Development of an Energy Conservation Policy and

Implementation Strategy for the Turks and Caicos Islands

Government of the Turks and Caicos Islands

Draft Final Report

25 February 2011

Contents

1 Introduction 4

1.1 Energy Conservation Policy and Implementation Strategy Progress Update 4

1.2 Structure of this Report 4

2 Overview of the Power Sector in the Turks and Caicos Islands 6

2.1 Overview of Power Sector Governance 6

2.2 PPC Electricity Services 9

2.3 TCU Electricity Services 19

3 Review of Policies, Legislation, and Regulation 27

3.1 Assessing Government Policies, Priorities, and Objectives for Energy and the Environment 27

3.2 Reviewing Energy Policies of Neighboring Countries 30

3.3 Reviewing the Relevant Legal and Regulatory Framework of the TCI 32

3.4 Reviewing Customs Regime for Energy Equipment 34

3.5 Reviewing the Building Code and Development Manual 35

4 Energy Efficiency in the Turks and Caicos Islands 37

4.1 Current Uptake of Energy Efficiency 38

4.2 Economic and Commercial Viability of Energy Efficiency Technologies 4-47

4.3 Barriers to the Uptake of Energy Efficiency Technologies 58

5 Renewable Energy in the Turks and Caicos Islands 63

5.1 Current Uptake of Renewable Energy 63

5.2 Economic and Commercial Viability of Renewable Energy Technologies 64

5.3 Barriers to the Uptake of Technologies for Renewable Energy 76

6 Recommendations for a Draft Energy Conservation Policy and an Implementation Strategy 80

6.1 Recommended Draft Energy Conservation Policy 80

6.2 Recommended Draft Implementation Strategy and Action Plan 96

Appendices

Appendix A: Energy Efficiency Technologies Appendix B: Walk-Through Audits Appendix C: Renewable Energy Technologies

Acronyms and Abbreviations A/C Air Conditioning AEC Atlantic Equipment & Power (Turks and Caicos, Ltd.) BNSI Barbados National Standards Institute CFL Compact Fluorescent Lamp CRT Cathode Ray Tube CSP Concentrated Solar Power CO2 Carbon Dioxide CUC Caribbean Utilities Company DECR Department of Environment and Coastal Resources EE Energy Efficiency ESCO Energy Services Company GLS General Lighting Service IDB Inter-American Development Bank IPP Independent Power Producer LCD Liquid Crystal Display LED Light Emitting Diode LFGTE Landfill Gas to Energy LRMC Long Run Marginal Cost MEPS Minimum Energy Performance Standards NPV Net Present Value O&M Operations and Maintenance OTEC Ocean Thermal Energy Conversion PPC Provo Power Company, Ltd. PPCR Pilot Program for Climate Resilience PV Photovoltaic PWC Provo Water Company RO Reverse Osmosis SCF Strategic Climate Fund SWAC Seawater Air Conditioning TCEM Turks and Caicos Environmental Management TCI Turks and Caicos Islands TCIG Turks and Caicos Islands Government tCO2e Tons of carbon dioxide equivalent TCU Turks and Caicos Utilities, Ltd. TCWC Turks and Caicos Water Company UK United Kingdom US$ United States Dollars VFD Variable Frequency Drive WTE Waste to Energy WTI West Texas Intermediate

4

1 Introduction

The Government of the Turks and Caicos Islands (‗TCI‘) contracted Castalia to develop an Energy Conservation Policy and Implementation Strategy, with the purpose of creating a more sustainable energy framework for the TCI. ‗Sustainable‘ within the context of our assignment indicates a combination of renewable energy and energy efficiency and conservation projects that reduces the TCI‘s dependency on imported fossil fuels, reduces electricity costs and prices for the TCI, improves the TCI‘s energy security, and increases local and global environmental sustainability.

This document represents the Draft Final Report of our assignment. As required by our Description of Services, this Draft Final Report contains a draft Energy Conservation Policy and Implementation Strategy. It also contains our updated findings on opportunities for, and barriers to viable renewable energy (RE) and energy efficiency (EE) technologies in the TCI.

Below we provide a brief update on the progress of our assignment (1.1). Then, we present the structure of this Report (1.2).

1.1 Energy Conservation Policy and Implementation Strategy Progress Update

This Draft Final Report is submitted as part of the fifth and last activity of our assignment (Activity 5—Prepare an Energy Conservation Policy and Implementation Strategy). Before this Draft Final Report, we completed Activities 0-4 of our assignment by submitting first the Inception Report (24 November 2010), and then the Progress Report (16 January 2011). The Government of the TCI (‗the Government‘) endorsed the Inception Report (6 December 2010), as well as the Progress Report (4 February 2011), and provided comments for completing and improving our work. We address all of those comments in this Draft Final Report.

In the context of our assignment, the Government is represented by the Department of Environment and Coastal Resources (‗DECR‘) and the Electricity Commissioner‘s Office.

Following this Draft Final Report, we plan to travel to the TCI for conducting public consultations with stakeholders during the week of 7 March 2011. To complete our assignment, we plan to submit our Final Report by 31 March 2011.

1.2 Structure of this Report

This Draft Final Report is structured as follows:

Section 2 contains an overview of the power sector in the TCI. We describe the main entities involved in the sector, and review organization and operations of the two electric utilities operating in the TCI—Provo Power Company, Ltd. (PPC), and Turks and Caicos Utilities, Ltd. (TCU). We find that both utilities are relatively efficient compared to others in the Caribbean, and that they are taking concrete steps to reduce costs through more efficient conventional and renewable generation

Section 3 contains a review of policies, legislations, and regulations relevant to our assignment. We find that the TCI‘s current policy, legal, and regulatory framework is not designed to promote energy efficiency and renewable energy,

5

although recent initiatives have recognized the need for reform, and taken important steps in this direction

In section 4 we analyze the potential for, and barriers to EE technologies. We find that most EE technologies are viable in the TCI, although their uptake—with a few exceptions—is overall low due to limited access to capital, limited and uncompetitive equipment supply, incomplete information, and agency problems

In section 5 we analyze the potential for, and barriers to RE technologies. We find that a few RE technologies—especially wind at utility scale, waste-based technologies, solar water heaters—would be economically viable. However, they are blocked by barriers related to utility regulation, third party generation regime, access to credit, and information

Finally, section 6 contains a draft Energy Conservation Policy, comprising policy, legal, and regulatory measures; and a draft Implementation Strategy and Action Plan for achieving the Energy Conservation Policy.

This report also contains the following three appendices:

Appendix A contains descriptions of energy efficiency technologies and assumptions we used to assess them

Appendix B contains the walk-through audit reports for facilities we visited during our first trip to the TCI

Appendix C contains descriptions of renewable energy technologies and assumptions we used to assess them.

6

2 Overview of the Power Sector in the Turks and Caicos Islands

In this section we provide a general description of the power sector in the TCI. The purpose is to have a clear understanding of who the main actors in the power sector are, what they do, and how they interrelate. First, we provide a brief overview of the sector‘s governance (section 2.1). Then, we review in more detail Provo Power Company, Ltd. (‗PPC‘, section 2.2), which operates in Providenciales, North Caicos, and Middle Caicos; and Turks and Caicos Utilities, Ltd. (‗TCU‘, section 2.3), which operates in Grand Turk and Salt Cay.

We dedicate this section to the power sector, because it is central to our assignment. We recognize that other entities that do not belong to the power sector—such as water utilities, or waste service providers—are also relevant to the Energy Conservation Policy and Implementation Strategy. We deal with these in other sections of this report, as appropriate to assess opportunities for energy conservation.

2.1 Overview of Power Sector Governance

We define ‗governance of the power sector‘ as the way the Government tells service providers what to do, and ensures they do it. More specifically, in this Report we intend ‗governance‘ in the TCI‘s power sector as the relationship between Government and electricity service providers, and the rules, laws, policies, and customs that define this relationship and ensure that providers are accountable to Government for their service to consumers, to which in turn Government is accountable. Figure 2.1 summarizes how Government entities, service providers, and consumers interrelate.

Figure 2.1: Power Sector Governance in the TCI

Governor

Ministry of Works, Housing, and Utilities

Ministry of Environment and District

Administration

Public/Consumers

Provo Power Company

Turks and Caicos Utilities

Electricity Commissioner

Department of Environment and Coastal

Resources

Atlantic Equipment and Power

Fortis Turks and Caicos

Consultative Forum

Advisory Council

Government

Service providersaccountable to

accountable to

Service and tariff regulation

Sustainable energy policy

WRBEnteprises, Inc.

7

Below we summarize roles and responsibilities of key Government entities and service providers.

2.1.1 Government Entities

The key Government entities involved in TCI‘s power sector governance are the following:

The Governor is in charge of granting and revoking licenses, and approving rates the utilities may charge to consumers.1 Public supplier‘s licenses allow supplying electricity to any person within the area specified in the license, whereas private supplier‘s licenses allow supplying electricity to one‘s self or to persons specified in the license

The Electricity Commissioner (whose office is situated within the Ministry of Works, Housing, and Utilities, which in turn reports to the Governor) is in charge of overseeing the fuel clause adjustment mechanism (adjusted monthly), ensuring quality of service (including inspection and testing of electrical plant), and determining differences between consumers and suppliers. If necessary and as directed by the Governor, the Commissioner may assume control of suppliers‘ licenses.2 Additional duties include supervising the electricity inspectorate, and regulating the electrical construction sector

The Department of Environment and Coastal Resources (‘DECR’) within the Ministry of Environment and District Administration is responsible for the promotion of sustainable management and use of TCI‘s natural resources. Within this general role, the DECR is leading the TCI‘s efforts to develop a policy and implementation strategy for conserving energy and using it more efficiently, and for encouraging the development of cost-effective renewable energy technologies3. Our assignment contributes to this purpose

The Advisory Council and the Consultative Forum are appointed by the Governor4 under the interim constitutional arrangements5 to represent the views of the community; the Governor may consult them on any matter.

2.1.2 Service Providers

Electricity generation, transmission, and distribution services in the TCI are provided by two vertically integrated electric utilities:

1. Fortis Turks and Caicos includes two power companies (acquired by Fortis Incorporated in August 2006) with a combined installed capacity of 54MW:

1 Turks and Caicos Islands, Electricity Ordinance, 15 May 1998 (Chapter 114 of the Laws of the TCI), parts II and V

2 Turks and Caicos Islands, Electricity Ordinance, 15 May 1998 (Chapter 114 of the Laws of the TCI), parts IV and V.

3 Department of Environmental and Coastal Resources of the Turks and Caicos Islands, http://www.environment.tc/DECR.html (last accessed 10 January 2011).

4 Government of the Turks and Caicos Islands, Statement by the Governor on Suspending Parts of the TCI Constitution, 14 February 2009. http://www.tcgov.tc/overview.html (last accessed 27 December 2010).

5 Since 2009, the TCI are under direct rule by the UK‘s Foreign Commonwealth Office, and run by an appointed Governor. The interim constitutional arrangements are expected to last for two years (although this period may be shortened or extended if necessary). The Governor and the UK Government are committed to holding free and fair elections by July 2011, if not sooner. The House of Assembly and ministerial government would then be restored, possibly under new constitutional arrangements. http://www.tcgov.tc/overview.html (last accessed 27 December 2010).

8

a. Provo Power Company Ltd. (‘PPC’) operates on the islands of Providenciales, North Caicos, and Middle Caicos

b. Atlantic Equipment and Power (Turks and Caicos) Ltd. (‘Atlantic’) operates on the island of South Caicos

2. Turks and Caicos Utilities, Ltd. (‘TCU’), owned by WRB Enterprises, operates on the islands of Grand Turk and Salt Cay (installed capacity 11MW).

Below we review the licenses (or ‗Take-Over Agreements‘) under which these utilities operate. Then, we review the utilities‘ operations.

Take-Over Agreements of Fortis Turks and Caicos

Fortis Turks and Caicos provides electricity to Providenciales, North Caicos, and Middle Caicos through PPC, and to South Caicos through Atlantic, for terms of 50 years under a Take-Over Agreement concluded in 1987.6

The licenses contain the following provisions for electricity rates and service:

Rates are to be set by the Government, using a future test year, in a way that provides Fortis Turks and Caicos with an allowed return on assets of 17.50 percent, known as the ‗Allowable Operating Profit‘. Return must include interest on the amounts by which actual operating profits fall short of the Allowable Operating Profits on a cumulative basis (known as ‗cumulative shortfall‘). Fortis Turks and Caicos submits calculations to the Governor of the amount of the Allowable Operating Profit and the cumulative shortfall on an annual basis, and has the right to request an increase in electricity rates to recover the cumulative shortfall

PPC is granted an exclusive public supplier‘s license to provide service to the whole of Providenciales. If the Governor receives application to grant a private supplier‘s license, PPC has right to receive a written notice of the application, and to be heard before the Governor prior to a decision being made on the application.

Take-Over Agreement of Turks and Caicos Utilities, Ltd.

TCU provides generation and distribution of electricity on Grand Turk and Salt Cay for a term of 50 years under a Take-Over Agreement with the Government concluded in 19867.

The licenses contain the following provisions for electricity rates and service:

Rates are to be set to grant TCU an Allowable Operating Profit of 15 percent8. Return must include interest on the amounts by which actual operating profits fall short of the Allowable Operating Profits on a cumulative basis (known as ‗cumulative shortfall‘). TCU submits calculations to the Governor of the amount of the Allowable Operating Profit and the cumulative shortfall on an annual basis. TCU has the right to request an increase in electricity rates to recover the cumulative shortfall

6 Agreement for the Take-over from Government of the Electricity Supply Systems, 1 January 1987.

7 Agreement for the Take-over from Government of the Electricity Supply Systems, 1 April 1986.

8 Meeting with TCU Management, Providenciales, 12 November 2010.

9

TCU is to provide service the whole of the Islands of Grand Turk and Salt Cay in accordance with the Electricity Ordinance of 1985.

In the next sections, we review the operations of PPC (2.2) and TCU (2.3).

2.2 PPC Electricity Services

PPC is a fully integrated electric utility serving more than 9,000 customers in Providenciales, North Caicos, and Middle Caicos (corresponding to 85 per cent of electricity consumers in the TCI). In 2009, the utility had a total electricity generation capacity (all diesel-powered) of 54MW; peak demand in that year reached 29.6MW. PPC distributes electricity to its customers through 235 kilometers of transmission and distribution lines.9

In this section, we show how demand in PPC‘s service area has grown considerably since the 1990s, although growth slowed down after 2008 (2.2.1). Then, we analyze PPC‘s supply of electricity. We illustrate how recent investments in diesel-fuelled generation have led to a high reserve capacity, and—combined with the slowdown in demand—virtually no capacity requirements in the medium term. We also see how PPC has not actively considered renewable generation, although it would consider purchasing it from an independent power producer as long as it is cost-effective and reliable (0). Finally, we review tariffs under PPC and how they—just like the utility‘s costs—are closely correlated to the price of fuel (2.2.3). We benchmark key operational and financial indicators for PPC against those of other Caribbean utilities, showing that PPC is a relatively efficient electric utility compared to others in the region, even including larger ones.

2.2.1 Electricity Demand in PPC’s service area

Below we analyze the growth in peak demand in PPC‘s service area, PPC‘s load factor, and consumption of electricity by PPC‘s customers.

Peak Demand Growth

Demand for power has grown consistently since the 1990s in Providenciales, driven by tourism and strong real estate development (especially hotels and condominiums). Annual growth in peak demand was 22 percent in 2006 when Fortis acquired PPC; it decreased to 10 percent in 2008 with the economic slowdown, and to less than 5 percent in 2009 when peak demand reached 29.6MW. The latest data from July 2010 show a peak demand of 30.8MW, confirming the trend of a slower growth in demand.10

Load factor

The system load factor—defined as the ―ratio of the average load to peak load during a specified time interval‖,11 typically a year—was 69 percent in 2009 in PPC‘s service area. PPC ranks in the middle of other Caribbean countries shown in Figure 2.2. A relatively higher system load factor indicates a steadier load, with less need for generation capacity per unit of power consumed. PPC might further reduce peak load compared to countries such as Grenada and St. Lucia, the best performers, and Barbados, but its load is slightly less peaky than Dominica‘s.

9 Fortis Turks and Caicos‘ Annual Report, 2009.

10 Meeting with TCU Management, Providenciales, 12 November 2010.

11 Steven Soft, Power System Economics, IEEE Press, 2002 (p.448).

10

Figure 2.2: Comparing PPC’s Load Factor with that of other Caribbean Utilities (2009)

Source: Utilities‘ Annual Reports, 2009.

The load factor could be improved by encouraging customers to shift their electricity consumption from peak time to off-peak time. By successfully displacing more demand to off-peak times, generation costs as well as customer bills could decrease. This could be done through more cost-reflective tariffs that charge people more for consuming at peak compared to off-peak times, and through awareness campaigns.

Consumption of Electricity

Figure 2.3 shows the trends in total annual electricity consumption from 2003 to 2009 broken down by (i) residential customers, (ii) commercial customers, and (iii) hotels.12

Figure 2.3: Evolution of Electricity Consumption by Customer Type, PPC

Source: PPC Electricity Rate Review, 2009; PPC Annual Report, 2009

12 Note: This includes customers in PPC‘s tariff categories for Small Hotels/Supermarkets, Major Hotels, Club Med, and

Pine Cay.

74% 74%70% 69% 68%

56%

0%

25%

50%

75%

100%

Grenada(GRENLEC)

St. Lucia(LUCELEC)

Barbados(BL&P)

Turks andCaicos Islands

(PPC)

Dominica(DOMLEC)

Turks andCaicos Islands

(TCU)

2751

20

5336

54

0

20

40

60

80

100

120

140

160

180

2003 2004 2005 2006 2007 2008 2009

GW

h

Residential

Commercial

Hotels

Residential

Commercial

Hotels

Commercial

Hotels

Commercial

Hotels

85

161

Overall average annual growth rate of 11.5%

11

Total electricity consumption during the period shown grew steadily at an average 11.5 percent per year, from 85GWh in 2003 to 161GWh in 2009. Commercial demand experienced the highest growth, at 17.7 percent per year. Table 2.1 shows that residential and commercial customers represent PPC‘s largest consumers, followed by hotels and supermarkets, and then the Water Company and Club Med. The breakdown suggests that households, businesses, and hotels may each represent up to one third of total savings.

Table 2.1: Electricity Consumption by Customer Type for PPC, 2009

Source: PPC Regulatory Filing, 2009.

2.2.2 Electricity Supply in PPC’s service area

Although many customers, particularly within the hotel industry, have recently expressed interest in developing self-generating capacity, PPC remains legally responsible for all generation in its service area. Below we review PPC‘s plant mix, renewable energy outlook, reserve capacity margin, generation costs, fuel efficiency, opportunities and constraints for fuel supply, and losses.

Plant Mix

Before acquisition by Fortis, PPC‘s generating capacity included both high and medium speed diesel generators. In recent years, however, the commissioning of additional medium speed units (Caterpillar 3600 series) has effectively allowed putting in reserve the remaining high speed units (Caterpillar 3500 series). Total installed capacity in 2009 was 54MW. As of 2010, PPC has 10 medium speed Caterpillar generators in operation; the high speed units remain on standby as backup capacity.

Additionally, to increase its efficiency in generation in 2010 PPC decided to commission two V20W32 Wartsila diesel units (2 x 8.7MW). The first of the two engines was commissioned in October 2010, while the second is scheduled to be commissioned in May 2011. At that time, the generating capacity of the utility will reach 60 MW (including 46.3MW of medium speed diesel, and 17.7MW of high speed diesel plant). All units run on Diesel No. 2 fuel.13

Renewable energy outlook for PPC

PPC has adopted a cautious but open approach to renewable generation. In 2010, utility management publicly noted that the technologies with the most potential in the TCI (wind and solar) do not provide firm power, and that—until costs of renewables decrease

13 Information provided by PPC Management, November-December 2010.

Energy Sales, PPC (2009) MWh %

Residential 50,242 31.1%

Commercial 42,488 26.3%

Large Hotel 27,141 16.8%

Small Hotel/Supermarket 21,486 13.3%

Water Co. 10,501 6.5%

Club Med 5,008 3.1%

Government 2,908 1.8%

Streetlights 1,292 0.8%

Pine Cay 485 0.3%

Total 161,551 100%

12

substantially—diesel generation (especially with newer and more efficient plants PPC has invested in) remain a reliable and cost-effective solution for countries like the TCI.14 At the same time, PPC management is considering a wind study for 2011, and has stated that it would not exclude purchasing power from an independent power producer that uses wind technology, provided that it were supplied at avoided cost and with satisfactory financial and operational safeguards.15

Reserve capacity margin

Generation capacity is built to meet peak demand, plus a reserve margin. A standard measure of the ability of generation capacity to meet peak demand is the reserve capacity margin. The reserve capacity margin is calculated as the difference between generation capacity less peak demand, divided by peak demand. A reserve capacity margin of zero means the country‘s generating capacity is exactly equal to the country‘s peak demand. Most electricity systems target a reserve capacity margin of at least 15 percent to ensure that the system can withstand unplanned outages during periods of peak demand—although in island countries they are typically higher due to these systems‘ isolation and small size.

Figure 2.4: PPC’s Reserve Margin compared to other Caribbean Utilities (2009)

Source: Utilities‘ Annual Reports, 2009

By the end of 2009, PPC had a reserve capacity margin of 82 percent, well above that of other Caribbean countries as shown in Figure 2.4. Peak demand that year was 29.6MW, significantly below the generating capacity of 54 MW16. Even excluding high speed diesel units (but including the Wartsila unit to be commissioned in Spring 2011), and assuming current peak load is 30MW, PPC‘s reserve capacity margin would stand at about 54 percent by mid-2011. Another typical standard for a reserve capacity margin is to ensure that reserve

14 Eddinton Powell, The Facts Please—Not Myths, Turks and Caicos Sun, 29 October 2010.

15 Meeting with PPC Management, Providenciales, 16 November 2010.

16 Fortis Turks and Caicos‘ Annual Report, 2009.

168%

82%

55%44% 44%

36%

0%

25%

50%

75%

100%

125%

150%

175%

200%

Turks andCaicosIslands(TCU)

Turks andCaicosIslands(PPC)

Dominica(DOMLEC)

Grenada(GRENLEC)

Barbados(BL&P)

St. Lucia(LUCELEC)

13

capacity is available to back up the single largest generating unit on the system (this is known as an N-1 security standard). For PPC, N-1 security would require 8.7MW of reserve capacity to back up a Wartsila Unit—PPC is well above this, and claims keeping a N-2 standard.

PPC does not foresee any capacity requirements in the medium term (2011-2015) thanks to its recent investments in new plant. At current demand growth rates, the reserve capacity margin can accommodate consumption growth in PPC‘s service area for the next five years, as well as continued decommissioning of some older units. However, PPC stated that its acquisition of the two Wartsila units was dictated by efficiency (these units‘ heat rate—energy consumed per kilowatt-hour produced—is about 7 percent lower than that of Caterpillars) not by demand—this suggests the utility might consider replacing older units with more cost-effective generation (including any economically viable renewables) provided it sees the right incentive for doing so.

Generation Costs

PPC is a relatively efficient generator. This is shown by benchmarking PPC‘s generation operating cost (defined as the sum of all fuel and generation-related operating expenditures, divided by gross generation) against other Caribbean utilities, in Figure 2.5. While generation costs in the region of US$0.20 per kWh are high by the standards of larger systems, these high costs are common in the Caribbean mostly due to the small size of systems.

Figure 2.5: PPC’s Generation Operating Cost compared to other Caribbean Utilities (2009)

Source: Utilities‘ Annual Reports, 2009

As for other Caribbean utilities, PPC‘s generation costs are largely driven by diesel fuel prices—the utility (like others in other Caribbean countries) experienced higher generation operating costs in 2008, when fuel prices reached very high levels (almost US$5.00 per gallon for PPC‘s Diesel No. 2 fuel,17 and over US$133 per barrel for West Texas Intermediate crude

17 PPC Regulatory Filing, 2008

0.26

0.21

0.18 0.16 0.16

0.15

-

0.05

0.10

0.15

0.20

0.25

0.30

Dominica(DOMLEC)

Turks andCaicos Islands

(TCU)

Turks andCaicos Islands

(PPC)

Barbados(BL&P)

Grenada(GRENLEC)

St. Lucia(LUCELEC)

US$

/kW

h

14

oil (WTI)).18 PPC‘s generation operating costs are higher than those in Barbados, Grenada, or Saint Lucia, but lower than Dominica‘s (considering this country‘s diesel generation only).

Figure 2.6 shows an estimate of the all-in cost (or long run marginal cost, LRMC) of the two types of generators currently operated by PPC (Wartsila, and Caterpillar medium speed diesel plants). It should be noted that these estimates are different than actual values shown in Figure 2.5, because we made these estimates using a high discount factor equal to the Allowable Operating Profit for PPC (17.5 percent), which PPC does not make in reality. Using a lower discount factor, estimated values would be more comparable to actual values registered in 2009. To calculate the all-in costs of the different generators for PPC, we include all costs that are part of the LRMC of electricity generation:

Capital costs

Fixed O&M costs

Variable O&M costs

Fuel costs

Major maintenance.

Figure 2.6: Estimated All-in Costs of Generation of PPC’s Plants (Diesel US$3/gal)

Source: Castalia estimate based on data on current plants provided by PPC.

Note: Figures based on assumed Diesel fuel costs of US$3.00 per gallon.

18 U.S. West Texas Intermediate and Gulf Coast No 2 Diesel Low Sulfur Spot Price FOB, US Energy Information

Administration, Spot Prices for Crude Oil and Petroleum Products, http://www.eia.doe.gov/dnav/pet/pet_pri_spt_s1_d.htm and http://www.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EER_EPD2DL_PF4_RGC_DPG&f=D

0.03 0.04

0.19

0.20

0.23

0.26

-

0.05

0.10

0.15

0.20

0.25

0.30

Wartsila Caterpillar

US$

/kW

h

Capital Costs Fixed O&M Costs Variable O&M Costs Fuel costs Major maintenance

15

The figure shows that, at a fuel price of US$3.00 per gallon, the all-in cost of generation of Wartsila plants is about US$0.23 per kWh, while that of Caterpillar plants is US$0.26 per kWh. We use a fuel price assumption of US$3.00 per gallon because we need some estimate of what fuel prices will be in the medium-long term—particularly to understand whether energy efficiency and renewable energy technologies could be cost-effective (in sections 4.2 and 5.2, we use benchmarks of conventional generation based on this assumption to assess the viability of these technologies). We take the market as a reliable indicator: US$3.00 per gallon is as a reasonable estimate of what PPC‘s fuel costs for Diesel No. 2 would be (based on historical fuel cost data)19 with oil prices of about US$93 per barrel, which is where United States Gulf Coast ten-year oil futures are trading as of January 2011.20

Our calculations are based on data provided by PPC during our National Energy Audit and subsequent follow-up.21 We have made the following assumptions:

Capital costs equal to US$1.2 million per MW for medium-speed Wartsila diesel plants, and US$1.5 million per MW for medium-speed Caterpillar diesel plants.

Pre-tax Weighted Average Cost of Capital (WACC) = 17.5 percent

Annual inflation in Turks and Caicos = 4 percent22

Tax rate = 0 percent

Diesel fuel price = US$3.00 per gallon.

At US$3.00 per gallon, PPC‘s fuel costs represent 80 percent of their cost to generate electricity. These fuel costs, based on PPC‘s license, are subject to a full pass-through to consumers.

Fuel efficiency

Figure 2.7 compares fuel efficiency—gross kWh generated per liter of fuel consumed, considering diesel plants only—across various Caribbean countries. PPC‘s relative efficiency is shown by its middle ranking (before the first Wartsila unit was commissioned) even when compared to some larger systems such as Barbados (239MW installed capacity, 166MW peak demand) or Saint Lucia (76MW installed capacity, 56MW peak demand). To ensure an accurate comparison, Dominica‘s figures are based only on its diesel plants, excluding hydro-based generation.

Despite PPC‘s relative efficiency, its cost of generation is high in absolute terms because it is largely driven by the cost of diesel fuel, which represents by far the greatest portion of its all-in cost. With a different generating mix, PPC‘s cost of power could drop.

19 PPC Regulatory Filings, 2008

20 Bloomberg L.P., WTI Crude Future, June 2019 (2010). Bloomberg database, accessed 5 January 2011. Historical prices for US Gulf Coast No. 2 Diesel Low Sulfur Spot Price: US Energy Information Agency (EIA), http://www.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EER_EPD2DL_PF4_RGC_DPG&f=D

21 Meeting with PPC management, Providenciales, 16 November 2010. Remote follow-up by telephone and e-mail, November 2010-January 2011.

22 Turks and Caicos Islands, Department of Economic Planning and Statistics http://www.depstc.org/quickstats/qstat1.html (last accessed 1 December 2010).

16

Figure 2.7: PPC’s Fuel Efficiency compared to other Caribbean Utilities (2009)

Source: Utilities‘ Annual Reports, 2009 (diesel-based generation only considered)

Opportunities and constraints for fuel supply

Fuel supply in the TCI is characterized more by constraints than opportunities. Fuel is provided in small barges due to lack of deep seawater ports. This increases frequency and costs of supply, and limits the competitiveness of procurement23—many potential suppliers have backed off after expressing initial interest when asked to guarantee 6-8 weeks of security of supply, although this is more frequent for TCU.24 The use of cheaper fuels such as heavy fuel oil is limited by the size of the plants used for TCI‘s market (low speed diesel plants in Barbados, for example, are about 12.5MW each—50 percent larger than PPC‘s largest unit); the lighter Diesel No. 2 remains the most convenient option for fossil fuel-based generation. Finally, the TCI lies far from ongoing initiatives for increased energy integration in the Caribbean, especially the planned East Caribbean Gas Pipeline from Trinidad and Tobago, and undersea transmission cables for electricity generated with geothermal sources such as Dominica‘s.

PPC is actively addressing the efficiency of its fuel supply by increasing its fuel storage capacity with new infrastructure.25 Boosting on-site storage (currently limited to two days) and increasing overall storage capacity as PPC is doing represents the most immediate opportunity to improve fuel supply in the TCI, and should be encouraged—it can reduce frequency of shipments, decrease costs, and of course increase an isolated system‘s power reliability. Efficient handling of planning and permitting from public authorities can play a key role in ensuring this happens swiftly and effectively.

System losses

System losses are equal to net energy generated minus energy consumed by customers—they account for losses of electricity during transmission and distribution, as well as theft and

23 Meeting with PPC Management, Providenciales, 16 November 2010.

24 Meeting with TCU Management, Grand Turk, 12 November 2010.

25 Meeting with PPC Management, Providenciales, 16 November 2010.

4.4 4.3 4.2

3.9 3.9 3.8

0

1

2

3

4

5

St. Lucia(LUCELEC)

Grenada(GRENLEC)

Barbados(BL&P)

Turks andCaicos Islands

(PPC)

Dominica(DOMLEC)

Turks andCaicos Islands

(TCU)

kWh

/lit

er

17

under-billing. Electricity systems in industrialized countries typically have system losses below 10 percent. PPC‘s system losses in 2009 were relatively high compared to those of other Caribbean utilities (10.3 percent), as shown in Figure 2.8.

Figure 2.8: PPC’s System Losses compared to other Caribbean Utilities (2009)

Source: Utilities‘ Annual Reports, 2009

2.2.3 Electricity Tariffs in PPC’s service area

Below we review PPC‘s tariff categories and components, and analyze the trend in the fuel charge component relative to the price of oil.

Tariff Categories

PPC‘s five tariff categories are:

Residential premises—used as a dwelling and which do not comprise more than one unit of accommodation

Non-residential premises—other than a large hotel, a large supermarket, a medium hotel, a small commercial premises, a water making utility and official premises which are not residential premises

Official premises—wholly occupied by Government departments

Hotels

Others—large supermarket, small commercial premises, water making utility, street lighting, and the Providenciales International Airport.

PPC has requested a rate review,26 designed to rebalance rates among the various customer categories to better reflect cost of service and reach the Allowable Operating Profit of 17.5 percent (which is currently not reached). The review request involves in particular hotels, for which the tariff is under the average cost of service; residential customers are not affected.

26 PPC, Electricity Rate Review, 30 March 2010.

10.3% 10.3%9.6%

9.2%

6.9%

4.3%

0%

4%

8%

12%

Dominica(DOMLEC)

Turks andCaicos Islands

(PPC)

St. Lucia(LUCELEC)

Grenada(GRENLEC)

Barbados(BL&P)

Turks andCaicos Islands

(TCU)

18

Tariff Components

The rate charged by PPC to each category comprises a base rate per kWh, which includes a fixed portion of fuel costs; and a fuel charge per kWh that depends on the cost per gallon of fuel oil. The base rate portion of the electricity tariff is intended to cover the operating expenses of the utility, and provide a return on assets for PPC. The fuel charge portion of the electricity tariff is designed to recover expenses incurred by the utility due to variations in the cost of fuel with respect to the fixed reference of US$0.90 per gallon. If and when the cost per gallon of fuel imported differs from US$0.90 per gallon, the fuel charge (positive or negative) is added to the base rate to adjust the overall rate. The fuel charge for PPC‘s service area is calculated by adding US$0.08 for each cent of the amount by which the cost per gallon of fuel exceeds US$0.90 per gallon.27

Volatility of fuel charges based on the price of oil

Because all of PPC‘s generators operate on Diesel fuel, the cost of generating electricity and the tariff tracks the price of Diesel. This is illustrated in Figure 2.9, which shows the direct correlation between the price of Diesel No. 2 and the fuel charge in PPC‘s service area between 2007 and 2010. The oil price spike of 2008 is well visible.

Figure 2.9: Volatility of Fuel Charge for PPC, 2007-2010

Source: PPC (fuel charge) and US Energy Information Administration (Diesel prices)

Because of fluctuations in the cost of diesel fuel, tariff prices in PPC‘s service area increased by US$0.22 per kWh from April 2007 to August 2008. By then, the fuel charge brought the tariff rate for residential customers on Providenciales to US$0.61 per kWh28.

27 Electricity Ordinance, Chapter 114, 15 May 1998. Electricity Rates and Charges Amendment, (Providenciales) 2000.

28 PPC Regulatory Filing, 2008.

-

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

US$

/kW

h

US$

/gal

lon

Fuel Charge (PPC)

U.S. Gulf CoastNo. 2 Diesel

19

2.3 TCU Electricity Services

Turks and Caicos Utilities, Limited (TCU) was incorporated on April 30, 1982. TCU is a vertically integrated utility that provides generation and distribution of electricity on Grand Turk and Salt Cay, where it owns and operates two diesel-fired generating plants with a total installed capacity of 11.043MW. TCU took over operations in Grand Turk and Salt Cay from the Government in 1986. As of 2009, TCU‘s customer base counts over 2,200 connections, with an estimated peak demand of 4.5MW. It is owned by Blanchard TCI Ltd., a company registered in the Turks and Caicos Islands29 part of WRB Enterprises.30

In this section, we show how demand in TCU‘s service area increased substantially until 2008, followed by an unexpected drop (due to a hurricane and an economic slowdown) that forced the company to reconsider its expansion plans (2.3.1). Then, we analyze supply of electricity, characterized by very high capacity margins as a legacy of the past; we see how TCU has been proactive in considering renewable energy options as a way to generate electricity at lower cost, although land issues have hampered its efforts so far (2.3.2). Finally, we review tariffs under TCU (2.3.3). Benchmarking TCU‘s key operational and financial indicators against those of other Caribbean utilities, TCU emerges as a well-run utility with low system losses. TCU has also shown an effective ability to face unforeseen events (such as the destruction of its distribution network) to ensure reliable service. Its relatively higher costs of generation are not far from those of larger companies, and due to the very small size of TCU‘s market and plants.

To avoid repetitions, we do not explain key terms and indicators again—these are already explained above in the review of PPC.

2.3.1 Electricity Demand in TCU’s service area

Below we analyze the growth in peak demand in TCU‘s service area, TCU‘s load factor, and consumption of electricity by TCU‘s customers.

Peak Demand Growth

Peak demand in TCU‘s service area experienced a significant growth from 2002 to 2008, increasing from 2.3MW to 4.2MW. In 2008, Grand Turk was struck by Hurricane Ike. The effects of the hurricane, combined with the general economic slowdown of that year and the political events in the TCI in 2009, led to a sudden stop to the growing trend, and a drop in demand. Demand has picked up slowly since 2008, and only as of 2010 has it recovered to pre-hurricane levels (4.2MW). Load forecast carried out by TCU in December 2009 projects demand to remain relatively flat for the coming four years.31

Load factor

TCU‘s system load factor was 56 percent in 2009, and about 62 percent in 2008 (based on TCU‘s assumption that demand dropped to 4.0MW after the hurricane). TCU ranks lowest of other Caribbean countries shown in Figure 2.10, revealing a peaky load that could be improved, as discussed above for PPC.

29 TCU, Financial Statements for the year ended 31 December, 2009.

30 WRB Enterprises, Inc. Electric Utilities and Power, http://www.wrbenterprises.com/electric.asp (last accessed 5 December 2010).

31 TCU, TCU’s System Development Plans 2006 to 2010, 2010.

20

Figure 2.10: Comparing TCU’s Load Factor with that of other Caribbean Utilities (2009)

Source: Utilities‘ Annual Reports, 2009.

Consumption of Electricity

Figure 2.11 shows the trends in monthly electricity consumption from 2007 to 2010. Monthly consumption dropped to almost 500MWh in 2008, and then increased reaching about 2,000MWh in mid-2010. Total annual consumption in 2009 was 18.6GWh.32

Figure 2.11: Evolution of Monthly Electricity Consumption, TCU

Source: TCU statistics, 2007-2010

Table 2.2 shows electricity consumption by customer type in TCU‘s service area. The relative lack of hotels compared to PPC‘s service area means that residential and commercial customers represent relatively higher consumption centers than for PPC. The Government is a particularly significant customer for TCU with about 18 percent of sales—which, coupled with RO Units, reaches 25 percent.

32 TCU Statistics, 2007-2010.

74% 74%70% 69% 68%

56%

0%

25%

50%

75%

100%

Grenada(GRENLEC)

St. Lucia(LUCELEC)

Barbados(BL&P)

Turks andCaicos Islands

(PPC)

Dominica(DOMLEC)

Turks andCaicos Islands

(TCU)

0

500

1000

1500

2000

2500

Jan

-07

Ap

r-0

7

Jul-

07

Oct

-07

Jan

-08

Ap

r-0

8

Jul-

08

Oct

-08

Jan

-09

Ap

r-0

9

Jul-

09

Oct

-09

Jan

-10

Ap

r-1

0

Jul-

10

MW

h

21

Table 2.2: Electricity Consumption by Customer Type for TCU, 2009

Source: TCU Annual Statistics, 2009.

