Sparks fly as CUC and regulator clash over power generation capacity

Cayman’s utilities regulator has approved a proposal by power firm CUC to add more generation capacity in a bid to avoid blackouts — but with fossil fuels rather than green energy.

Officials at the Utility Regulation and Competition Office, known as OfReg or URCO, said the decision was based on CUC’s failure to abide by the terms of its transmission and distribution licence in its application.

But CUC hit back that OfReg had allowed one of four proposals that would be most expensive for the consumer — and one that would “perpetuate reliance on fossil fuels as the primary generation source for Grand Cayman’s energy future”.

The row broke out after CUC last summer submitted four different plans to the regulator as part of what was treated as a “certificate of need” (CON) to boost power production.

Samuel Jackson, OfReg chairman, said, “This process took much longer than would ordinarily be necessary because CUC’s submission included alternative proposals for generation which failed to meet both the terms of its transmission and distribution licence and the prescribed format for a certificate of need as set out in CUC’s main agreement.

“Despite this, given the now urgent need to address grid stability, which is due to the
failure of CUC in previous years to submit a CON in accordance with its licence, the
Board decided to treat CUC’s submission as a certificate of need.”

OfReg said the CUC proposal that was approved was for 90.1 megawatts (MW) of new thermal, firm, capacity, which will be open to bidders, including CUC.

The three others were a blend of firm capacity and standalone solar generation, a mix of firm and hybrid solar-plus-storage generation, and a combination hybrid solar-plus-storage with no new firm generation.

The regulator said none of the rejected proposals were in line with CUC’s transmission and distribution licence, as they included “a component of non-firm renewables generation”.

It added that the board was “constrained by CUC’s licence and the legislative framework to only authorise the one option in the proposal for electricity generation which conforms to
CUC’s licence, namely the option of 90.1MW of firm generation”.

The regulator explained, “In so doing, we were mindful of our duty to protect the public interest by, inter alia, promoting competition in electricity generation, in accordance with the relevant statutory provisions and CUC’s generation licence.”

CUC: Preferred option not chosen

But CUC said its preferred option was for 100MW of large-scale solar power, plus battery storage and and 36MW of thermal generation.

“This option would ensure the delivery of reliable and safe service, position renewable energy as the primary source on the grid and offer significant cost savings to customers,” a CUC spokesperson said.

“OfReg has chosen to decline this proposal in favour of the business-as-usual scenario of 90 MW of thermal generation.”

But OfReg insisted the decision, which will mean a request for proposal to supply the extra power, for which CUC and other qualified bidders can compete, did not mean it had turned its back on renewable energy.

Sonji Myles, OfReg’s interim CEO, said, “CUC’s own submissions makes the distinction between firm and hybrid generation clear.

“If CUC believes it is time to redefine what qualifies as firm capacity, that requires a formal, transparent process to amend the licence – not a request to reinterpret it midstream to fit a preferred outcome.”

A spokesman for the regulator added, “URCO [OfReg] also wishes to dispel any perception that this determination is a step back from renewable energy adoption.”

He added that OfReg was “just weeks away” from the launch of a request for proposal for the biggest-ever renewable energy solicitation project.

“This is not a rejection of renewables,” Myles said, “it is a defence of process and fairness. We are already advancing a 22.5 MW renewable dispatchable solar-plus-storage project through a competitive process and more will follow later this year.”

‘Shifting the blame’

James Whittaker, president of the Cayman Renewable Energy Association, told the Compass, “It is unfortunate that we are in a position where we are replacing fossil fuel generation with more fossil fuel generation in 2025, however, the source of this problem originates with CUC and not the regulator.

“For years CUC has attempted to diminish the growth of third-party-owned renewable energy systems, which would have helped to avoid the grid problems they’re experiencing now.”

Whittaker added that it was only because of the 2024 national energy policy that the country could sort out problems in the future.

“While none of this materially affects Cayman’s renewable energy goals under the new policy, given it’s largely just a replacement of existing generation, unfortunately, the new policy is too little too late to impact the current need at hand,” he said.

Whittaker added that CUC seemed to be trying to “shift the blame to the regulator” for not resolving the problem.

But he highlighted that “the regulator has to follow the law and CUC has been trying to have the regulator approve a large utility-scale solar farm without any competitive bid process — which is in violation of the law — for years now.”

He continued, “In simple terms, CUC created the problem through their own actions and is in effect asking the regulator to approve a project that would circumvent the law in order to remedy a problem they themselves created.

“The regulator has said ‘no’ to doing so and it appears CUC is now trying to paint them as anti-renewables and making a poor choice for Cayman in not gifting the monopoly utility the right to build solar farms without any competitive bid process at all.”