Barbados, National Energy Policy, Draft December 2006

Draft

BARBADOS N ATIONAL ENERGY P OLICY

The Ministry of Energy & the Environment

DRAFT

THE NATIONAL ENERGY POLICY OF BARBADOS

Prepared by: Energy Policy Committee

December 2006

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TABLE OF CONTENTS

EXECUTIVE SUMMARY ................................................................................................... I ES 1.0 ES 2.0 ES 3.0 ES 4.0 ES 5.0 ES 5.1 ES 5.2 ES 5.3 ES 5.4 ES 6.0: ES 7.0:

INTRODUCTION .....................................................................................................I CURRENT ENERGY CONSUMPTION PATTERNS.....................................................I ENERGY AND THE ENVIRONMENT .......................................................................II REGIONAL AND INTERNATIONAL ENERGY ISSUES............................................ III T HE NATIONAL ENERGY POLICY ...................................................................... III Ensuring Security and Stability of Supply ....................................................iv Maximising Energy Efficiency.......................................................................iv Creating a Competitive Market....................................................................vi Achieving Environmental Sustainability................................................... vii E NSURING EFFECTIVE AND T IMELY IMPLEMENTATION .................................. VIII SUMMARY..................................................................................................... VIII

1.0

INTRODUCTION .....................................................................................................1

1.1

COUNTRY PROFILE ..............................................................................................1

1.2 ENERGY AND THE ECONOMY .................................................................................. 2 1.2.1 Energy Consumption by Sector.......................................................................... 6 1.2.2 Energy Demand Forecast .................................................................................. 7 1.3 ENERGY AND THE ENVIRONMENT ........................................................................... 8 1.3.1 Climate Change and the UNFCCC ................................................................... 8 1.3.2 Ambient Environmental Conditions .................................................................. 9 1.4 ENERGY AND SOCIETY........................................................................................... 10 2.0 2.1 2.2

REGIONAL AND INTERNATIONAL ENERGY ISSUES ............................ 14 GLOBAL MARKET FORCES .................................................................................... 14 REGIONAL INITIATIVES.......................................................................................... 15

3.0

GOALS, PRINCIPLES AND OBJECTIVES OF THE ENERGY POLICY 18

4.0

THE ENERGY POLICY....................................................................................... 21

4.1 POLICY ISSUE # 1 – E NSURING SECURITY AND STABILITY OF SUPPLY ................ 21 4.1.1 Petroleum Product Supply and Market Diversification................................. 21 4.1.2 Renewable Energy............................................................................................ 26

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4.1.3 Electricity Generation Expansion Planning................................................... 30 THE PRESENT SITUATION ................................................................................. 30 4.1.4 Storage capacity and Contingency Planning.................................................. 34 4.2 POLICY ISSUE # 2 – MAXIMISING E NERGY EFFICIENCY ....................................... 36 4.2.1 Fuel Storage and Distribution ......................................................................... 36 4.2.2 Electricity Generation and Distribution. ........................................................ 37 4.2.3 Sectoral Energy Use and Conservation .......................................................... 38 HOME ENERGY EFFICIENCY................................................................................................ 40 HOME ENERGY AUDITS ....................................................................................................... 40 4.2.3.1 Public Sector Energy Conservation Programme.................................... 40 4.2.3.2 Manufacturing .......................................................................................... 43 4.2.3.3 Retail ......................................................................................................... 43 4.2.3.4 Transport................................................................................................... 43 4.2.3.5 Tourism ..................................................................................................... 45 4.2.3.6 Agriculture................................................................................................ 45 4.2.4 Demand Side Management .............................................................................. 45 4.3 POLICY ISSUE # 3: CREATING A COMPETITIVE MARKET ...................................... 47 4.4 POLICY ISSUE # 4: ACHIEVING ENVIRONMENTAL SUSTAINABILITY .................... 51 5.0 5.1 5.2 5.3 5.4 5.5 5.6 5.7

ENSURING EFFECTIVE AND TIMELY IMPLEMENTATION ................ 53 INTRODUCTION ...................................................................................................... 53 FISCAL POLICY & ECONOMIC INSTRUMENTS ....................................................... 53 LEGISLATIVE FRAMEWORK ................................................................................... 54 EDUCATION AND RESEARCH ................................................................................. 54 INSTITUTIONAL REFORM & CAPACITY BUILDING ................................................ 55 INVESTMENT AND INDUSTRY PROMOTION............................................................ 55 TARGETS AND INDICATORS ................................................................................... 56

