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
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.
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$14 per ton of CO2 as of 10 January 2011 on PointCarbon (www.pointcarbon.com) 74 19.2 kg of carbon per GJ for diesel. We convert carbon into CO
2 by a factor of 3.67 to account for the higher molecular
weight of CO2 after oxidation of carbon (44/12 is the ratio between the molecular weights of carbon and oxygen) 75 Assumed thermal efficiency factor of 30% for Wartsila plants, and 25% for Caterpillar plants.
76 Assumed 30 percent of generation in the TCI from Wartsila plants, and the remaining 70 percent from Caterpillar plants 77 The word ‗equivalent‘ refers to the fact that, based on IPCC guidelines, greenhouse gases other than carbon dioxide may
be expressed in carbon dioxide terms using their global warming potential.
749 535 126 (2) (24) (29) (31) (81) (117) (155) (161) (173) (182) (212) (242) (400.00) (200.00) - 200.00 400.00 600.00 800.00
Solar LED Street Lighting LED Street Lighting
Efficient Retail Refrigerators (Condensing Unit) Efficient Residential Refrigerators
LCD Computer Monitors T5 High Output Fluorescent Lamps Efficient Split A/C Systems
T8 Fluorescent Lamps w/Occupancy Sensor Magnetic Induction Street Lighting Efficient Chillers
Variable Frequency Drives Efficient Window A/C Systems Premium Efficiency Motors Power Monitors
Compact Fluorescent Lamps (CFLs)
US$/tCO2
(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