NET METERING IMPLEMENTATION IN BELIZE

1. NET METERING IMPLEMENTATION IN BELIZE 11th OOCUR Annual Conference Presentation by Derek Davis – Public Utilities Commission

2. Why Renewable Energy Generation • Global warming and climate change • Impact of rising sea levels and stronger hurricanes in LAC region • All countries need to take action to reduce green house gas emissions • Power generation from fossil fuels a major contributor to climate change • In Belize in the 1990s US$ 3 m spent for Diesel Plant de-mobilization and cleanup

3. GOB policy with respect to RE generationWhere does Net Metering Fit? • GOB where possible to encourage RE generation to displace fossil fuel generation • Utility grade RE generation implemented from 1995 to 2013 (hydro, bio-mass and solar) • Belize in 2013 only generates very small quantities for energy using fossil fuels in-country • Belize imports energy from Mexico – Coal, Natural Gas and HFO are used for generation • Belize must continue to introduce policy to reduce climate change impacts • GOB has started to promote the use of small scale RE generation including Net Metering Chalillo Hydro Dam

4. “Net Metering” –A definition Development by utility customers of small scale renewable energy (RE) generation Interconnection to the utility power grid of the RE generation Utility power system used to bank energy when RE output higher than customer load Customer uses banked energy when needed Only Net Energy is Metered

5. Net Metering further explained • Monthly Billing by utility based on net energy flow to customer • Customer allowed to displace only their load with RE generation • Customer effectively allowed to sell energy to the utility at their average in-feed utility tariff rate; taxes also not payable • Customer loses any utility banked energy after 1 year • RE generation system design therefore covers only customer’s load • no excess energy can be sold to the utility

6. Typical Net Metering Customer Typical Customer having: Lights interior/exterior Refrigerator Electronics/Computers Water heater Washer Dryer Air Conditioning Belize City - Kings Park

7. Example of Net Metering Facility design • Residential solar roof-top generation system design • 66 solar panels, each 180 W • Cabling • Invertor • Interface switchbox with protection (frequency, voltage and current) also allows reclosing • 11.88 KW max generation • Mono-crystalline silicone solar cells with approx. 15% efficiency • 1,028 square feet needed for roof-top installation of solar panels • Economic Life – 20 years with some degradation

8. Solar NM Facility design Chart 2- customer hour load, solar gen output hourly, temp in deg. C Graph shows for a typical day: customer load solar generation Temperature deg. C Solar Energy banked by utility in the day Banked Energy from Utility used at night

9. Results Financial Analysis Customer perspective • IRR 7.77% • NPV US$ 2,372 (discount rate–7%) • Payback 9.45 years • APV Project Cost US$ 45K - 2013$ • Initial Investment US$ 40 K – 2013$ • APV Project Benefits US$ 48 K – 2013$ • Benefit to Cost ratio 1.05 • LCOE US$ 0.2660/KWh • Assumption that benefit based the avoided cost of customer, being the full average retail residential tariff plus taxes (US$ 0.28/KWh generated)

10. Financial Analysis from Utility perspective • Displaced Energy - solar energy + reduction in T&D losses • Utility avoided costs at US$ 0.18/KWh • GOB Taxes (GST) eliminated US$ 0.03/KWh • Utility stranded costs (SC) US$ 0.07/KWh • SC Per year (this example) US$ 1,121 • Who will pay the Utility Stranded Costs (SC)?? • If Customer pays the SC the Solar PV project is NOT financially feasible • IRR becomes 3.68%; Benefit to Cost ratio – 0.75 • A recent Cost of Service study would be needed to define more accurately

11. Options for allocation of Utility Stranded Costs

12. Using externalities for the allocation of stranded costs • Structure the payments of the SC by considering the cost of externalities • Externalities (external to energy pricing system) • human health costs caused by air pollution; • damage to land and worker health cost from coal and oil and gas extraction; • climate change effects (strong hurricanes, rising sea levels); • acid rain and water pollution; • cost of protecting fossil fuel reserves. • Numerous studies and other non-polluting generation technologies available to value externalities and derive the level of incentives for RE (further reading – cost of coal externalities- http://www.skepticalscience.com/true-cost-of-coal-power.html) • Who pays for the externalities today?? • Who benefits from the reduction of externalities?? • In Belize we must discuss further

13. Engineering/Technical Analysis Solar NM designs and adequate interface to utility’s grid easily dealt with by local engineers and technicians and utility technical staff Due to interconnection to Mexico there are no costly spinning reserve requirements when cumulative RE is up to 15% of peak load Interactive Power System Analysis (IPSA) software used for engineering analysis There are no issues with the transient system response when there is instantaneous switching of RE (cloud cover or sudden wind speed reduction) – RE being 15% of peak load

14. Without Mexico – RE performance Without Mexico spinning reserve required, will also require higher levels of system reserves for same reliability – very expensive Without Mexico transient response become a problem at about 15% of peak load – Power Quality events Should we always expect Mexico to be interconnected?? Recommendation – RE be capped individually and cumulatively The cap will limit SC to pre-determined limits and allow design limits to be maintained for spinning reserve and the system transient response Caps need to be determined

15. Actions required of the GOB/Regulator/Utility – promote NM Review of financial and technical studies conducted for NM Commission new studies to allow complete understanding of NM if appropriate; More current Cost of Service Study would be important Amend the Electricity Act if deemed necessary to allow subsidy for NM customer class (revise strict cost of service requirement) Introduce Interconnection regulations which define the term “Net Metering” and create a new tariff customer class for NM Introduce Interconnection regulations which by law require the utility to consider NM requests from their customers and interconnect them where technically feasible

16. More Actions by GOB/Regulator/Utility – promote NM Determination of the distribution of identified utility stranded costs Regulator and utility to develop technical standards for NM including Smart grid solutions Regulator to legislate caps for individual and cumulative RE installed capacity (first come, first served) to be reviewed annually Issue license to Net Metering customers (Establishes a link to the regulator allowing for control of design and operational standards used by the NM customer)