2.3.2 Electricity Supply in TCU’s service area

TCU is the sole provider of electricity on the islands of Grand Turk and Salt Cay. Below we review TCU‘s plant mix, reserve capacity margin, generation costs, fuel efficiency, opportunities and constraints for fuel supply, and losses.

Plant Mix

TCU operates two power plants: (i) a plant in Grand Turk including six Caterpillar 3500 series high speed diesel engines, with a combined installed capacity of 10.3MW; and (ii) a plant in Salt Cay including two Caterpillar 3300 series units with a combined installed capacity of 0.3MW.

Current installed capacity was reached between 2006 and 2007, when the last two containerized units (generators inside a container on a trailer) were installed in Grand Turk for peak load—given demand growth at that time, the purpose was to prevent other units from becoming overloaded during peak hours. TCU‘s plans in 2006 had included a further expansion in generation capacity with two medium speed diesel generators, more efficient compared to high speed diesel units, but this option was discarded because of the high cost of the units at that time (installed costs of bids received ranged from US$2.5 million to US$3.5 million per MW, more than twice current levels). TCU‘s focus in 2007shifted to installing a Medium Voltage Switchgear and new control system, until the top priority after the hurricane in 2008 became the reconstruction of the distribution network, which had been all but destroyed and was swiftly rebuilt with TCU‘s own funding.33

Renewable energy outlook for TCU

TCU has considered renewable energy to reduce its overall cost of generation and increase security of supply in its service area. The utility‘s efforts to introduce wind date from the early 1990s, when it planned to install wind turbines, and secured all necessary permits and project finance—however, it did not manage to do so because land grants were denied. In 2009, TCU submitted a new proposal for a hybrid wind-solar PV-diesel system including eight to nine wind turbines (650-850kW each) and about 1MW of solar PV. TCU‘s preliminary estimate for capacity factors are encouraging—a relatively high 32 percent for wind; and 18-20 percent for solar PV, which is a reasonable estimate for the Caribbean based on our experience.34 However, preliminary estimates need to be confirmed by a detailed assessment of the wind resource, especially considering high gusts registered in Grand Turk

33 TCU, TCU’s System Development Plans 2006 to 2010, 2010.

34 TCU, Renewable Energy Development Strategy Turks and Caicos Utility, Ltd, 2009.

Energy Sales, TCU (2009) MWh %

Residential 7,632 38.6%

Commercial 7,057 35.7%

Government 3,493 17.7%

RO Units 1,417 7.2%

Streetlights 161 0.8%

Total 19,760 100.0%

22

(over 7 meters per second). Following its request to the Government in 2010, TCU obtained approval for installing meteorological towers on Crown Land for a period of three years to conduct a detailed assessment.35 However, it received no long-term approval for installing and operating a possible wind farm—this has stalled the initiative.

TCU has considered ‗Class 1‘ turbines (such as those produced by Vestas), designed to withhold extreme gusts of 250 kilometers per hour, and average annual wind speeds of 10 meters per second;36 as well as lowerable or tiltable turbines (such as those produced by Vergnet37), designed to lower or tilt down the nacelle and blades in case of hurricanes. We assess the viability of both types of turbines in section 5.2.2 using quotes we obtained recently from the two manufacturers.

Reserve capacity margin

As a result of an expansion plan implemented under high expected growth in demand, TCU‘s reserve capacity margin stands at over 160 percent, far above any other Caribbean utility as shown in Figure 2.12. The utility‘s latest load forecast conducted in December 2009 concluded that ―no new engine would be needed before 2014‖.38 An accident in early 2010, however, has much reduced the reserve margin, and new plant will be needed sooner.

Figure 2.12: TCU’s Reserve Margin compared to other Caribbean Utilities (2009)

Source: Utilities‘ Annual Reports, 2009

Generation Costs

Given the very small size of its system and dependency on expensive fuel imports, TCU‘s generation operating costs are relatively high compared to other Caribbean utilities (see Figure 2.13). However, its performance is not far from that of larger companies such as

35 TCIG Advisory Council, Policy Position, 6 October 2010.

36 Vestas, http://www.vestas.com/en/wind-power-plants/procurement/turbine-overview.aspx#/vestas-univers, http://www.vestas.com/en/wind-power-plants/wind-project-planning/siting/wind-classes.aspx#/vestas-univers (last accessed 20 December 2010).

37 Vergnet Wind, http://www.vergnet.fr (last accessed 21 December 2010).

38 TCU, TCU’s System Development Plans 2006 to 2010, 2010.

168%

82%

55%44% 44%

36%

0%

25%

50%

75%

100%

125%

150%

175%

200%

Turks andCaicosIslands(TCU)

Turks andCaicos

Islands (PPC)

Dominica(DOMLEC)

Grenada(GRENLEC)

Barbados(BL&P)

St. Lucia(LUCELEC)

23

Dominica‘s (which includes hydro in its plant mix totaling an installed capacity of 24.2MW, and has a peak demand of 15.6MW).

Figure 2.13: TCU’s Generation Operating Cost compared to other Caribbean Utilities (2009)

Source: Utilities‘ Annual Reports, 2009

Figure 2.14 shows an estimate of the all-in cost (or LRMC, broken down in its various components) of the two plants operated by TCU under a fuel cost assumption of US$3.00 per gallon, as done for TCU. As for PPC, it should be noted that these estimates are different than actual values shown in Figure 2.13, because we made these estimates using a high discount factor equal to the Allowable Operating Profit for TCU (15.0 percent), which PPC does not make in reality. Using a lower discount factor, estimated values would be more comparable to actual values registered in 2009.

The figure shows that, at a fuel price of US$3.00 per gallon, the all-in cost of generation in Grand Turk is about US$0.26 per kWh, while that in Salt Cay is only slightly higher (US$0.27 per kWh). Our calculations are based on data provided by TCU during our National Energy Audit and subsequent follow-up.39 We have made the following assumptions:

Capital costs equal to US$1.5 million per MW for high-speed Caterpillar 3500 series plants, and US$1.1 million for the Caterpillar 3300 series plants. This is not the cost originally sustained by TCU, but the estimated installed cost it would have to sustain today to replace these units (unless market conditions allowed considering medium speed diesel units)

Pre-tax Weighted Average Cost of Capital (WACC) = 15.0 percent

Annual inflation in Turks and Caicos = 4 percent40

Tax rate = 0 percent

39 Meeting with PPC management, Providenciales, 16 November 2010. Remote follow-up by telephone and e-mail,

November 2010-January 2011.

40 Turks and Caicos Islands, Department of Economic Planning and Statistics http://www.depstc.org/quickstats/qstat1.html (last accessed 1 December 2010).

0.26

0.21

0.18 0.16 0.16

0.15

-

0.05

0.10

0.15

0.20

0.25

0.30

Dominica(DOMLEC)

Turks andCaicos Islands

(TCU)

Turks andCaicos Islands

(PPC)

Barbados(BL&P)

Grenada(GRENLEC)

St. Lucia(LUCELEC)

US$

/kW

h

24

Diesel fuel price = US$3.00 per gallon.

At US$3.00 per gallon, TCU‘s fuel costs represent (as for PPC) 80 percent of their cost to generate electricity. These fuel costs, based on TCU‘s license, are also subject to a full pass-through to consumers.

Figure 2.14: Estimated All-in Costs of Generation of TCU’s Plants (Diesel US$3/gal)

Source: Castalia estimate based on data on current plants provided by TCU.

Note: Figures based on assumed Diesel fuel costs of US$3.00 per gallon.

Opportunities and constraints for fuel supply

Fuel supply for TCU is characterized more by constraints than opportunities—even more than for PPC given the much smaller size of TCU‘s market, which further limits its negotiating power. Isolation, lack of deep seawater port facilities, frequent shipments of small barges, and limited competitiveness in procurement are the key constraints. In the case of TCU, competitiveness in procurement is almost non-existent, and the utility has struggled to secure competitive bids either due to the too small size of the business, or to an inability by potential suppliers to ensure the desired security (6-8 weeks). As for PPC, the most immediate and feasible opportunities for improving efficiency in fuel supply lie in logistics and enhanced storage.

Fuel efficiency

Figure 2.15 compares fuel efficiency across various Caribbean countries. TCU ranks on the low end of the spectrum, although not by much—which demonstrates well-run operations even when compared to larger companies. Note that this figure only considers diesel-based generation for Dominica, excluding its hydro generation to ensure an accurate comparison.

0.02 0.04

0.21 0.21

0.27 0.26

-

0.05

0.10

0.15

0.20

0.25

0.30

Salt Cay Grand Turk

US$

/kW

h

Capital Costs Fixed O&M Costs Variable O&M Costs Fuel costs Major maintenance

25

Figure 2.15: TCU’s Fuel Efficiency compared to other Caribbean Utilities (2009)

Source: Utilities‘ Annual Reports, 2009 (diesel-based generation only considered)

System losses

TCU‘s system losses are the lowest among those of other Caribbean utilities considered (4.3 percent in 2009), as shown in Figure 2.16.

Figure 2.16: TCU’s System Losses compared to other Caribbean Utilities (2009)

Source: Utilities‘ Annual Reports, 2009

2.3.3 Electricity Tariffs in TCU’s service area

Below we review TCU‘s tariff categories and components.

Tariff Categories

TCU‘s tariff categories include:

Residential premises

Non-residential premises

4.4 4.3 4.2

3.9 3.9 3.8

0

1

2

3

4

5

St. Lucia(LUCELEC)

Grenada(GRENLEC)

Barbados(BL&P)

Turks andCaicos Islands

(PPC)

Dominica(DOMLEC)

Turks andCaicos Islands

(TCU)

kWh

/lit

er

10.3% 10.3%9.6%

9.2%

6.9%

4.3%

0%

4%

8%

12%

Dominica(DOMLEC)

Turks andCaicos Islands

(PPC)

St. Lucia(LUCELEC)

Grenada(GRENLEC)

Barbados(BL&P)

Turks andCaicos Islands

(TCU)

26

Official premises, premises which are wholly occupied by Government, consular missions, and the Federal Aviation Agency of the United States Government

Street lighting.

Tariff Components

As for PPC, the electricity tariff charged by TCU to each customer category comprises a base rate per kWh and a fuel charge per kWh that is dependent on the imported cost per gallon of fuel oil. The formula is just like the one described above for PPC, except that the fixed reference is equal to US$1.00 per gallon. Figure 2.17 shows how TCU‘s fuel charge tracks oil prices.

Figure 2.17: Volatility of Fuel Charge for TCU, 2007-2010

Source: TCU (fuel charge) and US Energy Information Administration (Diesel prices).

-

0.05

0.10

0.15

0.20

0.25

0.30

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

US$

/kW

h

US$

/gal

lon

Fuel Charge(Grand Turk & Salt Cay)

U.S. Gulf CoastNo. 2 Diesel

27

3 Review of Policies, Legislation, and Regulation

In this section we review Government policies, priorities, and objectives for energy and the environment (3.1), energy policies of neighboring countries (3.2), the relevant legal and regulatory framework in the TCI (3.3), customs regime for energy equipment (3.4), and the building code and development manual (3.5). We discuss opportunities and constraints for fuel supply in our analysis of PPC‘s and TCU‘s operations in sections 2.2 and 2.3 above.

3.1 Assessing Government Policies, Priorities, and Objectives for Energy and the Environment

Below we review the following documents, particularly in the light of the objectives of the Energy Conservation Policy and Implementation Strategy as described in section 6.1.1:

The Turks and Caicos Islands Environment Charter (‗the Environment Charter‘, dated September 2001), signed by the Governments of the TCI and the United Kingdom (UK), and the related Strategy for Action to Implement the Environment Charter of the Turks and Caicos Islands (‗the Strategy for Action‘, dated 2003)41

The Draft Turks and Caicos Climate Change Policy42

The Policy Position of the Advisory Council on Renewable Energy43.

3.1.1 Environment Charter and Strategy for Action

The 2001 Environment Charter, combined with the 2003 Strategy for Action that lays out a detailed plan for implementing it, creates a general framework that is consistent with developing an Energy Conservation Policy and Implementation Strategy according to our Description of Services. Particularly relevant are the following provisions:

Under Commitments 8 and 9 of the Environment Charter, the UK Government agrees to ―use the existing Environment Fund for the Overseas Territories, and promote access to other sources of public funding, for projects of lasting benefit to the Turks and Caicos Islands environment‖, and ―help the Turks and Caicos Islands identify further funding partners for environmental projects such as donors, the private sector or non-governmental organizations‖

Under Commitment 3 of the Environment Charter, the TCI Government agrees to ―ensure that environmental considerations are integrated within social and economic planning processes; [and] promote sustainable patterns of production and consumption within the territory‖

Action 3.b.3 of the Strategy for Action calls for policies that can promote the sustainable production and consumption of energy on the TCI

41 TCI, Environment Charter, September 2001, http://www.environment.tc/content/root/files/20090831091508-

Environment-Charter.pdf; and Strategy for Action to Implement the Environment Charter, http://www.environment.tc/content/root/files/20090831091825-Environmental-Charter-Strategy.pdf (last accessed 20 December 2010).

42 Government of TCI, Draft Climate Change Policy: Responding to Climate Change in the Turks and Caicos Islands, 2010.

43 TCIG Advisory Council, Policy Position, 6 October 2010.

28

Actions under Commitment 4 of the Strategy for Action require that environmental and health impacts be duly addressed when approving major infrastructure projects following international best practices.

Our only comments to the Environment Charter and the Strategy for Action are as follows:

Their focus on local, rather than global environmental sustainability is appropriate for the TCI given its small size and its unique ecosystem

The scope of our assignment fits appropriately within the need for policies that address both the demand and the supply side of sustainable energy

Actions under Environment Charter Commitment 4 (ensuring that environmental and health impacts are duly assessed for major infrastructure projects) do not mention considerations on ensuring efficient, effective, and reliable infrastructure services. These considerations are not in contrast with environmental and health sustainability, and would benefit from being clearly stated in policy documents such as the Environment Charter and the Strategy for Action as a basis for increasing the efficiency and effectiveness of planning and permitting processes for implementing infrastructure projects (particularly those that affect the energy sector, such as fuel storage and port facilities)

Identifying and securing external funding will be critical to implementing some measures for overcoming barriers to implementing sustainable energy.

3.1.2 Draft Climate Change Policy

We regard the Draft Climate Change Policy as generally an appropriate document in that it mostly focuses on adaptation to environmental impacts often attributed to climate change, rather than mitigation of greenhouse gases that are often associated to those impacts. However, this should be made clearer in the document. The TCI are one of the smallest countries in the world—the price it would pay by mitigating greenhouse gas emissions would be hugely disproportionate to any benefits it could reap. The document would benefit from referencing the objectives of the Energy Conservation Policy and Implementation Strategy—and noting that mitigation of greenhouse gases would be pursued as long as energy costs may be reduced. Actions such as ―development of measures to minimize energy consumption and consequently reducing greenhouse gas emissions‖44 should be changed: ‗using energy more efficiently‘ or ‗conserving unnecessary energy‘ are more appropriate expressions than ‗minimizing energy consumption‘ because growth in energy consumption may in itself be a good thing, associated with economic growth—the important thing is to consume efficiently, reducing energy intensity (energy consumed per unit of output).

The Draft Climate Change Policy is also appropriate in that it acknowledges those risks and impacts often associated with climate change that are particularly relevant to small and low-lying island countries:

Sea level rise—loss of land, increased erosion, salt water intrusion

Hurricanes—damage to infrastructure, destruction of crops, biodiversity loss

44 Draft Climate Change Policy, page 42.

29

Floods—damage to infrastructure, pest outbreaks, displacement of people, erosion, destruction of crops

Droughts—restriction of development, loss of life, health, diseases.

However, the document‘s clarity and effectiveness as policy would benefit from (i) being more concise and neutral on climate change science (which is already sufficiently dealt with in many specialized publications that could just be referenced), and (ii) focusing more on actions that can make the TCI more resilient to natural climatic and environmental effects, regardless of whether they be man-made or not.

Finally, the document is appropriate in that it acknowledges the key regional and international entities and initiatives related to climate change mitigation and adaptation. Again, efforts for mitigation should focused on lobbying through the appropriate channels for making other richer, larger countries take mitigating actions that are not viable for the TCI to undertake, but that might positively affect it. Alongside initiatives mentioned, we suggest following closely the Pilot Program for Climate Resilience (PPCR),45 which is starting as part of the Strategic Climate Fund (SCF) initiatives—the Caribbean Region is one of the two regional groups and nine countries worldwide selected for participation in the PPCR. This initiative is particularly important regarding concrete actions that would involve the private sector in making small island countries better equipped to face climatic and environmental challenges. As of January 2011, a study is being commissioned to analyze what private sector initiatives would best contribute to this end, focusing on Haiti, Jamaica, Grenada, Dominica, Saint Lucia, and Saint Vincent and the Grenadines. The outcomes of this study are likely to provide relevant insight and concrete ideas for the TCI.

3.1.3 The Policy Position of the Advisory Council on Renewable Energy

In 2010 the Advisory Council issued a Policy Position on renewable energy as a step to fill a policy gap on this matter. The position recommends, among various things:

– Supporting private investment in renewable energy technologies through the use of Crown Land, tax deferral and/or concessions

– Reviewing and considering the feasibility of renewable energy generation targets binding on utilities

– Changing building and planning regulations to support micro-generation and water efficiency

– Clarifying cost structures and incentives for existing suppliers to invest in renewable energy

Through these initiatives, the Advisory Council intends to help ensure security of electricity supply on TCI, and address the growing concern over high energy costs in the country.

We think this is a useful position in the right direction, with one important caveat: binding renewable energy generation targets may pose a risk of implementing projects that increase the cost of electricity in the TCI (and prices to customers) for the sake of meeting a target. Embedding reasonable renewable energy options in least-cost generation planning, and

45 Pilot Program for Climate Resilience, http://www.climatefundsupdate.org/listing/pilot-program-for-climate-resilience

(last accessed 6 January 2011).

30

creating a regime to allow third party generators to sell limited amounts of renewable electricity at avoided cost may be a better solution—our recommendations contained in section 6 discuss this matter in more detail.

3.2 Reviewing Energy Policies of Neighboring Countries

In this section, we review elements of energy policies of Dominica, Barbados, and the Cayman Islands. As required by our Description of Services, this review is strictly functional rather than informational—its purpose is to identify key lessons learned and ideas on how to draft (or not to draft) an energy policy for a country such as the TCI.

3.2.1 Dominica’s Draft Energy Policy

Dominica‘s draft National Energy Policy (the Policy)46 is being developed under a consulting assignment supported by the Organization of American States (OAS). Our analysis of the draft document finds that:

The Policy should clearly state that reducing electricity generation costs and prices is the top priority, and other goals (such as a ―low-carbon future‖) should be pursued only as long as they do not interfere with it. This responds to the same rationale stated for the objectives of the TCI‘s Energy Conservation Policy and Implementation Strategy (see section 6.1.1). Least-cost generation planning should be mentioned as the most important among the ―good planning principles‖, and added to the various strategic, environmental, and social assessments mentioned in the draft Policy. The activities and decisions of the Independent Regulatory Commission (IRC)47 are fully consistent with this suggestion, and represent a best practices example that the TCI‘s Electricity Commissioner may wish to consider

The Policy should clarify that its reference to a ―liberalization of the electricity sector‖ only means the possibility by any independent power producers (IPPs) to access the grid to sell their power to a single buyer, and does not mean the unbundling of the electricity sector, or common carriage.48 Dominica—like the TCI—has a small electricity system: unbundling of the electricity is not practical, and would be potentially harmful. The IRC seems to be following an approach of allowing independent power producers where financially and operationally viable, while retaining a distribution and supply monopoly. In our opinion, this is well suited to Dominica‘s small system size and current state of development, and is a very important point to keep in mind as the TCI undertakes a review of its Electricity Ordinance (see below section 3.3). Having fully integrated utilities that provide reliable service is an appropriate solution for small systems—integrating IPPs where appropriate should not be confused with unnecessary and too extensive sector reform.

46 Isada Consulting Group, Draft National Energy Policy of the Commonwealth of Dominica and Goals of National Energy Policy of

Dominica, 5 November 2009.

47 Independent Regulatory Commission of Dominica, http://www.ircdominica.org/ (last accessed 10 January 2011).

48 We define ‗common carriage‘ as the sharing of utility transmission and distribution networks to provide these services to the public.

31

We suggest that the Government request any updated version of Dominica‘s national energy policy to the Government of the Commonwealth of Dominica.

3.2.2 Barbados’ Sustainable Energy Framework

Barbados is developing a Sustainable Energy Framework with support from the Inter-American Development Bank and Castalia. Although an official policy document has not been adopted by the Government of Barbados as of January 2011, the Government has endorsed the key policy principles made by Castalia. They are relevant for the TCI, and we intend to use as them as an example (of course, adapted to local context and needs, and subject to discussion with the Government of the TCI) to draft an Energy Conservation Policy and Implementation Strategy. Below we review these key principles, and comment on how they would be applicable to the TCI:

1. Win-win approach: top priority is to be given to measures that both increase sustainability and reduce the cost of energy to the economy. The government should focus its policies on promoting those measures that reduce costs while also reducing oil dependency and decreasing the potential impacts of global warming—this is fully consistent with the TCI‘s context and objectives

2. Cost-benefit analysis: where a measure could increase sustainability but would also increase costs to the economy, it will only be pursued if the sustainability benefits exceed the economic costs. There are a number of technologies that could reduce oil imports and CO2 emissions, but would, if deployed, increase the cost of energy to the country. Government should not, as a general policy, pursue those sustainable energy options that increase the cost of energy to the country. Government should consider particular measures on a case-by-case basis, but will need to be convinced that the sustainability benefits offset the additional costs imposed on the taxpayers and energy users—also this is fully consistent with the TCI‘s context and objectives, as we discuss further in sections 4 and 5

3. International support: the Government will work to ensure that Barbados has full access to international support for sustainable energy measures, in the form of concessional finance, grants, and carbon credits. Global mechanisms to address climate change include the Clean Development Mechanism, and carbon mitigation strategies supported by grants and concessional loans provided by entities such as the Global Environment Facility and the United Nations Environment Program. These measures can allow for further cost reductions for Barbados in pursuing sustainable energy measures. They may also increase the range of sustainable energy measures that make sense for Barbados, by reducing the cost of certain measures, and so ensuring that they can be implemented without increasing energy costs for citizens of Barbados—this is relevant to the TCI, although it should be adapted to include sources of funding that are accessible to it such as the Environment Fund for the Overseas Territories (see section 3.1.1) and the Caribbean Development Bank.

4. Technology neutrality: policy will promote all measures that increase sustainability and reduce costs, rather than favoring particular technologies. There is no need to ‘pick winners’. Rather, the objective should be to create a framework in which market participants have the incentive and ability to develop renewable generation projects that benefit the country, regardless of technology. This framework could apply to any technology that, in time, becomes economically viable—this is fully consistent with the TCI‘s context and objectives

5. Build on existing strengths: elements of Barbados’ country energy system that serve the country well will be supported and developed to promote sustainable energy, not undermined. Barbados’

32

energy sector is lower cost and more reliable than most of its Caribbean neighbors. Making the energy sector more sustainable should not put this achievement at risk. Rather, the policy changes should be designed to build on existing strengths. In particular, the Government will be mindful of the need to ensure that BL&P can continue to operate as a professional, financially viable electricity utility, and that regulatory decisions are made by the Fair Trading Commission, in accordance with its statutory mandates. Government policy initiatives will respect the independence and autonomy of both the utility and its regulator—although the TCI‘s energy costs are higher than in Barbados, the same considerations of supporting the regulator and utilities that provide reliable service and must be financially viable are applicable to the TCI.

3.2.3 Elements of sustainable energy policy in the Cayman Islands

No official policy has been developed for the Cayman Islands, but one key element relevant to the TCI is embedded in the License49 granted to its utility, the Caribbean Utilities Company (CUC). In the system planning process (section 32.5), the CUC can recommend and justify a limit on capacity for the purchase of any non-firm renewable capacity (including distributed generation), and establish any purchase price from these sources based on avoided cost.

The importance of setting an appropriate limit on distributed generation, and setting the price on avoided cost, can be seen from Spain‘s experience with feed-in tariffs for solar PV. A 2007 Law established a feed-in tariff of US$0.44 per kWh for 25 years to solar PV, which corresponded to ten times that year‘s average wholesale price (US$0.04 per kWh). No cap was set—just a general target of 400MW of solar power by 2010, for promoting a domestic manufacturing industry. The result was that 3,500MW of distributed solar PV had been installed by 2008 already, with €126 billion in obligations to over 50,000 ‗solar entrepreneurs‘ who mostly bought equipment abroad.50

3.3 Reviewing the Relevant Legal and Regulatory Framework of the TCI

We assessed the following documents with the purpose of verifying whether and to what extent they include effective provisions for promoting viable sustainable energy projects:

The Electricity Ordinance of 1985,51 and draft Terms of Reference for revising it

Licenses (or Take-Over Agreements) of PPC and TCU, as referenced in section 2.1.2

Our general assessment is that the TCI‘s legal and regulatory framework does not provide adequate rules and incentives for a more sustainable production (by utilities or third parties) and consumption of electricity. In particular:

49 Government of the Cayman Islands, Transmission and Distribution Licence Granted to Caribbean Utilities Company,

Ltd., 3 April 2008, http://www.caymanera.com/Publications/cuctdlic08finl.pdf (last accessed 10 January 2011).

50 Spain's Solar Deals on Edge of Bankruptcy as Subsidies Founder, Bloomberg, 18 October 2010 http://www.bloomberg.com/news/2010-10-18/spanish-solar-projects-on-brink-of-bankruptcy-as-subsidy-policies-founder.html (last accessed 10 January 2011).

51 Laws of the Turks and Caicos Islands, Chapter 114: Electricity Ordinance and Subsidiary Legislation, 15 May 1988.

33

There is no obligation for utilities to develop least-cost expansion plans including renewable energy that may be economically viable and whose primary energy resource is available in the country

There is no obligation for electric utilities to purchase renewable energy from large and small third party IPPs when this costs less (at a margin below avoided cost of generation) and provided that third parties are technically and financially able of providing reliable supply

Self-generation of electricity with wind and solar PV technologies generation are permitted without a license—therefore, other technologies (including fossil fuel based-technologies) require a license52

For obtaining a private supplier‘s license (authorizing a person to use any electrical plant for the purpose of supplying himself or any other person specified in the license) an applicant must show that the electricity supplied by the utility is not readily available on reasonable terms53

Metering and tariff arrangements do not include mechanisms commonly used to integrate third-party renewable generation, such as feed-in tariffs and net billing

Criteria for setting tariffs do not include providing clear signals for customers to (i) consume energy more efficiently, and (ii) assess self-generation opportunities based on a disaggregated tariff structure that separates the cost of receiving different services from the electric grid in addition to energy—namely connection to the distribution system, and provision of back-up and stand-by power

Fuel costs for conventional electricity generation are subject to a full pass-through to customers, but no similar provision is made for capital costs for developing renewable energy plants when they could lower the utilities‘ cost of generation (we note that a provision along these lines was requested by TCU in its Proposed Renewable Energy Initiative).54

The Government has prepared draft Terms of Reference for the Review of the Operations of the Public Suppliers of Electricity and Regulatory Framework.55 The purpose of this review is to ensure the effectiveness of public suppliers in fulfilling the nation‘s energy interests, and the appropriateness of the regulatory framework they are subject to—including the Electricity Ordinance. The review acknowledges the need to address energy security and to promote diversification of the energy mix through integration of renewable technologies. Our assessment of these draft Terms of Reference is as follows:

Including in the scope of work net metering and feed-in tariff arrangements to encourage distributed renewable generation addresses a regulatory gap, but should

52 Electricity Ordinance of 1985, Part II Section 3.2.

53 Electricity Ordinance of 1985, Part II Section 4.2.

54 TCU, Proposed Renewable Energy Initiative: ―Adjustments to current tariff mechanisms to a) make more effective the tariff administration mechanism and (b) to accommodate the introduction of electricity derived from renewable energy in lieu of fuel charge/surcharge‖.

55 Ministry of Works, Housing & Utilities, Government of the TCI, Review of the Operations of the Public Suppliers of Electricity in the TCI and the Regulatory Framework Governing Their Operations (Draft), received 22 November 2010.

34

be modified to clarify that: (i) net billing (or bi-directional metering) is the preferred option over net metering, because net metering in effect pays the project developer‘s electricity at the retail rate, not at avoided cost; and (ii) feed-in tariffs should not include any subsidy element, but be determined at real avoided cost

Reviewing the efficiency of a full fuel cost pass-through is also useful, although something about considering a similar mechanism for capital costs of renewable energy projects would be appropriate

Sector unbundling in the TCI, given its system‘s size and stage of development, would not be an appropriate reform and should not be encouraged or even mentioned (see section 3.2.1)

Reviewing the tariff structure to encourage operational efficiency and viable renewable generation is useful, although efficient consumption of electricity should also be added as an objective of tariff reform

Assessing the feasibility of IPPs and PPAs is appropriate.

In summary, these Terms of Reference address most of the items identified above as the key shortcomings of the current legal and regulatory framework. We understand that this Report is intended to provide more specific context and information for the Government to finalize the scope of this assignment.

3.4 Reviewing Customs Regime for Energy Equipment

The Government of the TCI adopted a new Customs Tariff Order in 2010.56 The order imposes a standard 30 percent duty on most imports, and—based on recommendations57 by the DECR—establishes preferred duties or exemptions to promote sustainable energy equipment and technologies, illustrated in Table 3.1. A higher duty (40 percent) is established for clothes dryers, electric water heaters, and electric heating resistors.

Table 3.1: Customs Incentives for Sustainable Energy Equipment

Type Equipment Customs duty

Energy Efficiency

Efficient appliances: air conditioners, refrigerators, laundry machines, clothes driers (Energy Star)

15%

Compact fluorescent lamps (CFLs) 0%

Low-flow shower heads, faucet aerators, low-volume flush toilets

10%

Renewable Energy

Wind generators

Photovoltaic systems, cells and batteries*

Solar water heaters

0%

Source: Government of the Turks and Caicos Islands, Customs Tariff Order 2010, 1 August 2010.

Note: *Primary cells and batteries to be used in conjunction with photovoltaic systems.

56 Government of Turks and Caicos Islands, Customs Tariff Order, 1 August 2010.

57 Department of Environmental and Coastal Resources, TCI. DECR Recommendation on Customs Tariffs, 19 May 2010.

35

Our comments are the following:

Efficiency. As we show below in section 4, most EE equipment, and several small RE systems, are already commercially viable in the TCI—that is, they already save money for those who implement them without the need for a preferential customs treatment. If their uptake is still limited, reducing the upfront cost is unlikely to be the most efficient policy measure. For systems (such as solar PV, as shown in section 5) that are commercially viable but not economically viable (that is, whose electricity costs more than the electricity provided from the grid), preferential customs treatment may end up being counterproductive

Effectiveness. It is too early to determine whether these recent provisions are effective to increase the uptake of sustainable energy equipment in the TCI. However, the Government should consider the tradeoff between giving up customs duties and the ability to spend money on addressing other barriers—such as insufficient financing, or limited awareness

Ease of application and standards used. Referring only to the Energy Star standard makes things easier for customs officials, but is not appropriate because—while it covers some efficient equipment from a nearby market—it excludes other efficient equipment that is certified under different standards for appliances or lighting, such as standards adopted in the European Union.58 On the other hand, no certification or minimum standard is defined in the Customs Order for CFLs—this may end up subsidizing below-standard lamps that have often jeopardized the reputation and success of efficient lighting solutions.

3.5 Reviewing the Building Code and Development Manual

We reviewed the TCI‘ Building Code59 and Development Manual,60 and discussed them with the Planning and Housing Department.61 These documents do not address energy efficiency in any of the key end-uses:

Efficient lighting in buildings

Heating, Ventilation, and Air Conditioning (HVAC)

Insulation and tightness of building envelope (walls, roof, and windows)

Passive measures for ventilation and cooling

Minimum standards for equipment and appliances.

Buildings in TCI waste energy because simple measures like good insulation and proper control of air conditioning are often overlooked. Often air conditioners fight incoming hot

58 The CE mark is a self-certification system through which manufacturers certify that their equipment meets all standards

prescribed by EU laws and regulations. The EU Energy Star is another certification system for office appliances www.eu-energystar.org/en/database (last accessed 10 January 2011). The EU Energy Labeling system should also be considered, http://ec.europa.eu/energy/efficiency/labelling/energy_labelling_en.htm (last accessed 10 January 2011).

59 Department of Planning, Building Code of the Turks and Caicos Islands, May 2006.

60 Department of Planning, Development Manual of the Turks and Caicos Islands, 2007.

61 Meeting with the Planning and Housing Department, 11 November 2010.

36

air to keep the space cool. Operating small fans for controlled ventilation can reduce the running time for air conditioners, but our field visits suggest this practice is not used.

37

4 Energy Efficiency in the Turks and Caicos Islands

In this section we show that there is good potential for increased use of energy efficiency (EE) technologies in the TCI. Table 4.1 lists the technologies of interest, and indicates which have real additional potential—not already exploited—for the TCI. Appendix A describes the EE technologies in greater detail, and shows assumptions used to assess them.

Table 4.1: Energy Efficiency Potential by Technology Type

EE Technology Description Potential

Compact Fluorescent Lamps (CFLs)

Efficient light bulbs that replace conventional incandescent ones. More efficient (more power converted to light, less to heat), more luminous for any given installed capacity, and up to 10-20 times more long-lasting

High

Power Monitors Handheld devices that provide real-time information on energy consumption and expenditure. Increase awareness on energy efficiency, and achieve behavioral changes for a more efficient consumption of energy

High

Premium Efficiency Motors

Efficient motors that replace conventional motors. Higher actual power for the same electrical motor load and rated power

High

Efficient Window A/C Systems

Air Conditioning (A/C) systems for window installation that are more efficient than conventional ones. Same or better performance, lower electrical load

High

Efficient Split A/C Systems

A/C systems with indoor unit for air emission separate from outdoor condensing unit, more efficient than conventional systems. One system can cool multiple rooms. Same or better performance, lower electrical load

High

Magnetic Induction Street Lighting

High-efficiency street lights that replace conventional ones. Higher efficiency, better luminosity, longer lifetime, and lower costs

High

Variable Frequency Drives (VFDs)

Add-on devices that adjust motor speed (especially on pumps and fans) to make motor output meet actual demand, avoiding unnecessary extra output

Medium

Efficient Chillers Industrial cooling devices with efficient compressors incorporating VFD technology. They replace conventional chillers with traditional compressors that operate at constant speed

Medium

T8 Fluorescent Lamps with Occupancy Sensor

Efficient fluorescent lights for offices that replace older fluorescent lights, achieving better lighting with lower energy consumption. Occupancy sensors turn lights on or off based on detecting people in a room, reducing ‗on‘ time

Medium

T5 High Output Fluorescent Lamps

Lighting fixtures for indoor applications, mostly in the industrial sector. They replace conventional metal halide bulbs. Brighter and higher quality light, lower electricity consumption

Medium

LCD Computer Monitors

Liquid Crystal Display (LCD) monitors that replace conventional Cathode Ray Tube (CRT) monitors for computers. Better performance, lower consumption

Low

Efficient Residential Refrigerators

Efficient fridges for homes that replace conventional ones. Lower power draw, better insulation Low

Efficient Retail Refrigerators (Condensing Unit)

Condensing units with more efficient cooling performance for commercial refrigerators used in stores, supermarkets, and restaurants. Replacement is limited to the condensing unit to contain costs

Low

LED Street Lighting

Light Emitting Diode (LED) street lights that replace conventional street lights, and also provide maintenance cost savings. Higher efficiency, but very high installation cost

None

Solar LED Street Lighting

LED street lights for new off-grid installations (no replacement of baseline technology), with solar PV collectors and a battery. Very high installation cost

None

38

Despite the clear potential to save money, benefit the economy, and improve the environment that most of these technologies offer, their adoption in the TCI—with a few exceptions, such as lighting in some non-residential facilities, and variable frequency drives—is still limited. The main barriers to the uptake of viable EE technologies are limited access to capital, limited and uncompetitive equipment supply, incomplete information, and agency problems.

The rest of this section starts by describing the current uptake of EE measures in the TCI based on our National Energy Audit (section 4.1). Then, it shows which technologies are likely to be economically and commercially viable (section 4.2). In addition to the EE technologies shown in Table 4.1, which focus on electricity end-uses, Box 4.1 discusses uptake of efficient building design across all sectors (based on our prior discussion in section 3.5); and Box 4.2 discusses gas and electric cooking stoves. Finally, this section discusses the key barriers that prevent an optimal uptake of viable EE technologies in the TCI (section 4.3). Box 4.3 summarizes the results of our survey on willingness to pay for efficient equipment.

4.1 Current Uptake of Energy Efficiency

During our first trip to the TCI, we conducted a National Energy Audit through a representative sample of walk-through audits in facilities belonging to different sectors (see Table 4.2 for a list of facilities audited, and Appendix B of this report for the concise reports from these walk-through audits); and discussions with public and private sector stakeholders (see Appendix A of our Inception Report for a full list of our meetings).

Table 4.2: Facilities where we conducted a walk-through audit

Facility Sector

Providenciales International Airport Commercial

IGA Supermarket Commercial

Grand Turk Cruise Centre Commercial

NJS Francis Building Commercial

CEES Supermarket Commercial

Caicos Pride Seafood Industrial

Provo Seafood Industrial

Beaches Resort Hotel

La Vista Azul Resort Hotel

Gansevoort Resort Hotel

Club Med Hotel

Cheshire Hall Medical Centre Public

DECR Building, Providenciales Public

Community College Public

Clement Howell High School Public

Myrtle Rigby Complex Public

TCI Government Reverse Osmosis (RO) Plant Water Services

Turks and Caicos Water Company Water Services

39

Below we summarize our findings from the National Energy Audit, and then assess the uptake of key EE technologies.

4.1.1 Summary of findings from the National Energy Audit

As shown in Table 4.2, during our visit we carried out walk-through audits of facilities belonging to commercial, industrial, hotel, public, water services, and transport sectors. In addition, we discussed uptake of efficient technologies in the residential sector with the Planning and Housing Department and housing developers. Finally, on 11 November 2010 in Providenciales, we held a workshop with equipment retailers and energy service providers that complemented and clarified our discussions and observations during site visits. Below we summarize our findings for each sector, focusing on the main end-uses.

