This is part 2 of the Barbados FIT series; part 1 can be read here “Barbados Feed-In Tariff in the works“.
After a few years of program creation and industry consultation, the Barbados FIT program was slated to launch on July 6th, 2019. However, there were some delays and additional fine tuning before the Fair Trading Commission officially launched the Barbados Feed In Tariff Program, up to and including 1MW, on October 1st, 2019.
The official documents and rules can be found on the Fair Trading Commission’s website on the Decisions and Orders page. For convenience, the PDFs are linked directly from their site:
- Order (summary)
Below are the key elements as summarized in tables from the FTC Decision:
- A 20-year contract which is a crucial improvement over the RER
- Rates in the initial tranche typically decline in step with decreasing technology cost i.e these early rates will likely be the best rates
- A community adder of 10% is being offered for community – shared RE projects which have a minimum of 15 residential customer investors with no single entity owning more than 50% of a single project
- The Barbados 100% RE 2030 target is 625MW
At this point it is worth asking, where are we now in relation to our 2030 goal?
According to the FIT Decision document dated September 24, 2019, there was 24MW of customer owned distributed renewable energy and BL&P’s 10MW solar PV farm in Trents, St. Lucy.
- 24MW + 10MW = 34MW installed; 34MW/625MW = 5.44%
An additional 20MW of licences were issued under the RER program in 2019:
- 24MW + 10MW + 20MW = 54MW; 54MW/625MW = 8.64%
The number of FIT applications for residential, commercial and utility scale projects are expected to rise substantially as we continue towards 2030. Assuming all of this first FIT tranche capacity is claimed it would result in an increase of 32.7MW.
- 24MW + 10MW + 20MW + 32.7MW = 86.7MW; 86.7MW/625MW = 13.87%
Total RE capacity would be 86.7MW or 13.87% of our 2030 target. Assuming the capacity is not used earlier and lasts until the end of 2021, that leaves 8 years to install the remaining 86.13%. Dividing it equally amongst those years, the challenge would be to install roughly 11%, or a new 67MW of RE capacity each year.
It sounds like an arduous challenge given that it took 10 years of the RER program to reach 24MW of distributed generation. The key point to note is that systems were more expensive and more notably, system sizes were capped at 150kW during most of that time. Later it was increased to 500kW and currently is 1MW. The regulatory framework is in place, it is now for the following stakeholders to collaborate in reaching the 100% renewable energy goal:
- Homeowners, businesses and landowners
- Town and Country Planning
- Barbados Light and Power
- Ministry of Energy
- Financing entities
- Installation companies
Homeowners, businesses and landowners
First and foremost, there must be demand for the RE projects to be physically installed, not just an intellectual interest. A solar photovoltaic project for example may go on a homeowner’s roof, the rooftop of a business, or be installed as a ground mounted system on a piece of land. The robust FIT program that is in place represents a tremendous opportunity to convert Bajan sunshine into dependable, recurring income. Given sufficient awareness and marketing I am optimistic that demand for RE will increase over the next 10 years.
Town and Country Planning
For renewable energy systems which are built on the ground, for example wind turbines or ground mounted solar PV, the Town and Country Development Planning Office must issue an approval for the installation. Currently, the application and approval process for renewable energy projects is a bottleneck in the overall FIT process. This is an area to be streamlined in order to shorten the timeline required for construction to begin. (June 2020 update: The Planning and Development (Amendment) Bill, 2020 has passed and is expected to increase operational efficiency and shorten processing times.)
Barbados Light and Power
One might expect the island’s sole utility to be vehemently opposed to the introduction of renewable energy. However, the reality is exactly the opposite. It was Barbados Light and Power which introduced the Renewable Energy Rider in 2010 and has been a proponent of the transition to 100% renewable energy. To that end, the Company has been processing applications in a timely fashion. As more distributed generation is added to the Barbadian electrical grid, some infrastructure will need to be upgraded. I am confident that these upgrades will proceed and will not impede RE growth.
