Belco’s solar rate shock hits Bermuda hard
An abrupt slash in payments to Bermuda residents who invested in solar energy is based on “perplexing” calculations by the island’s energy regulator, according to two industry leaders.
The Regulatory Authority of Bermuda’s approval of a hike in the Fuel Adjustment Rate for the island’s electricity provider, Belco, came as a rebate to the power company’s customers who had opted to get solar power was almost halved.
Attention was seized by anticipated higher electricity bills owing to the increased FAR starting last month, and protests took place outside the utility company’s headquarters.
Walter Roban, the Minister of Home Affairs, later announced that changes to the FAR would scale back the hike in charges. But the matter had already overshadowed the surprise dealt to residents who invested in renewable energy.
Two companies, Greenlight Energy and Sunny Side Solar, spoke to The Royal Gazette about the RA’s decision.
“From the customers we have spoken to, it’s extremely frustrating to be told that, as of immediately, your feed-in rate is going to drop by 48 per cent,” Cameron Smith, the executive director of Greenlight Energy, said last week.
“The watchdog makes a mistake, and we’re paying the price.”
Mr Smith was referring to the RA’s justification for cutting the rebate from 0.2265 cents per kilowatt-hour to 0.131 cents.
According to a report on the RA website, the original methodology was published in 2018 and the Feed-In-Tariff rate was set in 2019.
The document said that a review of the methodology and rate last year resulted in a calculation "based on the avoided costs of generation and economic benefits“.
It stated that distributed generators — customers who have installed solar panels — “have been overpaid during the period of October 2022 through to September 2023.
“Therefore, avoided costs of generation have been estimated to be lower than what DGs were actually paid, leading to the negative value. As such, the FIT value will have to be reduced in order to account for the imbalance from the scheme over the past year.”
The overpayment was said to be about $254,000, with a recommendation to spread “trueing-up” the amount over this year’s final quarter and through 2024.
It is expected that the FIT will be reviewed every three months from now on.
Asked how it could have taken several years for the RA to realise it was overpaying solar generators, Mr Smith said: “It’s a good question, and I don’t have an answer.”
The regulator declined to comment.
In November 2022, the RA advertised its review of the Feed-In-Tariff for the public to give feedback.
The consultation document got 69 responses, according to a preliminary report published in August.
Mr Smith said he would be “slow to point the finger at Belco”, since the power company is meant to obtain a profit for its services.
Greenlight also markets energy storage batteries, which allow customers to use their solar electricity at home after sundown — cutting out the need to sell excess solar-generated power back to Belco’s grid.
But he said some customers who already had solar panelling in place had been left “a bit frustrated with the unexpected decrease in the FIT”.
Claire Smith, a cofounder of Sunny Side Solar, said the steep cut in the rebate for solar generators meant “less incentive for people — it seems to be going in the wrong direction”.
She said it was “perplexing how the RA justifies reducing the FIT despite increased fuel costs”.
“How could this equate to a lower avoided cost to Belco?”
Ms Smith said the RA appeared to have overlooked the benefit to Bermuda’s economy of locally produced renewable energy, which does not require the purchase of fossil fuels from overseas.
“It’s money that stays on the island,” she said. “There’s a lot of economic benefit from that, but in this process that value appears to be zero.”
She also pointed out the Bermuda Government’s investment in solar panelling for its buildings.
“Look at the money the Government will save on solar. The decrease in the FIT also hurts the taxpayers.”
Ms Smith said she found the RA’s formula for calculating the Feed-In-Tariff for solar power “remarkable”.
She said the island stood at “a pivotal juncture in its energy journey”.
“It is time to re-evaluate and recalibrate the FIT methodology, considering the wider societal and economic benefits of renewable energy.”