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Belco solar policy bad for everyone

Sunny outlook: rooftops are critical real estate for solar power, so residential solar is an important piece of our future electricity supply

On August 16, 2016, in the doldrums of the summer, Belco informed the Energy Commission that it has ended its eight-year “pilot” and would no longer allow “net-metering” for people who install rooftop solar power.

This proposal is not only a direct contradiction of the stated renewable energy aims of the Department of Energy, the Bermuda Government (via the recently passed Electricity Act) and Belco itself, but is also bad for all Bermuda residents.

According to Belco, they are simply ending “a subsidy ... that compensates residential customers who feed excess renewable energy to Belco’s grid at the same retail rate that customers pay for power purchased from Belco, without the expense of the fixed costs associated with generation, transmission and distribution” (my emphasis). In other words, they are making the cost of electricity more fair.

This proposal is bad for Bermuda, because it has the potential to severely damage the domestic solar power industry in Bermuda, which would significantly reduce our options for renewable energy; it will also very likely result in escalating power bills for all residents.

Belco is proposing three things:

1. To remove the net metering for all new solar power customers and to replace it with a tariff based on “avoided cost, which is largely the cost of fuel”.

2. To cap the number of new installations at 350.

3. To make the new tariff available for a two-year period (with no indication of the long-term plan).

Let’s start by talking about what “net-metering” means and whether it is, in fact, unfair. It means that people who have paid to install solar panels on their roofs can effectively run their meter both forwards and backwards.

They sell power to Belco at the same price that they buy it back when they need it.

This has benefits for both parties: Belco gets to use residential solar power generated during the day during peak demand to power the air-conditioning, refrigeration and computer servers in Bermuda’s office buildings; at night the residents can use their credits to offset the cost of using Belco’s power to aircondition their homes. Thus Belco is buying power from residences at a time when it is very expensive to generate by other means (“peak” power requires more expensive fuel than “baseload”) and selling it back to them when the baseload engines are running at the lowest possible cost. Thus, the case for a “fair” tariff being simply “avoided fuel cost” is not as simple as it sounds.

This proposal also challenges the economic justification for installing new residential solar power. Two years is not long enough to provide a secure payback for the initial investment, while the reduced tariff makes it much harder to recoup the investment.

This removes a potentially substantial contribution to our long-term electricity infrastructure, furthermore, one where the capital investment does not need to be made by Belco (and paid for by all electricity ratepayers in Bermuda).

Given the limited land area in Bermuda, rooftops are critical real estate for solar power, so residential solar is an important piece of our future electricity supply.

The proposal could also have a dramatic negative impact on our local solar power industry — one which employs many unskilled and skilled Bermudians, and which provides healthy competition to Belco.

Losing this industry would be bad for our economy in the long term by reducing Belco’s incentive to produce power efficiently, as well as being very bad in the short term for the people involved in the industry. It may also mean that we lose a lot of local expertise in renewable energy.

Finally, Belco’s proposal makes going “off-grid” more attractive for large domestic electricity users. As with most technology, new battery technology is becoming increasingly efficient and attractive, and if large consumers of electricity can’t recoup their investment through fair payment from Belco, they will likely choose to install batteries and go “off-grid” altogether.

In fact, new residential photovoltaic-plus-battery combinations can already provide electricity cheaper than Belco can for high-demand customers. This is bad for the rest of us, because the “fixed costs associated with generation, transmission and distribution” referred to by Belco then fall on fewer ratepayers.

Fixed costs are like paying rent on your house — if five people live in the house, the share of the rent for each person is much less than if the house only has one person who pays the full rent. The same thing happens in electricity systems: the fewer people who pay for the maintenance of the grid and other fixed costs, the more it costs each of them.

This in turn makes going off-grid more attractive, further reducing the rate-base and increasing the fixed-cost burden. This is known as the “solar death spiral” and in some jurisdictions has resulted in soaring electricity costs for anyone without residential solar power.

Belco’s proposed changes to net-metering have no economic justification, and in fact are likely to contribute to significant long-term increases in the cost of power. They are bad for the local Bermuda economy. They are also counter to global trends (which I have discussed elsewhere) and the stated goals of the Bermuda Government and Belco itself.

Bermuda deserves a robust, forward-looking electricity industry and so, for the good of Bermuda, the Energy Commission must not approve this proposal.

•Dr Judith Landsberg is a director of Greenrock, and is part of Greenrock’s sustainable energy advocacy team.