The future of residential rooftop solar in the Cayman Islands is under threat amid claims that regulatory missteps are causing job losses and harming the islands’ chances of meeting the goals of its National Energy Policy.
Cayman Renewable Energy Association president James Whittaker said the decisions of OfReg had done “more harm than COVID-19” to the industry.
Related: Regulator defends solar decision
The utilities regulator recently slashed the rate paid to homeowners for solar energy in a move that went against the vote of its own independent price-setting committee.
Greentech, Cayman’s biggest installer of rooftop solar panels, has laid off almost half of its staff in the past year, cutting 11 jobs.
Whittaker, who founded the company, said the suspension in December, 2019, of the Consumer Owned Renewable Energy programme – which allows homeowners to sell solar energy back to the Caribbean Utilities Company at a subsidised rate – had effectively left the industry in limbo for a year and led to local job losses.
The popular programme was renewed on a temporary basis last month, but Whittaker said the damage had already been done.
And he said the new tariff – the most substantial cut in the history of the CORE programme – was too low to sustain jobs in residential solar at their current rate.
He said question marks over the long-term future of that programme mean the ability of Cayman homeowners to install solar panels is now in doubt, despite the fact that the country’s National Energy Policy requires consumers to have this right.
And he called on government to step in and compel the regulator to make decisions that were consistent with its policy.
OfReg has indicated in publications on its website that the ability of the grid to handle new renewable energy capacity has run out.
The new 500 kilowatt allocation is being drawn from the DER commercial solar programme and there are no guarantees that there will be further allocations to CORE for homeowners even when a new battery storage project, adding new renewable energy capacity, is completed.
OfReg argued that a lower rate reduced the subsidy that other electricity consumers pay for solar power and still offered a reasonable return for businesses.
CREA disputes this saying the regulator has ‘radically altered’ its view on what that return should be.
OfReg stated that there was no ‘independent analysis’ to support the higher rate and carrying out that kind of study would take time and money, potentially impacting electricity costs further.
It said the CORE programme had subsidised the solar industry to the tune of around $5.5 million since its inception in 2011 and that a lower rate was now justified.
In a statement to the Cayman Compass, OfReg consumer affairs manager Daniel Lee said the regulator has consulted widely and felt that its decision on the CORE rate balanced the interests of all stakeholders.
“We felt that our decision process was conducted with honesty, integrity, and was in the best interest of consumers and the people of these islands, whom we have an overriding duty to protect,” he said.
In a more detailed response to our questions, published in full on our website, OfReg indicated its board had considered the recommendation of an independent board for a higher rate but had not accepted it.
CREA argues for a more gradual reduction in the subsidy, which it says must account for all costs and benefits.
Whittaker noted the subsidy to date amounts to an average of just over $1-a-month for each CUC customer.
CREA argues that the country gets back millions of dollars in net economic and environmental benefits in return for that investment.
Whittaker acknowledged there were renewable energy capacity constraints on the grid, but he said these had been apparent for more than four years and it was OfReg’s job to resolve them and ensure access to solar for all.
He said there was a vast amount of evidence to back up CREA’s claims that a higher rate was justified and argues that this is why the independent panel voted for it.
“Nobody, including the government, supported the OfReg position other than OfReg itself and CUC,” he said.
Richard Harrison, CEO of Greentech, said delays in approving new tranches of the programme meant the industry was suspended for months every time capacity ran out.
In 2020, he said, Greentech had only been able to offer solar panels for residential customers for two weeks.
“We held onto staff as long as we could and probably longer than we should, but the time gaps between each tranche are just far too long and OfReg’s many timelines on making decisions were never kept.”
Combined with uncertainty over the long-term future of the CORE programme, he said, he had been forced to cut jobs and offer lower quality technologies to continue providing economically viable residential solar options.
“It has been horrible, but a necessity.”
He welcomed the recent decision of OfReg to add 500 kW of new capacity to the programme but said this amounted to 50 houses and would be used up within a week.
“The industry and consumers are in very uncertain times due to lack of basic planning by OfReg,” he said.
Another consequence of that is that there has been no growth in the industry.
Dave Johnston, of Corporate Electric said there was currently little incentive for businesses to get involved in solar.
“In terms of job creation the absence of a clearly defined, consistent, ongoing programme is hurting the economy.”
Johnston, also head of the Cayman Contractors Association, said there were several businesses that had considered ‘entering the market’ but were put off by the stop-start allocation of capacity through the CORE programme.