Ministry of Energy
The Ministry of Energy and Water Resources issues the Electric Light and Power Act (ELPA) renewable energy licences which are necessary to participate in the feed in tariff Barbados has introduced. Once relevant approvals are received from Town and Country Planning, Barbados Light and Power and Government Electrical Engineering Department (GEED) an application is submitted to the Ministry of Energy. Other required documents are included and the entire package is processed. There do not seem to be any issues having a renewable energy licence issued in a reasonable amount of time.
Financing entities
Although the price of solar energy in Barbados has decreased over the years, it is still a large capital expense. Many people or businesses who will invest in a solar FIT project will seek a loan from their bank or another financing entity. It is important that these financial entities do their due diligence to understand the unique nature of the feed in tariff program. A significant component is the fixed rate of electricity for 20 years. This provides banks with a level of comfort when a system is installed by a reputable company and is projected to generate sufficient revenue to cover the debt payments. The renewable energy rider program was around for 10 years during which time banks and other financing entities were exposed to solar loans. As the feed in tariff program is better defined than the RER, it is anticipated that it will be easier to finance FIT projects on the road to 2030.
Installation companies
Assuming all of the above stakeholders are engaged and things move forward smoothly; there is a customer with all the necessary approvals and financing in place, can it be built? Specially focusing on solar PV installers, the question arises as to the size of the solar labour force on the island. From the very rough estimate earlier in this post it was shown that 67MW of renewable generating capacity would need to be installed each year, every year from 2022-2030 in order for Barbados to reach its 2030 100% renewable energy goal.
Not all of that RE capacity is attributed to solar PV. The overall target for solar PV can be found on page 48, Table 3 from the Barbados National Energy Policy. Please note, this is one possible scenario.
- 310 MW – 24MW – 10MW – 20MW – 25.7MW (FIT) = 230.3MW
- 230.3MW / 8 years = 28.8MW of solar PV generating capacity to be installed each year through 2030
Cumulatively, across all the solar installation companies on the island, is there a large enough trained, experienced labour force to handle nearly 29MW of solar PV installations per year? Maybe, maybe not, but I am certain the companies will adapt for supply to meet demand. As the demand increases, more solar installers will be hired and trained as a long-term solution. If it is necessary for regional or international solar workers to fill the labour gap in the short term that may be a solution. Either way, over the next 10 years I do not expect a skilled labour shortage to prevent the country from achieving the 100% renewable energy objective.
Barbados Feed in Tariff Opportunities
In many ways the new FIT program is similar to the old RER one. Homeowners, businesses and landowners could install solar panels on their rooftops or on the ground before and they can continue to do so. A noticeable addition is the introduction of the 20-year timeframe, during which time the rate paid for the generated renewable electricity is fixed. The benefit which comes with it is that the projects become bankable which means lenders are more confident to lend to them. In the RER scenario, a lender could assess the generation and revenue projections of a project and issue a loan based on a particular rate, only to discover that after a few years the rate decreased and impacted the borrower’s ability to repay the loan. Although many homeowners and businesses moved forward with solar projects under the RER, another group was waiting for better defined conditions. This group includes entrepreneurs, investors and developers.
As in other jurisdictions around the world, once a feed in tariff program was implemented, creative ways to finance and develop solar projects emerged:
- Self-financed with cash.
- Self-financed using a loan.
- Rooftop leasing whereby an entrepreneur or developer leases the rooftop of a home or business to install solar panels. With the abundance of empty rooftops in Barbados, this is an opportunity for property owners to receive fixed roof rental payments from a 20-year tenant.
- Land leasing whereby an entrepreneur or developer leases land from a landowner. For flat land which is not being cultivated, overgrown or is under cultivated, land leasing represents an opportunity to receive steady income from a developer over 20 years, while still maintaining ownership of the land.
- Community ownership whereby a group of individuals pool their resources to invest in a larger solar PV project and receive returns proportionate to their investment.