6.0

SUMMARY OF POLICY INITIATIVES .......................................................... 57

7.0

APPENDIX 1 ........................................................................................................... 64

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LIST OF FIGURES

FIGURE 1.1: RGDP OF THE BARBADOS ECONOMY 1995-2004.............................................................................2 FIGURE 1.2: PER CAPITA ENERGY CONSUMPTION IN BARBADOS (1983-2005) ...................................................3 FIGURE 1.3: PETROLEUM AS A PERCENTAGE OF BARBADOS IMPORT BILL..........................................................4 FIGURE 1.4: ENERGY INTENSITY DATA FOR BARBADOS ......................................................................................5 FIGURE 1.6: ELECTRICITY USAGE BY SECTOR FOR 2004 ......................................................................................7 FIGURE 4.2: COMPARISON OF THE INSTALLED CAPACITY BY P OWER PLANT TYPE FOR 2001 & 2005……….32

LIST OF TABLES

TABLE 1.1: GLOBAL ENERGY CONSUMPTION PER CAPITA....................................................................................3 TABLE 1.2: PETROLEUM CONSUMPTION BY KEY USERS IN 1998.........................................................................6 TABLE 1.3: TRENDS IN MOTOR VEHICLES REGISTRATION ...................................................................................9 TABLE 4.1: BL&P'S EXISTING GENERATING UNITS ............................................................................................31 TABLE 6.1: ACTION P LAN FOR THE NATIONAL ENERGY POLICY .......................................................................57 TABLE 7-1: COMMENTS RECEIVED FROM STAKEHOLDERS ................................................................................64

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EXECUTIVE SUMMARY ES 1.0

Introduction

Barbados is the most easterly island in the Caribbean archipelago. With a population of approximately 272,000 people residing in an area of 435 km2 (166 miles2), Barbados is one of the most densely populated countries in the world. Barbados has limited on-shore mineral and hydrocarbon resources, which have been efficiently exploited over the last few decades. Offshore resources have considerable potential, with an offshore license area of approximately 43,000 km2 (18 532.9 miles2). Ranked 30 th by the United Nations Human Development Index and with an average annual per capita income of US$8,500 Barbados may be defined as a middle income country. The country has transitioned from an agrarian to a service-based economy. Tourism has become the single largest foreign exchange earner and the sugar cane industry is undergoing fundamental restructuring to survive in a post preferential markets environment. Gross Domestic Product has increased steadily over the last decade and concomitant with this economic growth, energy consumption has increased, exceeding 1,400 kilograms of oil equivalent per capita per year in 2004. The spiralling cost of fuel along with burgeoning demand has dramatically increased the costs of fuel imports, placing considerable strain on foreign reserves. The inflationary impacts of rising energy costs have been felt by all sectors of society. The Government of Barbados wishes to develop and implement a national energy policy to mitigate the negative impacts of the oil prices and take advantage of national renewable and non-renewable resources. ES 2.0

Current Energy Consumption Patterns

Electricity generation (~ 50%) and transport (33%) are by far the two largest consumers of the fuel imported into the island. The manufacturing sector is a distant third at ~ 5%.

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Of the electricity generated (~ 885 million kilowatt hours in 2005), domestic consumption was the major user at 34%. The Commercial sector was the second largest consumer with 23%. Electricity sales by the lone electric utility company, the privately owned Barbados Light and Power Co. Ltd. (BL&P), increased by 6.4% in 2005 and for planning purposes the Company has tended to use a projected growth in energy demand of 4% per year. ES 3.0