Residential Sector

Residential buildings in the TCI are very differently equipped in lighting, air conditioning, and appliances depending on which of three broad categories their occupants belong to:

Middle and high-income expatriates—professionals with work permits ranging from a few months to a couple of years represent important electricity-consuming centers. Efficient technologies in their homes have a low penetration, especially due to their transient nature and tendency to consider appliances disposable goods

Middle-income belongers and non-belongers—residences occupied by the middle class are where most efficient technologies are found. CFL penetration is relatively good, although incandescent light bulbs are still widespread. Retailers and installers report of increasing interest for high-efficiency air conditioning solutions, although most still purchase standard efficiency units. The same is true for refrigerators and other white goods, also due to the TCI‘s climate whose humidity and drifting salt may affect performance and lifetime of appliances. No use of power monitors is reported, and we saw none available for sale

Low-income belongers—end-uses in the homes of belongers with the lowest incomes are mostly represented by lighting and appliances, with little air conditioning. Incandescent light bulbs are the prevalent lighting technology; almost no appliances are high-efficiency.

Commercial and Industrial Sector

Key end-uses in the commercial and industrial sectors include air conditioning, refrigeration, water heating, lighting, and electromotive equipment:

Air conditioning—split systems are the predominant A/C solution in larger facilities, although office space also uses window units for cooling. In both cases, equipment is often of a standard as opposed to high efficiency type, and in some cases obsolete

Refrigeration—many condensing units for retail refrigerators are efficient, although some older or standard efficiency units remain in use; refrigeration units in seafood processing facilities are generally older and less efficient than in retail establishments

40

Water heating—almost no water heating is done with solar energy—electric boilers are predominant, and some gas is used

Lighting—we observed good penetration of efficient lighting, although the transition is far from complete. Fluorescent lamps for the industrial and commercial facilities are mostly of the older type with a magnetic ballast and higher wattage (T12) instead of the newer, lower-wattage T8 lamps with electronic ballasts. We saw almost no occupancy sensors, and many lights turned on without use. Halogen lights are still widely used for exteriors. Incandescent or mercury vapor bulbs are also still widely used

Electromotive—premium efficiency motors are the exception, but variable frequency drives (VFDs) are of common use (although mostly without monitoring and control devices to check they function correctly)

Hotel Sector

Many years of growth in the tourism industry have expanded electricity demand for this sector in the TCI. Efficient technologies are generally mixed with conventional ones, and it is not always the case that newer facilities are the best equipped (especially for lighting):

Air conditioning—split systems are predominant in hotels, mostly with standard efficiency air-cooled central chillers, although some high-end hotels have high-efficiency centrifugal chillers. Distribution pumps are mostly equipped with VFDs. Sensors that turn off fans with open doors and windows are common, although thermostats are mostly non-programmable and overcool space

Water heating—almost no water heating is done with solar energy—electric boilers are predominant (with some instantaneous electric hot water heaters)

Lighting—lighting technologies are not homogenous across hotels or even within one same facility. Exterior and common areas include a mix of T12, LED, and even halogen lights. Rooms have incandescent bulbs as well as CFLs (often both technologies side by side). In some cases (especially in common spaces) lighting savings are done by leaving every other fixture without an incandescent bulb rather than using CFLs. We observed some T8 lamps, although T12 are more common. Card readers that enable room lighting (with an effect similar to that of occupancy sensors for offices) are widespread

Electromotive—pool pumps are almost all provided with VFDs.

Relevant to our findings for hotels in the TCI are the findings of the Caribbean Hotel Energy Efficiency Action Program (CHENACT). CHENACT is an inter-organizational initiative that was put into operation in 2009, funded by the Inter-American Development Bank (IDB). CHENACT‘s goal is to improve the competiveness of small and medium sized hotels (less 400 rooms) in the Caribbean Region through the improved use of energy. As part of this work, the program undertook a pilot project in Barbados from which it aims to provide lessons learned to states throughout the Caribbean and begin a movement in the Caribbean hotel sector towards greater energy efficiency and micro-generation through the use of renewable energies. CHENACT is focusing on developing an energy efficiency model

41

and a clean energy policy for the hotel sector in Barbados that may be replicated throughout the Caribbean.62

Audits conducted under CHENACT identify the main end-uses in hotels in Barbados—these end-uses are also likely to represent the key opportunities for savings in other similar countries. CHENACT‘s summary breakdown of electricity consumption in the Barbados hotel sector is shown in Figure 4.1.

Figure 4.1: Breakdown of Electricity Consumption in Barbados’ Hotel Sector, 2010

Source: CHENACT, October 2010

CHENACT‘s recommendations include:63

Allowing utilities to fund energy efficiency projects in hotels, and recover costs of doing so (plus a reasonable return) through their rate base

Mandating energy efficiency standards for air conditioning, hot water, lighting, and appliances in hotels in the Building Code

Funding pre-investment grants and low interest loans for hotels

Promoting solar water heating in hotels

Training staff to improve maintenance of equipment and energy conservation.

Findings and recommendations CHENACT are consistent with findings and energy saving recommendations we make for hotels included in our walk-through audits. Our audits contained in Appendix B include similar specific recommendations for lighting, timing devices/breakers, staff training on energy management practices, AC system maintenance or

62 Duffy-Mayers, Loreto. Caribbean Hotel Energy Efficiency Action Program (CHENACT). CREF 2010. 15 Oct 2010

63 Duffy-Mayers, Loreto. Caribbean Hotel Energy Efficiency Action Program (CHENACT). CREF 2010. 15 Oct 2010

19%

39%

50% 50%54%

9%

14%

12%15%

4%

2%

8%

4%

10%19%

9%

10%11%

11%13%

8%

4%2%

9%6%

31%

14%9%

2%3%

11%

21%

7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Very Small Small Medium Large Very Large

Size of Hotel

BREAKDOWN OF ELECTRICITY CONSUMPTION IN THE HOTEL SECTOR

Miscellaneous

Office Areas Equipment

Hot Water

Pumps

Kitchen

Laundry

Guest Rooms Equip. & Lighting

Lighting

Air Conditioning

42

upgrades, and the installation of solar water heaters. Our general recommendations for the TCI‘s Energy Conservation Policy in section 6 are also consistent with CHENACT‘s.

Public Sector

Public sector buildings include diverse facilities such as government offices, schools, and the hospital. Key end-uses are air conditioning, lighting, and some water heating:

Air conditioning—a few rooms in schools (especially computer rooms) have window or portable A/C units, mostly standard-efficiency. Split systems are the most used in other types of buildings, with varying ages and efficiencies

Lighting—T12 lamps with magnetic ballasts are the most common in schools. Government buildings use primarily T8 lamps with electronic ballasts (although some T12 units remain). CFLs are used for exteriors, as well as in the hospital interiors. Street lighting is limited, and mostly uses low-efficiency mercury vapor lamps instead of higher-efficiency magnetic induction ones

Water heating—most hot water is provided with electric boilers; the hospital uses a diesel boiler.

Box 4.1: Building Design

The vast majority of buildings in the TCI are poorly insulated concrete structures. Most buildings are not equipped with energy efficient windows (most windows are single-pane) or doors. Buildings are generally not sealed well—this increases consumption of electricity for air conditioning where this is used; and where there is no air conditioning, relatively higher temperatures increase power draw of refrigerators. Building management systems (BMSs), which monitor and control use of electricity, water, and gas services, are found in the TCI only in very few hotel and commercial facilities.

As discussed in section 3.5 TCI‘s Building Code and Development Manual do not address energy efficiency questions common to tropical countries—such as requiring an evaluation between natural and mechanical ventilation to identify the most efficient cooling option, or requiring buildings be constructed efficiently and with sufficient insulation. A comprehensive energy performance standard would cover building envelope and wall construction requirements, as well as minimum equipment performance standards for lighting, heating, ventilation, and air conditioning.

Water Services

Reverse Osmosis (RO) technology is used on all Turks and Caicos Islands for providing potable water from seawater. The HAB Group owns the producer of desalinated water for Providenciales (Turks and Caicos Water Company (TCWC)), as well as the distributor for that island (Provo Water Company (PWC), of which the Government also is a minority shareholder). The Turks and Caicos Islands Government (TCIG) produces and distributes water in Grand Turk, South Caicos, and Salt Cay. Operating the RO process represents by far the largest end-use of electricity for both TCWC and TCIG.

The difference in efficiency between the private and public operator is striking: opportunities for increased efficiency in the Government-run water business lie more in institutional and management reform than in the adoption of any specific EE technology—there are a few opportunities for improving lighting and air conditioning, but savings yielded would be little compared to broader opportunities for increasing operating efficiency.

43

Two of the three RO units in Grand Turk use new VFDs and energy recovery devices, while TCWC‘s four operating units do not—however, TCWC‘s units operate at high efficiency. Tariffs are well below cost-recovery levels (tariffs are roughly equal to production costs only, that is US$0.03 per gallon for connected customers). Non-revenue water is about 35 percent. Small scale of operations (260,00 gallons per day in Grand Turk compared to 2.5 million per day in Providenciales), limited customer base (just 980 customers in Grand Turk), and underinvestment make the situation of the TCIG water business even more critical. Managers of the TCIG do not know how much power the business consumes—Government Treasury is in charge of paying TCU directly. The Government considered to privatize its water business in Grand Turk for at least two years, but the process has stalled.64

Transport Sector

Opportunities for savings in TCI‘s transport sector are limited by a small and scattered population. There are only about 121 kilometers of roads in the TCI, and no railway. These roads serve the transport needs of 32,000 people and about 6,300 motor vehicles (estimated applying a 2.9 percent average annual population growth rate to the 1997 figure of 4,754 vehicles). Population density is low—only 64 people per square kilometer.65

The lack of a ‗critical mass‘ makes mass transport solutions (commonly adopted to replace individual transportation in cities) not viable, at least in the current context. Using biofuels as a more efficient source of energy for transport would not be viable either—there is no local feedstock supply, and the limited size of the market would not justify in any way the storage, handling, and distribution infrastructure that ethanol and biodiesel require. The sustainability of biofuels has also been questioned in past few years, and recent increases in the prices of crops seem to confirm this trend.

In this context, the key opportunity lies in promoting fuel efficiency of passenger vehicles. Several policy measures are possible, ranging from regulations to systems that combine fees on high-consumption vehicles and incentives for more fuel-efficient ones. Electric and hybrid vehicles may represent a good option, and one that the Government is already supporting with a reduced import duty (10 percent as opposed to 35-60 percent on conventional vehicles, depending on engine size). Hybrid vehicles recharge themselves, and would have no impact on the electricity grid.

For electric vehicles, the Government‘s current policy position seems more than cost-benefit justified from the point of view of the country, and seems to make electric vehicles an attractive option for an individual consumer. Appendix A.5 shows an exercise where we compared the foregone import duty for one thousand electric vehicles, against the savings for the country deriving from the avoided cost of gasoline net of the additional cost of electricity used to charge the vehicles (under the current power generation mix, and assuming Diesel prices of US$3.0 per gallon).

This preliminary estimate is, of course, based on several assumptions, and would warrant further analysis. However, it does show that a reduced import duty of only 20 percent would yield a net present value (NPV) of zero for the country. It also shows that an individual

64 Meeting with TCIG RO Plant Management, Grand Turk, 12 November 2010.

65 Department of Economic Planning and Statistics, TCI, Yearbook of Statistics, 2000. http://www.thecommonwealth.org/YearbookInternal/140416/140431/turks_and_caicos_islands (last accessed 12 January 2011)

44

would get a positive NPV by choosing a more expensive electric vehicle over a comparable conventional one thanks to a reduced duty of 20 percent. The Government‘s reduced import duty of 10 percent would seem to provide an excess of incentive.

Box 4.2: Electric and Gas Cook Stoves

Many households in the TCI use electric cooking appliances—unlike hotels, which mostly use propane as the ones we audited, shown in Appendix B. Gas-based cook stoves create fewer emissions of greenhouse gases than electric ones when power is generated by a predominantly coal- or (like in the TCI) oil-based generation mix; and are more efficient than electric ones.

Lower emissions in contexts of coal- or oil-based generation mix

Natural gas-based fuels (like methane, propane, or butane) have lower carbon contents from stationary combustion than coal-based fuels, or petroleum-based fuels (like diesel, or Liquefied Petroleum Gas—LPG). Carbon content of natural gas-based fuels ranges from 13.5 kilograms of Carbon per Gigajoule (kgC/GJ) for methane, to 16.8kgC/GJ for butane. Propane contains 16.2kgC/GJ. Coal-based fuels range from 24 to 29kgC/GJ, while petroleum-based fuels range from 16 to 29kgC/GJ. Diesel No.2 used to generate electricity in the TCI has a carbon content of 19.2kgC/GJ, which leads to an emission factor for the TCI of 1.06tCO2/MWh as we explain in section 4.2.4. If the TCI generated electricity only from natural gas, its emission factor would be about 0.75tCO2/MWh.

Gas-based cook stoves reduce GHG emissions when the electricity generation mix is predominantly based on coal- or oil-based fuels. As the share of renewable power generation increases, the relative advantage of gas-based cook stoves in terms of GHG emissions decreases. In the TCI, however, complete diesel-based generation means that gas-based cook stoves would emit less—in addition to avoiding line losses. Also LPG, which is actually an oil-based fuel, has a carbon content of 16kgC/GJ, lower than the one for Diesel.

Greater efficiency

Gas and LPG cook stoves are generally more efficient than electric coil cookers, particularly if losses in generation, transmission and distribution of electricity are considered. A study recently completed for the World LPG Association compared the efficiency of LPG for cooking to that of various other fuels (including electricity, kerosene, and biomass) throughout various regions around the world, and found that LPG and natural gas are the most efficient fuels for cooking in most regions. Electric coil stoves were found to have an efficiency of 70 percent of that of LPG and natural gas high-efficiency stoves in Europe, and 72 percent in the United States.

* Source: IPCC (2006). IPCC Guidelines for National Greenhouse Gas Inventories. Volume 2: Energy; Chapter 2: Stationary Combustion; Energetics Incorporated (2009). LP Gas: Efficient energy for a Modern World. Report prepared for the World LP Gas Association.

4.1.2 Uptake of EE technologies

Table 4.3 summarizes our assessment of the uptake of key EE technologies related to electricity end-uses. For each technology, the table first indicates whether or not the technology is economically viable—that is, whether energy savings more than offset the cost of implementing a given technology (see section 4.2 for these calculations). Then, the table shows the estimated uptake (high, medium, low, or none) of each technology in the residential, commercial and industrial, hotel, and public sector establishments (public sector includes street lighting). Finally, the last column contains a few comments summarizing our overall findings for each technology.

45

Table 4.3: Estimated Current Uptake of EE Technologies in the Turks and Caicos Islands

EE Technology Econ.

Viable?

Uptake by Sector

Comment Residential

Commercial and Industrial

Hotel Public

Compact Fluorescent Lamps (CFLs)

Yes Low Medium Medium Medium CFLs are the cheapest and most cost-effective energy efficiency technology. In spite of these benefits and the increasing availability of CFLs in stores, most residential customers—and many non-residential ones—still use incandescent bulbs

Power Monitors Yes None None None None We saw no power monitors in use or on sale in the TCI

Premium Efficiency Motors

Yes N/A Low N/A N/A Most motors we observed during our field visits were standard efficiency motors. In some cases, motors had been rewound after failure—this results in even lower operating efficiency. At industrial sites, many motors have long run hours and are under maintained. Replacement of these motors will be more cost-effective than doing overdue maintenance

Efficient Window Air Conditioning Systems

Yes Low Low Low Low Almost no window A/C systems installed in households (low-income households mostly have no A/C at all) are of an efficient type. A higher portion of split systems installed in non-residential premises are efficient, but uptake remains low

Variable Frequency Drives

Yes N/A High High High VFDs have a relatively high penetration in the TCI, both for fan and for pump motors

Efficient Chillers Yes N/A N/A Low N/A We saw a few efficient chillers at premises we visited. Central chiller plants are not common, and are typically only found in large hotel buildings with central ventilation, or used in industrial processes.

Magnetic Induction Street Lighting

Yes N/A N/A N/A None Virtually all street lighting uses conventional lamps (mostly mercury vapor)

T8 Fluorescent Lamps with Occupancy Sensor

Yes N/A Medium Medium Medium T8 lamps are relatively widespread (although the occupancy sensors that are typically installed with them are not). Offices that have T12 fluorescent lamps can be retrofitted with T8 lamps. Customers who have already completed a retrofit with T8s use 32W lamps, which should be replaced with 25W ones

Efficient Split Air Conditioning Systems

Yes N/A Low Low Low Split A/C systems are the most common type of A/C system in non-residential premises in the TCI. Most that we observed are obsolete. There is significant

46

EE Technology Econ.

Viable?

Uptake by Sector

Comment Residential

Commercial and Industrial

Hotel Public

scope in retrofitting them. The systems‘ configuration could also be improved at many sites by having one system serve several rooms

T5 High Output Fluorescent Lamps

Yes N/A Low N/A N/A We saw few T5 fixtures in premises we visited—metal halide lamps are more common in warehouse and exterior of industrial premises

LCD Computer Monitors

Yes High High High High LCD monitors are almost everywhere. Older cathode ray tube (CRT) monitors, which consume about three times as much energy, have all but disappeared from premises and store shelves, and mostly survive in a few Government offices

Efficient Residential Refrigerators

No Low N/A Low Low Inefficient refrigerators are a major component of residential load (and present in some hotel rooms and Government offices). New refrigerators are typically more efficient then the refrigerators they replace—but in spite of achieving commercial savings for customers, efficient refrigerators may not economically viable, because they are designed to perform efficiently in different climate conditions

Efficient Retail Refrigerators (Condensing Unit)

No N/A Medium Medium N/A We saw a relatively good amount of efficient retail refrigerators. A few obsolete and inefficient units remain, but seem to be the exception

LED Street Lighting No N/A N/A N/A None There are currently no LED street lights in the TCI. As we show in the next section, this technology is too expensive—unless prices come down significantly, we expect that LED street lighting will (and should) have no uptake in the country

Solar LED Street Lighting

No N/A N/A N/A None There are no Solar LED street lights in the TCI—as we show in the next section, adding a solar panel and a battery makes LED street lights even more expensive and less cost-effective. Since these are off-grid installations, this technology is also not useful in the TCI, which has virtually complete electricity service coverage

4-47

4.2 Economic and Commercial Viability of Energy Efficiency Technologies

Figure 4.2 summarizes the viability of energy efficiency technologies in the TCI. To read the figure, note that the blue bars indicate the cost required by each technology to save one kWh. The cost of saving one kilowatt hour is compared with the cost of generating that kilowatt hour (given a specific fuel cost assumption, as we explain below), which is shown continuous lines (all-in cost, or just the fuel . From the point of view of the TCI as a country, technologies that can save one kilowatt hour of electricity for less than it costs to generate it are considered ‗economically viable’.

As the figure clearly shows, almost all the energy efficiency technologies reviewed are economically viable. In fact, the only technologies that are not economically viable in the long term are efficient retail refrigerators, and LED street lighting (with or without a solar panel).

Figure 4.2 also shows the tariffs customers face (based on the same fuel cost assumption used for generation costs), shown as dotted lines. From the point of view of customers, energy efficiency technologies are viable if they save the customer money—the customer‘s benchmark is not avoided generation cost, but the tariff the customer avoids paying. Any technology with a cost per kilowatt hour saved less than the applicable tariff will save the customer money. We refer to these technologies as ‗commercially viable‘. The analysis shows that all the technologies except for LED street-lighting (with or without solar panels) are commercially viable.

The following sections set out the analysis and assumptions in detail, and also assess the cost of reducing CO2 emissions using EE technologies.

4-48

Figure 4.2: Viability of Energy Efficiency Technologies in the Turks and Caicos Islands

Note: Savings costs of EE measures (US$/kWh) are based on a 10% discount rate. Generation costs and tariffs are based on Diesel prices of US$3.00/gallon; and are grossed up for average losses for PPC and TCU (average of 9.7% based on 2009 data from utilities). Generation costs (fuel costs, which include variable operation and maintenance costs and are used as the benchmark for the short term; and all-in costs, which are used as the benchmark for the long term) are a weighted average (based on plant generation data from 2009) for PPC and TCU.

1.06

0.84

0.40

0.27

0.25

0.24

0.24

0.19

0.15

0.11

0.10

0.09

0.08

0.05

0.02

0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70

Solar LED Street Lighting

LED Street Lighting

Efficient Retail Refrigerators (Condensing Unit)

Efficient Residential Refrigerators

LCD Computer Monitors

T5 High Output Fluorescent Lamps

Efficient Split A/C Systems

T8 Fluorescent Lamps w/Occupancy Sensor

Magnetic Induction Street Lighting

Efficient Chillers

Variable Frequency Drives

Efficient Window A/C Systems

Premium Efficiency Motors

Power Monitors

Compact Fluorescent Lamps (CFLs)

US$/kWh

Average fuel cost (short term): US$0.23/kWh

Average all-in cost (medium term): US$0.27/kWh

Streetlight tariff: US$0.42/kWh

Residential tariff: US$0.44/kWh

Non-residential tariff: US$0.50/kWh

Econ. viableComm. viable

49

4.2.1 Defining the ‘viability’ of EE technologies

We evaluate the viability of EE technologies based on their savings cost. We define the ‗savings cost‘ of a technology as the cost to save one kilowatt hour using that technology. The savings costs is calculated by turning the upfront cost of the technology installation into an annual capital cost, and then dividing the annual capital cost by the number of kilowatt hours the technology would save in one year. The annual capital cost figure is calculated the same way that an annual hire-purchase payment would be calculated, and assumes a cost of capital (interest rate) of 10 percent.66

A technology is economically viable if it reduces the overall cost of supplying electricity in the TCI. Specifically, for the purposes of this study an EE technology is defined as ‗economically viable‘ when its savings cost is less than the cost of electricity generation at a diesel fuel price of US$3.00 per gallon.67 This means that, with diesel fuel at US$3.00 per gallon, it would cost less to implement an economically viable EE technology than to generate electricity.

The relevant estimate of the cost of electricity generation depends on whether we adopt a short term or a medium term perspective:

Short term, what matters is the fuel cost savings (as well as savings of the variable operation and maintenance (O&M) costs). The average fuel cost in the TCI—a weighted average by plant generation for PPC and TCU, including variable O&M costs, and grossed up for an average 9.7 percent transmission and distribution losses—is US$0.23 per kWh. We consider system losses in assessing energy efficiency technologies, because they are technologies for reducing electricity consumption—therefore, what matters is the cost to supply electricity to the customer premises. This includes the cost of system losses

Medium term, lower demand lowers the need for investment in new capacity, as well as fuel costs—therefore, the relevant avoided cost is the all-in cost of generation, which includes the sum of all fixed and variable levelized costs of generation. The average all-in cost in the TCI—also a weighted average for PPC and TCU, and grossed up for losses—is US$0.27 per kWh.

Therefore, in the medium term an energy efficiency technology should be considered economically viable if its cost per kilowatt hour saved is less than US$0.27 per kWh.

A technology is commercially viable if a customer can save money by using it. To put it more precisely, for the purposes of this study an EE technology is defined as ‗commercially viable‘ when its savings cost is less than the electricity tariff at diesel fuel prices of US$3.00 per gallon—this means that, at that fuel price level, it costs the customer less to implement the EE technology than to buy electricity. The relevant benchmark for the electricity tariff

66 We assume an interest rate of 10 percent based on our experience in sustainable energy programs in the Caribbean

supported by international and regional development banks. Loans from the Inter-American Development Bank (IDB) might allow on-lending to final consumers at lower rates, but the TCI are not a member of the IDB—although they are a member of the Caribbean Development Bank. We assumed a relatively higher rate of 10 percent considering the uncertainty surrounding the likelihood that the TCI may access any concessional finance (that is, loans at rates that are below-market but higher than zero) for funding the implementation of EE measures.

67 As explained in section 0, we use this fuel cost assumption as a reasonable estimate of what the per-gallon cost of fuel would be for PPC and TCU if oil prices were at the level of ten-year future contracts.

50

depends on the sector that the customer implementing an EE technology belongs to. Based on an average of tariffs in PPC‘s and TCU‘s service areas (including the fuel clause adjustment calculated with fuel prices of US$3.00 per gallon), we assume

– A non-residential tariff of US$0.50 per kWh

– A residential tariff of US$0.44 per kWh

– A street lighting tariff of US$0.42 per kWh.

Table 4.4 shows the savings cost of each technology, and whether each technology is economically viable. The table also shows the breakeven diesel fuel price for economic viability—that is, the fuel price at which the technology in question would be just viable. For example, we see that premium efficiency motors in industry would save money even if diesel fuel prices fell to US$0.30 per gallon; CFLs and power monitors, which have an extremely low savings cost, would be viable even if fuel were free (at oil prices of US$0.00 per gallon, the average all-in cost of generation would be US$0.06 per kWh). On the other hand, efficient retail refrigeration technology for households, which is not viable with oil at US$3.00 per gallon, would become viable if oil rose above US$4.80 per gallon on a sustained basis; LED street lights would need oil to cost US$10.90 per gallon (or US$14.00 per gallon if suing solar panels) to be viable.

51

Table 4.4: Efficiency Technologies—Savings Costs, Viability, Breakeven Oil Price

Note: *At oil prices of US$0.00 per barrel, average all-in generation cost is US$0.06 per kWh.

EE Technology Savings cost

(US$ per kWh)

Benchmark for economic viability

Economically viable with diesel at US$3.00

per gallon?

Breakeven diesel fuel price for economic

viability (US$ per gallon)

Compact Fluorescent Lamps (CFLs) 0.02

Short term: average fuel cost—including

variable O&M cost—of all plant

types

(US$0.23/kWh)

Medium term: average all-in

generation cost of all plant types

(US$0.27/kWh)

Yes 0.00*

Power Monitors 0.05 Yes 0.00*

Premium Efficiency Motors 0.08 Yes 0.30

Efficient Window A/C Systems 0.09 Yes 0.40

Variable Frequency Drives 0.10 Yes 0.60

Efficient Chillers 0.11 Yes 0.80

Magnetic Induction Street Lighting 0.15 Yes 1.30

T8 Fluorescent Lamps with Occupancy Sensor 0.19 Yes 1.90

Efficient Split A/C Systems 0.24 Yes 2.60

T5 High Output Fluorescent Lamps 0.24 Yes 2.60

LCD Computer Monitors 0.25 Yes 2.70

Efficient Residential Refrigerators 0.27 Yes 3.00

Efficient Retail Refrigerators (Condensing Unit) 0.40 No 4.80

LED Street Lighting 0.84 No 10.9

Solar LED Street Lighting 1.06 No 14.0

52

The savings cost calculations in Table 4.4 are calculated from estimates of: typical installed capacity, lifetime, capital cost, O&M costs, and yearly energy and financial savings for each type of energy efficient technology, compared to a typical baseline technology. These estimates are presented in Table 4.5. The table also provides an estimate of the savings that a customer would get for each unit of the technology installed compared to using a corresponding standard type of equipment.

Table 4.5: Energy Efficiency Technologies—Key Data

Source: Castalia estimates based on experience in Barbados, adjusted for TCI-specific information gathered during our National Energy Audit, and interviews and workshop with equipment retailers in the TCI.

Notes: *O&M costs only considered when different from the O&M costs of the baseline—Street Light technologies achieve cost savings, and only VFDs have additional O&M costs. **Financial savings calculated based on applicable tariffs calculated with diesel costs at US$3.00/gallon.

EE Technology Installed capacity

(kW)

Savings over

baseline (% on kW)

Lifetime (years)

Capital cost

(US$)

O&M costs* (US$)

Yearly energy savings

(kWh/yr)

Yearly financial savings** (US$/yr)

Compact Fluorescent Lamps (CFLs)

0.015 75% 5 5 0 82.1 36.2

Power Monitors NA 10% 20 130 0 315.6 139.0

Premium Efficiency Motors

9.846 5% 20 1,500 0 2,191.2 1,096.7

Efficient Window Air Conditioning Systems

1.000 33% 15 500 0 730.0 321.6

Variable Frequency Drives

7.178 27% 10 7,000 60 11,687.2 5,849.4

Efficient Chillers 117.000 57% 20 408,000 -6,297 382,500 191,441.3

Magnetic Induction Street Lighting

0.030 48% 20 450 -35 120.5 50.0

T8 Fluorescent Lamps with Occupancy Sensor

0.048 60% 19 180 0 116.0 58.1

Efficient Split Air Conditioning Systems

1.846 38% 15 4,200 0 2,308.0 1,155.2

T5 High Output Fluorescent Lamps

0.352 23% 16 600 0 318.0 159.2

LCD Computer Monitors 0.040 67% 15 300 0 160.0 80.1

Efficient Residential Refrigerators

0.105 34% 12 885 0 481.8 212.2

Efficient Retail Refrigerators (Condensing Unit)

0.525 15% 15 2,500 0 812.0 406.4

LED Street Lighting 0.035 39% 20 1,000 -35 98.6 40.9

Solar LED Street Lighting

0.000 100% 20 2,500 -26 251.9 104.6

53

4.2.2 Assessing the economic and commercial viability of EE technologies

As shown in Figure 4.2, we find that—with diesel fuel at US$3 per gallon—the following technologies are economically and commercially viable:

CFLs (US$0.02 per kWh)

Power Monitors (US$0.05 per kWh)

Premium Efficiency Motors (US$0.08 per kWh)

Efficient Window A/C Systems (US$0.09 per kWh)

Variable Frequency Drives (US$0.10 per kWh)

Efficient Chillers (US$0.11 per kWh)

Magnetic Induction Street Lights (US$0.15 per kWh)

T8 Fluorescent Lamps with Occupancy Sensor (US$0.19 per kWh)

Efficient Split A/C Systems (US$0.24 per kWh)

T5 High Output Fluorescent Lamps (US$0.24 per kWh)

LCD Computer Monitors (US$0.25 per kWh)

Efficient Residential Refrigerators (just viable at US$0.27 per kWh).

The following technology is commercially viable, but not economically viable:

Efficient Retail Refrigerators (Condensing Unit) (US$0.40 per kWh).

Only two technologies are not viable, both economically and commercially—LED Street Lighting (US$0.84 per kWh) and Solar LED Street Lighting (US$1.06 per kWh).

The breakeven diesel fuel prices shown in Table 4.4 suggest that even at lower oil prices—in particular, current Diesel Number 2 fuel prices of about US$2.5 per gallon68 as of 10 January 2011—the viability of standard EE technologies on Turks and Caicos remains high. Most technologies that are economically viable with diesel fuel prices of US$3 per gallon are viable even at current oil prices (this does not include Split System A/Cs, T5 High Output Fluorescent Lamps, LCD Computer Monitors, and Efficient Residential Refrigerators).

Our key findings by main technology types show that:

All lighting technologies for residential, commercial, and industrial customers are viable. CFLs are the most cost-effective measure to save energy—as noted, they would be economically viable even if fuel were free. Other more sophisticated lighting measures cost more, due to more complex installation, but are still effective compared to the cost of generating electricity—T8 lamps (with occupancy sensors, which increase their efficiency) have a breakeven diesel fuel price of US$1.90 per gallon. T5 lamps need a higher diesel fuel price to be economically viable (at least US$2.60 per gallon), but this is still lower than the US$3.00 per gallon benchmark

68 Source: Energy Information Administration, U.S. Gulf Coast No.2 Diesel Low Sulfur Spot Price FOB (US$ per gallon),

at http://www.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EER_EPD2DL_PF4_RGC_DPG&f=D (last accessed 10 January 2011).

54

Magnetic Induction Lights are a viable option for street lighting, but LED lights (with or without solar panels) is not.69 The TCI should consider magnetic induction technology for street lighting. LED technology is still cost-prohibitive for municipal street lighting. With a breakeven diesel fuel price of US$10.90 per gallon, it is clear that considerable advances in the technology will be needed before LED street lighting should be seriously considered. Solar LED street lights are even less viable (breakeven diesel fuel price of US$14.00 per gallon)—since they are off-grid installations, they are not really useful for the TCI either given there are virtually no non-electrified areas in the country

Power monitors are a strong awareness tool for saving electricity. Power monitors show real-time electricity consumption and expenditure, and can induce long-lasting behavioral changes that save energy across all end uses of a customer. Estimated savings of 10 percent (based on existing studies70) are a reasonable estimate, and make these devices a very cost-effective measure (savings cost of US$0.05 per kWh), although one that we did not see available in the TCI

All mechanical technologies are viable. As long as diesel fuel prices remain above US$0.80 per gallon, Premium Efficiency Motors, Variable Frequency Drives, and Efficient Chillers can all deliver savings to the country and to individual customers—particularly industrial customers, but also hotels

All Air Conditioning technologies are highly viable. Efficient A/C units for residential use (mostly window systems) are very cost effective, and start saving money with diesel fuel prices of just US$0.40 per gallon. Efficient A/C units for commercial use (mostly split systems) are also cost effective, but need fuel prices of US$2.16 per gallon to be economically viable given their high installed cost in the TCI (based on our conversations with equipment suppliers)

LCD monitors for computers are viable. LCD monitors are economically viable when diesel fuel prices are above US$2.7 per gallon—but in any case they have a high uptake in the TCI already

Refrigeration technologies can save customers money, but only residential ones are economically viable. Efficient residential and retail refrigerators have a high savings cost (both about US$0.27 per kWh and US$0.40 per kWh, respectively) and are both commercially viable. However, at a diesel fuel price of US$3.00 per gallon, only residential efficient fridges are economically viable (perhaps thanks to the preferential customs regime, which makes them cost almost exactly like non-efficient ones).

69 Solar Street Lights are a renewable energy measure, and have even higher costs.

70 See for example Sarah Darby, The Effectiveness of Feedback on Energy Consumption, University of Oxford, April 2006 http://www.eci.ox.ac.uk/research/energy/downloads/smart-metering-report.pdf; Kurt Roth, Home Energy Displays, ASHRAE Journal, July 2008 http://www.tiaxllc.com/publications/home_energy_displays.pdf; and Dabby Parker and David Hoak, How Much Energy Are We Using? Potential of Residential Energy Demand Feedback Devices, Florida Solar Energy Center, 2006 http://www.fsec.ucf.edu/en/publications/pdf/FSEC-CR-1665-06.pdf.

55

4.2.3 Explaining the assumptions used to assess the viability of EE technologies

The viability of any EE technology is highly site-specific—it depends on how five key parameters of an EE technology compare to those of the particular baseline situation that it addresses:

1. Cost (capital, and O&M)

2. Lifetime

3. Time of energy use

4. Installed capacity

5. Energy consumption.

An accurate estimate of the viability of EE technologies can only come from an energy audit of the specific facility where an EE project takes place. For our analysis, we made assumptions for the parameters of EE technologies and for those of typical baseline situations they address on the basis of current market data, our experience in Barbados and the rest of the Caribbean, and our field visits during the National Energy Audit for the TCI in November 2010. Below we explain the assumptions we used to calculate savings costs, electricity generation benchmarks, and tariff benchmarks.

Savings costs

We calculated the savings cost of each EE technology on a Net Present Value (NPV) basis, using the following assumptions:

Capital costs, in US$—we estimated capital costs based on our observations while in the TCI, our discussions with local equipment providers, and our experience of the Barbados and North American EE market

Operations and maintenance (O&M) costs, in US$—we only considered O&M costs of an EE technology when different with respect to the baseline technology it replaces. Most EE technologies replace equivalent conventional equipment, and therefore do not require additional O&M (some technologies achieve savings)

Lifetime, in years—we estimated the lifetime of EE technologies based on our experience, and equipment sold in Barbados on the North American market

Yearly energy savings, in kWh per year—we assumed installed capacity, daily running time, and days of operation per year of each EE technology and the typical baseline situation it would replace or improve

Discount rate of 10 percent—we use this rate as a reasonable assumption for potential, but uncertain, concessional funding to support EE measures. It is higher than rates obtained by other neighboring countries that have access to multilateral development entities such as IDB or World Bank.

The formula we used to calculate each measure‘s savings cost is the following:

Cost of each measure to achieve a 1kWh saving (US$ per kWh saved)

= Annualized capital cost per kWh (discounted at 10 percent over lifetime)

+ Annual O&M costs per kWh

56

The average costs of all EE technologies—except the non viable ones, and excluding the lowest and highest values—is US$0.16. This is a weighted average based on the relative yearly savings of each technology, shown in Table 4.5.

Electricity generation benchmarks

We calculated the electricity generation benchmarks for economic viability using the following assumptions:

Diesel fuel price of US$3.00 per gallon, based on the price of ten year oil futures for Diesel No. 2 71

Average of fuel and variable O&M cost of generation of US$0.23 per kWh, based on our analysis presented in section 2 and grossed up for a weighted average of losses of PPC and TCU of 9.7 percent (average without losses is US$0.21 per kWh)

Average all-in generation cost of US$0.27 per kWh, as the average fuel and O&M cost above (average without losses is US$0.25 per kWh).

Tariff benchmarks

We calculated the tariff benchmarks for commercial viability using the following assumptions:

Diesel fuel price of US$3.00 per gallon, as above for electricity generation

Residential tariff of US$0.44 per kWh, calculated as an average for PPC and TCU residential tariffs including a fuel clause adjustment component based on a cost of US$3.00 per gallon (applying the appropriate base and factor values and formulae determined in the Electricity Ordinance72)

Non-residential tariff of US$0.50 per kWh, as above for the residential tariff

Street Lighting tariff of US$0.42 per kWh, as above for the residential tariff.

4.2.4 Assessing the cost of additional CO2 abatement

If the Government wishes to reduce carbon dioxide (CO2), it should do so by supporting economically viable technologies only—this would allow it to reduce CO2 while also saving money for the country. This would be consistent with the objectives and priorities of the Energy Conservation Policy and Implementation Strategy as stated in section 6.1.1.

Reducing CO2 by supporting non-economically viable technologies would carry an additional cost. Figure 4.3 illustrates abatement costs for the EE technologies (that is, the cost that each technology requires for reducing CO2 emissions by one additional ton). The figure shows that after the energy efficiency technologies that are economically viable—with a negative cost of abatement—are exhausted, the cost of reducing one ton of CO2 begins at around US$126 for retail refrigerators, and reaches US$749 for Solar LED Street Lights.

71 See section 0

72 Laws of the Turks and Caicos Islands, Chapter 114: Electricity Ordinance and Subsidiary Legislation, 15 May 1988.

57

The figure also shows the current price for Certified Emission Reductions (CERs)—about US$14.73 This shows that purchasing CERs from projects worldwide would still be a cheaper option to reduce CO2 emissions than supporting non-economically viable technologies.