Whittaker said this trend was the consequence of regulatory action in direct contradiction of the island’s National Energy Policy which targets distributed generation as a jobs-engine for Cayman.
CUC’s own Integrated Resource Plan calls for 70 megawatts of generation to come from rooftop solar by 2045 – an increase of around 700 percent.
Expanding this type of renewable energy was also advised by government’s post-COVID think tank, the Special Economic Advisory Council as one of its key recommendations for the post-pandemic economy.
New rate goes against vote of panel
The new rate range for solar energy, 15-17.5 cents per kilowatt hour, is significantly lower than the 22 cents per kWh rate recommended by an independent panel set up by the OfReg board to examine and adjudicate a fair rate for solar energy.
The panel, which included a senior government representative from the Ministry of Commerce, Planning and Infrastructure and the former head of the regulator, voted 5-3 for the higher rate, arguing that rooftop solar should continue to be subsidised because of the economic impact it has on the community.
Whittaker said, “OfReg has not only overruled the government and its own independent rate committee, it is acting contrary to the National Energy Policy which requires them to set rates for consumer renewable energy at levels which reflect all costs and benefits to the country.”
He said the country gets more than $5 million in direct economic benefits from the rooftop solar industry, compared with little or no long-term jobs benefit from large solar farms.
These farms, which can generate more energy at a lower rate, are supported by CUC and OfReg as a focus for Cayman’s transition to renewable energy.
The National Energy Plan recommends that both methods be used to help Cayman reach its target of generating 70% of its energy from renewable sources within 25 years.
Rooftop solar has been subsidised by all electricity consumers since the inception of the CORE programme.
As the cost of solar installations has come down, OfReg and CUC have been gradually reducing the subsidy as new capacity is released.
With the new tariff, Whittaker said, the regulator had abandoned that policy and sent the rates “off a cliff” for homeowners.
“CREA agrees that the subsidy must be eliminated but this must be a process that happens over time for smaller and smaller systems as the cost of solar continues to fall, just as OfReg has traditionally done over the past decade,” he said.
Whittaker said the new rate would inhibit the residential solar industry for years to come and creates economically viable options only for large commercial- and industrial-scale investors and meant there was virtually no chance of Cayman hitting the targets and goals of the National Energy Policy.
OfReg has previously indicated that the CORE programme had reached its capacity and that any new additions would compromise the stability of Cayman’s power grid – which can currently only accommodate a certain amount of energy from ‘intermittent’ sources like rooftop solar.
The new capacity, announced last week, was reallocated from the Distributed Energy Resource programme – which has had less uptake.
Whittaker said that DER is only economically viable for large commercial customers.
“OfReg continues to perpetuate this myth in their public statements and press releases that consumers can simply move from CORE to DER. The fact is DER is not viable for 99% of Cayman’s consumers. Period.”
Unless the CORE programme, or something like it, is renewed and expanded as the capacity of the grid to incorporate renewables increases, he said, the residential rooftop solar industry would die out in Cayman due to economic non-viability and lack of capacity.
Joey Hew, the minister responsible for energy, said government had set aggressive targets for the incorporation of renewables through the National Energy Policy. He said the creation of the environment for implementing that policy was OfReg’s remit.
Whittaker commended government for voting for a higher rate but questioned why they had allowed OfReg to go ahead and implement a different fee.
“In my opinion right now you have a regulator not only ignoring the recommendations of its own independent committee but in fact telling the government they above all know what’s best for the country, even if the government takes a contrary position.
“So in effect the un-elected technocrats inside OfReg have now become the defacto policymakers for the country when it comes to energy, instead of their true role in implementing government’s policy and wishes,” he said.
Utility vs. distributed generation
Part of the challenge links back to the capacity of Cayman’s power grid to accommodate renewable energy without impacting reliability and cost. OfReg has said previously that the current capacity of 17MW has been reached.
CUC is advocating for a focus on larger solar farms, which it says are far less expensive.
“Presently, utility-scale solar is about half the cost of distributed energy,” said Sacha Tibbetts, of CUC, at the transitional energy conference last year.
He said 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.”
Whittaker added that CREA is not against solar farms and supports a combination of utility-scale and distributed generation.
“OfReg and CUC are focussed on utility scale and merely pay lip service to supporting distributed generation. In simple terms this means there is no clarity on being able to put solar panels on homes going forward.
“It will become purely a commercial solar industry unless government steps in to ensure consumer choice and enforce the National Energy Policy.”
* James Whittaker, the president of CREA, and James Whittaker, the writer of this article, are not related.