Energy and the Environment

Government’s energy policy has the potential to impact significantly on the physical environment. As signatories to the United Nations Framework Convention on Climate Change (UNFCCC), we are morally if not legally obligated to play our small part in reducing Green House Gas (GHG) emissions, especially as a low-lying, coastal and water scarce country, we are likely to be impacted the most by climate change and sea-level rise. Carbon dioxide emissions account for 94% of the GHGs and fossil fuel (predominantly fuel oil) combustion for electricity generation accounts for 74% of all CO 2 emitted by the country, with transport contributing 14%. Therefore, there is a clear environmental driver to use either a cleaner fossil fuel (e.g. natural gas) and/or to use renewable energy sources to generate electricity. Concerns over the environmental health effects of methyl tertiary butyl ether (MTBE) and the synergy with the sugar cane industry that can be derived from the use as ethanol as an alternative octane enhancer have driven Government’s policy intention to replace MTBE with 10% ethanol in gasoline. Similarly, the Government will support the introduction of ultra low sulphur diesel (ULSD) into the local market and seek to harness the potential synergies of a local biodiesel industry, as it is understood that biodiesel is a welcomed additive to ULSD to improve its lubricity. An air quality study, conducted by the Pan American Health Organisation in 1994, estimated that vehicular traffic annually contributed 9,302 tonnes of hydrocarbons, 49,680 tonnes of carbon oxides, 2413 tonnes of nitrogen oxides, and 50 tonnes of lead to the atmosphere. It is the Government’s intention to enact legislation and regulations to control vehicular and point source (e.g. electricity generating plants) emissions.

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ES 4.0

Regional and International Energy Issues

The price has oil has reached unprecedented levels, exceeding US$75/bbl and predicted to rise further. Sustained demand from China and India has fuelled this increase. Geopolitical issues in the Middle East and in Venezuela, hurricanes in the Atlantic, limited production and refinery capacity have also created upward pressure on world oil prices. The Government’s policy assumes that energy prices will not decrease significantly over the next 20 years. Within the region, Trinidad & Tobago and Venezuela are major oil and gas producers and both countries have tabled regional energy proposals. Of particular interest to Barbados is the Trinidadian proposal to construct a trans-Caribbean undersea pipeline to distribute natural gas to the Eastern Caribbean. The availability of adequate and reliable amounts of natural gas will facilitate the desired transition from fuel oil to natural gas as the primary fuel for electricity generation and allow further expansion of natural gas distribution for domestic consumption. It is anticipated that the transition to natural gas will provide over Bds$40 million in savings annually. ES 5.0

The National Energy Policy

The BEP has used at its core, the five (5) principles of sustainable development as stated in the Barbados Sustainable Development Policy. The following energy policy objectives have been adapted from these principles:

x

x

x

x

x

The provision of adequate and affordable energy to all sectors of society as a prerequisite for a decent quality of life. Maximising the efficiency of energy use in production, storage, distribution and end-use. Reduced dependence on fossil fuels with more emphasis on renewable energy technologies as the primary energy sources. Use of an integrated mix of regulation and economic and market-oriented approaches to promote competition within both the petroleum and electricity sectors and to promote best industrial and environmental practices. Promotion of research and development in energy efficiency, oil and gas exploration and renewable energy technology.

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x x

Increased exploration for oil and gas resources and usage of found resources in such a manner as to ensure at least 50% transfer of known reserves of fossil fuels to the next generation. Increased private sector participation in a competitive energy sector. The national energy policy will reflect the inputs of the major stakeholders and will be accessible to all. x

ES 5.1 Ensuring Security and Stability of Supply Security of supply will be enhanced by the following measures: x x

Increased exploration for and equitable exploitation of onshore and offshore oil and gas resources. Diversification of the fuel mix with a transition to natural gas as the primary fossil fuel. It is anticipated that the fuel mix will be 70% natural gas by 2026. Reduced dependence on fossil fuels by the promotion of renewable energy x

The following renewable energy targets have been set: x x

10% of national energy usage will be from renewable sources by 2012 20% of national energy usage will be from renewable sources by 2026

A 10 MW wind farm, a 30 MW cogeneration plant using bagasse as a biofuel, and the recovery and use of landfill gas are renewable energy projects that will receive Government’s support over the next 5 years. The use of biodiesel and ethanol in vehicles will be promoted. The successful Barbados Solar Water Heater Model will be exported internationally and a Renewable Energy Centre will be established. ES 5.2 Maximising Energy Efficiency A new oil terminal and associated infrastructure have increased the efficiency of petroleum product storage and distribution. The BL&P has a mix of old and new generating plant with varying thermodynamic efficiencies. By 2005 diesel had replaced gas turbines as the plant that provided the greatest capacity. The total generating capacity