Figure 4.3: CO2 Abatement Cost Curve for EE Technologies

Source for CER price: PointCarbon, 10 January 2011

We calculate the cost of CO2 abatement through the following steps:

Country-wide emission factor of 1.06 tons of CO2e per MWh—first, we calculate emission factors for each plant type based on the carbon content of Diesel fuel, according to the guidelines of the Intergovernmental Panel on Climate Change (IPCC)74 and estimated thermal efficiency factors (the percentage of the fuels‘ energy content that is transformed in electricity).75 Then, we include losses (weighted average for PPC and TCU generation of 9.7 percent). Finally, we calculate a weighted average of plant emission factors (based on relative generation in MWh) between Wartsila and Caterpillar plants operating in the TCI76. The result (1.06 tons of carbon dioxide equivalent (tCO2e)77 per MWh generated) is close to common rough approximations of emissions factors from fossil fuel plants

Cost of abatement—we divide the cost savings (US$ per kWh) of each technology compared to the all-in generation cost of diesel plants by the avoided emissions

73 CER price of US$14 per ton of CO2 as of 10 January 2011 on PointCarbon (www.pointcarbon.com)

74 19.2 kg of carbon per GJ for diesel. We convert carbon into CO2 by a factor of 3.67 to account for the higher molecular weight of CO2 after oxidation of carbon (44/12 is the ratio between the molecular weights of carbon and oxygen)

75 Assumed thermal efficiency factor of 30% for Wartsila plants, and 25% for Caterpillar plants.

76 Assumed 30 percent of generation in the TCI from Wartsila plants, and the remaining 70 percent from Caterpillar plants

77 The word ‗equivalent‘ refers to the fact that, based on IPCC guidelines, greenhouse gases other than carbon dioxide may be expressed in carbon dioxide terms using their global warming potential.

749

535

126

(2)

(24)

(29)

(31)

(81)

(117)

(155)

(161)

(173)

(182)

(212)

(242)

(400.00) (200.00) - 200.00 400.00 600.00 800.00

Solar LED Street Lighting

LED Street Lighting

Efficient Retail Refrigerators (Condensing Unit)

Efficient Residential Refrigerators

LCD Computer Monitors

T5 High Output Fluorescent Lamps

Efficient Split A/C Systems

T8 Fluorescent Lamps w/Occupancy Sensor

Magnetic Induction Street Lighting

Efficient Chillers

Variable Frequency Drives

Efficient Window A/C Systems

Premium Efficiency Motors

Power Monitors

Compact Fluorescent Lamps (CFLs)

US$/tCO2

CER Price: US$14/tCO2

58

(that is, the emission factor but expressed in tCO2e per kWh). We use the following formula:

Cost of abatement

(US$ per ton of CO2) =

Cost savings (US$ per kWh)

Avoided emissions (tons of CO2 per kWh)

4.3 Barriers to the Uptake of Energy Efficiency Technologies

Our analysis shows that—in spite of a few exceptions, and encouraging interest by some parts of the general public (see results of our survey in Box 4.3)—use of energy efficiency technologies on Turks and Caicos falls short of its full economic potential. Since all the economically viable energy efficiency technologies are also commercially viable, one would think that all consumers would be rushing to adopt them. The technology would save money, so why doesn‘t everybody install it? Tariffs are not the reason—as shown in Figure 4.2, if anything tariffs already create an excess of commercial incentive for energy efficiency, to which consumers are overall not responding. Table 4.4 shows that most savings costs are well below tariffs—these technologies would already pay for themselves. Therefore, there must be other barriers stopping energy efficiency investments.

In short, the reasons for a limited uptake of efficient technologies in the TCI are:

Limited access to capital—many consumers would need to borrow to install the efficient technologies, and cannot find financiers willing to lend to them—or are charged excessive interest rates

Limited and uncompetitive equipment supply—there is a chicken and egg problem; given limited uptake of many technologies in the TCI, they are hard to purchase on the island, or are sold only at uncompetitive prices. Limited availability and high costs in turn retard uptake

Incomplete information—where a technology is not widely used, people may be unaware of its benefits, again creating a chicken and egg problem

Agency problems—these take place when the person who should invest in the equipment is not the same person who uses it—this happens in the public sector, in the development of new construction, and in leased buildings.

These barriers apply to all EE equipment considered. However, they may not apply to all segments of the population, which in the TCI includes three very distinct groups as noted in section 4.1.1). We discuss barriers in further detail below.

4.3.1 Limited access to capital is a barrier when credit terms make EE measures unattractive

Based on our interviews of various types of financial entities in the TCI,78 and our discussions with energy service providers and equipment retailers,79 we find that many

78 Scotia Bank, First Caribbean International Bank, 12 November 2010.

79 Providenciales, 11 November 2010.

59

customers in the country—particularly low- and medium-income households, and small-medium businesses—can only access capital on terms that make EE measures unattractive to them. This fact may prevent a socially optimal outcome from being reached. However, it does not represent a market imperfection (such as incomplete information, or limited supply of equipment, discussed below)—in fact, it is evidence of the credit market working as expected to, and pricing in the higher default risk for these customers.

Our conversations with financial institutions confirmed that there is sufficient capital available in the TCI—there is no shortage of liquidity per se. The problem is often not access to capital in itself either—most customers are likely to obtain lending, at least for small sums. The problem is that many borrowers do not have access to capital on terms that actually make EE technologies attractive. Terms commonly vary depending on the type of client: larger companies and high-income households with an established credit history usually enjoy more favorable terms, while smaller businesses and low- or middle-income households normally face more unfavorable ones. Unfavorable terms include high interest rates, short lending tenors, and high collateral requirements.

As a result, low-income segments of the population often tend not to borrow to purchase appliances, because it is not attractive. Unlike in most other Caribbean countries, hire-purchase has a very limited application; lay-away is a far more common practice. As one person pointed out during our workshop with energy service providers and equipment retailers, most people in the TCI cannot borrow unless they can demonstrate that they do not need to do so.80

Limited access to capital can affect all EE technologies, large and small. It may seem less of a barrier for EE technologies that have a small unit cost, such as lighting technologies. However, even these technologies can be implemented by borrowing money when more units of the same technology (or various different technologies) are aggregated for comprehensive retrofit packages. And for a low income household living paycheck to paycheck, there may never be the surplus available to buy CFL bulbs instead of the cheaper incandescent bulbs.

4.3.2 Limited and uncompetitive equipment supply is likely to be a temporary but important barrier

In spite of being open and dynamic, TCI remains a very small and remote market. There are relatively few professional providers of energy efficient equipment (whom we met during our workshop). Equipment is all imported—mostly from the United States and, to some extent, from Europe and Asia.

Customs incentives reviewed in section 3.4 have recently helped retailers and installers increase sales of efficient equipment. However, results are mixed—efficient refrigerators are report to cost just like standard ones, but many efficient A/C units are excluded from the incentives because they adopt a standard different from Energy Star.

Solar water heaters (which, it should be noted, are a renewable energy technology, not an energy efficiency one) are mostly imported from the United States with double-loop anti-freezing systems that are unnecessary in the TCI and increase costs. Imports of Caribbean-

80 Providenciales, 11 November 2010.

60

manufactured solar water heaters is underway (Solar Dynamics units manufactured in Saint Lucia or Barbados),81 but their penetration has been limited until now.

In general, our visits to stores and discussions with equipment retailers and installers suggest that this situation creates two market barriers in the TCI: relatively high prices, and relatively limited availability of EE equipment.

Box 4.3: Survey on Willingness to Pay for Efficient Equipment

We conducted a survey in order to assess consumer interest on TCI in buying and installing efficient appliances and small renewable energy systems. We collected and assessed over a hundred responses through:

- A field assessment with customers of the IGA Supermarket in Providenciales

- An online assessment accessible throughout the country and over six weeks through the DECR website.

The survey evaluated the penetration of sustainable energy technologies, tested public awareness of their costs and benefits, and assessed willingness to pay for these technologies. Results were encouraging—although some caution is advised due to some selection bias in the polled sample. People shopping at the IGA Supermarket are among the ones most likely to purchase premium efficient equipment, and the same may be argued for those who provided responses online.

Penetration

Responses indicated that key energy efficiency products have a good penetration in the TCI. 73 percent of people polled reported that they currently use CFLs, and almost half of them stated they use efficient A/C units. Reported use of solar water heaters was much lower, at about 12 percent. These results are shown in the figure below.

Costs and benefits

We found that the majority of people polled have good knowledge of the benefits of sustainable energy technologies. Most people were able to correctly identify the amount of

81 Conversation with Landmark Realty Ltd, 12 January 2011.

72.9%

44.9%

12.1%

27.1%

55.1%

87.9%

0%

25%

50%

75%

100%

Use of CFLs Use of High-efficiency AC Use of Solar Waterheater

61

savings gained through high-efficiency appliances (such as for CFLs and air conditioners). Most people also expressed confidence in the quality and reliability of lighting and A/C technologies. Between 30 and 40 percent of responses indicated that CFLs and efficient A/C units are not too expensive or difficult to find, although the remaining people polled indicated at least to some extent that they are.

Willingness to Pay

The majority of people polled indicated willingness to pay a premium for efficient equipment that would save them money through energy savings, as shown in the figure below.

Limited and uncompetitive supply of equipment is likely to be a temporary barrier as the market for EE equipment develops and becomes more competitive, but in the shorter term it affects all EE technologies. For example, CFLs in stores may be found, but cost about 50 percent more than in the United States—in spite of often not being of the best quality. Power monitors are not available. T8 lamps with an electronic ballast are available, but T12 lamps with a magnetic ballast are still widespread. Mechanical measures (premium efficiency motors, variable frequency drives, and efficient chillers) are not readily available—this is sometimes the case in industrialized countries too, but in the TCI turnaround time is longer. A wide range of air conditioners is available in stores, but we saw few efficient ones—these are mostly installed by professionals in higher-end premises on specific order, but stocks are mainly composed of cheaper, standard-efficiency units. The limited availability of equipment is accompanied by a relative lack of qualified installers and technicians in the TCI.

Limited and uncompetitive supply of equipment is a chicken and egg problem. Prices will fall and availability increase once demand is widespread, but in the meantime high prices and low availability retard demand.

4.3.3 Incomplete information is likely a temporary barrier, but should not be underestimated

Incomplete information is likely to be the least important of market imperfections, or at least a temporary one (as encouraging results from our survey also show in Box 4.3). We generally find that market agents—both sellers and buyers—are usually very responsive to

91.4% 97.1% 91.5% 96.6%

8.6% 2.9% 8.5% 3.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CFL High-efficiencyAC

High-effiencyRefrigerator

PremiumElectromotors

No

Yes

62

commercially viable investments. For new technologies though, there can be a chicken and egg problem with information too. People may not be aware of a technology until it is widespread, and lack of awareness can prevent a technology becoming widespread.

For many of the technologies considered, consumers may also not be fully aware of the real costs and benefits of energy efficiency measures—for example, our survey revealed some skepticism on solar water heaters, which equipment retailers and energy service providers interviewed in our workshop attribute to a negative reputation that sub-standard units gained years ago. Providers of credit may be unaware of these projects‘ viability, and therefore be less inclined to finance them. Providers of specialized equipment and services may be not fully responsive to new opportunities—this is the case with the 25 Watt T8 lamps mentioned above.

4.3.4 Agency problems are mostly a barrier for the non-residential and public sectors

Viable energy efficiency technologies may not happen when agents who should make the decision to invest in them (paying for their purchase) are not the same people who would use them (paying for their operation). This mismatch between capital and operating expenditure decisions is known as an agency problem, and its effect for the purposes of our analysis is to neutralize incentives for energy efficiency.

Agency problems working against energy efficiency are particularly important in the development of new construction, leased spaces, and in the public sector:

In the development of new construction (residential or non-residential) there may be a perverse incentive for both the developer and the buyer to keep capital costs down—this may mean investing in cheaper but inefficient equipment and material. Building codes specifying energy efficiency requirements for material, equipment, and design can make it compulsory to comply—but TCI‘s Building Code does not currently provide for any such rules. The TCI‘s large transient population—as well as the significant amount of those who just reside in the country for a few months a year—makes this problem particularly important, also for a renewable energy technology such as solar water heaters

In leased spaces, tenants have no interest in spending in new efficient equipment because the landlord will often not recognize their investment. Other times tenants will not buy efficient equipment because they will not lease the space long enough (or they do not know whether they will) for their investment to pay back for itself

Agency problems affect the public sector just like they affect the private one. Deciding to invest in efficient equipment is left to the initiative of the most conscious public officials—who however have no clear responsibilities and precise targets, and must consider cash limitations when purchasing equipment. This situation is likely to lead to inefficient decisions.

63

5 Renewable Energy in the Turks and Caicos Islands

This section shows that a few renewable energy (RE) technologies may be economically and commercially viable in the Turks and Caicos Islands, but none are used.

First, we review the current uptake of renewable energy (section 3.1). Then, we screen which technologies should be assessed (based on maturity and availability of the primary energy resource), and analyze the potential for and economic viability of renewable energy technologies for the TCI (section 3.2). (Table 5.2 contains a summary description of these technologies, and Appendix C provides a more detailed description). Finally, we look at the barriers that may have slowed the adoption of viable technologies (section 3.3).

5.1 Current Uptake of Renewable Energy

There is virtually no uptake of renewable energy in the TCI. The rare exceptions are small solar and wind systems distributed at customer premises and not connected to the grid. Below we discuss the uptake of utility scale technologies in more detail, then that of distributed technologies.

5.1.1 Uptake of utility scale technologies

There is no utility scale renewable electricity generated in the TCI. By ‗utility scale‘ we mean any technology that needs to be installed at a dedicated site, and supplies power over the transmission and distribution grid.

As we describe in more detail below, a few utility scale technologies are in the early stages of development: wind, solar, and waste to energy. However, none of these initiatives has really gone beyond the stage of initial assessment.

5.1.2 Uptake of distributed generation technologies

Distributed renewable generation is almost non-existent in the TCI. By ‗distributed generation technologies‘ we mean82 small-scale technologies that are located in close proximity to the load being served . We refer to these technologies as distributed generation, because they are distributed across the network at consumer premises.

During our National Energy Audit, we learned that there are a few distributed generation systems, none of which of course is connected to the grid:

Solar water heaters—equipment retailers and installers we met during our workshop83 reported installing the occasional solar water heater, and that this technology enjoys a bad reputation from a few systems installed in the 1990s and soon corroded by aggressive reverse osmosis water, and abandoned

Solar PV—a few residential customers have reportedly installed small solar photovoltaic systems for self-generation; a United States Geological Survey

82 There is no single, commonly accepted definition of ‗distributed generation‘. Two useful definitions are: (1) ―Any

electricity generation facility that produces electricity for use at the point of location, or supplies electricity to other consumers through a local lines distribution network‖ (New Zealand‘s Ministry of Economic Development); and (2) ―Small, modular, decentralized, grid-connected or off-grid energy systems located in or near the place where energy is used‖ (United States Environmental Protection Agency).

83 Workshop with Energy Service Providers and Equipment Retailers, Providenciales, 11 November 2010.

64

station in Grand Turk has also installed a small system near the lighthouse on the northeast point of the island84

Small wind—a residential customer in South Caicos applied for installing twelve wind turbines for self-generation, but the application was turned down in the planning and permitting process for reasons of visual impact; a farm in Providenciales had installed a small wind turbine a few years ago, but failed and the system lies abandoned.85

5.2 Economic and Commercial Viability of Renewable Energy Technologies

In this section we assess the TCI‘s RE potential. We start by screening which technologies should be considered based on maturity and availability of the primary energy resource (section 5.2.1). Then, we analyze the economic and commercial viability of technologies, 5.2.2), and present our conclusions on their viability (5.2.3). Finally, we present a CO2 abatement cost curve for the technologies (section 5.2.4).

5.2.1 Screening of RE technologies that have potential in the TCI

During our kick-off meeting,86 we presented a full list of potential RE technologies to consider for the TCI, and suggested screening them based on two criteria:

1. Maturity of technology—we define as a ‗mature RE technology‘ one that is in commercial operation somewhere in the world

2. Availability of primary energy resource—intended as an availability of sufficient quantity (for example, tons of solid waste) of the primary energy resource used by a RE technology, and of a sufficient quality (for example, fraction of solid waste that can be incinerated) so that this may be developed commercially. This also means that the availability must be cost-effective (for example, shipping tons of biomass to the TCI to fuel cogeneration plants would ensure availability, but it would not be cost-effective). Given the TCI‘s limited land mass, we bundle availability of land in this criterion.

Consistent with the implications of the Government‘s objectives in developing an Energy Conservation Policy and Implementation Strategy (see section 6.1.1), only renewable energy technologies that are mature and whose primary energy resource is available in the TCI should be assessed for their economic viability.

Table 5.1 illustrates the results of the screening. We note that, as agreed with Government officials during the kick-off meeting, this list of technologies screened (completed with biodiesel-based power generation, as suggested by the DECR) is exhaustive. As shown in the table, the screening leads to exclude the following technologies from our analysis based on the two criteria: hydropower; biomass cogeneration; biodiesel-based power generation;

84 Conversation with Turks and Caicos Utilities, Grand Turk, 12 November 2010; Workshop with Energy Service Providers

and Equipment Retailers, Providenciales, 11 November 2010.

85 Workshop with Energy Service Providers and Equipment Retailers, Providenciales, 11 November 2010.

86 Meeting with the Permanent Secretary of Environment, the Permanent Secretary of Works, the Electricity Commissioner, DECR officials, and the Energy Policy Coordination Tea. Providenciales, 10 November 2010.

65

geothermal energy; Ocean Thermal Energy Conversion (OTEC); and Ocean Wave Energy Conversion.

Table 5.1: Screening of RE Technologies to be assessed for the TCI

RE Technology Maturity (0-2) Availability of primary energy resource (0-2)

Comments Screening

result (in/out)

Solar PV 1 2 Technology long in commercial operation, but further improvements expected.

Excellent solar potential

In

Solar Water Heaters 2 2 Mature technology. Excellent solar potential In

Concentrated Solar Power (CSP)

1 1 Technology in commercial operation, but significant improvements and cost

reductions expected. Optimal plant size may exceed the needs of TCI. Excellent solar potential, limited land availability

In

Wind 2 1 Mature technology. Good wind potential, limited land availability

In

Municipal solid waste to energy (WTE)

2 1 Mature technology. Small waste volumes, compete with LFGTE

In

Landfill gas to energy (LFGTE)

2 1 Mature technology. Small waste volumes, compete with WTE

In

Seawater Air Conditioning (SWAC)

1 1 Technology based on other commercially proven ones, but further improvements expected. Likely availability of deep cool

water, but not ascertained

In

Hydro 2 0 Mature technology. No hydro resources in the TCI

Out

Geothermal energy 2 0 Mature technology. No geothermal resources in the TCI (conventional geothermal fluids or hot dry rock)

Out

Biomass cogeneration 2 0 Mature technology. There is no sufficient biomass available (or sufficient land to grow

it) for cogeneration in the TCI

Out

Biodiesel for power generation

2 0 Mature technology. No sufficient biodiesel feedstock available in the TCI (or sufficient

land to grow it)

Out

Ocean Thermal Energy Conversion (OTEC)

0 1 Technology at an experimental/pilot stage. Likely availability of good ocean thermal

gradient, but not ascertained

Out

Ocean Wave Energy Conversion

0 1 Technology at an experimental/pilot stage. Likely availability of good ocean kinetic

energy, but not ascertained

Out

As discussed in section 6.1.1, the TCI should not exclude the possibility that technologies screened out for not being mature (OTEC, wave) may become viable in the future, but should not focus on these until it happens. Regarding technologies screened out for lack of

66

primary energy resource (hydro, geothermal, biomass, biodiesel), this situation will not change—however, it is possible that importing biodiesel for backing up isolated generators (as considered by TCU) may be cost-effective; the Government should leave it to private operators to assess whether this makes commercial sense, and not prevent them from doing it.

We assess all other technologies for economic and commercial viability in the subsequent section 5.2.2. It is important to note that if a technology is screened in, this does not automatically mean it is immediately viable for TCI. For example, two technologies may be viable in theory, but in practice just one may be developed because they both compete for the same primary energy resource—this is typically the case for waste-based technologies in small island countries. Also, the plant size (installed capacity, expressed in megawatts) that allows certain costs that make a technology viable may exceed the size suitable for the TCI—this may typically be the case for Concentrated Solar Power (CSP). Finally, a technology may be viable at a size suitable for the TCI and still not be developed for a few years, if given the existing and planned demand-supply balance it is not needed. The purpose of this report is not to develop a least-cost plan for electricity generation in the TCI, but to provide a policy and implementation strategy for addressing a more sustainable production and consumption of energy (especially electricity) in the country.

5.2.2 Analysis of renewable energy technologies

Figure 5.1 and Figure 5.2 show our assessment of the economic and commercial viability of potential technologies for renewable generation in the service areas of PPC and TCU, respectively. The figures show the Long Run Marginal Cost (LRMC, or all-in cost) of generation (US$ per kWh) for a range of renewable energy technologies, and compare these against the average system variable cost and all-in cost of conventional generation, as well as PPC‘s and TCU‘s retail tariffs for residential and non-residential customers. As explained and referenced in section 0, we show generation costs (and retail tariffs) calculated on the basis of a cost of Diesel No. 2 fuel of US$3.00 per gallon—we need to use some estimate of future oil prices, and US$3.00 is a reasonable estimate because it corresponds to oil prices of about US$93 per barrel, which is the price a ten year oil future contract is trading at.

The figures show an indicative assessment of RE technologies‘ LRMCs for policy purposes, based on estimated average values of capital costs, O&M costs, capacity factor, and lifetime of the various technologies. The assumptions we used for each technology (and sources) are contained in Appendix C—we used data gathered in the TCI where available, and in other cases data from similar small island countries we have recently worked in (Barbados, Bahamas, and Mauritius). Of course, the actual LRMC of any project—especially RE projects—is highly site-specific, and requires a detailed feasibility study that is outside the scope of our assignment (for example, in our calculations we assumed capacity factors of 25 percent for all wind turbines, but detailed measurements would have to be taken to determine the specific capacity factor for a wind farm at a particular site).

A renewable technology is economically viable if it reduces the overall cost of generating electricity in the TCI. It is commercially viable if a utility or a customer can save money by using it. So, by comparing the cost of renewable generation with the right benchmark, we can see if a technology is economically viable, commercially viable, or both.

67

Figure 5.1: Viability of Renewable Energy Technologies in the Turks and Caicos Islands/PPC Service Area

Note: LRMCs of RE technologies (US$/kWh) are based on a 10% discount rate. Generation costs and tariffs are based on Diesel prices of US$3.00/gallon. Average system variable cost benchmark for distributed generation technologies are grossed up for losses (10.3%).

0.47

0.39

0.37

0.36

0.28

0.28

0.26

0.23

0.21

0.13

0.12

0.12

0.12

0.08

- 0.10 0.20 0.30 0.40 0.50 0.60 0.70

Solar PV (High-Efficiency, fixed, small)

Solar PV (High-Efficiency, fixed, commercial)

Wind (10kW distributed scale turbines)

Solar PV (thin film, fixed, small)

Solar PV (thin film, fixed, commercial)

CSP (Solar Tower, w/storage)

CSP (Parabolic Trough, w/storage)

Seawater Air Conditioning

Wind (275kW lowerable or tiltable turbines)

Solar Water Heater (flat plate, commercial)

Waste to Energy (incineration)

Wind (850kW 'Class 1' turbines)

Solar Water Heater (flat plate, small)

Landfill gas to energy (internal combustion)

US$/kWh

Residential tariff: US$0.45/kWh

Non-residential tariff: US$0.52/kWh

Avg. system variable cost (non-firm, utility): US$0.21/kWh

All-in cost of Wartsilas (firm): US$0.23/kWh

Avg. system variable cost (non-firm, distributed): US$0.23/kWh

Econ. viableComm. viable PPC

68

Figure 5.2: Viability of Renewable Energy Technologies in the Turks and Caicos Islands/TCU Service Area

Note: LRMCs of RE technologies (US$/kWh) are based on a 10% discount rate. Generation costs and tariffs are based on Diesel prices of US$3.00/gallon. Average system variable cost benchmark for distributed generation technologies are grossed up for losses (4.3%).

0.47

0.39

0.37

0.36

0.28

0.28

0.26

0.23

0.21

0.13

0.12

0.12

0.12

0.08

- 0.10 0.20 0.30 0.40 0.50 0.60 0.70

Solar PV (High-Efficiency, fixed, small)

Solar PV (High-Efficiency, fixed, commercial)

Wind (10kW distributed scale turbines)

Solar PV (thin film, fixed, small)

Solar PV (thin film, fixed, commercial)

CSP (Solar Tower, w/storage)

CSP (Parabolic Trough, w/storage)

Seawater Air Conditioning

Wind (275kW lowerable or tiltable turbines)

Solar Water Heater (flat plate, commercial)

Waste to Energy (incineration)

Wind (850kW 'Class 1' turbines)

Solar Water Heater (flat plate, small)

Landfill gas to energy (internal combustion)

US$/kWh

Residential tariff: US$0.43/kWh

Non-residential tariff: US$0.48/kWh

Avg. system variable cost (non-firm, utility): US$0.22/kWh

All-in cost of Caterpillars (firm): US$0.26/kWh

Econ. viableComm. viable

Avg. system variable cost (non-firm, distributed): US$0.23/kWh

TCU

69

Viable technologies

The analysis shows that there are five renewable energy technologies that may be economically viable in the TCI (both PPC‘s and TCU‘s service areas). These are:

Landfill gas to energy (internal combustion), on a large scale operated commercially (US$0.08 per kWh)

Solar water heaters (flat plate), on small and commercial scale for homes and businesses, respectively (US$0.12 and US$0.13 per kWh, respectively)

Wind (‘Class 1’, and lowerable/tiltable turbines), on a large scale operated commercially (US$0.12 and US$0.21 per kWh, respectively)

Waste to Energy (incineration), on a large scale operated commercially (US$0.12 per kWh). This cost was based on TCI-specific data, but it looks low compared to that of other plants in similar contexts—further investigation is warranted

Seawater Air-conditioning, on a large scale operated commercially (US$0.23 per kWh).

One additional technology would also be economically viable in TCU‘s service area:

Concentrated Solar Power (parabolic trough), on a large scale operated commercially (US$0.26 per kWh), although if also TCU were to switch from high-speed diesel plants to higher-efficiency medium speed diesel plants, the assessment would be similar to the one for PPC.

These six technologies are also all commercially viable. The residential customer and the commercial producer would save money with solar water heating. Utilities could cut their generating costs with each form of waste-based technology and wind generation. Also, seawater air conditioning (SWAC) would reduce total generation costs.

Technologies likely to be viable in the near future

The following technologies are likely to become viable in the near future—their cost has been falling rapidly and consistently over the past few years, and is expected to fall further:

Certain types of commercial and small scale solar photovoltaic technologies—thin film PV systems with fixed mounting at a commercial scale (about 50kW) have the lowest LRMC of PV systems; smaller installations of the same technology are more expensive, but expected to decrease in the coming years. LRMCs shown also depend on the discount rate assumed—we use 10 percent, but if cheaper financing were available the viability of solar PV would of course increase (commercial scale PV systems could cost US$0.22 per kWh with a discount rate of 10 percent). Given the TCI‘s climate, we do not consider tracking systems (single- or dual-axis tracking) that tilt the panels towards the sun increasing output, but are costly and more delicate than fixed mounting systems

Concentrated Solar Power (parabolic trough, and solar tower) for utility scale generation—CSP using parabolic troughs could be just viable in Grand Turk and Salt Cay, and the cost CSP using solar towers is not much higher. CSP technologies have experienced significant increases in efficiency and cost reductions in the near past, and further improvements are expected. The main

70

problem for CSP plants to be viable in the TCI is scale—optimal size to keep costs down is several tens of megawatts, which not only requires land space but is also more than the country needs in the medium term, as discussed in section 2.

Analyzing the economic viability for each technology

Figure 5.1 and Figure 5.2 show the viability of each RE technology by comparing the LRMC of the technology (shown by the horizontal bar) with the relevant benchmark for that technology (shown by the vertical lines). We use different benchmarks for economic viability depending on the type of conventional generation that the renewable technology displaces:

Landfill gas to energy, waste to energy, seawater air conditioning, and CSP technologies are benchmarked against the all-in cost of the cheapest base load generation option (Wartsila plants for PPC, and Caterpillar plants for TCU) because they are ‗firm‘ technologies—they can be depended on to generate electricity at any time, just like a conventional generation unit. For purposes of this analysis, we consider CSP ‗firm‘ in spite of being a solar technology because we consider energy storage solutions associated with these plants, and also given the limited range of plant types in the TCI. The Wartsila medium-speed diesel plants may be considered the future benchmark also for TCU if market conditions allowed TCU to switch to these larger and more efficient plants—the cheapest option is the appropriate benchmark for firm RE technologies, because it is the one that firm RE technologies would displace

Utility scale wind technologies are benchmarked against the average variable cost of the system operated by PPC or TCU, because they are ‗non-firm‘—that is, they cannot be switched on at will. This means that there needs to be a conventional generator on standby that is used as ‗firming‘ supply when the wind is not blowing. Every unit of energy (kWh) generated by wind technologies will save fuel and variable O&M costs, but it will not save the fixed costs of capacity (because the firming technology capacity would also be needed)

Solar PV, solar water heaters, and distributed wind technologies are also non-firm (for purposes of this analysis, we consider solar water heaters non-firm because they store some, but not all energy in the form of heat). As for utility scale wind, the appropriate benchmark is the average variable cost of the system, but grossed up for system losses, because distributed technologies generate energy consumed at (or very close to) customer premises, and therefore avoid these losses—in other words, distributed technologies are given some additional credit when benchmarked against conventional generation.

A complex analysis could factor in the exact cost of generation displaced for different types of renewable technologies, in different locations and of varying capacity. But it would be of limited value given that our benchmarks for viability are heavily dependent on an uncertain fuel price and can quickly change significantly. It is enough to conclude that some technologies are clearly viable, while others are border-line viable, and will become clearly so if fuel costs rise or the costs of the technologies drop.

Summary assessment of all RE technologies

Table 5.2 briefly describes all RE technologies assessed, and shows their costs, key parameters, and breakeven oil prices.

71

Table 5.2: Summary of Potential Renewable Energy Technologies in the TCI

Name Description Size of plant

Unit capital

cost (US$/kW)

O&M costs (US$/kW/

yr)

Lifetime (years)

Capacity factor (%)

LRMC (US$/kWh)

Viable with Diesel at

US$3.00/gal PPC/TCU?

Breakeven oil price PPC/TCU

(US$/gallon)

Solar water heater (flat plate, commercial)

Commercial and industrial systems for heating water using solar thermal energy

70 kW 1,600 24 20 19% 0.13 Yes/Yes 1.6/1.7

Solar water heater (flat plate, small)

Domestic systems for heating water using solar thermal energy

2kW 1,250 20 20 17% 0.12 Yes/Yes 1.5/1.5

Solar PV (thin film, fixed, commercial)

Thin film solar photovoltaic panels with fixed mounting

50kW 4,000 42 20 21% 0.28 No/No 3.8/3.7

Solar PV (thin film, fixed, small)

Thin film solar photovoltaic panels with fixed mounting

2kW 5,000 60 20 21% 0.36 No/No 4.8/4.8

Solar PV (high-efficiency, fixed, commercial)

High-efficiency solar photovoltaic panels with fixed mounting

50kW 5,000 42 20 19% 0.39 No/No 5.3/5.2

Solar PV (high-efficiency, fixed, small)

High-efficiency solar photovoltaic panels with fixed mounting

3kW 6,000 60 20 19% 0.47 No/No 6.4/6.3

CSP (parabolic trough, w/storage)

Generation of electricity by converting the sun‘s energy into heat using mirrors (~15% efficiency); with energy storage

50MW 8,000 100 20 45% 0.26 No/Yes 3.5/3.0

CSP (solar tower, w/storage)

Generation of electricity by converting the sun‘s energy into heat using mirrors (~35% efficiency); with energy storage

50MW 12,000 200 20 65% 0.28 No/No 3.8/3.3

Wind (850kW ‗Class 1‘ turbines)

Wind turbines for electricity generation, designed to resist extreme gusts of

250km/hr and average wind of 36km/hr 5MW 1,800 50 20 25% 0.12 Yes/Yes 1.6/1.6

Wind (275 kW lowerable or tiltable turbines)

Wind turbines for electricity generation that may be lowered or tilted in case of

hurricanes 5MW 3,150 98.5 20 25% 0.21 Yes/Yes 3.0/2.9

Wind (10kW distributed scale turbines)

Wind turbines for electricity generation 10kW 6,000 110 20 25% 0.37 No/No 5.0/4.9

Landfill gas to energy (internal combustion)

Generation of electricity by combusting methane captured from a landfill

2.5MW 4,000 150 20 90% 0.08 Yes/Yes 1.3/1.1

Waste to Energy (incineration)

Generation of electricity by combusting municipal solid waste

3.75MW 6,827 157 25 85% 0.12 Yes/Yes 0.6/0.5

Seawater Air Conditioning Use of ocean temperature for cooling 2 MW 4,200 165 20 33% 0.23 Yes/Yes 3.0/2.6

72

Explaining our calculations of generating costs and benchmarks

We use the following assumptions for calculating the LRMCs of each RE generating technology (US$ per kWh):

Capacity factor—that is, the share of time, expressed in percentage, at which a plant can operate at full capacity. This involves estimating the yearly output each renewable generation technology could produce (capacity factor multiplied by installed capacity multiplied by hours in a year). This would include resource availability (for example available solar energy, wind speed profile, and conversion efficiency of the technology)

Capital costs, in US$—we estimate capital costs based on discussions with local developers about market conditions on Turks and Caicos (where available, such as for waste-based technologies), information from other Caribbean or small island countries we have worked in (Barbados, Mauritius), and our experience of the North American renewable generation market

Operation and maintenance (O&M) costs, in US$—we estimate capital costs based on the same sources used for capital costs

Lifetime, in years—we estimate the lifetime of renewable generation equipment based on our experience of renewable generation technologies, in most cases 20 years being a reasonable approximation

Discount rate—we assume a discount rate of 10 percent, as for EE technologies.

The formula to calculate the cost of power from any technology is:

Cost of power (US$ per kWh) =

Annualized capital and O&M costs (US$)

Annual energy output (kWh per year)

Solar Water Heating—for this technology, we estimate the cost per kWh of electricity consumption saved based on our experience in Barbados (this is also appropriate because units manufactured in Barbados or Saint Lucia are beginning to be imported in the TCI)

Tariff and conventional energy costs—we estimate tariffs and conventional energy generation costs based on a cost for Diesel No. 2 of US$3.00 per gallon, as described in section 2 and as done for EE technologies.

Appendix C contains more detailed descriptions of technologies assessed, and sources for assumptions used.

5.2.3 Conclusions about the Viability of Technologies for Renewable Energy

Table 5.3 summarizes our conclusions about the economic and commercial viability of renewable energy technologies in the TCI.

73

Table 5.3: Conclusions about the Viability of Renewable Energy Technologies in the TCI

Technology Scale

Economic Viability with

Diesel at US$3.00/gal

Likely economic viability in near future

Commercial viability

Explanation

LFGTE Utility Provided there is sufficient waste stream available, LFGTE could generate electricity for as low as US$0.08 per kWh compared to all-in costs of US$0.23 or US$0.26 per kWh of Wartsilas and Caterpillars. Actual costs will depend on waste composition and volumes, and the cost to aggregate waste from all islands in one location. Gradual development in modules (small engines of 0.5MW) would be possible, but may increase costs. Generation costs would be lower than for WTE, but a much lower volume of waste would be actually eliminated as opposed to just landfilled.

WTE Utility WTE through incineration would have higher generation costs than LFGTE (about US$0.12 per kWh), but still lower than the all-in cost of generation. However, based on our experience in other similar contexts a cost of US$0.12 per kWh seems low—further investigation is warranted. WTE would eliminate much larger volumes of waste, reducing space and costs required for landfilling residual waste, such that a small tipping fee might be justified. Synergies with recycling operations (particularly for the non-residential sector, businesses and hotels) would increase efficiency.

Solar Water Heaters

Distributed Solar water heaters would clearly be economically and commercially viable for homes and businesses. They could be used instead of electricity at a much lower cost than the average system variable cost (US$0.12 and US$0.13, respectively as opposed to US$0.23 per kWh), saving money to consumers as well as utilities. The fact that most water heating in the TCI is currently done with electricity as opposed to gas or fuel oil increases their viability—although the transient nature of many customers reduces it.

Wind Utility Utility scale wind represents an economically viable option to generate electricity in the TCI. Under a conservative estimate of 25 percent capacity factor, turbines designed to withhold strong winds (‗Class 1‘) could generate for as low as US$0.12 per kWh—which is far less than the average system variable cost of PPC or TCU. Lowerable or tiltable turbines are much more expensive, making them only just viable. Land availability is limited, but off-shore installations may be an option provided that higher capacity factors are ascertained to compensate higher installation costs. A rough estimate shows that if installation costs were 50 percent higher on the ‗Class 1‘ turbines, the LRMC would remain US$0.12 per kWh provided there were a 35 percent

74

Technology Scale

Economic Viability with

Diesel at US$3.00/gal

Likely economic viability in near future

Commercial viability

Explanation

capacity factor. Precise resource assessments conducted over a sufficiently long period, however, need to replace speculations. Hybrid configurations with solar PV and batteries, or diesel fuel (fossil diesel, or biodiesel if cost-effective) may also be explored as TCU is doing, as they may help integrate wind‘s intermittent generation.

SWAC Utility This technology is commercially proven and viable, but in practice its realization is very difficult—it would need agreement on a piping network linking at least six large users (such as hotels) close to the coast, and likely require a difficult planning and approval process. However, given the importance of the hotel sector in the TCI, it should not be discarded, especially as new construction is being developed.

CSP Utility x At US$0.260.28 per kWh, CSP is not an economically viable option now—but it is expected to experience significant cost reductions in the future, especially in areas with abundant sunlight like the TCI. The ability of this technology to integrate energy storage makes it a particularly interesting candidate for the future. On the other hand, land availability and plant size may limit the practicality of this technology for the TCI—larger plants of several tens of megawatts are the ones that can contain costs.

Solar PV Distributed x All solar PV technologies have come down significantly in cost in recent years. However, at oil prices of US$3.00 per gallon none are clearly economically viable in the TCI, and will need further improvements to become an option to reduce energy costs in the country. Most are commercially viable, which may make them attractive to customers (see below about the problems this poses). Larger installations operated at utility scale may achieve significant cost reductions, but would need enough land.

Wind Distributed x x The capital costs of wind turbine technology, although decreasing in recent years, is still too expensive to make it viable in the TCI on a commercial or small scale. As we discuss below, there is a problem that distributed scale wind turbines cost less than the tariff, making them commercially viable even though they are not a least-cost solution.

