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Belco: solar rate change fairer to customers

Solar Panels

Belco’s decision to reduce the amount paid to solar power producers who put electricity back into the grid will effectively stop average customers subsidising wealthier ones.

That is the view of Walter Higgins, the power utility’s chief executive officer, who added that solar contributors would still be compensated for excess power despite the end of the six-year “net metering” incentive programme — but at a lower rate that was fairer to other Belco customers.

Belco applied to the Energy Commission on August 15 to change its rates for residential net metering and commercial renewable energy.

Special rates were adopted in 2010 to encourage the development of solar power, allowing residential customers to send their excess electricity into the grid at the highest tier retail rate plus fuel adjustment charges.

The incentive, initially set for 200 new customers, ultimately gained 325 participants by last month when Belco proposed switching to a compensation of “avoided cost” for new installations — mainly covering the cost of fuel.

Based on the August fuel adjustment rate, Belco said solar producers would receive 17.36 cents per kilowatt hour for their excess — roughly half the price paid under the previous incentive scheme. The scheme’s existing members will continue to receive the higher rate, but newcomers will receive the new “avoided cost” rate.

Denton Williams, Belco’s chief operating officer, said the net metering plan had met its objectives by encouraging people to adopt solar energy.

“When net metering gets very big, you have to think about how it affects others,” Mr Williams said. “That price includes the costs of distribution and transmission and all the fixed costs associated with Belco.

“The result is that people who can afford to put in these systems are going to be subsidised by someone else.”

Mr Williams estimated that the value of this effective subsidy had totalled about $500,000 over the six years of the scheme.

Some, including Judith Landsberg, Greenrock director, have suggested that the change will put people off installing solar systems and damage the renewable energy industry.

Belco argues that those who install systems that meet their own power needs would see no difference, as the solar power produced would offset the kilowatt hours they would otherwise have bought from Belco. Belco estimates that an appropriately sized solar power system with an expected life of 25 years would have a payback period of roughly eight to ten years, or 9 per cent to 11 per cent internal rate of return.

In a statement, Belco suggested that “too often, we fear, solar installations are being sold to Bermuda customers not on the basis of either good economics or the customer’s needs, but rather based on the artificiality of selling excess power to the utility at a price in excess of what the power cost to produce.”

Only those with larger systems intended to generate an excess supply will see their returns fall, Belco added.

Tim Madeiros, chief executive officer of solar energy firm AES, declined to comment until he had studied Belco’s proposals more closely.

Another green energy firm, Be Solar, put up a message on its Facebook page on August 18, stating that a solar system “is still just as great an investment as it has always been, especially with the recent Belco rate increases and the hot summer weather.

“The updated version of the current net metering programme simply encourages clients to invest in a suitably sized solar system, which can still result in reduced, zero or negative Belco bill.”

Mr Higgins said: “If you are an average customer, it probably costs you a few extra dollars a month to have solar panels on the roofs of rich people.

“We are agnostic about this. As a regulated utility, we are an agent of the government and we will act according to government policy.”

Grant Gibbons, the Minister of Economic Development, has called for a commission of inquiry on the ending of the net metering scheme to ensure that a range of perspectives had been considered.

Dr Gibbons has requested the inquiry’s findings by the end of this month, and appointed Raj Barua as a special adviser to the commission for the inquiry’s duration.