While individuals could reap more for providing energy to the national grid, customers of the utility company could be made to pay more for electricity in coming months.
This is one of the potential disadvantages outlined in the feed-in-tariff (FIT) consultation paper from the Fair Trading Commission (FTC), which is designed to garner feedback from key stakeholders.
The consultation period began on May 29 and ends on June 19, 2019.
The 32-page document, which noted that Government was seeking to cut back on its massive Fuel Import Bill and generate 100 per cent of the country’s renewable energy from renewable energy sources by 2030, also said there were some disadvantages to having a FIT programme.
In April, Minister of Energy and Water Resources Wilfred Abrahams revealed that the FTC would inform Government by early July, of what the proper FIT for renewable energy should be. At the time, Abrahams had given the assurance that the new FITs would ensure that investors would receive their fair returns.
As per the temporary rates set in July 2016, power for all units supplied to the national grid under the renewable energy rider programme fetch $0.416/kWh for solar photovoltaic, and $0.315/kWh for wind.
However, as the FTC seeks input in setting a more permanent and “reasonable” rate for energy sold to the national grid, it warned that these programmes are not without some “shortcomings”.
“There are some issues inherent in the design of feed-in-tariffs that may lead to a loss of public support and even market distortions,” said the document, though insisting that these were not specific to Barbados.
It pointed out that historically, FITs have been implemented through the use of subsidies, and in those circumstances a premium is added to the FIT rate as an incentive to spur investment.
“A potential consequence is higher energy costs to the consumer,” the FTC cautioned.
“As a result of the premium placed on the feed-in-tariff rate, the offtake, usually an electric utility, is faced with paying more than the market price for the energy from the renewable energy supplier. In turn, the offtaker passes these costs to the consumer,” it explained.
Alternatively, it said, the FIT programme may include an indirect support mechanism such as tax concessions. However, the FTC said “This may not be strictly applicable to Barbados, as the Government has not advised of any specific subsidies at this time.”
The FTC also warned that should new data become available over time, there may be a need to renegotiate or re-adjust the FIT rate.
“This may lead to a revised price, which may not be conducive to maintaining investor confidence,” the regulator said.
“To mitigate against this, there may be a need to structure the feed-in-tariff with a built-in renegotiation element so that investors are made aware from the initial stages,” it said, adding that a flexible pricing methodology was required so that changing costs are more accurately and easily reflected.