75

The problem of technologies that are commercially but not economically viable

Technologies that are commercially but not economically viable are a problem because they mean that customers have incentives to install technologies that are not least-cost solutions for the TCI.

As shown in Figure 5.1 and Figure 5.2 the following technologies are commercially but not economically viable:

Solar PV, commercial and small scale—both solar PV technologies considered (thin film and high-efficiency panels), which range from US$0.28 to US$0.47 per kWh in cost, are cheaper than the residential and non-residential tariffs. While PV technologies may become economically viable as the cost of panels continues to fall (or if cheaper financing were provided—these calculations assume a 10 percent discount factor), there is a risk that electricity consumers in the TCI will have incentives to install them well before they are economically viable. At current costs, installing solar PV technologies is at least US$0.05 per kWh more expensive than the conventional alternative (average system variable costs, including losses)

Distributed scale wind turbines (10kW)—new technologies for wind turbines of about 10kW in capacity allow electricity to be generated at a cost of US$0.37 per kWh. This is less than both the residential and non-residential tariffs in PPC‘s and TCU‘s service areas. Therefore, these units appeal to customers with steady loads of around 10kW or more at a single location, saving them between US$0.06 and US$0.12 per kWh. However, this technology is not economically viable and will unnecessarily incur a cost of US$0.14 per kWh more than the least-cost alternative (average system variable cost of US$0.23 per kWh, including losses).

This problem of technologies that are commercially viable but not economically viable arises in TCI because all electricity consumers face a per kWh charge that covers not only the cost of generation, but also the costs of the distribution grid, and the stand-by capacity the utilities has invested in. This means that customers who install non-firm renewable generation, and so only use electricity from the grid occasionally, do not pay the full cost of the connection to the network—these customers would effectively enjoy a service they do not pay for. If such customers were charged a monthly connection fee that reflected the true cost of their connection, and faced a correspondingly lower per kWh charge, the non-firm renewable generation would no longer be commercially viable.

Rebalancing PPC‘s and TCU‘s tariffs so that they provide more cost-reflective signals would be necessary—this could be done by allowing utilities to split their tariff into a fixed charge to cover distribution costs and back-up services, and a variable charge that more closely reflects generation costs.

5.2.4 Assessing the cost of additional CO2 abatement

As noted for EE technologies, if the Government wishes to reduce carbon dioxide (CO2), it should do so by supporting economically viable technologies only—this would allow it to reduce CO2 while also saving money for the country. Reducing CO2 by supporting non-economically viable technologies would carry an additional cost, as illustrated in Figure 4.3 for RE technologies. The figure shows that after the energy efficiency technologies that are economically viable—with a negative cost of abatement—are exhausted, the cost of

76

reducing one additional ton of CO2 begins at around US$2 for tiltable or lowerable wind turbines (utility scale), which would be the only technology that costs less than the current price for Certified Emission Reductions (CERs)—about US$14.87 All other technologies would be more expensive, reaching US$231 for high-efficiency solar PV for homes.

This also means that if the UK Government were interested in reducing CO2 emissions by supporting projects in the TCI, it should start supporting RE projects that are win-win solutions (those that have a negative abatement cost). A few technologies would have a positive abatement cost that is less than the market cost for one tone of carbon dioxide—in that case, the UK Government may be interested in supporting lowerable or tiltable wind turbines if it considers the current CER price as a reasonable benchmark for the cost of CO2 abatement achieved by overseas projects. Governments may refer to different CO2 prices too for policy purposes—usually referred to ‗carbon shadow prices‘. If the UK Government (or any other external entity interested in abating CO2) considered, for example, that a more accurate price of carbon were US$30 per ton, it may be interested in supporting a CSP plant (parabolic troughs) in the TCI, because this would have a lower abatement cost of US$0.18 per ton of CO2.

Figure 5.3: CO2 Abatement Cost Curve for RE Technologies

Source for CER price: PointCarbon, 10 January 2011

We calculate the cost of CO2 abatement through in the same way illustrated in section 4.2.4, but using different benchmarks for conventional generation costs for each RE technology, as opposed to only one for all technologies as done for EE.

5.3 Barriers to the Uptake of Technologies for Renewable Energy

In this section we assess the barriers to the uptake of renewable technologies, focusing on those technologies that are economically viable based on our analysis in section 5.2. We start

87 CER price of US$14 per ton of CO2 as of 10 January 2011 on PointCarbon (www.pointcarbon.com)

231

152

137

125

54

36

18

2

(16)

(88)

(94)

(106)

(116)

(157)

-200.00 -150.00 -100.00 -50.00 0.00 50.00 100.00 150.00 200.00 250.00 300.00

Solar PV (High-Efficiency, fixed, small)

Solar PV (High-Efficiency, fixed, commercial)

Wind (10kW distributed scale turbines)

Solar PV (thin film, fixed, small)

Solar PV (thin film, fixed, commercial)

CSP (Solar Tower, w/storage)

CSP (Parabolic Trough, w/storage)

Wind (275kW lowerable or tiltable turbines)

Seawater Air Conditioning

Wind (850kW 'Class 1' turbines)

Solar Water Heater (flat plate, commercial)

Solar Water Heater (flat plate, small)

Waste to Energy (incineration)

Landfill gas to energy (internal combustion)

CER Price: US$14/tCO2

77

by discussing the barriers for utility scale technologies, then we turn to barriers for distributed technologies.

5.3.1 Barriers for utility scale technologies

There are four main barriers to utility scale technologies in the TCI. The first three relate to a lack of incentives to adopt renewable energy in the regulatory regime under which PPC and TCU operate. The fourth barrier relates to planning and permitting.

PPC and TCU have not been required to demonstrate that its choice of generation investment is likely to lead to the lowest cost power for the country

This means utilities have not been required to consider renewable technologies, and to adopt these technologies if they offer lower cost power than conventional generation. This does not mean that, in practice, the utilities have not chosen low-cost options—in fact, our analysis in section 2 shows how PPC has installed new medium speed diesel plants to reduce generation costs, and how TCU has tried to implement a wind/PV project with the same purpose. The flaw is in the regulatory framework, rather than in utility operations per se.

The design of the Fuel Charge provides a disincentive to PPC and TCU to use renewable technologies

PPC and TCU may be able to lower the total cost of power generation by using renewables, but still not be able to recover all of that lower cost. In contrast, with conventional generation, PPC and TCU can be more certain of recovering the cost of generation. This is not to argue against a fuel cost adjustment mechanism, but simply to point out that the particular design used for the Fuel Charge has reduced incentives for the use of renewables, even when they are lower cost, because (unlike for conventional energy) PPC and TCU are not allowed to securely recover the costs of investments in renewable generation. The Advisory Council‘s 2010 Policy Position recognizes this barrier (―existing suppliers‘ cost structures and incentives to invest in RE [are] unclear‖).88

There is no regime for third party generation (utility scale Renewable Energy IPPs)

Opportunities for utility-scale IPPs in the TCI are likely to be limited. Addressing the two barriers described above should give sufficient incentive and ability to PPC and TCU to identify and develop efficient renewable energy. On small systems like those in the TCI there are real advantages to having a single entity develop and operate the entire system. If PPC and TCU can successfully identify and develop the main renewable generation opportunities on the island, they should be able to continue as the sole generators in their respective service areas.

On the other hand, there is always the possibility that someone else may have a resource, technology, or insight that enables him or her to develop an opportunity that PPC and TCU are not able or willing to develop. This is likely to be the case for waste-based generation, or even wind generation in the service area of PPC, which—as noted in section 2.2—has stated its preference to purchase power (provided that it be technically and economically viable) from an independent wind developer than develop that resource itself.

Our analysis shows that utility-scale renewable energy IPPs would be economically viable (such as for waste-based generation, or wind generation); and technically viable (waste-based

88 TCIG Advisory Council, Policy Position, 6 October 2010.

78

generation and SWAC could provide base load power, while limits to intermittent power could be set for wind or solar PV). However, there is no regime for third party generation in the TCI. PPC and TCU are not required to purchase renewable power from third party suppliers where this is cheaper than providing power themselves, and does not create risks to power quality or reliability. At the same time, any potential IPP would face an uncertain licensing regime, and have no clear technical and economic framework within which conclude a power purchase agreement that is satisfactory for both the utility and the IPP, as well as beneficial to customers.

Permitting and planning processes are not suited to renewable energy generation projects

For conventional developments that have been done many times, the submittal requirements, public consultation process, and approval processes are clearly defined and the process appears reasonably streamlined. Introducing renewable energy technologies, on the other hand, requires the planning process be developed from first principles. As a result, the timeframe for permitting is excessively long, and the process is excessively complex and uncertain. Each technology‘s environmental, social, and aesthetic implications may prevent even a viable project from being developed, with no clear rules set out in advance. Concessions for land are particularly hard to get, especially given that it is a premium asset in the TCI.

Permitting and planning barriers (particularly for land concessions) have made potential wind development in the TCI difficult. Also, uncertainty and lack of clear rules have stalled the development of a comprehensive waste management system including waste-based power generation—procurement, started in 2007, is still in a phase of negotiation of a contract; and lack of coordination regarding an already scarce waste stream risks jeopardizing the opportunity to address waste management while generating some cost-effective electricity. SWAC might be viable for some of TCI‘s hotels, but needs a clear framework within which it may be developed.

Again, the Advisory Council has recognized some of these matters in its Policy Position of 2010, encouraging the Government to ―support private investments in renewable energy technologies through the use of crown land, tax deferral and/or concessions if appropriate, and where consistent with (a) new crown land policy, (…) (c) planning, including environmental impact assessments‖.

5.3.2 Barriers for distributed technologies

The barriers to the uptake of distributed technologies for renewable energy relate to sector regulation, financing for small RE systems, and lack of information.

Customers are not allowed to connect their systems or sell to the grid (distributed scale Renewable Energy IPPs)

There are no rules that allow households and businesses to sell excess generation of their distributed technologies back to PPC and TCU, or that require PPC and TCU to purchase that power even if it saves cost. This means that if a householder or business does not

79

require the full capacity of a renewable generation unit for self-generation, it has no way of fully using that capacity, so it becomes more costly.89

Tariff and metering rules allowing to sell excess electricity generation need to be prepared with care, avoiding excessive incentives that would end up increasing costs to the population. Grid-connection rules need to ensure safety while allowing utilities to continue providing reliable service on TCI‘s relatively small systems.

Distributed technologies have a high upfront cost, and access to credit is limited

Many lower-income households in TCI‘s segmented society have limited access to credit, so that expensive equipment is unaffordable for them, even if the equipment would pay for itself overtime. Access to credit is made worse by the fact that the technologies are new and unfamiliar, and equipment suppliers have not yet developed hire purchase schemes or other consumer finance arrangements for them—lay-away still dominates small credit, at least for a significant part of the population.

Customers are unfamiliar with distributed renewable technologies

These technologies are relatively new and unknown to the public. Familiarity with the true costs and benefits of solar water heaters is still scarce. Other technologies—particularly solar PV—are more complex, and customers will be slow to adopt technologies they do not know. Costs and performance of solar PV technologies have improved significantly only in recent years, and customers may not be convinced of their commercial viability.90

89 More broadly, any industry requires the development of a market in order to grow. See Dr. Travis Bradford, Solar

Revolution: The Economic Transformation of the Global Energy Industry, 2006, pages 193-194: ―(…) Achieving growth in any industry depends on more than availability and cost-effectiveness. Growth also requires the development of markets and businesses to deliver the solutions. In the case of solar energy, the supply chain requires manufacturing capability, distributors, integrators, and installers. Market development also requires financing, rationalized building codes, interconnection agreements, and certification and training programs. The growth of the PV market requires that people-consumers, architects, builders, installers, services, and utility executives-all become comfortable with PV technology.‖

90 See Dr. Travis Bradford, Solar Revolution, pages 155-156: ―Beyond the cash costs of installation, maintenance, and financing that are included in the economic calculation of cost per kWh delivered, switching to a new and unfamiliar technology creates additional noncash costs for PV system purchasers in time and effort to evaluate such a system-that is, information costs. (…) As more PV systems are installed, each new user increases aggregate market awareness, thereby reducing information costs for future systems, and this adoption trend gains steam until a technology becomes mainstream and information costs become a small portion of an adopter's total cost-via implementation of standardized solutions and through a general sharing of awareness and technical knowledge.‖

80

6 Recommendations for a Draft Energy Conservation Policy and an Implementation Strategy

This section contains recommendations for a draft Energy Conservation Policy (‗the Policy‘, section 6.1) and an Implementation Strategy (‗the Strategy‘, section 6.2). We look forward to discussing the Policy and the Strategy with the Government and other stakeholders at public consultations during the week of 7 March 2011 in the TCI.

6.1 Recommended Draft Energy Conservation Policy

The Energy Conservation Policy of the TCI should pursue clear objectives; be based on solid core policy principles; comprise concrete, feasible actions to achieve the objectives while respecting the core policy principles; and recognize the resources needed to carry out the actions. The sections below discuss each of these matters.

6.1.1 Objectives of an Energy Conservation Policy

The Government of the TCI may wish to adopt the following objectives for its Energy Conservation Policy:

To promote viable renewable energy and energy efficiency and conservation projects that will

reduce the TCI’s dependency on imported fossil fuels, and therefore:

- Reduce electricity costs and prices, as absolute priority, while also

- Improving energy security, and

- Increasing local and global environmental sustainability.

The objectives as formulated above give priority to reducing electricity costs and prices. This has the following three implications:

Greater use of RE and EE technologies should not be an objective in itself—these technologies should be promoted only if, compared to fossil fuel-based and standard-efficiency technologies, they are ‗economically viable‘ (that is, if they reduce electricity costs for the TCI as a whole)

The objectives of improving energy security and increasing environmental sustainability should be pursued only to the extent that this may be done while reducing electricity costs. In particular, the objective of reducing emissions of carbon dioxide (CO2) should only be pursued through those technologies that have a negative ‗carbon abatement cost‘,91 meaning that they abate CO2 emissions while also saving money

Only renewable energy technologies that are mature (that is, in commercial operation somewhere in the world) and whose primary energy resource is available in the TCI should be assessed for their economic viability. Given its limited natural resources and already high energy costs, the TCI is not the appropriate setting for pursuing technologies that are still at a pilot or pre-commercial stage. This said, the TCI should remain open to developing any technology that becomes mature and is economically viable for the country.

91 The ‗carbon abatement cost‘ of a renewable energy or energy efficiency technology is the cost (expressed in US$) to

avoid 1 ton of CO2 equivalent.

81

These objectives—and its implications—were endorsed by the Government,92 represented by the DECR and the Electricity Commissioner‘s Office. These objectives and implications guide the analysis and recommendations contained in this Report.

Binding Renewable Energy Targets would not be a good option

We do not recommended establishing binding renewable energy targets for the power utilities in the TCI; binding targets would be contrary to the objectives of the Energy Conservation Policy. As discussed in section 3.1.3, the main risk of binding targets is implementing projects that increase costs (and prices) of electricity for the sake of complying with the targets. In addition, setting binding renewable energy targets would not be practical in the short or medium term in the TCI, given the high excess capacity in the PPC and TCU systems.93 The recent accident in TCU‘s plants does not suggest setting targets either—base load capacity needs to be reestablished before intermittent renewable capacity can be considered. Imposing obligations on the power utilities to develop new renewable capacity would create stranded assets whose costs would ultimately have to be paid by customers.

A much preferable way to obtain the maximum possible amount of economically viable renewable energy generation is to create binding mechanisms to assess and develop promising opportunities. At utility scale, this could be done by creating an obligation to include renewable energy options in least-cost planning by power utilities. Binding mechanisms would have to be accompanied by other mechanisms that allow power utilities to safely recover their investments in renewable generation. Action 1 below (section 6.1.3) discusses these mechanisms in detail.

At distributed scale, we recommend using incentives rather than obligations since residential and non-residential customers would be the ones expected to develop distributed renewable generation systems. Action 2 presents in detail how this could be done.

6.1.2 Core policy principles for an Energy Conservation Policy

The Government of the TCI may wish to build its Energy Conservation Policy around the following five core policy principles.

1. Win-win approach—Give top priority to measures that reduce the cost of energy to the economy while increasing sustainability. The Government should pursue its Energy Conservation Policy by promoting above all others those measures that are economically viable, because these measures reduce energy costs to the country and at the same time reduce oil dependency and emissions of greenhouse gases

2. Cost-benefit analysis—Where a measure could increase sustainability but would also increase energy costs, promote it only if the benefits of enhanced sustainability exceed the economic costs. There are a number of technologies (such as smaller wind and solar PV systems, or LED streetlights) that could reduce oil imports and CO2 emissions, but would, if deployed, increase the cost of energy to the country. As a general policy, the Government should not

92 The Government endorsed these objectives and its implications in its comments to our Inception Report (Government

of the Turks and Caicos Islands, TCIG Energy Conservation Policy and Implementation Strategy—Inception Report Comments, 6 December 2010), and further in its comments to our Progress Report (Government of the Turks and Caicos Islands, TCIG Energy Conservation Policy and Implementation Strategy—Progress Report Comments, 4 February 2011).

93 See section 2.2.2 and section 2.3.2.

82

promote those sustainable energy options that increase the cost of energy to the country. Government should consider specific measures on a case-by-case basis, but would promote them only if it is convinced that the sustainability benefits to the TCI offset the additional costs imposed on taxpayers and energy users

3. International support—Ensure that the TCI has full access to international support for sustainable energy measures, in the form of concessional finance, grants, and carbon credits. International sources of funding that are accessible to the TCI are the UK Government (in particular the Environment Fund for the Overseas Territories), the Caribbean Development Bank, and—possibly, in the future—the Caribbean Hotel Energy Efficiency Action Program (CHENACT). In particular, the UK Government has carbon abatement targets,94 and pays money to comply with them—the Government of the TCI should work with the UK Government to identify measures through which the TCI can reduce carbon emissions at a cheaper cost than its other options (using tools such as a carbon abatement cost curve), and obtain funding for those measures. Other entities such as the Global Environment Facility (GEF) and the United Nations Environment Programme (UNEP) also provide grants and concessional loans for implementing renewable energy and energy efficiency projects that reduce CO2 emissions

4. Technology neutrality—Promote all measures that increase sustainability and reduce costs, rather than favoring particular technologies and excluding others. There is no need to pick winners upfront. Rather, the Energy Conservation Policy should create a framework where market participants have the incentive and ability to develop renewable energy and energy efficiency projects that benefit the country, regardless of technology. For example, rather than prohibiting specific technologies because they might be too expensive (such as CSP), the Government should put in place a framework that allows any economically viable technology to sell power to the grid below avoided cost—this framework could apply to any technology that, in time, becomes economically viable

5. Build on existing strengths—Support entities of TCI’s energy sector that serve the country well, and develop them to promote sustainable energy, rather than undermine them. Although the TCI‘s energy sector faces various challenges, it is served by two relatively efficient and well-functioning power utilities that provide reliable service under an effective regulator. Making the energy sector more sustainable should not put these achievements at risk—for example, by considering potentially harmful measures such as sector unbundling, or imposing the purchase of high-cost renewable electricity while not guaranteeing an adequate rate of return for utilities. Rather, the policy changes should be designed to build on existing strengths. In particular, the Government should be mindful of the need to ensure that PPC and TCU can continue to operate as profitable power utilities, and respect their planning and operating independence. Government should also ensure that regulatory decisions are made

94 The target is to cut CO2 emissions by 34 percent of 1990 levels by 2020. See

http://www.direct.gov.uk/en/Nl1/Newsroom/DG_179190 (last accessed 23 February 2011).

83

by the Electricity Commissioner in accordance with its statutory mandates, and respect its independence.

6.1.3 Recommended actions for achieving an Energy Conservation Policy

We recommend the following 14 actions for achieving the proposed objectives of the Energy Conservation Policy within the Policy‘s five core policy principles:

Action 1: Change the regulation of the power sector to promote economically viable renewable energy at utility scale

Action 2: Change the regulation of the power sector to promote economically viable renewable energy at distributed scale

Action 3: PPC and TCU to establish a Grid Code

Action 4: Change the regulation of the power sector to allow PPC and TCU to recover investments in energy efficiency

Action 5: Identify the best waste management solution for the TCI, and establish a clear procurement process for implementing it

Action 6: Favor the assessment and development of wind energy

Action 7: Mandate Solar Water Heaters in new buildings, and promote them in existing ones

Action 8: Promote efficient and renewable air conditioning in hotels

Action 9: Promote widespread adoption of Compact Fluorescent Lights (CFLs)

Action 10: Leave customs incentives largely as they are, but eliminate discriminations and loops for sub-standard equipment

Action 11: Mandate Energy Efficiency in the Building Code and Development Manual

Action 12: Procure an ESCO for retrofitting public buildings and marketing to large consumers

Action 13: Negotiate an arrangement for retrofitting street lights

Action 14: Outsource water operations in Grand Turk, South Caicos, and Salt Cay.

Each action represents an initiative (general, or technology-specific) that may be implemented in various ways. Below we describe each of these actions and key options on how to carry them out.

Action 1: Change the regulation of the power sector to promote economically viable renewable energy at utility scale

Greater use of economically viable renewable energy technologies would lower the cost of electricity service in the TCI, and increase sustainability. The regulatory regime applying to PPC and TCU should ensure that customers pay no more than is reasonably necessary for a reliable electricity service; while also allowing PPC and TCU to recover their costs through tariffs plus their allowed return on capital. Disputes on the Allowable Operating Profit should be avoided. To achieve all of this, we recommend that the Electricity Commissioner

84

develop a regulatory regime with three core elements—which the Government may wish to keep in mind as it proceeds with its planned Review of the Operations of the Public Suppliers of Electricity and Regulatory Framework:

Requiring PPC and TCU to show that their generation expansion plans are least cost. PPC and TCU have made investments in generation assets that are reasonably efficient (see sections 2.2 and 2.3). However, there is no requirement in the regulatory framework that this should be the case, and as a consequence this might be subject to an inadequate scrutiny in the future. The problem is a gap in the regulatory framework rather than an operating deficiency by utilities or a shortcoming in regulatory activity per se—there is no requirement that PPC and TCU demonstrate that their plans are least-cost, nor that they include plausible renewable energy options. The Electricity Commissioner should therefore require PPC and TCU to demonstrate that their generation expansion plans are likely to result in the lowest cost of service as a condition for allowing those costs to be passed through to the tariffs; and verify PPC‘s and TCU‘s methodology and assumptions used to do so. Specifically, PPC and TCU should be required to:

– use internationally recognized least-cost expansion planning optimization software to generate their expansion plan

– include in the planning process plausible renewable options agreed with the Electricity Commissioner that can be commercially viable

– prepare the least cost expansion plans taking into account a range of future oil price scenarios.

PPC and TCU should present their least cost expansion plans including renewable energy options to the Electricity Commissioner for approval before they make investments. The Electricity Commissioner should approve plans, but should not be involved in approving specific projects and investment decisions of PPC and TCU—the role of the regulator should be one of control, not of management.

A clear tariff setting principle should say that the rate base includes all approved investments.

Guaranteeing that PPC and TCU can recover the costs of investments in renewable generation. When PPC and TCU invest in a new renewable generation plant, they substitute a capital cost for a fuel cost. Provided that the expected capital cost is lower than the expected fuel cost, this lowers total system costs and customers should benefit. However, PPC and TCU may be concerned about their ability to recover the cost of their investments, particularly if fuel costs should fall in the future.

To overcome this risk, PPC and TCU should have the option of asking the Electricity Commissioner to approve an investment in a proposed renewable energy project. The Electricity Commissioner should approve the investment if it is satisfied that the investment would be reasonably likely to lower the total cost of electricity generation. Once an investment was approved and operating, the fuel cost component of the tariff should be reduced by the amount of fuel saved, and in its place PPC and TCU should be allowed to recover the cost of the renewable investment. This cost should be set at a fixed amount per year,

85

sufficient to recover the capital cost of the plant (this includes a reasonable return on investment) as well as the operating and maintenance costs.

This mechanism could be established as a Renewable Energy Cost Recovery Charge, which would be separate from the fuel charge. This separate charge would ensure transparency—if oil prices decrease, PPC and TCU would still be able to recover their renewable energy investment costs, but have a hard time justifying a higher fuel charge before customers

Requiring PPC and TCU to purchase renewable power from third party suppliers, where this is cheaper than generating power themselves, and does not create risks to power quality or reliability. Within small service areas like those in the TCI there are real advantages to having a single entity develop and operate an entire system, such as PPC and TCU do in their respective service areas. On the other hand, there is always the possibility that another firm may have a resource, technology, or insight that enables it to develop an opportunity that PPC and TCU are not able or willing to develop—for example, using a waste-based electricity generation technology, or wind turbines.

For these reasons, PPC and TCU should be required to purchase power from third parties who can supply at some margin below their avoided cost. PPC and TCU would establish ‗avoided cost benchmarks‘ for firm and non-firm power. The Electricity Commissioner would check the benchmarks, and establish thresholds below them for purchasing power. Third parties would be allowed to challenge PPC‘s and TCU‘s benchmarks, and to have their proposal assessed independently by the Electricity Commissioner.

This third party regime would have three main elements:

– An obligation to purchase power at a margin below avoided costs (so that there is a real benefit from third party generation) when there is a credible offer by a third party that provides adequate guarantees of reliability and complies with all technical standards

– A licensing regime for third party generators that sets conditions to be satisfied (location and type of facility, technical capacity, and financial capacity) for obtaining a license for technologies other than wind or solar PV used for self-generation (see section 3.3)

– Setting principles for Power Purchase Agreements (PPAs) with third party generators according to best practices. Best practices would include setting the term of a PPA at least for the useful lifetime of a system; establishing payments for energy and capacity (subject to indexation and adjustment); ensuring compliance with a Grid Code and technical standards; establishing clear rules for maintenance outages (ensuring they only happen as scheduled, and not during peak months or for an excessive amount of time); establish ‗step-in rights‘ (ensuring that a utility can take over operations of a project if this ceases to operate for a certain amount of time without consent and for reasons other than force majeure or agreed maintenance); and establishing provisions for liquidated damages, insurance, termination, and dispute settlement.

86

Given the current excess generation capacity, it is likely that these elements will be implemented only in the medium term. The problem of stranded assets should be avoided, and new generation capacity should be planned and constructed to meet actual demand. However, this type of regulatory regime would be consistent with the Energy Conservation Policy, and serve the TCI well in the future.

Action 2: Change the regulation of the power sector to promote economically viable renewable energy at distributed scale

Small scale solar and wind generation technologies are not economically viable in the TCI, but if the capital costs of these technologies decrease further (or oil prices increase) it is possible that they may become so. Also, as shown in section 5.2.3, even though they are not economically viable, these technologies are commercially viable—customers may find it attractive to install these technologies on their premises to decrease their electricity bill.

When customers invest in distributed generation, their consumption of the power PPC and TCU generate with fossil fuels decreases. At the same time, because the distributed renewable power is intermittent, and often does not completely meet a customer‘s demands, customers will continue to require that PPC and TCU maintain their connection to the power grid, and will expect PPC and TCU to supply them with power when generation from their own distributed generation unit is not enough. At other times, customers may generate power in excess of their own needs. This excess power can be made available to the grid, and customers would expect to be paid for it.

It will be in the TCI‘s interest to develop a regulatory and tariff framework that allows efficient investment in distributed renewable generation. At the same time, this framework should not provide incentives for inefficient investments that will end up increasing the total cost of electricity supply in the country. To achieve both of these objectives at the same time, PPC and TCU should develop, and the Electricity Commissioner should approve, the following:

A fully disaggregated, cost reflective tariff. This would require disaggregating the current tariff into separate, cost reflective charges for (i) supply of energy (sale of kilowatt hours); (ii) connection to the distribution system; and (iii) provision of generating capacity in order to give customers the ability to rely on PPC and TCU for back-up and stand-by power by paying only the connection (iii) and capacity (ii) charges, if they wish to self-generate

A feed-in tariff set at avoided variable cost. The Electricity Commissioner should require PPC and TCU to purchase power from small distributed generation units. However, the price PPC and TCU are required to pay should be no more than their avoided fuel cost (plus any variable cost directly related to generation; as well as avoided cost of line losses)

There would be two options for determining a feed-in tariff based on avoided variable cost:

– Project a future fuel cost, and fix the feed-in tariff at that level for the useful lifetime of potential systems that could benefit from it (20 years)

– Base it on actual fuel costs, as incurred on a monthly basis (as the fuel charge is incurred)

87

Bidirectional metering rules for distributed generation. Implementing a feed-in tariff would require metering separately the power that customers buy from PPC or TCU, and the power that PPC and TCU buy from customers. The reason is that these two types of power are charged at different prices—the retail tariff, and the feed-in tariff at avoided variable cost, respectively. Bidirectional meters allow doing this, and in this sense are ‗smart‘. We do not recommend net metering, because this simply spins a meter backwards and is equivalent to setting the feed-in tariff at the retail tariff. The result of net metering would be that the utility pays considerably more than avoided cost for power, and so the total cost of the electricity supply goes up. If the utility is to remain financially viable, this cost needs to be passed on to customers. The ultimate effect of net metering, then, is that those customers who do not have distributed generation subsidize those who do.

Tariffs that vary by time of day in line with cost variations over the day are not a priority given current excess capacity. They are likely to be useful in the medium term, so far as this is practical given the additional metering and billing costs involved in using time of day tariffs.

Prepaid meters are unlikely to affect energy conservation, nor are they necessary to improve collection rates because PPC‘s and TCU‘s collection rates are at relatively high levels. However, they may prove practical for transient customers, or for selected large customers that are insolvent (including any public sector customers).

Action 3: PPC and TCU to establish a Grid Code

When enabling other generators to connect to the system, PPC and TCU need to retain control of the grid to ensure safety, reliability, and power quality. To this end, PPC and TCU should develop a Grid Code—that is, a set of technical and operating standards to apply to all generators, both utility scale and distributed, who connect to the grid. The Electricity Commissioner should approve this Grid Code to ensure that it does not impose restrictions on third party generators beyond those that are necessary to ensure safety, reliability, and power quality across the grid. PPC and TCU should cooperate in this task, and establish one same Grid Code for the TCI. It is also likely that the Grid Code may be largely developed from existing policies and procedures of PPC‘s and TCU‘s international businesses—Fortis Incorporated and WRB Enterprises, respectively.

Action 4: Change the regulation of the power sector to allow PPC and TCU to recover investments in energy efficiency

A mechanism similar to the Renewable Energy Cost Recovery Charge should be allowed for PPC and TCU to recover, through the rate base, any capital investment in energy efficiency projects for their customers. These investments would decrease the total cost of electricity by reducing the amount of fuel used. This mechanism could be used to fund:

Free distribution of CFLs, as discussed under Action 9

Purchase and installation of efficient air conditioners in households, businesses, and hotels.

To make this attractive for utilities, a rate of return should also be allowed on top of the cost recovery.

88

Action 5: Identify the best waste management solution for the TCI, and establish a clear procurement process for implementing it

Both waste-based technologies (landfill gas to energy; and waste to energy) for generating electricity appear to be economically viable in the TCI. However, further assessment is warranted for both, and it is unlikely that both may be developed given the TCI‘s limited waste stream. Landfill gas to energy is a cheaper option but would leave more residual waste, requiring further costs and space (which is quite limited in the TCI). Waste to energy is more expensive—perhaps even more than estimates shown in section 5, which look low compared to our experience in other Caribbean countries, and might not cover full compliance with best environmental practices. However, waste to energy would eliminate far more waste than landfill gas to energy, probably justifying a tipping fee.

Managing the TCI‘s waste stream is critical for the country‘s environmental sustainability as tourism continues to grow—and is likely to allow generating cost-effective electricity. However, attempts to do so have failed and risk jeopardizing a good opportunity. The procurement process for a waste management solution (including electricity generation) that started in 2007 has stalled due to several uncertainties. Meanwhile, private operators have developed a business for waste collection and recycling with a growing non-residential sector.

The Government should:

Commission an independent study on the optimal management of the waste stream. This study should develop an updated forecast of future levels and composition of the waste stream. In addition, it should investigate in detail which waste-based electricity generation solution is best for the TCI, taking into account competing technologies, their costs, and the needs of waste management and energy generation. The study should recommend how the waste stream should be managed; recommend any payment mechanisms for waste to energy plants (taking into account their dual benefits of energy generation and waste elimination); and recommend appropriate regulation applicable to waste to energy based on best environmental practices

Promulgate environmental regulations governing waste management, in particular related to local secondary emissions of waste to energy to ensure compliance with international best practices. Compliance would increase the relative cost of any waste to energy plant, but these should be assessed against economic benefits of a reduced volume of residual waste

If possible, conduct a new competitive tender to procure a technology solution that optimally provides for both waste management and energy generation needs.

Action 6: Favor the assessment and development of wind energy

Wind energy represents an interesting potential for TCI. Preliminary assessments of the resource are encouraging, and costs are likely to be competitive, even for more expensive technologies designed to be resilient to hurricanes. However, detailed information is needed to assess how much of this potential is technically feasible and commercially viable—both onshore and offshore. Permitting and planning barriers have hampered detailed assessments.

The Government should favor wind energy by:

89

Commissioning a wind map for the TCI to identify the best sites—if possible, offshore as well as onshore

Granting use of crown land, consistent with the Advisory Council‘s Policy Position of 2010, for both assessment and development of wind energy

Creating streamlined rules and processes to obtain permits for feasibility studies and installation of turbines and transmission/distribution lines

Granting assessment licenses for periods long enough to assess the resource properly (not less than one year)

Considering concessions for developing a wind farm for periods not less than the useful lifetime of a wind farm, possibly with options for renewal.

An initial limit of 10 percent of peak capacity might be a reasonable and safe first step for integrating wind energy in TCI‘s grid until better information on the resource is collected (and experience in managing wind farms is gained), and proves that it is technically and economically feasible to go beyond this limit.

Action 7: Mandate Solar Water Heaters in new buildings, and promote them in existing ones

Solar water heaters are among the most cost-effective renewable technologies, but their implementation in the TCI has been blocked by agency problems, limited supply of equipment, and higher than reasonable costs due to the predominant import of systems designed for the United States.

The Government should:

For new buildings, mandate that when a water heater is installed it be a solar water heater, and one compliant with a Caribbean certification such as one used in Barbados, Saint Lucia, or Jamaica. The mandate should be included in the Building Code and Development Manual. An effect of this mandate would be that new buildings must be constructed with the necessary space for installing solar water heating systems. This would affect builders, who however would recover costs from sales just as they do with any other requirement of the Building Code and Development Manual

For existing buildings, promote an increased uptake of solar water heaters by:

– Providing information on their functioning, costs, and performance

– Considering tax deductions in addition to customs incentives

– Providing financing for installing solar water heater systems. Two main options would be possible: (i) financing could be sought from the UK Government, arguing that a widespread program for funding solar water heaters would generate CO2 emissions reductions at a very cheap cost; (ii) PPC and TCU could be allowed to fund the cost of purchasing and installing the systems, and recover these costs through their tariffs.

Action 8: Promote efficient and renewable air conditioning in hotels

As shown in Figure 4.1, the CHENACT Program found that air conditioning is the single largest end-use of electricity in hotels in Barbados (from 19 to 39 percent for small hotels,

90

and from 50 to 54 percent for medium-large hotels). Barbados is the country selected to pilot the CHENACT Program, which—as its name suggests—will extend to the rest of the Caribbean. The Project Manager of CHENACT stated that the CHENACT will seek funding from donors other than the Inter-American Development Bank (IDB), to allow countries like the TCI to access the Program in the future.95

The Government should:

Contact CHENACT through its Project Manager for updated findings on energy efficiency measures in hotels, lessons learned from the Barbados experience, and potential for non-IDB member countries to access funding from CHENACT

Investigate the viability of solar air conditioning—solar cooling is one of the least-known solar applications, but it is being developed by specialized companies in the Caribbean and that the Government should contact. The company RED conducted a study for solar cooling at the Sandals resort in 2008, and showed a payback of about 7 years—however, the project was not implemented because the resort preferred not to allocate the required land space to this project. RED could not indicate general cost estimates for this technology, but indicated that payback periods for its projects in the Caribbean range from 6 to 8 years96

Investigate the viability of SWAC—it is not clear that waters surrounding the TCI would allow developing SWAC cost-effectively. This technology works with deep-sea cold water close to the shore, requiring steep slopes in the seabed surrounding the TCI. However, the presence of many beach hotels that could join efforts in building a large scale plant suggests assessing this technology in greater detail before dismissing it. A bathymetric assessment would show the conformation and slope of the seabed (and also be useful for offshore wind development, which requires shallow waters); and an investigation of the temperature gradient would reveal whether it is sufficient for developing SWAC.

Action 9: Promote widespread adoption of Compact Fluorescent Lights (CFLs)

CFLs represent a significant potential for energy saving, but their penetration in the TCI is limited. There are various options to increase uptake of CFLs—customs incentives, utility-led programs, fiscal incentives, and regulatory measures. The Government of the TCI has enacted a full exemption from customs duties for CFLs, but is concerned that this exemption is not being passed on to the general public. Action 4 discusses the option of having utilities fund efficient lighting for their customers. Under such an option, the Government would just have to allow utilities to recover the costs for doing so (plus a reasonable return) through their rate base.

The fiscal support option would need to be investigated with the UK Government, given current fiscal constraints of the TCI Government. As discussed under Action 7 for solar

95 Loreto Duffy-Mayers, CHENACT Project Manager, Caribbean Hotel Energy Efficiency Action Program (CHENACT),

Caribbean Renewable Energy Forum Presentation, 15 October 2010. Contact: Loreto Duffy-Mayers - CHENACT Project chenactproject@gmail.com

96 Austrian company S.O.L.I.D. operates in the Caribbean (with base in Jamaica) through RED, Renewable Energy Developers: http://www.redcaribbean.com/projectsclients.htm. S.O.L.I.D. solar cooling products are discussed at http://www.solid.at/index.php?option=com_content&task=view&id=42&Itemid=53.

91

water heaters, it is possible that the UK Government see the opportunity of reducing carbon emissions to meet its commitment by funding mass distribution of CFLs in the TCI.

Direct regulation could be used to ban sub-standard CFLs from being imported (adopting a Caribbean-specific standard such as one that is being finalized by the Barbados National Standards Institute). One step further in direct regulation would be to phase out traditional incandescent light bulbs, or General Lighting Service (GLS)—an option that the Government of Barbados is considering. This would entail a restriction in (i) import, and (ii) sales of incandescent light bulbs.

