I was reading the following headlines;
Energy Consultant on net metering
Energy Consultant Winston Haye said the Jamaica Public Service Company (JPS) would suffer financial losses if the government decides to adopt the system of net metering.
Cabinet to discuss policy on net metering
Net metering allows customers of the light and power utility to produce electricity at their own facilities.
However this would be done with the understanding that if they produce excess power it can be sent to the national electricity grid and the customer is compensated.
Anthony Chen wants gov’t to introduce net metering
WORLD-renowned Jamaican atmospheric physicist and renewable energy expert, Professor Anthony Chen is calling on Government to mandate the Jamaica Public Service Company to introduce net metering locally.
Net metering should replace the current policy of net billing, Chen said, in order to encourage more perople to get engaged in the generation of solar electricity.
The error in the word people spelled as peorple is not on my side. It is actually spelled like this in the original article.
The math, basic math that is. Shows that from the 770,000 plus homes that if slightly less than half were to go fully solar via net metering using a below market price for an average solar system that it would translate to a total of 350,000 homes each with a 1000W – 1200W on the grid solar system and a cost of US$1.225 billion.
This would involve several moving parts meaning several homes subject to vandalism and parts breaking and also loosing efficiency over the years.
To put it into perspective at US$1.225 billion that would be more than enough for Jamaica to build a brand new 1200MW LNG power plant and JPS being able to sell the power back to the consumer at less than the current market rate.
This is so as USD3,500 x 350,000 = US$1.225 billion.
Taking a smaller number USD3,500 X 175,000 = US$612.5 million.
Taking even smaller to USD3,500 X 87,500 = US$306.25 million or roughly 1/4 of the funds Jamaica Government went begging the IMF for.
Of course if you are not so lucky to find a USD3,500 for a on the gird solar system for an average home as it may cost USD5,000 more. It goes without saying that the overall figure would be much higher in terms of USD no matter if the total amount of homes adopting on the gird solar is 87,500 or 350,000.
But maybe you will be so lucky and obtain one of the following systems:
It currently costs somewhere between J$2 million to J$3 million to fully equip a three-bedroom house with solar-generated power. This puts solar systems out of the reach of the majo-rity of Jamaican homeowners.
Net metering will make the payback period on deploying solar technology shorter and is a matter of priority if we are truly serious about energy self-sufficiency.
Source: More Incentives Needed To Fuel Solar Revolution By Don Wehby, Guest Writer Jamaica Gleaner.
For unless something is wrong with my calculator J$2 million and J$3 million equals US$23,255.81 and $34,883.72. I guess over a 15 year pay back for the J$2 million system that would equate to about little over $11,000 per month if your bill is $10,900 per month may look like a really lovely alternative for a three bedroom home in Jamaica.
Of course if three bedroom home means an average size apartment in Norbrook with three air condition units, PC, two Laptops, blow dryer, toaster oven, juice maker, blender, microwave oven, washer, dryer, good size fridge then the average bill may be about $15,000 to $20,000 per month from JPS then a J$2 million solar system may very well apply.
But if one were to use the lower of the two systems proposed in the article only 56,675 Jamaican three bed room homes would account for US$1.225 billion as $1,225,000,000/23,255.81 = 52,675. It is quite possible that this number constituted the entire average middle class living in Norbrook and similar environs.
Now if I am trying to be efficient and help an economy grow. Why would I want to see that much money leave the country and benefit so few people? Would that lead to an increase in demand for the US dollar?
Fact is US$612.5 million equals a new 800MW plant, US$306.25 equals a new 488 MW plant with all the trappings to function in the market.
Likewise if JPS were allowed to create a new investment vehicle and take it to the Jamaica Stock Exchange in seeking to raise capital to build a more efficient plant in the form of a new LNG power plant. The break down would be as follows:
This is so as USD24,500 x 50,000 investors = US$1.225 billion.
Taking a smaller number USD12,250 x 50,000 investors = US$612.5 million.
Taking even smaller to USD12,250 x 25,000 investors = US$306.25 million.
Now why in the world would one seek to introduce Net Metering across the board as when in the long run it will not benefit the country as a whole with exception of the small numbers with existing solar systems are those in the process of setting up one, If the combined capital used in foreign exchange involves so much money over a period of time while producing so little energy in comparison to the amount of money spent when compared to the equivalent spend by JPS in respect to LNG power plant expansion and upgrade?
The only aspect of Net Metering that appears appealing for the few who can afford a US$3,500 solar system is that any excess power is sent to grid without any problems from JPS as frankly I do not care for a reward from JPS.
