Propuesta de mejora en la implementación del SG-SST en la empresa

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).

 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}

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.

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.}

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.