GLS could be promptly banned and directly substituted by CFL alternatives, as was the case in Cuba. Or, it could be gradually phased out by the introduction of Minimum Energy Performance Standards (MEPS) as was the case in Australia.97 If the Government were to regulate the use of GLS, with the aim of removing GLS from the market, an effective way to do this would be through a gradual phase out, much like what Australia is doing. The proposed policy should follow these stages:

1. Setting a deadline for phase out of all inefficient light-bulbs (for example, 2015)—in consultation with key stakeholders, including industry, consumers, various government agencies and technology developers, policy makers should set a final deadline by which it is feasible to phase out all inefficient residential GLS

2. Issuing a policy that establishes phased levels of acceptable efficiency of light-bulbs by the established deadline—light sources that produce less than 25 lumens (a measurement of light intensity) per watt of energy consumed are inefficient, given currently available technology. Such a level of efficiency should represent the MEPS used

3. Implementing a phased and progressive restriction on the import and sale of inefficient light-bulbs—initially the most inefficient light sources should be removed from the market (less than 15 lumens per watt), progressing to the more efficient (less than 25 lumens per watt). The most effective policy instrument by which inefficient light sources can be effectively removed from the market is the implementation of a MEPS. The table below shows the efficiency of different light bulb types.

Table 6-1: Efficiency of Different Light Bulb Types

Light Type Lumens per Watt

General Lighting Service/Halogen 12-24

Compact Fluorescent Lamp (CFL) 50-70

Sodium Lamp 90-140

Light Emitting Diode (LED) 200+

Source: Eco-Green Power Solutions, http://www.eco-gps.com/led_info.html

Since the TCI (like many countries today, also given the large predominance of China in producing light bulbs) imports most or all of its GLS bulbs, it could enforce a phase-out of GLS by restricting the import of certain light bulbs. The restriction would be based on the

97 Global Efforts to Phase-Out Incandescent Lamps. An update from Paul Waide, International Energy Agency (IEA).

92

bulbs‘ failure to meet requirements as established within the MEPS. The MEPS could be increased over time until only light bulbs with the required level of efficiency are imported.

Import restrictions are commonly supplemented with a staggered restriction on the sale of inefficient light-bulbs. For example, if GLS that produced less than 15 lumen per Watt had complete import restrictions enforced from January 2012, then by December 2012 the market will have sold much of the standing stock, and had time to import CFL alternatives for when a restriction on selling less than 15 lumen per Watt GLS comes into force. The MEPS can then be increased to restrict the importation of the next tier of inefficient lighting, providing that an efficient and acceptable substitute is available or developed. Table 6-2 illustrates an example timeframe from Australia of import and sales restrictions on increasingly inefficient light sources based on increasing MEPS.

Table 6-2: GLS Import and Sales Restrictions in Australia

Light Type Import Restriction Sales Restriction

GLS light bulbs (Tungsten Filament)

Extra low voltage (ELV) halogen non-reflectors

Self-ballasted CFLs

Jan 2011 Dec 2011

>40W candle, fancy round and decorative lamps

Mains voltage halogen non-reflectors

ELV halogen reflectors

Jan 2012 Dec 2012

Mains voltage reflector lamps, including halogen (PAR, ER, R, etc)

>25W candle fancy round and decorative lamps

Jan 2014 Dec 2014

Pilot lamps 25W and below To be determined dependent on the

availability of efficient replacement products

To be determined dependent on the

availability of efficient replacement products

Source: Dep. of Climate Change and Energy Efficiency of Australia, http://www.climatechange.gov.au/

It is important to note that a MEPS does not necessarily promote one particular type of light bulb technology over another, but rather promotes a light bulb technology that complies with required efficiency levels—this is consistent with the recommended technology-neutral principle of the SEF. At a MEPS of 25 lumens per Watt, CFLs are likely to be the technology best placed commercial expansion, but both Sodium Lamps and LEDs comply with MEPS and are more efficient than CFLs. The cheapest technology that complies with required efficiency levels is likely to prevail.

When phasing out GSLs it is important to consider the appropriate disposal of CFLs, due to the mercury content of the most likely alternative to GSL. Though CFLs do contain mercury, it is many times less than a household thermometer or a watch battery—however, the volume of CFLs on the market can make this a real problem. (Generally, CFL use is likely to reduce mercury within the atmosphere—the most potent vector for which Mercury enters the human body—as reductions in energy demand are likely to be coupled with reduction in fossil fuel burning and therefore mercury emissions). The required instruments

93

to deal with it include appropriate disposal facilities or mechanisms, and public awareness and education campaigns for the public on how to dispose of used or broken CFLs.

Action 10: Leave customs incentives as they are, but eliminate discriminations and loops for sub-standard equipment

Assuming the Government wishes to continue the recent preferential customs regime for efficient equipment, the only recommendations would be to:

Eliminate discriminations in standards eligible for preferential customs treatment, in particular the reference to only one standard (Energy Star) while ignoring others as discussed in section 3.4

Ensure that sub-standard equipment is not eligible for preferential customs treatment, and actually banning its import. This is particularly important for sub-standard CFLs, which—as discussed under Action 9—could be banned by requiring compliance with a Caribbean-specific standard such as that being developed by the BNSI.

Based on our preliminary analysis discussed in section 4.1.1, the Government‘s policy position towards electric and hybrid vehicles also looks sound.

Action 11: Mandate Energy Efficiency in the Building Code and Development Manual

The Department of Planning should amend the Building Code and Development Manual to mandate energy efficiency measures for new buildings. This mandate would affect builders much the same way that any other building rule does. Energy standards for buildings provide a degree of control over building design, and encourage energy conscious design in building. These inefficiencies could be reduced over time if the building code required energy efficient designs and materials in new buildings and major renovations. Many industrialized countries have included such requirements in their buildings codes.

Key energy efficiency rules would include the following:

Lighting, by defining a maximum lighting density (Watts per square meter) based on the space type

Insulation, by stating minimum levels for wall R-values, window properties, and ‗tightness‘ of the envelope

Equipment efficiency, by setting minimum standards for mechanical equipment such as air conditioners.

If necessary, a standard for the TCI could quickly be developed from an existing one. For example, the American Society of Heating, Refrigeration and Air Conditioning Engineers (ASHRAE) Standard 90.1 2007 could be reviewed for its application in the TCI. Bermuda, The Bahamas, the Dominican Republic, and Jamaica are the Caribbean climate zones described in the standard. Therefore, it is likely that this standard could also be applied to the TCI with little or no modification. This standard sets out minimum requirements for:

Building Envelope

Heating, Ventilating, and Air Conditioning

Service Water Heating

94

Power

Lighting

Other Equipment (such as electric motors).

Each section of the ASHRAE Standard refers to requirements based on the climate zone for which a building is designed. They are structured to include a general description of the section, definition of compliance path, mandatory provisions, submittals and product information requirements.

The ASHRAE Standard 189.1 Standard for the Design of High-Performance, Green Buildings Except Low-Rise Residential Buildings was published in February 2010.98 Energy efficiency performance requirements of this new standard are higher than the ones of ASHRAE 90.1, and could also be considered.

Action 12: Procure an ESCO for retrofitting public buildings and marketing to large consumers

The Government should outsource the retrofit of public buildings to an Energy Services Company (ESCO). An ESCO is a specialized business that (i) develops, finances, and implements energy efficiency projects on a turnkey basis; (ii) guarantees a contracted amount of savings to clients, assuming the risk for these savings‘ actual realization; and (iii) earns returns over time from the financial savings the projects create.

Procuring the services of an ESCO would not entail costs for the Government (apart from the administrative costs of doing so). Under a performance-based contracting scheme, an ESCO would be procured to finance the capital works needed; and would guarantee a pre-established amount of savings, and would receive its return through a share of the savings achieved.99 The challenge may be the limited volume of savings, which might make the business unattractive—bundling all public facilities together may address this challenge.

An ESCO approach would help to overcome the twin problems of implementing retrofits entirely within the public sector—lack of fiscal resources, and agency problems. The Government should enact this approach by:

Identifying the public buildings to be audited and retrofitted, trying to bundle as many facilities as possible from all islands to provide a scale of business that is interesting for an ESCO

Drafting and publishing terms of reference for a performance-based contracting scheme

Approving the initiative within budgeting and expenditure processes, given the potential this program has to reduce government expenditure.

A Government-organized trade show should be included in the package for the ESCO selected to audit and retrofit public buildings. The trade show (or exhibition) would be the opportunity for the selected ESCO to pitch its services to other large consumers, such as

98 See http://www.ashrae.org/.

99 It is likely that the selected ESCO will audit each facility again—based on information from existing audits—prior to implementing any energy efficiency measure. The reason is that an ESCO would guarantee savings and finance the project only based on its own assessment.

95

hotels or malls. This would lead to further savings in the private sector, and also make the tender more attractive for potential participating ESCOs.

Action 13: Negotiate an arrangement for retrofitting street lights

The Government should discuss a new arrangement with PPC and TCU for operating streetlights, to include their full retrofit. The new arrangement would have to allow not only recovering costs of the retrofit, but also making a reasonable return on capital. Based on preliminary numbers for magnetic induction street lights, the payback period for investments in this technology would be about 5.3 years.

Action 14: Outsource water operations in Grand Turk, South Caicos, and Salt Cay

The TCIG is struggling to carry out water operations efficiently in Grand Turk, South Caicos, and Salt Cay. High levels of non-revenue water, unclear accountability, small scale of operations and limited customer base, and underinvestment have frustrated the Government‘s efforts for an outright privatization—the Government may explore less ambitious options for involving the private sector to increase efficiency, at least in the short to medium term.

A performance-based management contract designed around efficiency targets and providing the right incentives might attract good bids and lead to relatively quick improvements in efficiency. A successful management contract would:

Provide experienced managers

Develop and implement a short-term turn-around plan

Install proper metering and accounting systems, which could generate reliable information and reduce non-revenue water

Receive a fixed fee payment from the Government, plus a performance bonus based on improvements.

6.1.4 Resources required for implementing recommended actions

We recommend establishing an Energy Unit within the Electricity Commissioner‘s Office comprising a small, skilled body of staff. In particular, this would mean a core staff of one economist and one engineer, both of whom should have experience in the power sector. The core staff would be supplemented by specialists brought in on contract for specific projects and work peaks.

We recommend that a considerable portion of the specific regulatory tasks be contracted out by the Electricity Commissioner. A recent paper for the World Bank argues that contracting out regulatory functions helps regulatory bodies improve their performance with respect to three main qualities: competence, independence, and legitimacy.100

Regulatory competence is improved by contracting out functions because it makes certain specialist skills available only when they are needed, brings in international experience, and, in the case of training, can foster strong in-house skills. Contracting out can also help build independence through, for example, profiting from another group‘s reputation, and helps build legitimacy since external studies are sometimes viewed as being more credible.

100 Trémolet, Sophie, Padmesh Shukla, and Courtney Venton (2004) Contracting Out Utility Regulatory Functions, Washington,

DC: World Bank, 2004 http://rru.worldbank.org/Documents/PapersLinks/2550.pdf

96

The Electricity Commissioner's Office would contract out for specific projects, or during peak work loads. This is not unusual. In the survey for the World Bank study previously mentioned, most of the regulatory agencies—75 percent of the survey sample—engaged external parties to carry out regulatory tasks, and plan to do so again in the future.

6.2 Recommended Draft Implementation Strategy and Action Plan

Figure 6.1 shows the proposed Implementation Strategy and Action Plan for carrying out the proposed actions over the next two years. Actions are organized by six main topics:

1. Adopt and Energy Conservation Policy. The top priority is to finalize the Policy after completing public consultations, and adopt it at TCI‘s Energy Conservation Policy. This will set the framework of objectives, actions, resources, and priorities for all other initiatives

2. Complete the Legal and Regulatory Framework for Sustainable Energy. The next step is to complete the legal and regulatory framework for sustainable energy, focusing on revising the Electricity Ordinance

3. Lead the Regulatory Process for Renewable Energy and Energy Efficiency. The Government, Electricity Commissioner, and power utilities should work together to prepare and implement the new regulations for renewable energy and energy efficiency. Third party generation at a small scale may become attractive soon—rules for selling excess electricity to the grid, and connecting securely to it, may need to be frontloaded compared to rules for utility scale renewable energy development

4. Lead Assessment and Implementation of Key Renewable Energy and Energy Efficiency Initiatives. Meanwhile, specific initiatives can be launched for assessing and implementing key renewable energy and energy efficiency initiatives. These would focus on the key technologies for the TCI—putting the implementation of waste-based technologies back on track, assessing and developing wind, exploring efficient and renewable air conditioning, promoting CFLs and efficient street lighting, revising the Building Code and Development Manual, and procuring an ESCO for public sector retrofits

5. Establish Financial and Human Resources for Implementing the Energy Conservation Policy. Making all of actions happen will require setting up an Energy Unit comprising just two people, but fully devoted to sustainable energy

6. Communicate the Energy Conservation Policy. The general public should be involved and educated about the changes and initiatives that will be taking place. This process is starting already with the public consultations for finalizing the policy, will get the final tools from our assignment, and then should continue with the planned Energy and Water Conservation Campaign.

The figure shows the entity responsible for leading each action, adding an asterisk (*) for tasks that are likely to require support of specialized consultants. For this, most topics start with an action to secure the necessary funding.

97

Figure 6.1: Implementation Strategy and Action Plan for the TCI’s Energy Conservation Policy

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

1 Adopt an Energy Conservation Policy

1.1 Conduct consultations on Energy Conservation Policy Government*

1.2 Revise Energy Conservation Policy, prepare final versions Government*

1.3 Adopt Energy Conservation Policy Government

2 Complete Legal and Regulatory Framework for Sustainable Energy

2.1 Secure funding for revising the Electricity Ordinance, revise and publish TORs Government

2.2 Revise Electricity Ordinance Government*

2.3 Present revised Electricity Ordinance to House of Assembly (or Adv.Council/Cons.Forum) Government

2.4 Approve revised Electricity Ordinance, publish as Law of the TCI House of Assembly

3 Lead Regulatory Process for Renewable Energy and Energy Efficiency

3.1 Secure funding for tariff study and regulatory reforms Government

3.2 Develop rules for least-cost planning and recovery by utilities of investments in RE/EE Electricity Commissioner*

3.3 Prepare least-cost expansion plans PPC, TCU

3.4 Approve least-cost expansion plans Electricity Commissioner*

3.5 Conduct tariff study, revise tariffs Electricity Commissioner*

3.6 Develop rules for selling renewable energy to the grid Electricity Commissioner*

3.7 Set obligation for PPC, TCU to purchase power from third parties at below avoided cost Electricity Commissioner*

3.8 Prepare Grid Code for interconnection of distributed renewable generation PPC, TCU

3.9 Approve Grid Code for interconnection of distributed renewable generation Electricity Commissioner*

4 Lead Assessment and Implementation of Key RE and EE Initiatives

4.1 Secure funding for studies on waste, wind, SWAC and A/C, environmental and building regulations Government

4.2 Revise customs incentives to eliminate discriminations and loops for sub-standard equipment Government

4.3 Commission study on comprehensive management of waste in TCI Government*

4.4 Commission and promulgate environmental regulations for waste management (including CFLs) DECR*

4.5 Lead implementation of a comprehensive waste management solution for TCI Government

4.6 Assess wind energy potential Government/Priv.Developers

4.7 Grant license(s) for development of wind potential Government

4.8 Investigate feasibility of SWAC and solar air conditioning Government*

4.9 Promote widespread adoption of CFLs Government

4.10 Revise Building Code and Development Manual to include EE and solar water heating Dep. of Planning

4.11 Negotiate an arrangement for retrofitting street lights Government

4.12 Procure an ESCO for retrofitting public buildings Government

5 Establish Financial and Human Resources for Implementing Energy Conservation Policy

5.1 Secure budget support for Energy Unit, decide its placement within the Government Government

5.2 Hire and set up Energy Unit Government

6 Communicate Energy Conservation Policy

6.1 Prepare documents and tools for disseminating Policy and Strategy Government*

6.2 Implement Energy and Water Conservation Campaign Government

* May require support of consultants

2011 2012Entity Responsible

98

Appendix A: Energy Efficiency Technologies

In this Appendix, we describe Energy Efficiency technologies, and explain our assumptions used to assess them. We present technologies by type:

Lighting—Compact Fluorescent Lamps (CFLs), T8 Fluorescent Lamps with Occupancy Sensors, T5 High Output Fluorescent Lamps, and Street Lighting technologies (Magnetic Induction Street Lighting, LED, and Solar LED)

Air Conditioning—Efficient Window A/C Systems, and Efficient Split A/C Systems

Refrigeration—Efficient Residential Refrigerators, and Efficient Retail Refrigerators (replacement of condensing unit)

Mechanical—Premium Efficiency Motors, Variable Frequency Drives, and Efficient Chillers

Other—LCD Computer Monitors and Power Monitors.

For each EE measure, we provide a table that summarizes its key features, and estimated savings compared to a typical baseline. The key items contained in the tables are as follows:

Key features and estimated savings of EE measures

Applicable sectors Sectors where the EE measure can be implemented—Residential, Commercial, Industrial, and Public

Installed capacity (in Watts) Power of the measure

Baseline replaced The baseline equipment or technology that we assumed to calculate estimated savings

Unit capital cost (in US$) Cost of purchasing and installing the measure

O&M costs per year (in US$) Annual costs of operating and maintaining the measure costs—only considered if more (or less) than the baseline‘s O&M costs

Lifetime (in years) EE measures‘ lifetime (where applicable, such as for lighting measures, based on assumed time of use per day and per year)

Energy savings per year (in kWh and in percentage)

Yearly savings compared to the baseline

Financial savings per year (in US$) Net yearly savings compared to the baseline, considering any O&M costs

Payback (in years) Years that an EE measure takes to recover capital cost with yearly savings (ratio of capital cost in US$ and yearly savings in US$)

NPV over lifetime (in US$) Net Present Value of the measure, at a 10 percent discount rate

Savings cost (in US$ per kWh) Cost in US$ cents to save 1kWh over the measure‘s lifetime, on a NPV basis (ratio of PV of all costs and PV of all kWh saved)

A.1 Lighting measures

Below we describe CFLs, T8 Fluorescent Lamps with Occupancy Sensors, T5 High Output Fluorescent Lamps, and Led Street Lighting.

99

Compact Fluorescent Lamps (CFLs)

CFLs are available at many local stores and lighting suppliers in TCI. They replace conventional incandescent lamps, compared to which they offer the following advantages: higher efficiency (more power converted to light, and less to heat—approximately 20 percent against 10 percent); higher efficacy (3-5 more lumen per Watt, allowing to achieve same or higher luminosity with a lower bulb power); longer lifetime (up to 10-20 times more). The cost however is significantly higher than a typical incandescent bulb. Ensuring quality CFLs are purchased and installed is critical—some lower-quality products are cheaper, but are likely to fail prematurely. Many of the higher quality bulbs come with a warranty in which the bulbs will be replaced if there is a failure during the warranty period.

The most common application of CFLs is in the residential sector—most households in TCI still use incandescent lamps. Most businesses already use fluorescent lamps, (although often of the older and less efficient T12 type), but some still have incandescent lighting, and could benefit from the installation of CFLs too. The table below summarizes key features and estimated savings of a typical CFL retrofit—a 15W CFL replacing a 60W incandescent lamp.

Compact Fluorescent Lamps (CFLs)

Applicable sectors Mostly Residential. Also Commercial, Industrial, and Public

Installed capacity (in Watts) 15 Watt CFL

Baseline replaced 60 Watt incandescent lamp

Unit capital cost (in US$) 5.0

O&M costs per year (in US$) None

Lifetime (in years) 4.9 (9,000 hours, 5 hours per day, 365 days per year)

Energy savings per year (in kWh and in percentage)

82.1kWh (75 percent over baseline)

Financial savings per year (in US$) 36.2

Payback (in years) 0.14 (less than 2 months)

NPV over lifetime (in US$) 132.6

Savings cost (in US$ per kWh) 0.02

T8 Fluorescent Lamps

Four-foot fluorescent fixtures are common in the commercial, industrial, and public sectors in TCI. Many of these fixtures contain two 40W T12101 lamps with magnetic ballasts,102 which are fluorescent lights of an older and less efficient kind. A typical EE measure consists of retrofitting these fixtures by replacing the 40W T12 lamps with 32W T8 lamps and the magnetic ballast with an electronic ballast. These lamps consume less energy thanks to a

101 The ―T‖ used for non-residential CFLs is a measure of the lamp‘s tubular diameter, in eights of inches (1 inch = 2.5

centimeters).

102 A ballast is a device that limits the consumption of current in a circuit, regulating/optimizing the flow. Electronic ballasts change the frequency of power to a much higher one, increasing lamp efficacy (capacity to produce a desired effect, in this case lumen, measure of perceived light), doing so more efficiently than magnetic ballasts, and can operate more than one lamp (in parallel better than in series given one‘s failure won‘t affect the others).

100

lower installed capacity, but generate a greater lumen. A good range of T8 lamps is available, such as the energy-saving T8-F25 type (25W per lamp before considering the ballast).

When retrofitting 40W T12 lamps, we recommend installing 25W T8 lamps with an electronic ballast. The 25W T8 lamps produce a similar lumen output to that of a 40W T12 lamp resulting in a minimal change in light levels. An electronic ballast further reduces energy consumption by about 5 percent compared to a magnetic ballast, with minimal changes to light levels. We recommend high-efficiency rapid or program start electronic ballasts for any retrofit. It is important to purchase a quality ballast, as a poor ballast can result in premature lamp failure. Lamp life is about 30,000 hours—this results in lower maintenance with fewer lamps to be changed.

We also recommend installing T8 lamps in association with occupancy sensors—we describe occupancy sensors below, and provide a common summary table for these two EE measures used together.

Occupancy Sensors

Occupancy sensors automatically turn off lights when they detect a given space is not occupied (and can also automatically turn lights on when they detect it is occupied). Although energy savings from occupancy sensors depend on the actual behavior of occupants, this measure often delivers good energy savings—we estimate about 20 percent based on our experience. We recommend dual occupancy sensors—that is, sensors that detect occupancy through passive infrared heat (heat emitted by all living things) as well as movement. The table below summarizes key features and estimated savings of a lighting retrofit consisting of replacing two T12 lamps with two T8 lamps and an Occupancy Sensor.

T8 Fluorescent Lamps with Occupancy Sensors

Applicable sectors Commercial, Industrial, and Public

Installed capacity (in Watts) 2x25 Watts (2x24 Watts actual power thanks to a 95 percent multiplier of an electronic ballast), with Occupancy Sensor

Baseline replaced 2x40 Watt T12 fluorescent lamps (2x48 Watts actual power due to a 120 percent multiplier of a magnetic ballast), without Occupancy Sensor

Unit capital cost (in US$) 180 (including two lamps, a ballast and an Occupancy Sensor)

O&M costs per year (in US$) None

Lifetime (in years) 18.8 (30,000 hours, 6.4 hours per day—instead of 8 per day thanks to 20 percent extra savings from the Occupancy Sensor—and 250 days per year)

Energy savings per year (in kWh and in percentage)

116kWh with two lamps, overall 60 percent savings over baseline (51 percent savings in capacity plus 20 percent further savings from the Occupancy Sensor)

Financial savings per year (in US$) 58.1

Payback (in years) 3.1

NPV over lifetime (in US$) 248.8

Savings cost (in US$ per kWh) 0.19

101

T5 High Output Fluorescent Lamps

High-bay103 fixtures are common throughout the industrial sector, and can also be found in some commercial and public buildings. Most of these high-bay fixtures use a conventional 400W metal halide lamp. These fixtures can be replaced by a 6-lamp T5 High Output (HO) 6x54W fixture. The entire fixture consumes about 25 percent less power than the 400W metal halide. This measure involves a complete fixture replacement unlike the other measures where there is a simple lamp replacement.

Another benefit of the retrofit is higher lamp lifetime—T5HO fixtures have a 20,000 hour lamp lifetime, which is up to 10 times more than conventional lamps. This reduces the frequency of re-lamping the fixtures, an activity that is expensive in high-bay areas. Also, T5HO fixtures turn on instantly and provide a consistent light level and color rendering index. The linear fluorescent lighting provides more uniform lighting distribution, which improves occupants‘ overall comfort. Additional savings can be achieved with the installation of multilevel switches, which allow reducing the number of operating lamps of a fixture at any given time. The table below summarizes key features and estimated savings of replacing a metal halide lamp with a six-lamp T5HO fixture.

T5 High Output Fluorescent Lamps

Applicable sectors Mostly Industrial. Also Commercial, and Public

Installed capacity (in Watts) 6x54Watts (352 Watts actual power thanks electronic ballast)

Baseline replaced 400 Watt metal halide lamp (458 Watts actual power due to magnetic ballast)

Unit capital cost (in US$) 600 (Includes complete fixture replacement)

O&M costs per year (in US$) None (Although the lamp life of T5‘s is 6.7 years, 20,000 hours, 12 hours per day, and 250 days per year, results in 2 lamp changes in the measure lifecycle compared to 3 for the metal halide lamps the O&M costs are virtually equal)

Lifetime (in years) 16 (refers to how long the savings are expected to last based on BCHydroQA Standard: Technology: Effective Measure Life104)

Energy savings per year (in kWh and in percentage)

318kWh (23 percent savings over baseline)

Financial savings per year (in US$) 159.2

Payback (in years) 3.77

NPV over lifetime (in US$) 585

Savings cost (in US$ per kWh) 0.24

Street Lighting

Visual perception of light. It is important to understand the night vision as it is the main factor for the cause of accidents that occur under low visibility. The eye has two visual

103 High Bay Light Fixtures are suitable for indoor applications where ceiling height exceeds 15 feet, and are ideal for

general purpose lighting in areas such as warehouse facilities, assembly areas, gyms, hangars, transportation garages, loading and staging areas.

104 BC Hydro - QA STANDARD Technology: Effective Measure Life Effective November 1, 2005

102

receptors, rods and cones. Cones functions primarily under Photopic (daylight) vision. Rods are the main active visual receptor under Scotopic (night) vision. Photopic vision exhibits low light sensitivity, high acuity and color vision. Scotopic vision is characterized by high light sensitivity, poor acuity and no color vision. Scotoptic vision is sensitive in blue color range. The high pressure sodium street lights are not human eye ―friendly‖; these lamps produce ―yellow–orange‖ tones. The scotopic response is lowest at these wavelengths. The light source that has a broad spectral output with large amount of blue output such as induction, ceramic metal halide, or LED, can reduce energy use while improving perceptions of visibility, safety and security. 105

Option 1: Magnetic Induction Street Lighting. The 30W Spectrally Enhanced Magnetic Induction lighting technology is proposed as a replacement of the existing 50W high pressure sodium street lighting fixtures in TCI. The expected lamp life of magnetic induction lamp is 20 years. They are approximately 50 percent more efficient than the conventional high pressure sodium lamp. The magnetic induction lamp provides better visually effective lumens resulting in higher quality light that will match the current lighting level of conventional high pressure street lighting. Maintenance is significantly reduced—a typical baseline conventional high pressure sodium lamp would require 4-5 times as many replacements compared to a magnetic induction lamp. We estimate a US$35 maintenance savings per lamp per year.106 Spectrally enhanced magnetic induction technology has instant start capabilities, no flickering, and uses the program start electronic ballast. The color rendering index (CRI) of high pressure sodium lamp is 20. Magnetic induction lamps have a CRI of 80. The magnetic induction lamp provides higher quality of the light with better reproduction of colors of visual environment. The table below summarizes key features and estimated savings of a magnetic induction street light replacing an existing conventional high pressure sodium street lamp.

Magnetic Induction Street Lighting

Applicable sectors Public

Installed capacity (in Watts) 30 Watts

Baseline replaced High-Pressure Sodium 50 Watt lamp

Unit capital cost (in US$) 450

O&M costs per year (in US$) (35)—savings over baseline costs

Lifetime (in years) 20 (12 hours per day, 365 days per year)

Energy savings per year (in kWh and in percentage)

120.5kWh (48 percent savings over baseline)

Financial savings per year (in US$) 50 (including O&M savings)

Payback (in years) 5.29

NPV over lifetime (in US$) 195

Savings cost (in US$ per kWh) 0.15

105 LRC ―Proven Method available to significantly reduce energy consumption in street lighting‖.

106 LED Roadway Lighting Limited, Nova Scotia, Canada.

103

Option 2: LED Street Lighting. Many street lighting in TCI consist of 50W high-pressure sodium fixtures. New Light-Emitting Diode (LED) Street Lighting technologies are available with an expected design life of 20 years. They are approximately 40 percent more efficient than typical high-pressure sodium fixtures. Although they do not provide as many lumens as the high-pressure sodium fixtures do, the LED lights provide more direct lighting resulting in less light pollution. They also offer substantial savings in maintenance costs—a typical baseline high-pressure sodium incandescent fixture requires re-lamping at least four times before a LED lamp does. We estimate a US$35 maintenance savings per lamp per year.107 The table below summarizes key features and estimated savings of a LED street light replacing a conventional street lamp—note the high savings cost and negative NPV.

Option 3: LED Street Lighting with solar panels (New installation). Electric Street Lights are significant consumers of energy. Today‘s solar street lighting technology has evolved; it converts the sun‘s energy into electricity and stores it to provide illumination from dusk to dawn. The system includes the power generator (panels), storage (battery) and energy management system (controller) as well as the LED light and pole.

Based on 30m between fixtures, there would be a cost saving of about US$1,500 per fixture by avoiding trenching, cabling, and backfilling. The table below summarizes key features and estimated savings of a Solar LED street light for new installation—note the high savings cost and negative NPV.

Solar LED Street Lighting

Applicable sectors Public

Installed capacity (in Watts) 0 Watts off-grid (35W LED)

Baseline High-Pressure Sodium 50 Watt lamp

Unit capital cost (in US$) 2,500

107 LED Roadway Lighting Limited, Nova Scotia, Canada.

LED Street Lighting

Applicable sectors Public

Installed capacity (in Watts) 35 Watts

Baseline replaced High-Pressure Sodium 50 Watt lamp

Unit capital cost (in US$) 1,000

O&M costs per year (in US$) (35)—savings over baseline costs

Lifetime (in years) 20 (12 hours per day, 365 days per year)

Energy savings per year (in kWh and in percentage)

98.6kWh (39 percent savings over baseline)

Financial savings per year (in US$) 40.9 (76 including O&M savings)

Payback (in years) 13.17

NPV over lifetime (in US$) (370)

Savings cost (in US$ per kWh) 0.84

104

O&M costs per year (in US$) (26)—savings over baseline costs

Lifetime (in years) 20 (12 hours per day, 365 days per year)

Energy savings per year (in kWh and in percentage)

252kWh (100 percent savings over baseline)

Financial savings per year (in US$) 104.6 (131 including O&M savings)

Payback (in years) 19.1

NPV over lifetime (in US$) (1,345)

Savings cost (in US$ per kWh) 1.06

A.2 Air conditioning measures

Below we describe Efficient Window A/C systems and Efficient Split A/C Systems.

Efficient Window Air Conditioning Systems

Most A/C systems in low- and middle-income households are window units, although such units may also be found in the commercial, industrial, and public sectors. New efficient window A/C units can achieve savings of over 30 percent. The table below summarizes key features and estimated savings of an efficient window A/C unit replacing a conventional one.

Efficient Window A/C Systems

Applicable sectors Mostly Residential. Also Commercial, Industrial, and Public

Installed capacity (in Watts) 1.0kW

Baseline replaced 1.5kW

Unit capital cost (in US$) 500

O&M costs per year (in US$) None—same as for baseline

Lifetime (in years) 15 (4 hours per day, 365 days per year)

Energy savings per year (in kWh and in percentage)

730kWh (33 percent over baseline)

Financial savings per year (in US$) 322

Payback (in years) 1.55

NPV over lifetime (in US$) 1,830

Savings cost (in US$ per kWh) 0.09

Efficient Split Air Conditioning Systems

Split A/C systems are commonly used in TCI—mostly in commercial, industrial, and public premises, but also in higher-income households. In addition to retrofitting older systems with new more efficient units, use of electricity by split systems can be reduced through better design and installation practices. Based on our preliminary site visits, many existing units are installed to serve a single space—this is an inefficient configuration for a building with multiple rooms of similar footage. New direct digital controls allow serving multiple rooms‘ cooling coils with a single outdoor unit. Some of the new EE split A/C systems use variable frequency driver (VFD) technology—described below—which may further decrease

105

the electrical usage. The table below summarizes key features and estimated savings of a retrofit involving the replacement of an old split A/C system with a new one.

Efficient Split A/C Systems

Applicable sectors Mostly Commercial, Industrial, and Public. Also Residential

Installed capacity (in Watts) 1.8kW

Baseline replaced 3.0kW

Unit capital cost (in US$) 4,200

O&M costs per year (in US$) None—same as for baseline

Lifetime (in years) 15 (8 hours per day, 250 days per year)

Energy savings per year (in kWh and in percentage)

2,308kWh per year (38 percent over baseline)

Financial savings per year (in US$) 1,155

Payback (in years) 3.6

NPV over lifetime (in US$) 4,387

Savings cost (in US$ per kWh) 0.24

A.3 Refrigeration measures

Below we describe Efficient Residential Refrigerators, and Efficient Retail Refrigerators (for these, we consider the replacement of the condensing unit only).

Efficient Residential Refrigerators

Older refrigerators are inefficient compared to new equipment, and many old units also do not have proper insulation for TCI‘s warm climate. The table below summarizes key features and estimated savings of a replacement of an old residential refrigerator with a new efficient one.

Efficient Residential Refrigerators

Applicable sectors Residential

Installed capacity (in Watts) 105 Watt average power draw

Baseline replaced 160 Watt average power draw

Unit capital cost (in US$) 885

O&M costs per year (in US$) None—same as for baseline

Lifetime (in years) 12 years

Energy savings per year (in kWh and in percentage)

481.8kWh (34 percent over baseline)

Financial savings per year (in US$) 212

Payback (in years) 4.2

NPV over lifetime (in US$) 642

Savings cost (in US$ per kWh) 0.27

106

Efficient Retail Refrigerators (Replacement of the Condensing Unit)

Commercial refrigerators and freezers are used primarily in the retail sector by convenience stores, supermarkets, and restaurants for storing or merchandising refrigerated or frozen products such as cold drinks, ice cube bags and frozen foods. However, these types of refrigerators are also sometimes found in industrial or public premises.

Self-contained commercial refrigerators and freezers often include exterior condensing units providing the cooling. Electrically powered refrigerated cases have shelves or drawers with one, two or three opaque or transparent doors, and—like those found in supermarkets—may have one or more interior lights to illuminate the contents. Various retrofits in these commercial refrigerators are possible, with savings up to 40 percent, including

Efficient lighting: interior illuminating lights can be retrofitted with T8 fluorescent lights with electronic ballasts, compact fluorescent lamps, LED lights, and programmable timers and controls that cycle lights and temperature as needed

Efficient compressors: commercial refrigerators and freezers use reciprocating compressors. These can be retrofitted with energy-efficient scroll or linear compressors

High-efficiency small motors: fans can be retrofitted with energy efficient permanent magnet motors—electronically-commutated motors (ECM) with efficient fan blades run cooler

Cabinet design improvements: these include better face frame and door gaskets, thicker insulations using foam-in-place insulation rather than mineral fiber insulations, and better condensate drain design, including traps to prevent air infiltration and reduce energy consumption

Replacement of the condensing unit only—this achieves savings on the cooling performance while limiting costs of replacement.

The table below summarizes key features and estimated savings of retrofitting a condensing unit in a retail refrigerator with an efficient one.

Efficient Retail Refrigerators (Replacement of Condensing Unit)

Applicable sectors Mostly Commercial. Also Industrial and Public

Installed capacity (in Watts) 525 Watt average power draw

Baseline replaced 618 Watt average power draw

Unit capital cost (in US$) 2,500

O&M costs per year (in US$) None—same as for baseline

Lifetime (in years) 15

Energy savings per year (in kWh and in percentage)

812kWh (15 percent over baseline)

Financial savings per year (in US$) 406

Payback (in years) 6.2

NPV over lifetime (in US$) 614

Savings cost (in US$ per kWh) 0.40

107

A.4 Mechanical measures

Below we describe Premium Efficiency Motors, Variable Frequency Drives, and Efficient Chillers (we present chillers with mechanical measures although they also achieve refrigeration however most this size either serve large commercial buildings or industrial processes).

Premium Efficiency Motors

Industrial facilities use a wide range of motors that have long operating hours—some even operate continuously. Electric motor systems consume large amounts of electrical energy, and represent significant opportunities for energy savings. Energy represents more than 97 percent of total motor operating costs over the motor‘s lifetime. However, the purchase of a new motor often tends to be driven by price, not by the amount of energy it will consume. Even a small improvement in efficiency may result in significant energy and cost savings. In cases where motors have failed and been rewound and reinstalled the savings can be significant as every time a motor is rewound it loses some of its efficiency.

Payback depends on the hours a motor is running—assuming a 10HP motor operates for 12 hours a day throughout the year, the payback can be between 4 and 5 years, but it can drop to 2-3 years were the motor to operate continuously. The table below summarizes key features and estimated savings of a retrofit involving the installation of premium efficiency motors.

Premium Efficiency Motors

Applicable sectors Mostly Industrial. Also Commercial and Public Sector

Installed capacity (in Watts) 11.2kW rated power, 80 percent motor loading, 91 percent efficiency (9.85kW actual power)

Baseline replaced 11.2kW rated power, 80 percent motor loading, 87 percent efficiency (10.35 kW actual power)

Unit capital cost (in US$) 1,500

O&M costs per year (in US$) None—same as for baseline

Lifetime (in years) 20 years (operating 50 percent of time throughout the year)

Energy savings per year (in kWh and in percentage)

2,191kWh (5 percent over baseline)

Financial savings per year (in US$) 1,097

Payback (in years) 1.37

NPV over lifetime (in US$) 6,427

Savings cost (in US$ per kWh) 0.08

Variable Frequency Drives

A variable frequency drive adjusts motor speed to meet actual demand, resulting in energy savings when reducing motor speed for periods of lower demand. Most process motors operate at a constant speed irrespective of the process load requirement. In water pumping, for example, a conventional motor runs at constant speed throughout its operating time, irrespective of peak water demand. There is a cubic relationship between the power

108

consumed by a motor and its speed. For example, a 50 percent reduction in speed will result in 87.5 percent savings in electrical energy consumption.

Savings from variable frequency drives must be analyzed on a case by case basis. Typically, in most cases where the load can be varied, paybacks will range from 5 to 10 years. The table below summarizes key features and estimated savings of installing a variable frequency drive to a motor.