I would only be happy to not have to invest US$2,000 in batteries on top of my solar system for a off the grid system, so as not to run into any problems with JPS.
The problem with this is. If JPS is not equipped to handle all these excess surplus of energy created by random homes using solar and or wind energy. This will only pose a technical challenge and safety problem for JPS.
Of course if this problem is resolved I could not care less for JPS paying me for excess energy created. As all I want is a system that will power my needs in its lows or highs and have a good pay back time for my investment.
Though some would argue that Net Metering and Net Billing are two different things. Fact still remains that the main foundation is the ability to have a grid tie solar generation and power system that eliminates the need of expensive batteries and be able to access power generated from the grid with surplus being a bonus being able to generate revenue.
So what’s the solution?
In addition to net metering, Paulwell said the government was giving serious thought to abolishing import duties and taxes on the components required for solar and wind-powered energy systems.
“Right now, what we’re trying to do is remove GCT and import duties,” Paulwell said, adding that among the proposals was “a full slew of incentives to encourage the use of hybrid and diesel motor vehicles”, as well as photovoltaic systems.
Source: NET METERING NEXT MONTH
CUSTOMERS TO SELL ELECTRICITY TO POWER COMPANY
by Vernon Davidson Senior Associate Editor Sunday, October 16, 2005
Net Metering should not be an incentive for residential homes seeking to earn money from excess power and or seeking to shorten their pay back time for their solar and or wind system.
Net Metering should benefit those who own responsible solar and or wind systems or other renewable energy platforms in a niche part of the population, as mass residential population adoption of renewable energy is counter productive from the overall benefit derived from the export of foreign exchange when compared to the government making sure the consumer gets a fair deal from the expansion and refurbishing of the JPS plants and grid to LNG and or clean Coal.
Only when JPS is ready and able to handle the excess power produced by the niche segment of the residential market to the grid by the homes using on the grid renewable systems, as this eliminates the need for expensive batteries should Net Metering be introduced to accommodate the niche segment of the population using such systems.
Of course removing all the taxes and duties that may exist on a single part of a solar system or renewable energy systems is always a step in the right direction in respect to future innovation in the market based on entrepreneurial forces.
If energy saving equipment or renewable energy saving system some how were to be used in a innovative manner that would provide greater economic impact than the cost associated when equating them to the monetary group spend to that of a LNG power plant. The economic impact will be greater than if it were only used for that reason and that alone. This may not be easily recognizable by the average mind.
But in the event an average mind is able to show the masses of average minds how this can be done. I am sure when awaken, the consumer would not want to be impeded by taxes and duties in squeezing out more juice from every hard earned dollar in improving their lives by maximizing renewable energy through innovation in alleviating other economic and social burdens.
In this situation, the entrepreneur would not only be using renewable energy for residential use in helping to reduce the countries dependency on fuel import regardless of LNG or not.
But significantly increase economic productivity households which in turn would help in economic growth for Jamaica.
This goes beyond savings on energy bill significantly, while achieving much more in reducing labour hours , and capital expenditures not associated with the cost of energy that may be used for other economic activities not attainable prior for the entire household via additional innovation currently not known to the local market.
To put it into a practical perspective one may look at it as live case study, though it only represent a niche within the market.
A home with 4 bedrooms and a family of over 8 has an average monthly light bill of $9,500 per month. This home energy bill is higher than a similar size home that has a medium size washer, a very large fridge, 2 colour television sets, a PC, cable box, radio, VCR, 2 fans, and 8 CFL bulbs.
The home with the higher bill of $9,500 per month does not have a refrigerator, does not have a washing machine, but burns a 19″ TV, 9 CFL bulbs, a PC, two Laptops, 4 fans and uses about twice the ironing. This household also have no automobile.
Implementing new innovation along with a US$8,235.50 renewable energy system, the home with the higher bill was able to save 11% of their monthly energy bill over the duration of the payment for the system of seven years. During this process the same home was able to obtain a small refrigerator, obtain a small washing machine with a dryer and with change left over to combine with previous sunk cost to obtain a small four seater second hand car in good condition.
All these changes created several opportunities otherwise not available due to the lack of resources and equipment to maximize such opportunities. It was innovation beyond simply providing a on the grid solar system benefiting from Net Metering that brought the before unseen opportunities.
At present the mind set appears focused the short term advantages that Net Metering may provide. While not looking beyond just simply meeting existing energy demand as a blanket solution for the masses. But instead should be looking at the bigger picture and its impact as the numbers increase beyond niche market applications for Net Metering.
BA Economics (CSUH)
Kingston Venture Capital