The dynamics of oil and gas have influenced the world’s politics and civil society for a hundred years. Oil is the basis of our prosperity and the seat of power for the world’s most successful companies. But oil and gas supplies are limited and the cost of exploration, recovery and processing are rising fast. Oil has been hovering around the $100 (per barrel) psychological barrier for some time and is likely to stay there for a while, but when it does move above that barrier, there is no limit to the cost of oil after that. Any increase in the cost of oil will make Anguilla’s fragile economy less and less sustainable and could result in a rapid collapse of our tourism industry. We need an alternative to oil, and we should be thankful that we have one.
Source of energy
Anguilla is cursed with no fossil fuels and is entirely dependent on the variable pricing of the world’s oil supply. Due to the scale of the island’s demand and buying power, Anguilla has one of the highest electricity rates anywhere. The cost of electricity is not the fault of mismanagement, corruption, or poor business, as is often reported, it is simply a reflection of the cost of burning high cost diesel fuel to generate electricity for a small community, and therefore, there is little room to adjust the cost of electricity. Buying high priced diesel is an unrelenting drain on the economy that can only be addressed with the use of solar.
Cost of traditional electricity
Electricity in Anguilla costs 43 US cents per unit, higher but close to the cost in most of the Caribbean where similar issues prevail. Many political bodies in the Caribbean islands have tried to manipulate the cost of electricity through subsidies, pressure on the management of the electricity companies and trading influence with oil producers. These tactics are fundamentally flawed as they mask market signals and encourage waste and delay technological solutions.
Cost of solar electricity
Solar electricity is characterized as an upfront expenditure with little recurring cost. As such, comparisons are hard to make with the monthly billing cycle of the utilities. A financial model known as the Levelized Cost of Energy is used in the solar industry to arrive at a comparable cost of electricity. This model is well documented and used for all solar system financial analysis. Using this method, electricity costs range from 20c per KWh to 24c per KWh, significantly lower than 43c per KWh utility electricity derived from diesel, and this is regarded as a cost that will not increase as time progresses. While diesel costs will inevitably rise as supplies get tighter in the coming years, solar will continue to fall in price as larger manufacturing facilities and improved technology bring lower costs. In comparison, there is no limit to solar power as a source of energy.
Solar Resource
The measurement of solar energy is called the irradiance level and is expressed in Full Sun Hours per day. The scale ranges from 0 to 7 allows an easy comparison of the amount of energy that will be produced by a solar system. Anguilla is blessed with nearly 6 hours of full sun per day, among the best in the world. By utilizing this limitless resource, Anguilla can produce much of its energy needs and address the cost of electricity.
Economic impact of diesel based generation
Virtually all of our energy comes from imported fuel, mostly diesel, and requires the export of most of our foreign exchange. While times were booming and cash flowed into Anguilla, foreign exchange was not such a significant issue, but with decreased economic activity and lower hotel occupancy and government revenue, foreign exchange is limited and valuable. The country is being drained of money to pay for the imported energy. Using our solar resource would allow the country to keep more of our earnings without the wild income fluctuations faced by fossil fuel exporters. Anguilla’s hotels and business are feeling the effects of high energy costs. Hotels have had to close due to their unmanageable costs; some are on the brink of closure, few are able to make a good return on investment. The hotel and tourism sector needs a solution to be able to continue. Our business community is being forced out of business, increasing unemployment and local and foreign investment. This investing is needed to keep cash flowing in the economy. At present, our homeowners are faced with unmanageable energy costs. Many have been disconnected and there is evidence of acute hardship among the population.
Environmental impact of diesel based generation
Anguilla may not be large enough to be considered a threat to our climate but the island is certain to feel the effects of increasingly intense weather patterns, rising sea levels and rising temperatures. The island has the chance to avail itself of climate change mitigation funding but in order to be considered, should demonstrate leadership in implementing solar as a mitigation measure. Anguilla has the opportunity to be considered a model of climate change mitigation and as such eligible for funding to achieve these goals. The publicity could only enhance our tourism product.