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had also increased to 239.1 MW. Further improvements in generation efficiency can be expected as older plant is phased out. The BL&P’s transmission lines (from the generating stations to the substations and between substations) have been placed underground. Transmission losses are approximately 7% which is considered an industry best practice. Distribution lines (from the substations to the customer) remain aboveground, vulnerable to wind damage, illegal hook-ups and aesthetically unpleasing. Whilst it is cost prohibitive to bury all of the existing transmission lines, it will be Government’s intention to mandate the use of underground distribution lines for new residential and commercial developments where viable. Over 20 years ago, the implementation of Demand Side Management had been estimated to have the potential to reduce energy consumption by 14 – 17%. The Public Sector utilises approximately 15% of the electricity generated on the island and a Public Sector Energy Conservation Programme has been developed. The programme will, inter alia, address energy usage by public vehicles, air conditioning and lighting in government buildings and mandate energy auditing and reporting. The Barbados Water Authority is the single largest energy consumer. Therefore, conservation of water is conservation of energy. The Government’s policy is to aggressively reduce Unaccounted-for-Water and to determine the feasibility of the BWA utilising alternative energy sources for its pumping requirements. An Energy Fund of Bds$10 million has been established to assist the tourism industry to install energy efficient devices. Energy efficiency labelling standards will be legislated and the Building Code will be implemented. The Government will compel the use of materials which keep houses cooler, such as thermal barriers, roof insulation, window tint and ceramic roof coatings by prohibiting the importation of products that do not meet energy efficiency standards that will be adopted by Barbados. Home energy audits will be promoted by the provision of tax incentives. Diesel vehicles are being encouraged. The government recognises that the private automobile, whilst highly convenient, is inherently inefficient and a comprehensive public transport plan will prioritise the improvement of mass transit systems.

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ES 5.3

Creating a Competitive Market

Currently, Barbados’ energy sector is regulated, with central Government exercising control over the pricing of petroleum products (gasoline, diesel, kerosene, and liquefied petroleum gas); electricity and natural gas pricing are regulated by the Fair Trading Commission. The electricity sector is a monopoly with only one company involved in the generation, distribution and transmission of electricity. The objective of the Government’s policy is to give the consumer a wider choice of products and services within the Barbadian energy market. Barbados’s on-shore oil and gas potential will continue to be exploited by the Barbados National Oil Company Ltd. Competitive bidding will be used for offshore exploration. Importation of oil will be de-regulated. However, Government will maintain control of storage and terminalling. The Government considers that there is the need for an improved regulatory environment for the distributive sub-sector. Legislation will be revised to establish, inter alia, new standards for the marketing of products. With respect to the retail petroleum sub-sector, the Government will allow new entities to enter this market. This sub-sector will be liberalised on the basis of a new regulatory environment which will include criteria for the establishment and relocation of gas stations, including environmental and safety standards. Government is cognisant of the reality that the petroleum market in Barbados is relatively small. The market contains few players and therefore there is a strong likelihood that prices can be influenced by a single player under a deregulated regime. Additionally, other entrants in the market may be encouraged to join what could be considered as a quasi cartel. The potential for dominant players to abuse the market is more likely to occur in small markets such as Barbados. To maintain Government’s regulatory oversight does not reduce the choice of products and services. It does however, maintain stability of price and a price policy that is in the interest of the consumer. The Government has in the past attempted to shield consumers from high oil prices by adjusting the tax take. The Government recognises that it will be unable to do so when the price of oil reaches prohibitively high levels. The Government will determine the optimum level at which the tax take will not be able to be adjusted and will create a new tax regime that will be revenue neutral.

