Anguilla Renewable Energy Integration Project
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Anguilla Renewable Energy Integration Project Final Report Presented to the Government of Anguilla Ministry of Infrastructure, Communications, Utilities, and Housing (MICUH) 19 October 2012 Copyright Castalia Limited. All rights reserved. Castalia is not liable for any loss caused by reliance on this document. Castalia is a part of the worldwide Castalia Advisory Group. Glossary of Terms ANGLEC Anguilla Electricity Company Limited ANEC Anguilla National Energy Committee AREO Anguilla Renewable Energy Office BL&P Barbados Light & Power CARICOM Caribbean Community CARILEC Caribbean Electric Utility Service Corporation CDKN Climate and Development Knowledge Network CERs Certified Emissions Reductions CO2 Carbon Dioxide COSS Cost of Service Study CSP Concentrated Solar Power DBOM Design, Build, Operate, and Maintain DFID United Kingdom Department for International Development DGIS Netherlands Directorate-General for International Cooperation ECERA Eastern Caribbean Electricity Regulatory Authority ECACC Enhancing Capacity for Adaptation to Climate Change in the Caribbean UK Overseas Territories EIAs Environmental Impact Assessments EXCO Executive Council FIT Feed-in Tariff GHG Greenhouse Gas GRENLEC Grenada Electricity Services Ltd IG Imperial Gallon IPCC Intergovernmental Panel on Climate Change IPPs Independent Power Producers IRR Internal Rate of Return kWh Kilowatt Hour LDCC Land Development Control Committee LRMCs Long Run Marginal Costs MICUH Ministry of Infrastructure, Communications, Utilities and Housing MSW Municipal Solid Waste MW Megawatt NEP National Energy Policy NPV Net Present Value NGO Non-Governmental Organization NCV Net Calorific Value NREL National Renewable Energy Laboratory O&M Operations & Maintenance OECS Organization of Eastern Caribbean States OTEC Ocean Thermal Energy Conversion OTEP Overseas Territories Environmental Programme PPA Power Purchase Agreement PUC Public Utilities Commission PV Photovoltaic RFP Request For Proposals SOC Standard Offer Contract SWAC Seawater Air Conditioning tCO2e Tons of Carbon Dioxide equivalent, as a common way to measure greenhouse gases (‘equivalent’ because all greenhouse gases other than CO2 are also measured in terms of CO2) T&D Transmission and Distribution TPD Tons Per Day WACC Weighted Average Cost of Capital Table of Contents 1 Introduction 1 1.1 Scope of Work of this Assignment 1 1.2 Institutional Responsibilities for Renewable Energy Integration 2 1.3 Content of this Report 3 2 Objectives of Integrating Renewable Energy in Anguilla 5 3 Overview of Anguilla’s Power Sector 8 3.1 Key Entities in Anguilla’s Power Sector 8 3.2 Electricity Demand and Supply 9 3.3 Electricity Tariffs 10 4 Anguilla’s Policy, Legal, and Regulatory Framework for Electricity 12 4.1 Relevant Policy 12 4.2 Relevant Legal and Regulatory Framework 12 5 Anguilla’s Renewable Energy Potential 14 5.1 Current Uptake of Renewable Energy 15 5.1.1 No uptake of utility scale technologies 15 5.1.2 Limited uptake of distributed generation technologies 15 5.2 Economic and Commercial Viability of Renewable Energy 16 5.2.1 Screening of renewable energy technologies 16 5.2.2 Analysis of renewable energy technologies 18 5.2.3 Conclusions about the viability of technologies for renewable energy 23 5.3 Assessing the Cost of Additional CO2 Abatement 26 6 Barriers to Renewable Energy 28 6.1 Commercial Barrier—Lack of Commercial Viability 29 6.2 Legal and Regulatory Barriers 30 6.2.1 The right to use an energy resource—no barriers 30 6.2.2 The right to access and develop a site—no barriers for utility scale renewables, but solar water heaters face a problem 31 6.2.3 The ability to sell electricity generated—minor barrier for utility scale renewables, significant barrier for distributed scale renewables 33 6.2.4 Existence of adequate regulatory framework for electricity—significant barriers at both utility and distributed scale 33 6.3 Other barriers 35 6.3.1 Financing—a barrier for viable distributed scale renewables 36 6.3.2 Limited availability of equipment—a low barrier for viable distributed scale renewables 36 6.3.3 Institutional capabilities—minor barriers, but limited electrical inspection capacity 36 6.3.4 Technical skills—minor barriers 39 6.3.5 Information and awareness—barriers for solar, wind, and waste energy 40 7 Recommendations to Integrate Renewable Energy 41 7.1 Measures for Realizing Anguilla’s Immediate Renewable Energy Potential 43 7.1.1 Utility and distributed scale renewables: amend ANGLEC’s Licence and Electricity Supply Regulations by adding Rules for Renewable Energy 43 7.1.2 Utility scale: amend ANGLEC’s licence and Electricity Supply Regulations by adding tariff setting principles on recovery of sustainable energy costs 57 7.1.3 Utility scale: ANGLEC immediately to publish request for expressions of interest for solar PV 58 7.1.4 Utility scale: ANGLEC to add O&M in the solar PV Request for Proposals 59 7.1.5 Distributed scale: amend