Implications for tourism
The cost of running a hospitality facility in Anguilla has two main factors, labour and energy. As revenues erode, management looks to cut cost. Cutting labour involves furloughed workers, layoffs, reductions in salaries and benefits, and reduced overtime. These cost cutting measures hit at the very heart of the country’s economy, as the wages of the hospitality workers drive turnover and therefore employments at supermarkets, hardware stores, entertainment, and importation of products, therefore reducing Government revenues. Reducing the cost of energy has only good implications for the economy. Hotels rooms are cheaper and therefore more competitive, occupancy increases, restaurants sell more meals and employ more workers, government would get more hotel tax revenue, more departure taxes, and more import duties.
Not competitive
With the current cost of electricity, hotels are not competitive with the prevailing rates. The traveling public is very cost conscious and makes decisions based on comparing value. We can describe our customer base as value conscious. With the cost of operating a hotel today, the owners cannot offer low enough rates to increase occupancy and still make a profit.
Investors are wary
Anguilla is in need of investment to revive failing properties, inject capital into the real estate sector and bring new and refurbished properties to the market. They are acutely aware of the implications of Anguilla’s energy costs and want to explore any avenue to reduce this cost. When offered solar, they want to know the return on investment and are intrigued by the excellent returns. However, the lack of legislative support for grid tied incentives make them wary of any investment including property.
Opportunity
Anguilla has at least two competent and able solar installation companies, so technical ability is easily available.
The global cost of solar equipment has been dropping sharply over the last two years and is now so low as to make solar energy by far the cheapest energy available to Anguilla. Nothing comes close to this price. If funding for residential and business systems becomes available, a migration to solar electricity will happen quickly, leading to lower cost of doing business and increased revenue and profits. Homeowners will be able to afford their energy usage and the number of disconnected customers will be reduced. Solar systems are self-financing, as the revenue from reduced consumption of expensive utility electricity pays for the loan payments. Solar is one of the best investments the public and businesses have available.
Lost opportunity
Three years ago, the Government of the day completed a National Energy Policy. The policy called for adoption of grid integration, incentives for electric vehicles, and far reaching policy decisions. Since then, the energy policy has languished, the Renewable Energy Integration initiative has stalled, and no legislation has been enacted. Other islands have
steamed passed Anguilla while we have vacillated over policy decisions because of hidden agendas, lobbying by the utility and a general lack of urgency.
Solutions
While generating electricity from solar is a great opportunity for Anguilla, the only practical way to implement solar is by interconnecting with the existing electricity grid. A stable and reliable grid is essential to the feasibility of cheaper power through solar. While the integration of solar energy into the grid is happening all over the world and is pretty much inevitable here, the progress in Anguilla is painfully slow at best. Tactics by the board of ANGLEC among others range from stories of doom and gloom should any solar based energy make its way to the grid, to delay tactics that suggest we need endless reports, tests and studies. There is no technical reason why rooftop solar cannot be implemented today, and in fact it already is. Countries all over the world are incentivizing the installation residential and commercial solar, known as distributed generation, to reduce the amount of dirty fossil fuel being used. While some study may be needed to ascertain the best rate for pwer returning to the grid the Government can implement an interim measure to be reviewed annually. There is no law that cannot be updated. It is far more important to offer a better rate right now to get the ball rolling than to wait and wait until we have missed the opportunity to help our economy. ANGLEC will not go out of business that is for certain. One possible way to sidestep the thorny issues of integration is to simply mandate that the utility derive a percentage of its power from renewable sources, namely wind and solar from distributed generation (see Castalia Report). After that, the utility can best determine how to incentivize the public to invest in solar themselves. If they are given a short timeframe in which to achieve this, the onus will be on them to get moving quickly and to offer a real incentive. This method has been used successfully all over the world.