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Barbados Light and Power Co. Ltd is the only entity that has been granted permission to sell electricity to the public in accordance with the provisions of the Electric Light and Power Act. The Government now considers that the changing international energy environment prescribes the need to end the monopoly of the Barbados Light and Power Co. in the generation of electricity. Barbados is well placed to exploit renewable energy technologies. Even where the cost of production is higher than the cost of fossil fuels, environmental sustainability and positive externalities through the use of clean energy such as solar and wind power would be in the public good. The Government will therefore liberalise the generation of electricity to allow Independent Power Producers, utilising renewable energy technology, to sell electricity to the national grid. ES 5.4

Achieving Environmental Sustainability

The energy policy has been assessed for its potential environmental impacts and the following mitigation measures have been identified.

x

x

x

x

x

x

Fuel composition standards - the Government will replace MTBE with ethanol in gasoline and reduce the sulphur content in diesel to internationally accepted standards. Vehicle emission standards will be legislated. Point source emissions of hydrocarbons (e.g. electricity generating stations) will be regulated. Groundwater and coastal zone protection policies will be maintained with respect to petroleum storage. Oil spill contingency planning and response capacity will be improved. Viable waste-to-energy projects will be encouraged.

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ES 6.0:

Ensuring Effective and Timely Implementation

It is the Government’s intention to ensure that the policy recommendations contained within this document are implemented effectively in a timely manner. To expedite implementation, an action plan has been developed. Institutional capacity will be increased by the strengthening of the Energy Division which will be responsible, inter alia, for overseeing the implementation of the BEP. Enabling legislation and secondary regulations will be enacted to: x x x x x x x x x x

Make energy efficiency labelling mandatory for appliances Mandate energy audits and reporting for major energy users Set standards for fuel quality (e.g. sulphur content) Set standards for vehicle emissions Set standards for occupational health and safety within the energy sector Regulate the exploration for and exploitation of resources (onshore and offshore) Prescribe penalties for non-compliance, including environmental damage Ensure stakeholder participation Create and regulate a “liberalised” and transparent energy market Establish the National Energy Authority

A Renewable Energy Centre will be developed, staffed and adequately funded by December 2009.

ES 7.0:

SUMMARY

The goals, principles, objectives and strategies outlined in the National Energy Policy are part of a vision to transition Barbados into a fully developed country by 2025. Policy initiatives have been presented to ensure sustainability in the energy sector both economically and environmentally.

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1.0

INTRODUCTION

The draft Barbados Energy Policy (BEP) was prepared by a committee of representatives of government agencies. The draft policy document was reviewed at a number of stakeholder meetings with both public and private sector participation. This final document incorporates the inputs obtained at these meetings. These comments are shown in Appendix 1. 1.1

Country Profile

Barbados is the most easterly of the Caribbean islands, approximately 300 miles (483 Km) north east of the coast of Venezuela and approximately 200 miles (322 km) from Trinidad. Barbados is approximately 166 square miles (431 sq. km) with an estimated population of 272,000 (United Nations, 2005), making it one of the most densely populated countries in the western hemisphere. Barbados’ maritime jurisdiction has recently been confirmed1 to cover approximately 200 nautical square miles, which may include up to 60,000 sq. km of sub marine shelf. In 2005, Barbados was ranked 30 th by the United Nations’ Human Development Index, with an average life expectancy of 76.6 years, and an adult literacy rate of 97%. Despite its small size, Barbados has a relatively high per capita income of approximately US $8,500 making it a middle-income developing country. Since independence from Britain in 1966, successive governments have sought to diversify the production base of the economy. Given its soil, topography and climate, sugar, manufactured from sugar cane, has traditionally been the island’s most significant export product. However, during the 1970s, manufacturing and tourism emerged as major foreign exchange earners. A stable economic climate has provided an attractive environment for foreign investment and a vibrant services industry.

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Ruling of the Permanent Court of Arbitration, the Hague, 2006.

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1.2

Energy and the Economy

As is evident from Figure 1.1 (Barbados Statistical Service 2004) Barbados’ economy, which has become predominantly service-based, has experienced sustained real Gross Domestic Product (GDP) growth, averaging 2.5% annually, from 1995 – 2004.

GDP ($ Millions)

6000 5000 4000 3000 2000 1000 0 1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Year

Figure 1.1: rGDP of the Barbados Economy 1995-2004

Source: Barbados Statistical Service In conjunction with this economic growth, per capita consumption of energy has steadily increased over the last two decades, exceeding 1,400 kilograms of oil equivalent per capita per year (kgoe/ca.year) in 2004 as is shown in Figure 1.2.