Variable Frequency Drives

Applicable sectors Industrial, as well as Commercial and Public Sector

Installed capacity (in Watts) 11.2kW rated power, 80 percent motor loading, 91 percent efficiency (7.18kW actual power), average operating speed 90 percent

Baseline replaced 11.2kW rated power, 80 percent motor loading, 91 percent efficiency (9.85 kW actual power), average operating speed 100 percent

Unit capital cost (in US$) 7,000

O&M costs per year (in US$) 60 (due to installation of the VFD)

Lifetime (in years) 10 years108 (operating 50 percent of time throughout the year)

Energy savings per year (in kWh and in percentage)

11,687kWh (27 percent over baseline)

Financial savings per year (in US$) 5,849

Payback (in years) 1.2

NPV over lifetime (in US$) 29,210

Savings cost (in US$ per kWh) 0.10

Efficient Chillers

Based on our preliminary review, several chillers currently in use operate at constant speed with standard efficiency compressors—they operate at a lower Coefficient of Performance (COP)109 value. Conventional chillers should be retrofitted with modern energy efficient chillers that typically operate at a minimum COP. In addition, modern chillers incorporate compressors with variable frequency drive technology (VFD). Chillers with VFD technology and direct digital control can reduce the electrical consumption by chilled systems by up to 30 percent.

The table below describes key features and estimated savings of retrofitting a chiller based on data we obtained from Beaches resort. The scale of this measure is large, but capital and operating costs would be scaled down proportionally for smaller installations and give a similar savings cost.

108 BChydro - QA STANDARD Technology: Effective Measure Life Effective November 1, 2005

109 The Coefficient of Performance is the efficiency ratio of the amount of heating or cooling provided by a heating or cooling unit to the energy consumed by the system.

109

Efficient Chillers (200 ton centrifugal chiller meant for large complexes, Beaches Resort)

Applicable sectors Mostly Industrial. Also Commercial

Installed capacity (in Watts) 117kW

Baseline replaced 270kW

Unit capital cost (in US$) 408,000

O&M costs per year (in US$) 6,297

Lifetime (in years) 20

Energy savings per year (in kWh and in percentage)

382,500kWh

Financial savings per year (in US$) 191,441

Payback (in years) 2.2

NPV over lifetime (in US$) 944,237

Savings cost (in US$ per kWh) 0.11

A.5 Other measures

Below we present Computer LCD Monitors and Power Monitors.

LCD Computer Monitors

Desktop Cathode Ray Tube (CRT) computer monitors can be retrofitted with energy efficient liquid crystal display (LCD) monitors. 19‖ 40W LCD computer monitors can replace conventional 120W CRT monitors of the same size, with savings in installed capacity and consumption of 67 percent. The market in the TCI has in the most part already shifted to LCD monitors as CRT monitors are becoming less prevalent in stores and in the near future there may be no other option but to purchase an LCD monitor when purchasing a new monitor. The table below summarizes key features and estimated savings of a retrofit using a LCD monitor of this type.

LCD Computer Monitors

Applicable sectors Residential, Commercial, Industrial, and Public

Installed capacity (in Watts) 40 Watts

Baseline replaced 120 Watts

Unit capital cost (in US$) 300

O&M costs per year (in US$) None

Lifetime (in years) 15 years (operating 8 hours per day, 250 days per year)

Energy savings per year (in kWh and in percentage)

160kWh (67 percent over baseline)

Financial savings per year (in US$) 80.1

Payback (in years) 3.8

NPV over lifetime (in US$) 296

Savings cost (in US$ per kWh) 0.25

110

Power Monitors

Power monitors represent an opportunity for education and awareness of energy conservation. These devices are intended for the residential sector. The power monitor is simply a device that is connected to the house‘s electricity meter and has a wireless display monitor that indicates the current and historical power consumption. The device can be used to determine the power consumption of various appliances throughout the house and is meant to make the occupants aware of their effect on their energy use thus resulting in a change of habits to a more energy conscious homeowner. Studies110 have shown a change of habits such as turning lights off and unplugging equipment can result in a 10 percent reduction in energy use. The table below summarizes key features and estimated savings of a using a power monitor of this type.

Power Monitors

Applicable sectors Residential

Installed capacity (in Watts) N/A

Baseline replaced N/A

Unit capital cost (in US$) 130

O&M costs per year (in US$) None

Lifetime (in years) 20

Energy savings per year (in kWh and in percentage)

316kWh (10 percent of estimated household energy use, assuming 3,156kWh per year)

Financial savings per year (in US$) 139

Payback (in years) 0.94

NPV over lifetime (in US$) 869

Savings cost (in US$ per kWh) 0.05

Electric Vehicles

The tables below show an exercise to assess whether the Government‘s reduced import duty on electric vehicles (10 percent instead of 35 percent for a conventional vehicle of up to 2,000cc) is cost-benefit justified. The exercise is based on several assumptions and should just be taken as a preliminary estimate. The result is that a reduced import duty of 20 percent would yield a NPV of zero for the country, and a positive NPV of about US$533 for the individual customer of an electric vehicle (based on the additional capital cost compared to a conventional vehicle, and on net operating savings deriving from additional power for charging and avoided cost of gasoline).

110 See for example Sarah Darby, The Effectiveness of Feedback on Energy Consumption, University of Oxford, April 2006

http://www.eci.ox.ac.uk/research/energy/downloads/smart-metering-report.pdf; Kurt Roth, Home Energy Displays, ASHRAE Journal, July 2008 http://www.tiaxllc.com/publications/home_energy_displays.pdf; and Dabby Parker and David Hoak, How Much Energy Are We Using? Potential of Residential Energy Demand Feedback Devices, Florida Solar Energy Center, 2006 http://www.fsec.ucf.edu/en/publications/pdf/FSEC-CR-1665-06.pdf.

111

Assumptions

MSRP for Nissan Tiida in USA (sold as 'Versa' in USA) US$/car 25,000 Source: Nissan USA www.nissanusa.com

MSRP for Nissan Leaf in USA US$/car 35,000 Source: Nissan USA http://www.nissanusa.com/leaf-electric-car/index#/leaf-electric-car/index

MSRP mark-up for TCI % 10% Assumption based on other Caribbean countries

Import duty on motor vehicles % 35% Source: Government of TCI

Discount rate % 10%

Average miles per driver per year miles/yr 8,000 Estimate for TCI based on US Department of Energy www.fueleconomy.gov (typical 15,000 miles/year)

Standard miles per gallon of Nissan Tiida miles/gallon 30 Source: Nissan USA

Average miles per gallon for all cars in TCI miles/gallon 20.5 Source: average of best and worst fuel efficiency for compact passenger cars in USA www.fueleconomy.gov

Volumetric cost of gasoline (excluding customs duty) US$/liter 1.07 Source: Government of TCI

Gasoline liters conversion liters/gallon 3.79

kWh per mile for Nissan Leaf kWh/mile 0.25 Source: Nissan USA http://www.nissanusa.com/leaf-electric-car/index#/leaf-electric-car/index

Estimated electricity cost US$/kWh 0.25 Source: Average residential tariff for PPC and TCU with Diesel at US$3/gallon

Assumed number of electric cars cars 1,000

Assumed vehicle life years 8

Vehicle emissions factor tCO2e/mile 0.000640 Source: average of best and worst emissions for compact passenger cars www.fueleconomy.gov

Note: MSRP = Manufacturer's Suggested Retail Price

Results

Foregone levy per electric vehicle that yields a neutral NPV US$ (5,804)

Total cost of foregone import duty US$ million (5.8)

Percentage of total import duty per vehicle % 58%

Reduced import duty for electric vehicles % 20%

Cost per electric vehicle US$ 32,696

Total cost of electric vehicle fleet US$ million 32.7

Total cost of additional electricity for charging vehicles (PV) US$ million (2.6)

Total avoided cost of gasoline (PV) US$ million 8.5

Simple payback (capital cost/yearly savings) years 5.3

Additional generation, yearly GWh 2.0

Additional generation, lifetime GWh 16.0

Annual savings US$ million 1.1

Savings over period (NPV) US$ million 5.8

Yearly avoided emissions tCO2e/yr 3,009

Lifetime avoided emissions tCO2e 24,076

Workings

Typical cost of Nissan Tiida in TCI US$/car 27,500

Hypothetical all-in cost of Nissan Leaf US$/car 38,500

Hypothetical CIF cost of Nissan Leaf US$/car 28,519

Hypothetical full import duty for Nissan Leaf US$/car 9,981

Volume of gasoline per year for a standard car gallons/yr 390

Avoided cost of gasoline per car US$/yr 1,584

Average kWh consumed per Leaf per year kWh/yr 2,000

Additional cost of electricity per car US$/yr (496)

Avoided gasoline emissions tCO2e/car 5.12

Additional electricity emissions tCO2e/car 2.11

112

Assessment for 1,000 vehicles for the country Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8

Initial cost US$ '000s (5,804)

Cost of additional electricity US$ '000s (496) (496) (496) (496) (496) (496) (496) (496)

Avoided cost of gasoline US$ '000s 1,584 1,584 1,584 1,584 1,584 1,584 1,584 1,584

Cash flow US$ '000s (5,804) 1,088 1,088 1,088 1,088 1,088 1,088 1,088 1,088

Discount rate % 0% 10% 21% 33% 46% 61% 77% 95% 114%

Discounted cash flow US$ '000s (5,804) 989 899 817 743 676 614 558 508

NPV US$ '000s 0

Assessment for one vehicle for an individual customer Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8

Additional initial cost US$ (5,196)

Cost of additional electricity US$ (496) (496) (496) (496) (496) (496) (496) (496)

Avoided cost of gasoline US$ 1,584 1,584 1,584 1,584 1,584 1,584 1,584 1,584

Cash flow US$ (5,196) 1,088 1,088 1,088 1,088 1,088 1,088 1,088 1,088

NPV US$ 553

113

Appendix B: Walk-Through Audits

Below we present summary reports of walk-through audits performed by Stantec for the public, industrial, and commercial facilities during the National Energy Audit (November 2010).

1. General Information

Facility name and type: Providenciales International Airport—Commercial

Address: Providenciales International Airport (PLS),

Airport Rd, Turks and Caicos Islands

Date: 11/09/10

Contact person Frank Penn, 649-243 1438

Energy Source Primary energy use is electricity.

2. Site Review

Lighting—The lighting consists mostly of 32W T8 lamps. Some areas contain potlights with 75W mercury vapor lamps. It was noted there were many lamps burnt out and not replaced. The parking area utilizes 175W mercury vapor lamps.

Air conditioning—There are 5 air handling units serving the airport. Four of these units are packaged units complete with fan and cooling system. One unit has a separate condensing unit located in the back lot that supplies cooling to the coil inside the air handling system. These units are controlled by a programmable thermostat and a timer that turns them off when not needed. There are a number of split system cooling units serving various office spaces.

Refrigeration—There are three refrigerated pop machines one of which is located outside the building.

Building envelope—The building is a concrete structure with no insulation.

3. Energy saving recommendations

Based on our analysis, the following are energy efficiency recommendations:

Retrofit the T12 lamps with T8 lamps. It is also recommended the T8 lamps be replaced with 25W T8 lamps and electronic ballasts

Retrofit the mercury vapor fixtures with compact fluorescents

Consider Solar Hot Water Heating

Replace air conditioning condensing units with premium efficiency units

Implement staff training and awareness programs. An ongoing training program should be in place to ensure that staff follow proper energy management practices.

114

1. General Information

Facility name and type: IGA Supermarket—Commercial

Address: Leeward Highway, Providenciales

Date: 11/16/10

Contact person Jeff Luker

Energy Source Primary energy use is electricity. Propane for bakery ovens.

2. Site Review

The IGA supermarket is the largest supermarket in Providenciales. The facility has undergone a number of energy upgrades since the current management has taken over operations of the facility.

Lighting—The lighting in the facility is primarily 2 lamp 32WT8 fixtures. There are some Par 20 & Par 30 incandescent fixtures that have been upgraded to LED. The warehouse area and exterior lighting consist of 400W and 250W metal halide lamps. Most of the display units contain T8 lamps. However, management staff is experimenting with LED lamps in two of the displays. Plans are being made to install motion controlled lighting in the coolers.

Air conditioning—Eight air conditioning units serve the store. The units are controlled by programmable thermostats.

Refrigeration—Nineteen condensing units are used in the store coolers and freezers. The units range from mid to high efficiency.

3. Energy saving recommendations

Based on a high level analysis the following are energy efficiency recommendations:

Retrofit the warehouse lighting with T5 high output fixtures. This will reduce energy and improve lighting quality in the space. Continue to explore LED lamp replacement options.

Install occupancy sensors for storage coolers/freezers and display cooler lighting.

Implement staff training and awareness programs. An ongoing training program should be in place to ensure that staff follow proper energy management practices.

115

1. General Information

Facility name and type: Grand Turk Cruise Centre—Commercial

Address: South Base, Grand Turk

Date: 11/12/10

Energy Source Primary energy use is electricity.

2. Site Review

The cruise centre contains multiple buildings and pools. The buildings consist of shops and a restaurant, which are separately metered. The remaining buildings include the office areas and maintenance shops, storage and mechanical equipment. The cruise center is only operational when the cruise ships are in.

Lighting—Throughout the shops there is a variety of lighting used, most of which being CFLs. The office lighting is primarily 50W MR16 lamps. Shops, storage and some exterior areas had 2 lamp 40WT12 fixtures. The exterior lighting also consists of CFLs.

Air conditioning—Some of the larger shops have split system cooling units. The doors remain open during store working hours. A few of the stores have air curtains at the entrances to help keep the cooling in the building. Around the pool there are ten cabins, each equipped with a window air conditioning units. Cooling for the office space consists of a fan system in the ceiling space equipped with a cooling coil and condensing unit located on the roof. The office had non-programmable thermostats with the temperature set at 64°F.

Water heating—Electric domestic water heaters are used for hot water.

Building envelope—Buildings are not insulated.

Waste—There is a waste water treatment plant for irrigation use. There are a number of pumps associated with this system as well as well brine pumps. The pool pumps are equipped with variable frequency drives. There are two large pumps associated with the Flow Rider water ride. These are not operated very often.

3. Energy saving recommendations

Based on our analysis the following are energy efficiency recommendations:

Retrofit the MR16 halogen lamps with LED fixtures

Replace the remaining T12 lamps with T8 lamps. We recommend replacing the current T8 lamps with 25W T8 lamps and electronic ballasts. This will result in a slight light level reduction in the spaces served by these lights

Install occupancy sensors on switches in offices to control the lighting

Replace air conditioning condensing units with premium efficiency units

Install programmable thermostats in office area and set temperatures to a reasonable set-point such as 72°F

Consider Solar Hot Water Heating

Implement staff training and awareness program. An ongoing training program should be in place to ensure staff follow proper energy management practices such as turning off lights when not needed.

116

1. General Information

Facility name and type: NJS Francis Building—Commercial

Address: Pond Street, Grand Turk

Date: 11/12/10

Energy Source Primary energy use is electricity.

2. Site Review

Lighting—There are CFL pot-lights throughout the facility. Type 32WT8 lamps were installed in the storage areas and the basement with a few 40WT12 lamps mixed in.

Air conditioning—There are central air handling units providing ventilation and cooling for the facility. There are three units in total, one serving each floor. The basement unit only re-circulates and cools air in the basement.

Refrigeration—The condensing units are all York brand with the exception of the unit in the server room which is Carrier. There are 4 - 12.5 ton (43.9 kW), 1 - 7.5 ton, and 1 - 2.5 ton (kW) of cooling capacity. All units have an estimated seasonal energy efficiency ratio of about 10-11.

Water heating—There is an electric, domestic, hot-water tank. The washroom fixtures have been upgraded to all low flow fixtures including the lavatory aerators with a flow rate of 0.5 gallons per minute.

Building envelope—NJS Francis building is a concrete structure with single glazed windows.

3. Energy saving recommendations

Based on our analysis the following are energy efficiency recommendations:

Replace the remaining T12 lamps with T8 lamps. We recommend considering to replace the current T8 lamps with 25W T8 lamps and electronic ballasts. This will result in a slight light level reduction in the spaces served by these lights

Replace air conditioning condensing units with premium efficiency units

Consider Solar Hot Water Heating

Install occupancy sensors on switches in offices to control the lighting

Staff training and awareness program. An ongoing training program should be in place to ensure staff follow proper energy management practices such as turning off lights when not needed.

117

1. General Information

Facility name and type: CEES Supermarket—Commercial

Address: Church Folly, Grand Turk

Date: 11/12/10

Energy Source Primary energy use is electricity.

2. Site Review

Lighting—The primary lighting in the facility is 4 lamp T5 high output fixtures. There are a few CFLs in the facility as well.

Air conditioning—There are three packaged Trane air handling units. These units are only turned on when needed. The air systems are controlled by programmable thermostats. The space is maintained around 76-78°F.

Refrigeration—There are 7 condensing units serving the store coolers and freezers. Two of these are not in use. The deli cooler is no longer used as well. The majority of the equipment is energy efficient.

Building envelope—The CEES supermarket is a new building, completed within the last 2 years. The building contains insulation in the walls and roof.

3. Energy saving recommendations

Based on our analysis, for further energy efficiency we recommend replacing refrigeration display units with more efficient models.

118

1. General Information

Facility name and type: Caicos Pride Seafood—Industrial

Address: South Caicos

Date: 11/15/10

Contact person Jim Baker

Energy Source Primary energy use is electricity.

2. Site Review

Lighting—Caicos Pride Seafood utilizes 40WT12 lamps throughout the facility. Exterior lighting is incandescent.

Air conditioning—In the main plant there are three Carrier fan coil units with condensers outside. These were installed in the past year and are fairly efficient units. There are two walk-in freezers. One is used full time while the other is only turned on as needed. Freezers are maintained at -5°F. The condensing unit is Larkin brand and is estimated to be a standard efficiency unit. There is an ice maker connected to a storage container that produces ice for the process. There is an additional refrigerated storage container that is used as needed.

Equipment—There are a few pumps for transferring water to the facility.

Building envelope—The building is not insulated except for the freezers and permanent shipping coolers. Entryways are equipped with plastic curtains including the freezers.

3. Energy saving recommendations

Based on our analysis the following are energy efficiency recommendations:

Retrofit the 40W T12 lamps and magnetic ballasts with 25W T8 lamps and electronic ballasts

Replace incandescent exterior lighting with CFLs

Air conditioning units could be replaced with premium high efficiency units with an EER of 11 or higher

Freezer condenser units should be replaced with premium efficiency units

Implement staff training and awareness program. An ongoing training program should be in place to ensure staff follow proper energy management practices such as reminders to turn off the lights.

119

1. General Information

Facility name and type: Provo Seafood—Industrial

Address: Five Cays, Providenciales

Date: 11/15/10

Contact person (name, phone, email)

Ernest Rigby

Energy Source Primary energy use is electricity.

2. Site Review

The facility is a small building. General operation takes place in the afternoons from noon to 5pm.

Lighting—Lighting is primarily 32WT8 lamps. Exterior lights are mercury vapor lamps.

Air conditioning—There are a few window units serving office spaces.

Refrigeration—The main cooling in the space consists of three condensing units in the back of the building. These units are older and fairly inefficient. They serve the coolers within the building.

Equipment—There is minimal process equipment.

3. Energy saving recommendations

Based on a high level analysis the following are energy efficiency recommendations:

Retrofit the 32W T8 lamps with 25W T8 lamps

Replace incandescent exterior lighting with CFLs

Air conditioning units should be replaced with premium high efficiency units

Freezer condenser units should be replaced with premium efficiency units

Implement staff training and awareness program. An ongoing training program should be in place to ensure staff follow proper energy management practices such as reminders to turn off the lights.

120

1. General Information

Facility name and type: Beaches Resort—Hotel

Address: Lower Bight Rd., Providenciales

Date: 11/13/10

Contact person Neil Willis

Energy Source Primary energy use is electricity. Propane used for cooking. Solar for domestic hot water.

2. Site Review

The Beaches Resort is the largest on Providenciales. It consists of three areas with a total of 620 rooms and multiple pools.

Lighting—Lighting throughout the facility undergoes constant upgrading. The rooms are equipped with CFLs, and there is a card reader that enables the lights when the card is inserted. The exterior lighting and restaurant/lobby areas have a mixture of LED and CFL lamps. Some of the back rooms still had T12 lamps with magnetic ballasts.

Air conditioning—Cooling for each of the three areas was provided through a central chiller plant. Each chiller plant was a high efficiency centrifugal chiller. Distribution pumps were equipped with variable frequency drives. The condenser water was cooled by circulating it through the ground well. Each room has an air conditioner with a cooling coil tied into the central cooling system.

Equipment—The facility contains its own RO plant. One of the plants was the original from when the resort was first constructed, and the other was new. Operations staff indicated the new unit used half the energy the old plant did. Pool pumps are equipped with VFDs. The pools are heated in the winter using heat recovered from the chiller. Domestic hot water comes from a central solar hot water heating plant.

Management system—The facility is controlled with a full Building Management System (BMS). The system currently monitors the electricity and water usage in which daily reports are produced and analyzed. It is being upgraded to monitor the gas usage as well. The system monitors the temperatures throughout all the common space and controls the schedule of the air handing equipment. In rooms, the air conditioner is controlled by a programmable thermostat. The programmable thermostat is equipped with an occupancy sensor. There are also door contacts on the patio and main entry doors that will disable the air conditioner if left open. To cool the condenser water, the three areas had HVAC.

Building envelope—Buildings are concrete structures with minimal to no insulation.

3. Energy saving recommendations

This facility is far ahead of most other facilities in the TCI when it comes to energy efficiency and energy management. Based on a high level analysis the following are energy efficiency recommendations:

Continue lighting retrofit program. There is a corporate lighting program that has been changing out the lights in many areas to install CFLs and LEDs. Some focus could be put on retrofitting the T12 lamps with T8 lamps. We recommend these be replaced with 25W T8 lamps and electronic ballasts

Implement staff training and awareness program. An ongoing training program should be in place to ensure staff follow proper energy management practices.

121

1. General Information

Facility name and type: La Vista Azul Resort—Hotel

Address: Turtle Cove, Providenciales

Date: 11/09/10

Contact person Norman Chambers

Energy Source Primary energy use is electricity.

2. Site Review

La Vista Azul is a new resort that is still under some construction. It consists of approximately 79 suites and 16 retail units.

Lighting—Lighting within the room consists of incandescent bulbs, mainly 60W. The exterior lighting throughout the resort is CFLs.

Air conditioning—Each room has a small fan coil unit with cooling coil. Cooling equipment was considered standard efficiency equipment.

Water heater—Domestic hot water is provided through an instantaneous electric hot water heater.

Appliances—Each suite is equipped with a full sized refrigerator, dishwasher, stovetop oven, microwave, television, and washer/dryer. The appliances and HVAC equipment are new. Appliances were not Energy Star rated appliances.

Equipment—There are a couple small pumps serving the pool.

3. Energy saving recommendations

Although the equipment is new the following are energy efficiency recommendations:

Install CFLs in the rooms. (Management staff indicated plans of this)

There are two possibilities for the cooling equipment. The first is to install more efficient condensing units although savings will be minimal. The second is to install a central cooling plant to serve all of the rooms. This plant would be significantly more efficient, however, this would require significant capital investment

Install Energy Star rated appliances

Energy management initiatives should be put in place engaging staff. There are a number of appliances in each suite, and the suites were set to maintain 78 deg F, even when unoccupied. We suggest the breakers to each room be shut off when they are unoccupied. When a guest is scheduled to be in that room, turn on the breaker in advance of their arrival.

122

1. General Information

Facility name and type: Gansevoort Resort—Hotel

Address: Grace Bay Beach, Providenciales

Date: 11/13/10

Contact person Bruce Maclaren

Energy Source Primary energy use is electricity. Propane used for cooking

2. Site Review

Gansevoort is a new resort, only a year and a half old. It consists of 52 condo style suites and 7 hotel rooms.

Lighting—Lighting throughout the facility primarily consists of MR16 50W halogen lamps. These can be found in the restaurant and rooms (approximately 22 in a 1 bedroom suite). There are pot lights throughout lobby and restaurant that utilize 40W incandescent lamps on dimmer switches. Lighting in these areas are on a timer and are turned off during the day. There are some LED accent lighting in the lobby and the hallway. Lighting for the suites are CFLs, where every second bulb was removed because the space was over lit. The office area was lit by T8 lamps and a mixture of efficient and inefficient lighting. Lighting in the basement is on all day and consists of T8 fluorescent bulbs. There are card readers in the rooms that disable the lighting when removed.

Air conditioning—Cooling for the facility is provided by a separate split system condensing unit for each suite and space. They are Daikin multi-split inverter units which are designed to provide cooling to multiple fan units in each room. Each room has small fan coil units complete with a fan section and a cooling coil tied in to the split system dedicated to that room. This system is rated with a seasonal energy efficiency ratio of about 13 (COP 3.2) and is considered an efficient unit. There are door sensors that disable the fan if the door is open. Thermostats are programmable, however, they are adjusted to settings to overcool the room. There are problems with the control systems for turning the AC on and off.

Equipment—Pool jet pumps are equipped with VFDs. Consideration is being given to installing a heater for the pool to heat it in the winter.

Water heater—Domestic hot water is provided by an electric hot water tank installed in each suite.

Management System—There is no central Building Management System (BMS). All areas are individually controlled with their own thermostats. Timers are used throughout the facility to control various lighting and HVAC systems.

Building envelope—Buildings are concrete structures with no insulation. Windows are single pane.

3. Energy saving recommendations

Based on a high level analysis the following are energy efficiency recommendations:

Retrofit the 32W T8 lamps with 25W T8 lamps and electronic ballasts.

Retrofit the MR16 halogen lamps with LED fixtures

Air conditioning units can be replaced with a central chiller plant using a centrifugal chiller. The efficiency of this type of system can be double to triple the current air conditioning efficiency. This retrofit requires a major capital expenditure. The chiller plant should be installed in an enclosure and be equipped with a VFD

Consider Solar Hot Water Heating for all domestic hot water use

Solar hot water can be used to preheat laundry water

Replace room thermostats with programmable thermostats complete with occupancy sensor

Implement staff training and awareness program. An ongoing training program should be in place to ensure staff follow proper energy management practices.

123

1. General Information

Facility name and type: Club Med—Hotel

Address: Grace Bay, Providenciales

Date: 11/13/10

Contact person Francisco (Maintenance Manager)

Energy Source Primary energy use is electricity. Propane used for cooking.

2. Site Review

Club Med is the oldest resort in Providenciales. It maintains a total of 292 rooms. The facility has received its green globe certification.

Lighting—Lighting throughout the facility is a mixture of efficient and inefficient lighting. In the lobby and common areas there are LEDs, CFLs, 40W T12 lamps and 50W MR16 halogen lamps. The rooms are equipped with incandescent bulbs. There is a card reader in the rooms that disables the lighting if the card is removed. Some of the back rooms have T12 lamps with magnetic ballasts.

Air Conditioning—Cooling for the facility is provided by a central chiller plant. The chiller plant is an air cooled chiller that has been sized for twice the capacity that exists. It is currently only operating one of the two compressors. Distribution pumps were equipped with variable frequency drives. Each room has a small fan coil unit complete with a fan section and a cooling coil tied into the central cooling system. There are door sensors that disable the fan if the door is open. Thermostats are none programmable, easily adjusted, and left on settings to overcool the room.

Equipment—Pool pumps are equipped with VFDs. The pools are heated in the winter using heat from the RO plant across the street from. They also receive their DHW from the same source.

Management system—The facility is had an old Building Management System (BMS) that is no longer in use. Timers are used to control the operation of the air handling systems and kitchen exhaust.

Building envelope—Buildings are concrete structures with no insulation. Windows are single pane with glass louvers.

3. Energy saving recommendations

Based on our analysis the following are energy efficiency recommendations:

Some focus could be put on retrofitting the T12 lamps with T8 lamps. It is recommended these be replaced with 25W T8 lamps and electronic ballasts

Retrofit the MR16 halogen lamps with LED fixtures

Consider Solar Hot Water Heating

Replace Chiller plant with centrifugal chiller installed in an enclosure. Chiller should be equipped with a VFD electromotor. This type of plant is over double the efficiency of the current plant

Replace room thermostats with programmable thermostats complete with occupancy sensor

Replace windows in rooms with solid double pane operable windows

Staff training and awareness program. An ongoing training program should be in place to ensure staff follow proper energy management practices.

124

1. General Information

Facility name and type: Cheshire Hall Medical Centre—Public

Address: Leeward Highway, Providenciales

Date: 11/11/10

Contact person (name, phone, email)

Donald Wilson

Energy Source Primary energy use is electricity. Diesel boilers

2. Site Review

The hospital began operation this year. It is a brand new building that was built with energy efficiency in mind. The building is already undergoing an energy assessment to see if there are any further operational improvements.

Lighting—The primary lighting throughout the hospital is CFL pot lights. There are some 32WT8 fixtures in storage areas and some rooms. The lighting switches throughout the common areas require a key to turn on and off. This allows operation staff to better control the lighting. In most areas with exterior windows only half of the lighting is turned on. Only half of the lighting in the lobby was on during the visit to the facility, and there was plenty of light in the space.

Air conditioners—The facility has a central air cooled chiller plant that provides the cooling to the air systems‘ serving the hospital. There are two 275 ton chillers. The chilled water pumps each contain VFDs. Additional cooling is provided to the server room, MRI and lab with a split system air conditioner for each of these rooms. There are seventeen air handling units complete with cooling coil and heating for humidity control. The air handling units distribute air to variable air volume boxes that control the amount of air needed to cool the space. These are equipped with cooling coils. All systems are controlled through the central building management system. This controls scheduling and set-points to ensure the indoor environment is maintained. All areas not in use are turned off at night.

Water heater—There is a diesel heating boiler which provides the heating to the air handling systems for humidification control and domestic hot water. Pumps associated with this system have VFDs. There is also a therapy pool with its own electric heater.

3. Energy saving recommendations

The facility appears to be well managed and very energy conscious. Although the equipment is new the following are energy efficiency recommendations:

Install Solar Water Heating for DHW with the diesel system as a back-up

Install Solar Hot Water Heating to preheat the therapy pool

In the future consideration should be given to the use of a water cooled centrifugal chiller. The condenser water could be cooled by running a closed loop through the ground. This could double the efficiency of the cooling plant. The chiller would require a proper enclosure.

125

1. General Information

Facility name and type: DECR Office—Public

Address: Lower Bight Road, Providenciales

Date: 12/09/10

Contact person Jewel Batchasingh

Energy Source Primary energy use is electricity.

2. Site Review

Lighting—Lighting consists primarily of T8 lamps throughout the building. For exterior lighting, CFLs are used.

Air conditioning—Cooling is distributed through ventilation units located in the ceiling space. There are two condensing units outside the building that provide cooling to the cooling coils.

Building envelope—DECR Office is a concrete structure with single glazed windows.

3. Energy saving recommendations

Based on our analysis the following are energy efficiency recommendations:

Replace T8 lamps with 25W T8 lamps. This will result in a slight light level reduction in the spaces with this retrofit

Install occupancy sensors on switches in offices to control the lighting

Replace air conditioning condensing units with premium efficiency units

Staff training and awareness program. An ongoing training program should be in place to ensure staff follow proper energy management practices such as turning off lights when not needed.

126

1. General Information

Facility name and type: Turks and Caicos Islands Community College—Public

Address: Grand Turk

Date: 11/12/10

Energy Source Primary energy use is electricity.

2. Site Review

Lighting—Lighting for the facility is primarily 4 and 2 lamp fixtures with 32WT8 lamps and electronic ballast. There are also some U–tube T12 fixtures. For exterior lighting, they use high pressure sodium lamps.

Air conditioning—Air conditioning is provided through multiple split system units of various sizes, age and efficiency. Units recorded had standard efficiencies.

Building envelope—The community college buildings are concrete block structures.

3. Energy saving recommendations

Based on our analysis the following are energy efficiency recommendations:

Replace the remaining T12 lamps with T8 lamps. We recommend consideration replacing the current T8 lamps with 25W T8 lamps and electronic ballasts

Install occupancy sensors on switches in offices and classrooms to control the lighting

Replace air conditioning condensing units with premium efficiency units

Implement staff training and awareness program. An ongoing training program should be in place to ensure occupants follow proper energy management practices such as turning off lights when not needed.

127

1. General Information

Facility name and type: Clement Howell High School—Public

Address: Blue Hills, Providenciales

Date: 11/11/10

Energy Source Primary energy use is electricity. Propane used for cooking.

2. Site Review

Clement Howell High School consists of a number of buildings some of which are two-story.

Lighting—Lighting in all buildings utilizes 40WT12 lamps and magnetic ballasts.

Air conditioning—These building primarily cool with ceiling fans. The some rooms are equipped with air conditioning. Air conditioning, where it does occur in spaces such as the computer room and offices, consists of mini-split systems. The portable units have built-in split system air conditioning equipment.

Refrigeration—The cafeteria building contains a freezer and refrigerator.

Building envelope—The majority of the buildings are concrete construction with wooden louvered windows containing no glass.

3. Energy saving recommendations

Based on our analysis the following are energy efficiency recommendations:

Replace the T12 lamps and magnetic ballasts with T8 lamps and electronic ballasts. We recommend considering replacing the current T12 lamps with 25W T8 lamps. This will result in similar light levels to the current lighting

Install occupancy sensors on switches in classrooms and offices to control the lighting

Replace air conditioning condensing units with premium efficiency units

Implement staff training and awareness program. An ongoing training program should be in place to ensure occupants follow proper energy management practices such as turning off lights when not needed.

128

1. General Information

Facility name and type: Myrtle Rigby Complex—Public

Address: Leeward Highway, Providenciales

Date: 11/10/10

Energy Source Primary energy use is electricity.

2. Site Review

The building was the old hospital and is soon to be converted into government offices. The majority of the building has been shut down and is not in use. The only areas typically used are the blood-bank, morgue and a few spaces for the staff.

Lighting—Lighting is primarily 40WT12 2-lamp fixtures with magnetic ballasts.

Air conditioning—Cooling consists of a number of window units and split system air conditioners with fan coil units in the ceiling space. Air conditioners are standard efficiency units. The morgue utilized two refrigerated shipping containers as a replacement for the cooler system they previously had. These are located outside the building and run constantly.

Water heating—There are a number of electric domestic hot water tanks throughout the facility located in the ceiling space.

Building equipment—The building is concrete with no insulation and single glazed windows.

3. Energy saving recommendations

Based on a high level analysis the following are energy efficiency recommendations:

Replace the remaining T12 lamps and magnetic ballasts with T8 lamps and electronic ballasts. We recommend replacing the current T8 lamps with 25W T8 lamps and electronic ballasts

Install occupancy sensors on switches in offices to control the lighting

Replace air conditioning condensing units with premium efficiency units

Install a proper insulated high efficiency cooler for the morgue. The current use of a shipping container is inefficient

Consider Solar Hot Water Heating

Implement staff training and awareness program. An ongoing training program should be in place to ensure staff follow proper energy management practices such as turning off lights when not needed.

129

1. General Information

Facility name and type: TCI Government Reverse Osmosis (RO) Plant-Water Services

Address: South Base, Grand Turk

Date: 11/12/10

Contact person (name, phone, email)

Zaheer Mohamed

Energy Source Primary energy use is electricity.

2. Site Review

The TCGI water plant produces potable water for Grand Turk. Their facility consists of a number of housing sheds and retired shipping containers. The process utilizes reverse osmosis (RO) to convert sea water to potable water. The plant has a current capacity of 260,000 gallons a day.

Equipment—There are three RO plants Two of the three units contain energy recovery devices that boost the water flow through the system. The older unit is much less efficient than the newer two but seems to be the most reliable. Two of the RO units contain variable frequency drives (VFD‘s). There are VFDs installed on the distribution pumps. There is no central control system for the plant.

3. Energy saving recommendations

The majority of the energy use is within the RO process. There are still a number of initiatives that could be done:

Replace older RO plant that does not have the energy recovery system

Incorporate a centralized control system that is capable of monitoring all systems associated with the plant

Install proper housing for all of the equipment to prevent rapid deterioration and some maintenance tasks. Housing for plant should be insulated for noise.

130

1. General Information

Facility name and type: Turks and Caicos Water Company—Water Services

Address: Grace Bay Road, Providenciales

Date: 11/10/10

Contact person Jared Fulton

Energy Source Primary energy use is electricity.

2. Site Review

The Turks and Caicos water company (TCWC) produces the majority of the potable water for Povidenciales. The process utilizes reverse osmosis (RO) to convert sea water to potable water. The plant has a current capacity of 2.5 million gallons a day. An additional plant that will come online in 2011, bringing the capacity to 3.8 million gallons a day. The company has some exclusive rights with a couple suppliers for testing new technologies designed to reduce the energy consumption of the RO process.

Equipment—Although the four operational units do not have variable frequency drives (VFDs), the pumps have been modified to operate at the peak of their pump curves. There are VFDs installed on the remaining pumps throughout the facility including the feed well pumps, transfer pumps and distribution pumps. Everything is monitored by a central control system. The facility also produces the hot water for Club Med by recovering heat from their process. The facility has also started recycling water for irrigation use on the golf course next to the plant.

Lighting—Lighting in the main RO plant utilized metal halide fixtures. The rest of the plant utilizes fluorescent tube and CFLs.

3. Energy saving recommendations

The majority of the energy use is within the RO process. Without a detailed analysis it is difficult to identify meaningful energy savings opportunities. TCWC know their business very well and have put a lot of effort in making their plant and energy efficient as possible. The one area noted is the lighting in the main plant could be replaced with either T8 fixtures or T5HO fixtures.

131

Appendix C: Renewable Energy Technologies

In this Appendix, we describe the renewable energy technologies reviewed in section 5, and the assumptions we used to assess them.

C.1 Landfill Gas to Energy

Landfill gas extraction can be combined with various types of technologies (most of them mature) for converting gas to energy, at both utility scale and distributed scale. There is no landfill gas to energy project operating in TCI, although the quality and quantity of existing waste seems sufficient to develop a small one in modules—which the private sector is considering.

Current state of development in the TCI

The TCI have one dump for waste for each island. The Blue Hills landfill on Providenciales is an unlined and unmanaged dump for all waste produced on the island, opened in 2001 after the previous landfill at South Dock was closed.

In March of 2008, Turks and Caicos Environmental Management (TCEM)/Sanitas Partners was selected by the Government of TCI for developing there a comprehensive solid waste management system that would eventually serve all of the TCI. According to the Department of Environmental Health, the contract is in negotiation.111 Sanitas Partners estimate that with collections from all islands there are 40,000 tons of solid waste per year,112 consistent with estimates made for the Environmental Health Office of about 70-80 tons of waste per day from Providenciales only.113 The landfill proposed would be equipped with a leak-proof lining and a methane collection system for generating electricity.

