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Net Billing: Opening the Door for Increased Renewable Energy Use

For many Jamaicans just the thought of lowering their electricity bill is enough to bring on a broad smile. Now imagine having the ability to not only pay zero on your electricity bill, but also be able to sell excess energy back to the public electricity grid!

Government recently announced a successful renegotiation of some the terms of the licence of the Jamaica Public Service Company (JPS). The renegotiation now forms a major springboard in its efforts to ensure a take-off of the country’s energy policy. These include energy security, the development of renewable energy sources, increases in energy efficiency and reinforcement of the regulatory framework to encourage investments in the sector.

Net Billing allows consumers to sell unused energy to the public electricity grid, generated from devices that harness renewable energy. This follows growing public calls for government to take steps to make energy more affordable. It is also is in step with government’s stated intent to increase the renewable energy intake to, at least, 20 percent of total demand.

“For far too long we’ve discussed renewables,” says Minister of Mining and Energy, Hon Clive Mullings, under whose portfolio net billing falls.

“What this agreement does is make economic sense for you to spur the investment to do it. It is now a game changer for renewables and for the public in meeting their own needs, and the national need as well,” he added.

‘Net billing’ allows owners of dedicated renewable energy equipment (such as wind and solar power) to sell excess power, generated from their equipment, to the Jamaica Public Service Company’s (JPS) grid. This will allow consumers to realize significant saving on electricity bills. Providers must obtain licences to sell the excess ‘as-available energy’ from Intermittent Renewable Energy Facilities up to 100kWh, facilitated through a five-year licence to participate in net metering, but only if generated by solar or wind devices.

The Office of Utilities Regulation (OUR) has developed a Standard Offer Contract (SOC), for the purchase of the ‘as-available energy’ and has outlined the terms, conditions and pricing regime for small power providers.

Compensation for the energy exchanged between JPS and customers, under the SOC, is determined via a net billing agreement, whereby the customer will pay the prevailing retail price for energy consumed from the national grid, as is applicable to the customer’s rate and class, and JPS will purchase the customer’s excess electricity at the “short run avoided cost of generation”.

Mr. Mullings points out that this option opens up ‘far reaching opportunities’ for the domestic energy consumer.

“People now see this as not just a means of lowering consumption, but as a means of earning money. What this also means is that more people will be inclined to go the route of renewable energy,” he adds.

The Minister says convincing the Jamaican consumer to invest in this direction, now that an agreement is in place, should not be too difficult as it is like having their own backyard garden to feed their household, only this time you also get to sell some of the produce, as well.  This creates a process of economic transformation, he noted.

The Petroleum Corporation of Jamaica (PCJ) recently hosted a symposium, to bring to the fore issues of concern regarding solar energy, including accessing financing.

The one-day seminar at the PCJ auditorium, Trafalgar Road, Kingston, the eight in an on-going series, was a collaboration between the PCJ and the Jamaica Solar Energy Association (JSA), and was held under the theme “Renewable Energy Loans for Homes and Businesses”.

The series has been examining key areas of Jamaica’s renewable energy industry, including the present status of the sector, and financing options for renewable energy projects for the micro, small and medium size enterprise (MSME) sector.

President of the Jamaica Solar Energy Association (JSA), Roger Chang, believes the seminar came at an opportune time, considering the agreement allowing connection to the electrical grid and selling energy to the grid through net billing and net metering.

These hurdles, widely seen as impeding the growth and development of solar energy in Jamaica, were recently cleared, putting the potential for development ‘in the right direction’.

“We now have that through the Net Billing agreement, so we can now connect and sell to the grid. The second hurdle impeding the sector is financing, and so we can give thanks to [finance] Minister Audley Shaw that he has reduced the interest rates, and that is a big move and so we should see more take up offers for loans,” he said.

Mr. Chang cautioned, however, that while he is relatively comfortable with the arrangements, he believes that the public needs to become more aware of the developments, especially the financing options.

He said the public need to be educated on the options available for financing, and their ability to connect to the electrical grid. Options available include those that connect directly to the grid, and those that require battery storage. There is also the ongoing option available to solar water heater purchasers.

“System costs are coming down, because there’s no need [in some instances] for batteries and payback time is as short, less than four (4) years,” he noted.

Explaining the advantages of financing a renewable facility, Mr. Chang said doing so at a level that covers the usual monthly electricity payment would mean that, after a few years, the facility would be owned and there would be no more monthly payments for electricity.

“Regardless of the cost of the system, you will fix your repayment terms at about five years. Because, now you’re generating electricity, you pay the JPS almost zero, you pay back your loan at almost $5,000 fixed for the next five years, and after that you would have paid off your loan and you’re still paying almost nothing to the JPS,” he said.

Two institutions, the National Housing Trust (NHT) and Capital and Credit Merchant Bank, who participated in the one-day seminar, announced that there were loan instruments available that the public can access to purchase solar energy equipment.

Capital and Credit Merchant Bank recently held a one-day seminar for persons wishing to invest in an alternate renewable energy solution, which could allow them to either reduce or eliminate their dependence on the public electricity supply

“If it is that you’d like to get away [from the public supply] altogether and run your various electrical appliances, we’re offering an alternative energy generating loan. We will provide you with up to $5 million of financing to acquire your own alternate energy generating system, because we know this is a major capital expenditure and we will allow you to amortise it over 10 years, making the payment affordable,”  Branch Manager, Owen Ferguson, explained.

The bank’s newspaper advertisements point to a minimum 9.5 percent interest rate calculated on the reducing balance.  Capital and Credit also offers up to $250,000 to acquire a solar water heater.

The NHT has two financing facilities for the purchase of renewable energy applications, a solar water heater loan and a solar panel Loan.

According to acting branch manager, Ava-Ann Scott, the facilities offered by the Trust are geared at persons in “good standing”. She said, however, anyone who comes in and regularizes contributions automatically becomes eligible.

“For the solar water heater loan, we offer up to $250,000 at three percent interest for a maximum of five years. For the solar panel loan, it’s a maximum of $1.5 million, at a maximum seven percent interest over 15 years,” she noted

There are restrictions, however.  These include persons already benefiting from a loan facility not becoming eligible until 15 years after the first loan. This is based on the current rules guiding the NHT, which states that eligibility for a second loan will only be facilitated after 15 years upon receiving the first loan. Based on customer feedback, requests have been made to the board of the NHT for this regulation to be reviewed.

Energy Minister Mullings points out that net billing is a good first step for residential consumers than it is for the productive sector, even though the domestic consumer, on aggregate, has the higher demand for electricity.

“For the productive sector, their demand for electricity [individually] will be higher but theirs is critical. So what this means is that there will have to be a streamlining in their utilization and, in a meaningful way, we have to get rid of the old inefficient plants that still exist,” he said.

“There is no silver bullet, we just have to modernize and the new plant at Old Harbour represents the first step in that process,” he added.

He says that with the changes taking place in the renewable energy landscape and with government’s determined efforts in that direction, there is no way any homeowner or consumer should not be actively considering or taking steps to have a renewable energy device installed.

“There is simply no reason why every consumer should not put in one, absolutely none,” he said empathically.

He adds that, through the Jamaica Solar Energy Association, there will soon come a time when all that is required to have a renewable energy device installed is a simple phone call.

Source: JIS



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