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Toe/Population ('000 persons)

1600 1400 1200 1000 800 600 400 200 0

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

Year

Figure 1.2: Per capita Energy Consumption in Barbados (1983-2005)

Source: Ministry of Energy 2006 Compared to global energy consumption trends, as illustrated in Table 1.1, Barbados is in the bracket of middle income countries. Table 1.1-1.1: Global Energy Consumption per capita Units: Kilograms of oil equivalent (kgoe) per person per year

Year World

1990 1633.6

2000 1639.6

2001 1631.3

Region/Classification

1990

2000

2001

Asia (excluding Middle East) Central America & Caribbean Europe Middle East & North Africa North America South America Developed Countries Developing Countries High Income Countries Low Income Countries Middle Income Countries

734.3 1232.7 … 1162.6 7539 965.4 … 693.1 4876.2 415.6 952.6

892.3 1259.7 3545.6 1513.9 8090.5 1120 4590.1 832.5 5447.8 478.3 1290

890.1 1265.4 3621.3 1487.1 7928.5 1088.8 4600.1 827.9 5440.2 479 1286.3

Source: International Energy Agency (IEA), 2004.

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Rising oil prices and burgeoning per capita consumption have increased the costs of importation of petroleum as a percentage of the island’s import bill since 1997 (see Figure 1.3). Data for 2005 and for the first half of 2006 are not available but would probably indicate a further significant increase in the costs of petroleum imports. 16.00

Percent of Import Bill

14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

Year

Figure 1.3: Petroleum as a Percentage of Barbados Import Bill

Source: Ministry of Energy (2005 Annual Statistical Digest) Energy Intensity is an internationally recognised index used to describe the amount of energy that a country uses to produce a unit of GDP. Figure 1.4 describes how Barbados’ energy intensity has varied over the last decade.

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85.00

Energy Intensity (TOE/GDP)

80.00 75.00 70.00 65.00 60.00 55.00 50.00

2004*

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

Year

Figure 1.4: Energy Intensity Data for Barbados

Source: Ministry of Energy 2006 It is encouraging to note that the Energy Intensity Index for Barbados has decreased over the last ten years, implying that Barbados has become more efficient in its conversion of energy into GDP, even though per capita energy consumption has increased. By August, 2006 the price of crude oil on the world market had exceeded US$73/barrel. The retail price in Barbados for a litre of gasoline has increased from BD$1.39 in June, 2002 to BD$2.46 in August, 2006. Over this same period, the electric utility (the Barbados Light & Power Co. Ltd.) has maintained its tariff rates at US$0.10/kwh. However, it has progressively changed the fuel adjustment component of the bill which has increased from US$0.056/kwh in June, 2002 to US$0.105/kwh in August, 2006. The average domestic electricity bill has increased by over 28% during this four year period. The cost of electricity which has ranged from US$0.18 to US$0.21/kwh has also impacted negatively on the competitiveness of the manufacturing and tourism sectors.

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1.2.1 Energy Consumption by Sector In 1998, which are the latest data available, petroleum usage was divided between the various sectors as illustrated in Table 1.2. It is noted that the transport sector was responsible for 33% and electricity generation accounted for ~50% of the fuel imported. Table 1.2: Petroleum Consumption by Key Users in 1998 Users Agriculture Commercial Cement Production Government Residential Electric Utility Tourism Manufacturing Road Transportation Sugar Manufacturing Other

Percentage Consumption of Petroleum Imports (%) 0.84 1.67 2.84 0.71 5.09 49.76 0.41 5.35 33.03 0.11 0.19

Source: Ministry of Energy

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In 2004, sectoral use of electricity was distributed as shown in Figure 1.6. 7%

15%

6%

Hotel Commercial 23%

Public Domestic Industrial

34%

Other

15%

Figure 1.6: Electricity Usage by Sector for 2004

Source: Ministry of Energy Domestic consumption was the major user at 34%. The Commercial sector was the second largest consumer with 23%. The public sector and the hotel sector both consumed 15% of the electricity generated in 2004. 1.2.2 Energy Demand Forecast There are no adequate forecasting models available within the Ministry of Energy and the Environment to predict energy demand over the next 20 years. Electricity generation capacity expansion planning has not traditionally been a function conducted by the line Ministry. It is the Government’s policy that national electricity generation expansion planning should be the responsibility of central government. For the purposes of this policy document, the following assumptions have been used: x

Even with the promotion of energy conservation and efficiency, per capita energy consumption will increase by ~ 4% annually.