Grand Bargain
Most of the arguments against the integration of solar with the grid consider the impact of an alternative energy source on the profitability of the utility, ANGLEC. Considering ANGLEC as a private company with all implied commercial issues ignores the history of utilities and the so called “grand bargain” utilities all owe their origins to. In the 1920s, electricity mega-entrepreneur Samuel Insull promoted the idea of the “Natural Monopoly” as a basis for the utilities to American state regulators. The regulatory bargain he proposed would give one company the exclusive right to supply electricity to the consumers. In return for the rights, the state would expect the utility to deliver the lowest prices and most reliable service possible. The utility was expected to hold the interest of the community at the heart of its operations or face the loss of license. The “Grand Bargain” identified the principle that the monopoly had to be earned by service to the community. Therefore, the utility which operates as a private company has to put the interests of the community above its own.
Once we view ANGLEC’s responsibilities in this light, we can see that the current obstructionary attitudes are not in keeping with the utility’s responsibility to the island that is granted in its license. A monopoly license under the “Grand Bargain” philosophy requires the utility be open to new ideas, cooperate in any technological advance that helps the country and provide access to the grid where it benefits the community. Integrating solar with the grid is the only way to move forward with the stated goals of increased renewable energy integration. The Government of Anguilla has recently spent hundreds of thousands of dollars on the Renewable Energy Integration workshop and consultancy, and has declared the adoption of Renewable Energy to be a priority in its campaign manifesto. It cannot be ignored that these goals are identified as being in the interest of the community and so a central tenant of the “Grand Bargain” under which it functions.
Comparisons with the rest of the world
Solar has been the focus of enormous incentives for a number of years throughout the world. All of Europe, Asia and the US, offer subsidies and financial assistance for solar installations. Practically the whole world recognizes the advantages of increased solar use. As the adoption of solar grows, the cost of manufacturing drops making solar more and more affordable for Anguilla.
Do the math
If we compare the use of solar in Europe, where huge amounts of solar are being installed, with Anguilla, the contrast is startling. A consumer in Britain is likely to spend twice as much as an Anguillian to install solar, due to higher wages, overhead, permitting costs and other factors. The value of the electricity produced is as much as 4 times higher in Anguilla. Anguilla has twice to three times as much sun. Calculate solar’s cost and benefit as 2 x 4 x 3 = 24 and you can see that installing solar in Anguilla is 24 times as viable as the UK. This formula works just as well for Germany or any northern location. Anguilla has an amazingly affordable resource in Solar.
Comparisons with other Caribbean islands
If we look at the larger Caribbean, we see rapid development in the solar sector. To detail a few cases:
Barbados
The private sector, a 4MW rooftop system was just commissioned.
The Government is installing solar on 12 Government rooftops under an IDB grant.
Barbados companies are exporting the technology by installing solar for other islands
Antigua
Antigua has stated the intention to install as much renewable energy as possible to offset what they recognize as an unsustainable energy source
St. Kitts & Nevis
A private company has hired Anguilla’s Comet Solar to install 500KW of rooftop solar.
St. Maarten
There are many private companies installing solar at a rapid rate. Hundreds of kilowatts have been installed this past year alone. The utility just works along with the customers without issue.
CARICOM
Caribbean Community (CARICOM) countries have recently given the green light to a Regional Energy Policy that will guide the 15-member grouping in its pursuit of energy efficiency and renewable energy.
Conclusion
Anguilla’s electricity rates impart a crushing influence on our businesses, homes, and hotel industry to the point of driving the island out of business. Any further increase in the rates would be devastating to our economy. No other technology offers the immediate solution that increased investment in solar would bring to Anguilla. Our failure to move to a better source of electricity is affecting our future economic well-being but the solution is readily at hand and can be implemented easily. The Government of Anguilla should implement legislative changes to facilitate grid integration and have duty free concessions for all renewable energy projects and electric cars as proposed by the National Energy Policy.
The integration of renewable energy into our grid is inevitable; it is happening throughout the Caribbean and cannot be avoided. However, delaying that initiative will only bring economic damage and negative growth.
Go Solar Anguilla is an interest group comprised of Anguilla’s private sector stakeholders. The group seeks to support grid-tie and net-metering legislation in order to encourage the rapid expansion of our solar resource
