is that distributed energy is more expensive than utility scale solar. “Presently, utility scale solar is about half the cost of distributed energy,” said Tibbetts.

There is no doubt that both industrial-scale and distributed renewable generation will be needed to grow green energy in Cayman.

“Distributed resources will play a major role in us achieving the goals of the National Energy Policy,” Tibbetts said. “But I have to caution that it’s important that we do so with a very strong eye on the cost of doing so.”

CREA, in turn, has argued that the focus on larger projects and cost, in terms of utility rates, is too myopic and disregards the greater economic effect created by many smaller solar projects, especially now in times of economic turmoil. And it emphasises that distributed solar costs are coming down, too.

CUC on the other hand believes that CREA’s effective lobbying for small-scale distributed renewables to the regulator and the government has taken attention away from utility scale initiatives.

Both the regulator and CUC point out that in the context of the Integrated Resource Plan, the capacity for distributed renewable energy is on track, whereas utility-scale solar is trailing behind the projections.

Bottleneck 4: Energy cost

While the National Energy Policy calls for a quick energy transition to meet climate change targets, the regulator OfReg is stepping on the brakes.

Asked what represented the main challenge to the widespread adoption of renewable energy technology, Boucher said at the event, “We have an existing asset base that consumers are paying for. So, you know, we cannot move too quickly, otherwise consumers will be hit with more cost than necessary.”

Boucher said there is a fine balance between implementing the energy transition and making the most economic use of what already exists.

While the cost of solar energy is going down, it is “not going down as quickly as we would like to see”, he added.

He noted that the regulator’s remit is to protect consumers and ensure low energy prices, rather than incentivise the industry.

“We have to be very careful what we mean by incentivising. There’s a cost to everything,” he said. “Our job as the regulator is to keep those costs as reasonably low as possible, while obviously promoting and implementing government policies.”

Cost is also the major stumbling block for ocean thermal energy conversion (OTEC) technology, which harnesses temperature differences between ocean surface water and deep ocean waters to power an electricity-generating turbine.

Boucher said the regulator will continue to look at innovative new technologies.

“OTEC, you know, I don’t think the horse is dead yet. We just need to come to an acceptable economic agreement for consumers,” he said.

Bottleneck 5: Permission issues for wind power

Under the optimal energy mix portfolio drafted by CUC, the projected 240MW of renewables in 2037 would consist of 140MW utility-scale solar, 36MW wind, 58MW distributed solar and 5MW waste to energy, as well as 60MW of battery storage.

However, wind power has run into permission issues that severely limit where on island it can be deployed.

When the IRP was drafted in 2017, the implementation of wind power was pushed to 2023 because of known interference issues with planes taking off and landing at Owen Roberts International Airport and with the doppler radar facility.

Those issues still exist and leave only a very narrow corridor where wind turbines could be installed.

“There are less issues with utility-scale solar right now and I think we should try to get that in play, while we continue to work on the permitting issues,” said Hew.

Because solar energy prices have declined significantly, it is possible that wind power may no longer be included in the revised and updated IRP, added Tibbetts.

Potential bottleneck 6: Land use

There is also some concern about how much land is required to carry out all the industrial-scale solar projects.

While rooftop solar uses available rooftop space without the need to purchase additional land, the feasibility of solar farms will depend on the availability of the right amount of land at the right price.

However, Tibbetts said, “I can tell you that there’s no shortage of landowners that have approached us and I’m sure there are other developers who have also been approached with land that is in the kind of right price range.”

Yet he acknowledged that an increase in demand for land as a result of new solar projects could potentially drive up prices until it reaches a limit where the cost becomes unviable.

Potential bottleneck 7: Funding

Given the high importance of energy prices for the consumer and the reluctance of the regulator to offer incentives, the capital cost and funding of Cayman’s green energy transition may be another issue.

This will also have to cover the replacement costs of diesel generators. Even if Cayman has sufficient storage capacity in place to support most of its energy coming from renewables, diesel or natural gas generators will still be needed to manage days or a series of days with very little sunshine.

But the planned conversion of CUC diesel generators to be able to burn natural gas will help significantly reduce CO2 emissions and mitigate the price volatility of diesel fuel.

According to Boucher, the renewables portion of the Integrated Resource Plan alone will require a capital expenditure of US$500 million to US$600 million over the next 20 years.

The cost of converting CUC diesel engines to natural gas and the waste-to-energy facility, which still has to be built, come in addition to that.

However, CUC’s Tibbetts believes that funding is not an impediment.

“So, we’re talking maybe $800 million, but I think there are players that already exist in these islands that are ready to make those investments, and they’re good quality players,” he said.

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2 COMMENTS

  1. OfReg needs to take a position on the policies surrounding green energy and get out of the way of the private sector investors that can work their way through these “bottlenecks.” This article makes the OfReg sound like they are wandering around in a pile of technology they may not have a real handle on, or understanding of. This isn’t that difficult to do. Maybe the political will is not there to light a fire under OfReg’s backside?

  2. For our new home owners we are designing these home to forget about CUC and build to be off-grid. The solar home battery storage technology is now affordable and reliable and with their own small propane backup generator for charging the batteries on extended cloudy weather days, they do not need CUC.