Sanitas Partners plans to develop the electricity generation project in stages, starting with a 500 kW landfill gas to energy plant with internal combustion technology. As landfill mass accumulates and waste management is centralized in Blue Hills from other islands (which would just have transfer stations), the company would expect capacity to grow over a 20 year period to 3-5 MW.114

Primary resource

The production of landfill gas results from the decomposition of organic matter, due to chemical reactions and microorganisms living in the organic materials. The quality of landfill as a resource therefore depends on the quantity and characteristics of a landfill (such as moisture content, composition of the waste, alkalinity, and internal temperature). In order to accurately assess the potential for landfill gas generation, a detailed study would need to determine the composition of TCI‘s solid waste.

111 Conversation with the Department of Environmental Health, 15 November 2010.

112 Discussion with Sanitas Partners, November 2010.

113 WESA, Solid Waste Management Study—Turks and Caicos Islands, 2002.

114 Discussion with Sanitas Partners, January 2011.

132

Technology for landfill gas to energy

Landfill gas to energy systems use the gas produced from landfills to generate electricity. The technology for extracting landfill gas is mature and widely available, and three types of technologies can be used for generating electricity from landfill gas: reciprocating internal combustion engines, gas or steam turbines, or fuel cells.

Internal combustion engines are the most commonly used option for landfill gas energy conversion projects. They have comparatively low capital costs, a high efficiency, and a high degree of standardization. Given these advantages and the expected size of the plant at Blue Hills, an internal combustion engine would seem like an appropriate landfill gas to energy option for the TCI

Gas turbines are most economical for capacities of over 3MW115. However, they typically have parasitic energy losses of 17 percent of gross output compared to internal combustion turbines (which have parasitic losses of seven percent). The turndown performance of gas-fed turbines is poor compared to internal combustion engines, and difficulties may occur when they are operated at less than a full load. Other problems include combustion chamber melting, corrosion, and accumulation of deposits on turbine blades

Fuel cells may become attractive in the future because of their higher energy efficiency, negligible emissions impact, lower maintenance costs, and suitability for all landfill sizes (although previous studies have suggested that fuel cells would be more competitive in small to medium projects116). At present, however, fuel cells remain uncompetitive with conventional applications, due to economic and technical disadvantages.

In terms of scale, engines range from small scale (up to 10kW) to utility scale (3-5MW, and above for gas turbines). Custom-designed engines beyond this size are also available.

Costs of landfill gas to energy

Landfill gas to energy project costs include costs for gas collection and flaring, electricity generation, and direct use. Each project involves the purchase and installation of equipment (capital costs) and the expense of operating and maintaining the project (O&M costs). The viability of a landfill gas to energy project depends primarily on the price and efficiency of the generator used, and the quality and quantity of the landfill gas resource.

Although reciprocating engine gas and diesel generators are based on the same type of technology, the capital costs for internal combustion and gas generators are higher than those of diesel generators (including generators that are currently operating in TCI), but typically lower than other renewable energy technologies. The capital cost of internal combustion engines is about US$3,000-US$4,000 per kW117. Because landfill gas is free, and the operations and maintenance costs for gas engines are low (usually about US$0.02 per kWh), landfill gas to energy is generally more competitive than other renewable energy technologies, and competitive with conventional generation given their fuel expenses.

115 Discussion with Sanitas Partners, January 2011.

116 United States Department of Energy (1997). Renewable Energy Annual 1996. Chapter 10 – Growth in the Landfill Gas Industry, http://www.p2pays.org/ref/11/10589/chap10.html

117 United States Environmental Protection Agency, Landfill Gas to Energy Project Development Handbook, 2010

133

Since internal combustion turbines are mature technologies, their costs are unlikely to decrease significantly in the future. Fuel cell technology costs, however, are likely to decrease with further technology developments and experience or learning effects118; but it is too early to predict when fuel cell technologies will be commercial, and how much they will cost.

The plant proposed by Sanitas Partners would have an investment cost of US$4,000 per kW, and O&M costs of about US$150 per kW per year. With an installed capacity of about 90 percent, it would provide firm power. These figures are consistent with recent ones we assessed in Barbados, Mexico, and Mauritius, and we use them for our analysis.

Conclusions on landfill gas to energy in the TCI

Landfill gas to energy may represent an interesting potential for TCI in the short term, provided that there exists enough waste stream (with a sufficiently good composition) to build an economically viable plant, even in modules. The ability to centralize all islands‘ waste on Providenciales would be critical to ensure large enough waste volumes and reduce costs. Delays in finalizing the contract suggest there may still be some uncertainty surrounding the project—a clear process would help overcome these uncertainties and provide a swift solution to the TCI‘s waste management needs.

Landfill gas to energy (internal combustion)

Installed capacity (MW)

Unit Capital Cost

(US$/kW)

O&M Costs (US$/kW/yr)

Capacity Factor

(%)

Annual output

(GWh/year)

Lifetime (years)

LRMC (US$/kWh)

2.5 4,000 150 90% 19.7 20 0.08

Source: TC Environmental Management/Sanitas Partners

C.2 Waste to Energy

There are no waste to energy plants operating in the TCI, but private investors engaged in solid waste collection (particularly for the commercial sector) have shown interest in developing one. Overall, the potential for this technology in TCI is good: waste to energy generation costs are competitive compared to other renewable and conventional technologies, and landfill costs would be reduced as the final volumes of waste that need to be disposed would be lower. Sufficient availability of waste stream, however, should be proven and secured before any plant may be developed.

Current state of development in the TCI

The private company TCI Waste Disposal Services has expressed interest in developing a waste to energy plant in Providenciales. TCI Waste is currently the largest collector of waste on the TCI, collecting between 50 and 80 percent of the commercial waste on Providenciales, as well as waste from about 4,000 homes. Estimated volumes are 70-80 tons of waste per day on Providenciales, and 100 tons per day including all of the TCI‘s islands.119

118 Schoots K., Kramer G.J., van der Zwaan B. (2010). Technology Learning for Fuel Cells: An Assessment of Past and Potential Cost

Reductions. Energy Policy Vol. 38, Issue 6, pp. 2887-2897

119 Meeting with Management of TCI Waste Management, November 2010.

134

TCI Waste‘s project would collect waste collection from all islands to power a waste to energy plant at Blue Hills with incineration technology. According to TCI Waste, the plant—provided it were capable of acquiring 100 tons of waste per day—would have an installed capacity of 3.75 MW; with a capacity factor of 85 percent, it would provide firm power.

Primary resource

Key resource factors affecting the viability of waste to energy projects include the quantity of waste, and its characteristics. The fraction of organic waste and moisture content of the waste determine the Net Calorific Value (NCV) of the waste, as well as associated emissions. A higher moisture content of the waste decreases its NCV. As noted for landfill gas to energy, a detailed study would have to determine the quantity and composition of the waste on TCI including organic content and moisture levels.

Technology for waste to energy

Waste to energy technologies convert waste matter into heat or various forms of fuel that can be used to generate electricity. Waste to energy technology is a proven, commercial technology currently used in more than 25 countries120. Several different technologies can be used for converting waste to energy. Most processes produce electricity directly through combustion, while others produce combustible fuels such as methane, methanol, ethanol or synthetic fuels. The key technologies include the following:

Anaerobic digestion (biogas) consists of a series of processes in which microorganisms break down biodegradable material in the absence of oxygen; it is used for industrial or domestic purposes to manage waste and/or to release energy. The technical expertise required to maintain industrial scale anaerobic digesters coupled with high capital costs and low process efficiencies has limited the level of its industrial application as a waste treatment technology

Incineration (the combustion of organic material) with energy recovery is the most commonly used waste to energy generation technology, and likely the most appropriate one for the TCI. Modern incinerators have decreased emissions of fine particulate, heavy metals, trace dioxin and acid gas emissions

Pyrolysis is a thermo-chemical decomposition of organic material at elevated temperatures in the absence of oxygen. Pyrolysis is useful for producing combustible fuels: charcoal, biochar, or biofuel

Plasma arc gasification is an experimental technology that uses an electric current that passes through a gas (air) to create plasma, a collection of free-moving electrons and ions. When plasma gas passes over waste, it causes rapid decomposition of the waste into its primary chemical constituents which is normally a mixture of predominantly carbon monoxide and hydrogen gas, known as syngas. (The extreme heat causes the inorganic portion of the waste to become a liquefied slag, which is cooled and forms a vitrified solid upon exiting the chamber.) The syngas can be combusted in a second stage in order to produce process heat and electricity.

120 Gamma Energy Ltd. http://www.gammaenergy.mu/index.php?item=16&lang=1

135

The scale of waste to energy plants depends on the type of technology used. Incineration technology is similar to the technology used for bagasse incineration, with a similar or larger size. Commercial-scale plants using pyrolysis and gasification would typically be in the order of 20,000 to 250,000 tpa121. Pyrolysis to charcoal and energy plants range from 20,000 to 50,000 tpa, with an energy output of 1MW to 2MW. Plants with a capacity exceeding 250,000 tpa are considered large scale.

Costs of waste to energy

Municipal solid waste to energy plants come in many different sizes and varieties, from low-tech mass-burn plants, to newer technologies like gasification, plasma arc and pyrolysis. Costs can vary from technology to technology. Variables such as capacity, the amount of up-front sorting required, emission testing and monitoring technologies, operator training, and ash management also have an impact on the project costs. Incinerators require control measures for stack emissions and flue gas cleaning equipment (such as acid scrubbing plant, carbon injection system, electrostatic precipitators or fabric 'type' filters, depending on the type of control system employed). Cleaning processes can form a significant proportion of the overall capital costs of a waste to energy plant—estimated between 30 and 60 percent in the United Kingdom, depending on the waste mix and technology122. Regulations concerning the design and operation of incinerator plants also mean that the capital costs and operating costs for waste to energy incinerators can be high.

Waste to energy plant capital expenditure can range from about US$3,500 to US$5,000 per kW installed depending on the technology, and waste stream composition and quantity. The plant proposed by TCI Waste would have an installed capital cost of US$6,827 per MW, and O&M costs of US$157 per kW per year. This is consistent with figures we assessed recently for Barbados and Mauritius, and we use them in our analysis for the TCI. Incineration technology is a mature technology, and therefore has limited scope for additional ‗learning‘ effects. It is unlikely to benefit from a significant decline in cost (unless the cost of materials, inputs or labor used to make incinerators decrease). Newer types of waste to energy technologies, however, may benefit from learning effects which could lead to a decline in capital costs.

Conclusions on waste to energy in the TCI

Waste to energy represents an interesting option for managing waste in the TCI and generating cost-competitive electricity—again provided sufficient waste volumes of the right composition are available. It is unlikely that sufficient volumes would be available even in the long term for developing both a waste to energy and a landfill gas to energy plant in the TCI. Uncertainty in the planning and procurement process has stalled a comprehensive waste management solution in the country—as for landfill gas to energy, a clear process needs to be established to define the most convenient option and implement it.

121 Last S., Pyrolysis and Gasification, Mechanical Biological Treatment Website, 2008, http://www.mbt.landfill-

site.com/Pyrolysis___Gasification/pyrolysis___gasification.html, last accessed 29 September 2010.

122 S. Last (2008). Mechanical Biological Treatment Website (http://www.mbt.landfill-site.com/EfW/efw.php)

136

Waste to energy (incineration)

Installed capacity (MW)

Unit Capital Cost

(US$/kW)

O&M Costs (US$/kW/yr)

Capacity Factor

(%)

Annual output

(GWh/year)

Lifetime (years)

LRMC (US$/kWh)

3.75 6,827 157 85% 27.9 25 0.12

Source: TCI Waste Disposal Services

C.3 Wind Energy

Wind energy is a mature technology that provides non-firm energy at both utility scale and distributed scale. Although preliminary estimates are very encouraging, the exact quality and availability of the wind resource in TCI is not ascertained. Detailed wind resource studies would need to confirm preliminary estimates, and land availability would need to be assured for a period equivalent to plant lifetime for actual projects to be developed successfully.

Current state of development in the TCI

There is no utility scale wind energy plant in the TCI. The most advanced plans for utility scale wind energy have been developed by TCU for implementation on Grand Turk and Salt Cay.123 TCU‘s proposal includes a hybrid wind-solar PV-diesel system including eight to nine wind turbines (650-850kW each) and about 1MW of solar PV. TCU‘s preliminary estimate for capacity factors are encouraging—a relatively high 32 percent. However, preliminary estimates need to be confirmed by a detailed assessment of the wind resource, especially considering high gusts registered in Grand Turk (over 7 meters per second). Following its request to the Government in 2010, TCU obtained approval for installing meteorological towers on Crown Land for a period of three years to conduct a detailed assessment.124 However, it received no long-term license agreement for installing and operating a possible wind farm.

Primary resource

The speed and consistency of wind resources are the primary concern for developing wind generation. These two factors directly affect the capacity factor of a wind plant. With highly variable wind, capacity factors and output are reduced increasing the long run marginal cost of the machine. Also, short term wind variability (that is, within a given minute or hour) decreases the reliability of wind plant causing more backup conventional generation to be needed.

The offshore wind industry has grown substantially in recent years. Wind resource assessments show that offshore locations typically offer better capacity factors (up to 7 percent more than for on-shore farms125). Before actual development of offshore wind could be considered, offshore wind resources on TCI should be assessed in detail, including a bathymetric survey (a study on the sea surface and depth). This would represent an important first step, as it is one of the two main components of an offshore wind resource assessment (the second one being wind measurements).

123 Turks and Caicos Utilities, LTD, Renewable Energy Development Strategy, 2009.

124 TCIG Advisory Council, Policy Position, 6 October 2010.

125 European Wind Energy Association, Oceans of Opportunity, September 2009.

137

Technology for wind energy

Wind turbines capture with their blades the kinetic energy in surface winds, and use the mechanical power generated by the rotation of the blades to turn a generator, thereby converting kinetic power into electrical energy. Wind turbines are an established, widespread technology that has recently increased its penetration worldwide (159GW installed worldwide by end-2009 according to the World Wind Association; a tenfold increase since 1997). Grid systems that have high penetration of wind energy include Denmark (over 19 percent of electricity generation), Spain and Portugal (over 11 percent), and Germany and the Republic of Ireland (over 6 percent).

In terms of types of technology, wind turbines come in three-blade or two-blade configurations—three-blade turbines capture more wind energy, but two-blade turbines are more suited to high wind speeds (and their higher rotational speed produces louder noise).

In terms of scale, larger turbines (from 1MW to 5MW) yield more power at relatively lower capital cost, and are preferred whenever it is possible to carry and install them—also because there are high fixed costs for developing a wind farm that must be sustained, regardless of installed capacity.

In terms of location where the technology can be installed, wind turbines can be installed onshore or offshore—the key technological aspect involved in offshore developments concerns the foundations, which are best placed in shallow waters (up to 20 meters) and close to shore (up to 20 kilometers).126

Other technical issues and opportunities for developing wind energy in TCI

There is limited ability to integrate intermittent power supply in the electricity system of TCI. The share of intermittent generation that a grid can handle depends on the response time of available stand-by and load-following generating units—diesel units typically have rapid response times. Additional diesel backup would be needed for developing wind farms beyond 10 percent of peak capacity (about 0.5MW for each additional MW of wind), and this would carry a high cost.

There is also limited availability of land for installing onshore wind farms in TCI. This limits the possibility of installing larger and more cost-effective turbines (3 to 5MW), and imposes the use of 1MW turbines instead, or even smaller ones as TCU is considering (this is a common problem in small island countries). Limited availability of land also constrains the choice of sites with a good wind resource and adequate accessibility.

Emerging technologies for energy storage and offshore wind forecasting devices should be considered in the medium term for increasing the share of grid-connected wind energy in TCI. Provided the cost of these technologies decreases over the next few years, they represent an interesting potential alternative to a strategy that only relies on additional rapid-response thermal capacity. The effect of energy storage technologies is to increase the effective capacity factor of a wind farm, ensuring better grid stability. Offshore wind forecasting devices provide early warning about changes in expected wind energy output—allowing ramping up of rapid response plants if wind decreases, or ramping down generation from wind in the event of storms (wind speeds of over 25 meters per second are too high for turbines to withstand).

126 European Wind Energy Association, Oceans of Opportunity, September 2009.

138

Finally, interruptible loads (customers that pay a special tariff accepting that service to them may be interrupted at certain times) may help stabilize the effects on the grid of intermittency.

Costs of wind energy

Capital costs of wind turbines vary greatly depending on the technology, the site, and the scale of a wind farm. ‗Class 1‘ turbines (such as those produced by Vestas), designed to withhold extreme gusts of 250 kilometers per hour, and average annual wind speeds of 10 meters per second, have installed capital costs of about US$1,800 per kW;127 lowerable or tiltable turbines (such as those produced by Vergnet128), designed to lower or tilt down the nacelle and blades in case of hurricanes, cost more (up to US$3,000-US$3,500 per kW). Only a detailed study for a specific site can price accurately the capital and O&M costs.

The future costs of wind energy depend on technology and market factors. Supply bottlenecks led to a steady increase in turbine prices, which peaked in 2008 for delivery in 2009. However, an easing of turbine demand in 2009, mainly due to financing issues coupled with an expanding supply chain, led to a global oversupply in 2010. Oversupply in the global wind market has meant that prices for contracts signed in late 2008 and 2009 for delivery in the first half of 2010 fell by 18 percent. The Energy Information Administration (EIA) expects capital costs of onshore wind to decrease by as much as 19.6 percent by 2035, and those of offshore wind to decrease even more (32.4 percent)129.

The estimated LRMC for the utility scale wind farm on TCI is US$0.12 per kWh, based on a 850kW ‗Class 1‘ turbine with a capacity factor of 25 percent. This is a conservative estimate we adopt for our analysis due to the fact that a detailed assessment has not been carried out yet—TCU‘s preliminary estimate is for a capacity factor of 32 percent130. Lowerable or tiltable turbines would have a higher LRMC with the same capacity factor—about US$0.21 per kWh. LRMCs of distributed scale turbines, assuming the same 25 percent capacity factor, would be US$0.37 per kWh for a 10kW turbine.

Conclusions on wind energy in the TCI

Wind energy represents an interesting potential for TCI, but detailed information is needed to assess how much of this potential is technically feasible and commercially viable. In particular, the country would benefit from detailed assessments for onshore potential as proposed by TCU, and potentially for offshore potential. Assessing offshore wind could be especially important, because it might address a key limitation to developing wind energy in small island countries—limited availability of land. Finally, the scope for developing wind energy could increase significantly if energy storage and wind forecasting solutions become technically and commercially viable.

An initial limit of 10 percent peak capacity might be a reasonable and safe first step for integrating wind energy in TCI‘s grid until better information on the resource is collected

127 Vestas, http://www.vestas.com/en/wind-power-plants/procurement/turbine-overview.aspx#/vestas-univers,

http://www.vestas.com/en/wind-power-plants/wind-project-planning/siting/wind-classes.aspx#/vestas-univers (last accessed 20 December 2010).

128 Vergnet Wind, http://www.vergnet.fr (last accessed 21 December 2010).

129 United States Energy Information Agency, Assumptions to the Annual Energy Outlook 2010, 2010

130 Turks and Caicos Utilities, LTD, Renewable Energy Development Strategy, 2009.

139

(and experience in managing wind farms is gained), and proves that it is technically and economically feasible to go beyond this limit.

Wind Energy (850kW ‘Class 1’ turbines)

Installed capacity (MW)

Unit Capital Cost

(US$/kW)

O&M Costs (US$/kW/yr)

Capacity Factor

(%)

Annual output

(GWh/year)

Lifetime (years)

LRMC (US$/kWh)

5 1,800 50 25% 10.9 20 0.12

Wind Energy (275kW lowerable or tiltable turbines)

5 3,150 98.5 25% 10.9 20 0.21

Wind Energy (10kW distributed turbines)

0.01 6,000 110 25% 0.02 20 0.37

Source: Capital and O&M Costs, lifetime: based on information provided by Vestas (Class 1 turbines) and Vergnet (lowerable/tiltable turbines), and information from a 10MW wind farm proposed by BL&P in Barbados. Capacity factor: conservative estimate based on a preliminary assessment by TCU of 32 percent in Grand Turk and Salt Cay.

C.4 Solar Photovoltaic Energy

TCI is very well endowed with sunlight, which represents the primary energy resource for solar photovoltaic (PV) systems. Because sunlight is intermittent, solar PV systems—a mature and internationally widespread technology—provide non-firm power, mostly as small or commercial systems distributed on the grid. Capital costs of solar PV systems are expected to fall further, following a downward trend that has brought their generation costs closer to competitive levels. Conversion efficiency of PV panels is also expected to further improve.

Current state of development in the TCI

There are no commercial scale solar PV plants in TCI, and penetration of smaller systems is almost none. With the abundance of solar exposure that TCI receives, many large and medium consumers of electricity—in particular, hotels—have begun expressing interest in systems designed for self-generation.

Primary resource

No solar radiation map exists for the TCI. However, we obtained a solar radiation map developed in 2010 for Bahamas131—estimating an average between 5 and 6kWh per square meter per day—and we use that as a proxy. These are very similar to radiation values estimated for Barbados, which allows us to use estimated from that country for output from various PV panel types (as well as from solar water heaters, below).

Technology for solar PV energy

Solar PV technology transforms solar radiation into electricity. The basic component of a PV system is the PV cell, a semiconductor device that converts solar radiation into direct-current electricity. (‗Conversion efficiency‘ is the ratio between the electrical power produced

131 Fichtner, Direct normal solar irradiation on The Bahamas, based on National Renewable Energy Laboratory (NREL), 2010.

140

by a solar PV cell and the amount of incident solar energy received per second.) PV cells are interconnected to form a PV panel (or module). PV panels combined with a set of additional application-dependent system components (such as inverters, batteries, electrical components, and mounting systems) form a PV system. PV systems can be used individually, or grouped together in arrays.

There are currently two types of commercial PV modules: wafer-based crystalline silicon (c-Si, which currently represent about 85 to 90 percent of the global annual market132) and thin films. Other technologies, such as advanced thin films, organic cells, and more novel concepts, are being developed, but are not commercially available. The efficiency of solar cells has increased considerably over the past few years, and is expected to increase further, especially for newer types of cells.

There are two categories of wafer-based crystalline silicon modules:

Monocrystalline modules are made from a single large silicon crystal cut from ingots. This is the most efficient (15 to 20 percent efficiency)133, but also the most expensive type of solar PV panel

Polycrystalline modules are cast in ingots of silicon that contain several small silicon crystals. This is the most common type of panel currently available on the market, and is somewhat less efficient (13 to 15 percent efficiency)

Thin film panels are cheaper to produce, but less efficient (efficiency ranges from 6 to 12 percent). They include amorphous silicon (a-Si) and micromorph silicon; cadmium-telluride (CdTe); and Copper-Indium-Diselenide (CIS) and Copper-Indium-Gallium-Diselenide (CIGS).

Mounting systems for the panels can be fixed, or integrate a tracking system. Tracking systems tilt panels (along one or two axes) towards the sun to increase exposure to radiation. Tracking systems are a mature technology, and increase the overall efficiency of a panel even by over 20 percent (depending on panel type). However, they are more fragile and expensive than fixed mounting systems, and are not used in areas prone to cyclones such as TCI.

Other technical issues and opportunities

The potential for increasing the use of PV in TCI may become constrained by the country‘s limited land mass, particularly for large-scale systems. Small and medium systems are more likely to be installed on residential and commercial rooftops. However, the constraint in availability of land will only be relevant in the medium to long term, when the cost of solar PV may be low enough to justify the more extensive installation of larger scale systems.

Costs of solar PV energy

The solar industry has made great progress over the past few years in reducing the costs of PV systems, and further reductions in cost are expected in the coming years. The cost of solar modules decreased from around US$27.0 per Watt in 1982 to approximately US$4.0 per Watt in 2009134. According to some estimates,135 the cost of PV systems could drop to 132 International Energy Agency. Technology Roadmap: Solar Photovoltaic Energy (2010).

133 Conversion efficiencies based on International Energy Agency. Technology Roadmap: Solar Photovoltaic Energy.

134 Solar Buzz (2010). Photovoltaic Industry Statistics: Costs (http://www.solarbuzz.com/StatsCosts.htm)

135 Energy Information Administration, Annual Energy Outlook 2010.

141

US$2.5 per Watt by 2035, driven by expected falling prices of polysilicon (however, a shortage in polysilicon supply in 2008 led to a price hike that could happen again).

The cost of generating electricity with solar PV is still relatively high compared to other energy sources. Assuming an output of 1,650kWh per kW per year, corresponding to a capacity factor of 21 percent (about 1,840 hours on 8,760 hours per year), the estimated LRMC of thin film solar PV systems in TCI is between US$0.28 per kWh (for larger systems of about 50kW), and US$0.36 per kWh (for smaller systems of about 2kW for domestic use).

Conclusions on solar PV energy in the TCI

Very good availability of the primary resource, continuously improving technology, and decreasing capital costs all contribute to a positive outlook for solar PV in TCI in the medium to long term.

Solar PV (thin film, fixed, commercial)

Installed capacity (MW)

Unit Capital Cost

(US$/kW)

O&M Costs (US$/kW/yr)

Capacity Factor

(%)

Annual output

(GWh/year)

Lifetime (years)

LRMC (US$/kWh)

0.05 4,000 42 21% 0.09 20 0.28

Solar PV (thin film, fixed, small)

0.002 5,000 60 21% 0.003 20 0.36

Solar PV (high efficiency, fixed, commercial)

0.05 5,000 42 19% 0.08 20 0.39

Solar PV (high efficiency, fixed, small)

0.003 6,000 60 19% 0.005 20 0.47

Source: Capacity factor based on radiation of 5.5kWh/m2/day. Capital and O&M costs based on figures for PV systems observed in Barbados.

C.5 Solar Water Heaters

TCI enjoys a very good availability and quality of solar radiation. Unlike solar PV, capital costs of solar thermal energy systems used to heat water—a relatively simple and very mature technology—are already low, making this a highly viable renewable energy option for the country.

Current state of development in the TCI

Penetration of solar hot water systems in the residential and commercial sector of TCI is minimal. The few systems installed are mostly imported from the United States, with double-loop anti-freezing systems that are unnecessary in the TCI and increase costs. Solar Dynamics systems manufactured in Barbados and Saint Lucia are being imported in the TCI—these should be cheaper and more appropriate for the TCI.136

136 Conversation with Landmark Realty Ltd, 12 January 2011.

142

Technology for solar water heating

The main components of a solar water heater system are the storage tank, and the solar collector. There are two main types of solar collectors utilized for low grade thermal applications:

Flat plate panels are the most common type of solar collectors. A flat plate collector is an insulated box with a glazed cover, an absorber, and copper pipes. The solar radiation passes through the glazed cover and heats the absorber. The circulation water in the pipes captures the thermal energy. The water can move by natural convection to an elevated tank, or be actively pumped through the collector. The intercept efficiency137 for flat plate collectors may be as high as 80 percent, but decreases rapidly with the increased difference between the temperature of the heated fluid and the ambient temperature.

Evacuated glass tube collectors use shallow glass tubes to reduce the heat loss to the surrounding environment. The absorber is located inside the tube and is heated by the sun radiation passing through the glass. The intercept efficiency of an evacuated tube collector is slightly lower than a flat plate collector. However, the efficiency of the collector is less impacted when the temperature difference between the heated fluid and the surrounding environment increases, therefore maintaining a higher efficiency even with a higher operating temperature. This makes evacuated tube collectors better suited to providing process heating in the temperature range from 80 to 90°C.

In terms of scale, solar water heaters range from storage tanks of just 100 liters and capacity of 1 to 2kW, to storage tanks of several hundred liters and capacity of 70 or 100kW. Scale corresponds to the sector—smaller systems are used in the residential sector, while larger ones are used in the commercial and industrial sectors. Commercial applications include in particular hotels and restaurants; industrial applications vary greatly—ranging from processing of poultry to horticulture (although this is less likely in warm climates).

Transfer of heat to a hot water system may be done through a ‗solar fluid‘ flowing through a tube attached to the absorber plate (or through heat pipes integrated in the solar plates) to fluid contained in a manifold at the top of the collector, which in turn is connected to the storage cylinder by a heat exchanger. The solar fluid usually contains a non-toxic anti-freeze solution.

Costs of solar water heaters

The capital cost of a solar water heaters depends not only on the installed capacity of the collector (Watts thermal), but also on the capacity of the storage tank. Estimated generation costs for residential and commercial solar hot water systems are as low as US$0.12 and US$0.13 per kWh, respectively138. Since this is a mature technology, capital costs are unlikely to fall to a significant extent. However, a study by the International Energy Agency suggests that costs decrease by 20 percent when the total capacity of domestic solar water heaters

137 Intercept efficiency is defined as the efficiency of the collector in converting solar energy to heat when the average

temperature of the panel is equal to the ambient temperature. At intercept efficiency, there are no losses or gains from the environment.

138 Meetings with retail distributors during our field visit to TCI, November 2010.

143

doubles within a given country139. For our assessment, we used cost figures collected from solar water heater manufacturers in Barbados (including Solar Dynamics, whose systems have begun to be imported in the TCI). Output per kW (thermal) installed can be assumed to be the same based on a similar solar radiation shown for Bahamas, as discussed above.

Conclusions on solar water heaters in TCI

Solar thermal energy for water heating is among the most cost-effective renewable energy technologies available. Introducing standards for solar water heater systems may be useful to ensure that systems sold on the market comply with a minimum level of efficiency—and that sub-standard systems are not imported in the country.

Solar Water Heater (flat plate, commercial)

Installed capacity (MW)

Unit Capital Cost

(US$/kW)

O&M Costs (US$/kW/yr)

Capacity Factor

(%)

Annual output

(GWh/year)

Lifetime (years)

LRMC (US$/kWh)

0.07 1,600 24 19% 0.1 20 0.13

Solar Water Heater (flat plate, small)

0.002 1,250 20 17% 0.002 20 0.12

Source: Based on data provided by solar water heater manufacturers in Barbados.

C.6 Concentrated Solar Power

While it is currently not a cost competitive and mature technology, Concentrated Solar Power (CSP) may represent a good opportunity for TCI in the medium to long term provided land is available. The primary resource (sunlight) is abundant in the country, and CSP has a better potential than solar PV in terms of conversion efficiency, suitability for utility scale plants, and ability to integrate energy storage. Thermal accumulators can increase capacity factors of CSP plants to over 60 percent, enhancing their potential ability to provide (almost) firm power140.

Current state of development in the TCI

There are no CSP plants in TCI, and none are being considered. In early 2010 the global installed and operating capacity of CSP plants was estimated at around 606MW141. Thirty percent of this capacity was installed in Spain, and the remaining 70 percent was installed in the United States. Emerging Energy Research, a research firm specializing in renewable energy, reports that an additional 1,292MW of CSP capacity has been planned for 2010142.

139 International Energy Agency (2009). Renewable Energy Essentials: Solar Heating and Cooling.

140 Solar Paces, European Solar Thermal Power Industry Association, Greenpeace (September 2005). Concentrated Solar Thermal Power – Now!

141 Emerging Energy Research (April 2010). Global Concentrated Solar Power Markets and Strategies: 2010-2025. (http://www.emerging-energy.com/uploadDocs/GlobalConcentratedSolarPowerMarketsandStrategies2010.pdf)

142 Emerging Energy Research (April 2010). Global Concentrated Solar Power Markets and Strategies: 2010-2025.

144

Technology for CSP

CSP technologies convert the sun‘s energy into high temperature heat using various mirror or lens configurations. This heat is then transformed into mechanical energy through a boiler that powers a steam turbine, and then into electricity (or, directly into electricity using micro-turbines).

There are four main types of CSP technology:

Parabolic troughs are the most commercially advanced type, although not the one with the highest conversion efficiency (15 percent efficiency, and expected to make limited improvements)143. Troughs (or mirrors) concentrate the sun‘s energy to heat a transfer fluid to around 400°C144. The heat transfer fluid is then circulated through a boiler and converted to high-pressure steam, which is then sent to a steam turbine to generate electricity. Motors constantly tilt the parabolic trough toward the sun

Solar towers145 contain the same key elements as parabolic troughs—mirrors, solar receiver, boiler/steam generator, and a steam turbine. However, mirrors of a solar tower (also referred to as heliostats) can move to track the sun along two axes, whereas parabolic troughs track the sun along one axis. The conversion efficiency of solar towers can reach 35 percent, and is expected to improve

Parabolic dishes are made of mirrors that concentrate the sun‘s rays at a focal point above the center of the dish. The focal point incorporates a Stirling engine146 or micro-turbine that directly converts solar heat into electricity, with a conversion efficiency of about 25-30 percent

Linear Fresnel reflectors consist of long rows of flat or slightly curved mirrors that reflect the sun‘s rays onto a downward-facing, linear, fixed receiver. Their conversion efficiency is the lowest (8-10 percent) but expected to improve.

One of the most interesting features of CSP plants is that they can be combined with heat storage. Accumulators store excess heat generated throughout the day and release the heat when needed, enabling CSP plants to continue to produce electricity after sunset. Excess heat is sent to a heat exchanger to warm a material (such as molten salts), which is then transferred to a hot reservoir. When needed, the heated fluid is sent from the hot tank to a steam generator to generate electricity. Most CSP plants have some degree of ability to store heat energy for short periods of time, and therefore can be combined with thermal storage147.

143 Foster Wheeler (2010). Utility Scale PV and CSP Solar Power Plants – Performance, Impact on the Territory and

Interaction with the Grid.

144 European Solar Thermal Electricity Association (2009). Parabolic Troughs.

145 Note: the solar tower referred to in this instance should not be confused with a solar chimney, which is sometimes also referred to as a solar tower

146 A Stirling engine converts heat directly into kinetic energy through the repeated compression and expansion of a gas enclosed within a chamber of the engine.

147 International Energy Agency (2010). Concentrated Solar Power – Technology Roadmap.

145

Experience shows that thermal storage systems of 6 to 12 hours can make CSP plants operate almost up to 6,000 hours annually (about 68 percent)148, as opposed to a much lower number of annual hours of operation of solar PV systems (typically 1,700 hours per year, or a capacity factor of about 20 percent).

Other technical issues and opportunities

In the long-term, the potential for concentrated solar power may be constrained by the limited land mass of TCI. As an example, the 100MW ―Shams 1‖ parabolic trough plant planned in Abu Dhabi will be installed on 300 hectares, therefore requiring about 3ha per MW149. Another parabolic trough plant planned in Southern California (Blythe, 1GW) will reportedly also require approximately the same surface area per MW150.

Costs of CSP

Unit capital costs of CSP plants are higher than those of solar PV systems, but one clear advantage of CSP compared to solar PV (or wind energy) is the possibility of using thermal energy storage to produce electricity during the night or limited cloudy periods. Including thermal storage, estimated capital costs are above US$8,000 per kW installed for parabolic troughs, and can reach more than US$12,000 for solar towers (which, however, compensate higher costs with a higher efficiency).151

Estimated LRMC for parabolic troughs and solar towers (including thermal storage) are US$0.26 and US$0.28 per kWh, respectively (based on capacity factors of 45 percent for parabolic troughs, and 65 percent for solar towers). Capital costs are expected to fall in the future—according to a report published by the Energy Sector Management Assistance Program in 2007152, as low as US$0.12 cents by 2015 (including thermal storage). While this may seem overly optimistic given that the cheapest CSP plants today have LRMCs of about US$0.20 to 0.25 per kWh, it is indicative of the expected cost reductions for components and installation.

Conclusions on CSP in the TCI

CSP might be a technology for TCI to consider in the medium to long term, as capital costs decrease, performance improves, and energy storage potential makes further progress—and provided that land for installing them is available.

148 Solar Paces, European Solar Thermal Power Industry Association, Greenpeace (September 2005). Concentrated Solar

Thermal Power – Now!

149 Renewable Energy Focus (September 3, 2010). Abener and Teyma Build 100MW CSP Plant in UAE.

150 Solar Server (September 1, 2010). 1GW Blythe CSP Receives Final Environmental Impact Statement. (http://www.solarserver.com/solar-magazine/solar-news/current/kw35/1gw-blythe-csp-receives-final-environmental-impact-statement.html)

151 Estimates based on International Energy Agency, Concentrated Solar Power – Technology Roadmap, 2010

152 Energy Sector Management Assistance Program, Technical and Economic Assessment of Off-Grid, Mini-Grid, and Grid Electrification Technologies, December 2007, http://siteresources.worldbank.org/EXTENERGY/Resources/336805-1157034157861/ElectrificationAssessmentRptSummaryFINAL17May07.pdf

146

CSP (Parabolic Trough, w/storage)

Installed capacity (MW)

Unit Capital Cost

(US$/kW)

O&M Costs (US$/kW/yr)

Capacity Factor

(%)

Annual output

(GWh/year)

Lifetime (years)

LRMC (US$/kWh)

50 8,000 100 45% 197.1 20 0.26

CSP (Solar Tower, w/storage)

50 12,000 200 65% 284.7 20 0.28

Source: International Energy Agency, Concentrated Solar Power – Technology Roadmap, 2010; PWC, 100% renewable electricity—a roadmap to 2050 for Europe and North Africa, 2010.

C.7 Seawater Air Conditioning (SWAC)

SWAC systems use deep sea cold water to supply air conditioning (as well as other secondary applications such as chilled-soil agriculture, aquaculture, desalination, and secondary cooling). SWAC systems use a combination of mature, established technologies—such as heat exchangers, chilled water distribution and building cooling systems—and can effectively replace base load power.

There are a few SWAC plants currently operating worldwide, including in Hawaii (operating since 1986), New York (since 2000), Toronto (since 2003), and Stockholm (since 1995)153. A preliminary assessment for a 2MW SWAC district cooling system in Barbados estimated a LRMC of about US$0.23 per kWh, but any assessment should be based on site-specific data.

Seawater Air Conditioning

Installed capacity (MW)

Unit Capital Cost

(US$/kW)

O&M Costs (US$/kW/yr)

Capacity Factor

(%)

Annual output

(GWh/year)

Lifetime (years)

LRMC (US$/kWh)

2 4,200 165 33% 5.7 20 0.23

Source: Stantec, Preliminary cost-savings calculations for a SWAC district cooling system located near Needhams Point, Barbados.

153 Makai Ocean Engineering (May 2010). Cold Seawater Air Conditioning. (http://www.makai.com/p-swac.htm)

T +1 (202) 466-6790 F +1 (202) 466-6797 1700 K Street NW Suite 450 WASHINGTON DC 20006 United States of America T: +61 (2) 9231 6862 F: +61 (2) 9231 3847 Level 10, 1 Castlereagh Street SYDNEY NSW 2000 Australia T: +64 (4) 913 2800 F: +64 (4) 913 2808 Level 2, 88 The Terrace PO Box 10-225 WELLINGTON New Zealand T +33 (1) 45 27 24 55 F +33 (1) 45 20 17 69 7 Rue Claude Chahu PARIS 75116 France ------------- www.castalia-advisors.com