Electricity Act to extend exemption from licence also to the sale of excess electricity once the person has a contract with the public supplier 59 7.1.6 Distributed scale: ANGLEC to develop pilot Standard Offer Contract (SOC) with pilot disaggregated tariff 59 7.1.7 Distributed scale: mandate solar water heating for new facilities 60 7.2 Additional Legal and Regulatory Measures for Later 61 7.2.1 Utility and distributed scale: commission a Cost of Service Study 61 7.2.2 Utility and distributed scale: amend the Electricity (Rates and Charges) Regulations with a disaggregated tariff structure 62 7.2.3 Distributed scale: issue a revised Standard Offer Contract 63 7.2.4 Utility and distributed scale: determine the best option for a regulator to administer rules 63 7.3 Other Measures 63 8 Roadmap for Renewable Energy Integration in Anguilla 67 8.1 Complete Legal and Regulatory Framework for Renewable Energy 67 8.2 Implement Utility Scale Renewable Energy 69 8.3 Implement Distributed Scale Renewable Energy 70 8.4 Carry Out Ancillary Actions 71 Appendices Appendix A : Institutional Outline of the Power Sector 73 Appendix B : Electricity Demand and Supply in Anguilla 77 Appendix C : Electricity Tariffs in Anguilla 86 Appendix D : Analysis of Anguilla’s National Energy Policy and Draft Climate Change Policy 88 Appendix E : Analysis of Anguilla’s Relevant Laws and Regulations 91 Appendix F : Estimated Conventional Generation Costs and Electricity Tariffs for Assessing Renewables 101 Appendix G : Renewable Energy Technologies 104 Appendix H : Calculation of Long Run Marginal Cost of Renewable Energy Generation 118 Appendix I : Calculation of Marginal Cost of Carbon Abatement for Renewable Energy Technologies 119 Appendix J : Recommended Changes to ANGLEC’s Licence and Electricity Supply Regulations 120 Appendix K : Optional Changes for ANGLEC’s By-laws or New Policy 124 Appendix L : Recommended Changes to the Electricity Act 125 Tables Table 5.1: Screening Renewable Energy Technologies to be Assessed in Anguilla 16 Table 5.2: Summary of Potential Renewable Energy Technologies in Anguilla 23 Table 5.3: Conclusions about the Viability of Renewable Energy Technologies in Anguilla 24 Table 6.1: Critical Factors for the Successful Development of Renewable Energy 28 Table 6.2: Barriers to Economically Viable Renewable Energy Technologies 29 Table 6.3: Assessment of Institutional Capabilities 36 Table 7.1: Recommendations for Integrating Renewable Energy Technologies 42 Table 7.2: Options for Implementing New Utility Scale Renewable Energy Projects 47 Table 7.3: Key Questions and Answers on the Net Metering vs. Net Billing Debate 53 Table B.1: ANGLEC Generating Units in Service 80 Table E.1: Summary of Land Rights 100 Table F.1: Estimated Total Tariffs with Fuel at US$4 per IG (US$ per kWh) 103 Figures Figure 3.1: Ownership of Anguilla Electricity Company Limited (ANGLEC) 8 Figure 3.2: ANGLEC Peak Demand (2006-2010) and Projected Peak Demand to 2015 9 Figure 5-1: Viability of Renewable Energy Technologies in Anguilla 19 Figure 5.2: CO2 Abatement Cost Curve for Renewable Energy Technologies (US$/tCO2e) 26 Figure 7.1: Difference between Net Metering and Net Billing 50 Figure 7.2: Relative Fuel Consumption of a Wartsila Engine at Different Loads 52 Figure 8.1: Roadmap for Renewable Energy Integration in Anguilla 68 Figure A.1: Power Sector Governance in Anguilla 73 Figure B.1: ANGLEC Peak Demand (2006-2010) 77 Figure B.2: ANGLEC Total Electricity Sales (2001-2010) 79 Figure B.3: ANGLEC’s Reserve Margin Compared to Other Caribbean Utilities (2010) 81 Figure B.4: ANGLEC’s Generation Operating Cost compared to other Caribbean Utilities (2010) 83 Figure B.5: ANGLEC’s Average Price of Fuel (US$/IG) and WTI Crude (US$/bbl) 83 Figure B.6: ANGLEC’s Fuel Efficiency compared to other Caribbean Utilities (2010) 84 Figure B.7: ANGLEC’s System Losses compared to other Caribbean Utilities (2010) 85 Figure C.1: Volatility of Fuel surcharge and Gulf Coast Prices of diesel No.2, 2007-2012 87 Figure F.1: Estimated All-in Costs of Generation of ANGLEC’s Plants with diesel US$4.00/IG 101 Boxes Box 7.1: Experience with Distributed Generation in the Caribbean Box 7.2: Solar PV with Net Billing at Avoided Fuel Cost from a Customer’s Perspective in Anguilla Executive Summary The Anguilla Renewable Energy Integration Project aims at providing the appropriate legal and regulatory framework for implementing renewable energy in Anguilla. This Executive Summary provides an overview of the context for the assignment; the approach followed; and key findings and recommendations. Context Anguilla is a British Overseas Dependent Territory located in the Eastern Caribbean. It is a very small island (only 91 square kilometers) with a small population (about 15,000 people). The terrain is relatively flat and low lying, making the country vulnerable to the frequent hurricanes and tropical storms that affect the Caribbean region. Anguilla, like many Caribbean countries, faces challenges for moving towards a more sustainable energy matrix.