The Utility Regulation and Competition Office has walked back a decision to commission a massive new investment in fossil fuels in an out-of-court compromise with Caribbean Utilities Company.
A surging population, business and tourism growth are putting new demands on the island’s energy grid. And significant investment is needed to produce more electricity.
But the regulator, known as URCO, and the utility company have clashed over where that power should come from. A settlement agreement announced this week heads off a court battle and should ensure that more of that new energy supply can come from solar farms.
“This is good for the consumer and good news for the country,” Richard Hew, president of CUC, told CompassTV on Wednesday.
He said the island is in “dire need” of additional energy supply.
“You can see the hotels going up, office buildings, condos, more homes, and we have to secure adequate capacity to serve that demand reliably,” he said.
But, he insisted, CUC wants as much of that new energy as possible to come from renewable sources. Solar energy is now cheaper as well as cleaner than fossil fuels and Hew believes going green will also mean lower bills for Cayman residents.
The regulator has insisted it was never seeking to hamper the island’s transition to renewable power. It says its decisions were designed to ensure a steady and reliable power supply and fair competition in the energy market.
90MW diesel generation plan scrapped
Following talks with the power company, it has determined that solar farms backed by sufficient battery storage are reliable enough to be considered ‘firm power’ – meaning the regulator is satisfied the lights will stay on day and night.
And it agreed to scrap an earlier decision to commission 90 megawatts – equivalent to more than half of Grand Cayman’s total energy supply – of new diesel generation.
That call, in April this year, caused controversy because it represented a long-term commitment to expensive and environmentally damaging fossil fuels. It also would likely have prevented Cayman from hitting its stated target of fully converting to renewable energy within 20 years.
Officials said their hands were tied because ‘thermal generation’ through fossil fuels was the only proposal from CUC contained in a legally required ‘certificate of need’ that met the contractual definition of ‘firm power’.
At the time, Sammy Jackson, president of the URCO board, said it had been forced to act to address urgent “grid stability” issues and prevent blackouts.
The power company insisted that it had submitted multiple alternate proposals, including a mix of diesel power and solar farms backed up by battery storage, that would allow for a cheaper, cleaner energy future for Cayman. It started a judicial review process in an effort to have the regulator’s decision overturned.
Compromise reached
Now, both parties have agreed to a compromise, which means the previous decision will be rescinded and CUC will submit a new ‘certificate of need’ by September.
Jackson said the agreement would mean renewables were allowed to “prove their viability as firm generation” in a fair and transparent competitive bid process.
He insisted the regulator is “committed to enabling the progression of cleaner energy generation in a way that is practical, secure, accountable and fair to consumers, whilst maintaining the necessary reliability of the grid”.
Hew said CUC’s updated submission would define the power generation requirements Grand Cayman was projected to need from 2027 on.
While it is likely that some new diesel engines will be required, given that CUC is retiring some of its older plant, the move paves the way for a much greater share of Cayman’s new energy supply to come from solar farms.
“We are very optimistic that we can see more renewables through this solicitation, which will drive cleaner energy and drive down costs,” Hew said.
For regulators, fair competition is the crux of the issue. The new certificate of need should determine what level of energy is required and it will then be up to the regulator to run a bid process for various power projects to fill that need.
Sonji Myles, interim CEO for the regulator, said the compromise was a pragmatic solution that avoided a costly court battle and allowed both parties to get on with the process of ensuring Cayman has a “reliable, well-planned and cost-effective” energy infrastructure.
“We welcome this practical resolution,” he added. “While the office stands by the principles underpinning its original determination, we have always believed that regulatory clarity and process integrity can and should be achieved without protracted litigation at the cost of the people.”
CUC can bid for solar projects along with any other interested parties.
A separate bid process is already under way for a 23MW solar farm with battery storage.