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x

There will be no significant energy consumer (example aluminium manufacture) added to the economy over the design period. 1.3

Energy and the Environment 1.3.1 Climate Change and the UNFCCC

Barbados is heavily dependent on the importation and use of fossil fuels for energy and transportation requirements. As a small island developing state, Barbados is not a major contributor to global warming and climate change, but is likely to be significantly impacted if adaptation measures are not implemented. The national Green House Gas (GHG) inventory for the years 1990, 1994 and 1997 revealed the following: x x

CO2 emissions made up 94% - 96% of total GHG emissions, with progressive increases over the years reported on (1,564.23 Gg (1990), 1913.81 (1994), and 2198.40 Gg. (1997) Electricity generation via combustion of fossil fuels accounted for the majority of the CO 2 emissions (74%) over the 3 years investigated, followed by road transportation (14%), and all others (9%) – i.e manufacturing/industrial, commercial/institutional, residential and agricultural sectors.

Abatement options recommended in The Barbados First National Communications Report under the United Nations Framework Convention on Climate Change (UNFCCC) include:

x

x

x

x

x

x

x

x

Efforts By the Government – increase the use of renewable energy Efforts by The Barbados Light and Power Co. Ltd. to reduce fuel consumption in electricity production and, where possible, shift towards the use of cleaner energy sources (e.g. natural gas). Emphasis on energy efficiency measures in the industrial, commercial, institutional and residential sectors Reduction of CO2 emissions from the cement industry Introduction of Electric Vehicles and Hybrids Reducing disposal of organic materials in landfills Recovery of landfill gas from the Mangrove Pond Landfill Increased support for Research and Development

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1.3.2 Ambient Environmental Conditions In addition to its impact on climate change on a global scale, energy usage also has the potential to affect the local environment including outdoor air quality (e.g. vehicle and stack emissions), drinking water quality (e.g. contamination by petroleum hydrocarbons or by fuel additives – lead and MTBE), coastal ecosystems (e.g. marine oil spills), site contamination (e.g. petroleum refinery or petrol stations) and general aesthetics (e.g. overhead electricity transmission lines). The Government, in its The State of the Environment Report 2000, had the following observations about the impact of energy on the local environment: x “Increases in vehicular traffic, industrial activity and the incidence of Sahara dust have become the sources of growing concern about the quality of the air and its possible linkage to certain health problems on the island.” x Barbados Light and Power was identified as a significant point source of air pollution. The SOE report cited a 1994 PAHO study that stated BL&P 1992 emissions included 4,590 tons of Sulphur Dioxide, 1,716 tonnes of nitrous oxide, and 373 tonnes of particulates. x Vehicular traffic in Barbados has been increasing constantly since the 1960’s, see Table 1.2. The PAHO (1994) Air Quality Study estimated that vehicular traffic annually contributed 9,302 tonnes of hydrocarbons, 49,680 tonnes of carbon oxides, 2413 tonnes of nitrogen oxides, and 50 tonnes of lead to the atmosphere. Table 1.3: Trends in Motor Vehicles Registration Year

Total

Private Cars

Buses/Coaches Hired/ Taxis

Lorries/Vans

Other Commercial Vehicles

1992 1995 1998 2001 2004

46, 957 54, 670 68,094 71, 756 106, 178

38, 257 42, 701 53, 763 55, 479 86, 240

3, 067 3, 551 3, 630 5, 133 4, 785

5, 040 4, 348 5, 196 6, 502 6, 893

593 1, 724 2, 521 1, 127 2, 641

Source: Ministry of Public Works and Transport 2006 Lead as a fuel additive was phased out in 1999 and replaced by methyl tertiary butyl ether (MTBE). Closure of the Mobil refinery has removed one of the more significant point

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sources of air pollution associated with the use of fossil fuels. However, the old refinery site requires remediation to remove hydrocarbon contamination before the site can be put to other uses. 1.4

Energy and Society

Energy and society Flying into Barbados during the day or night allows one to readily visualize the ubiquitous role of energy in this most easterly Caribbean society. By night one is struck by the flashing lights across the country, from the north to the south, east to west it becomes apparent that Barbados is an island with near 100% electrical coverage. Depending on the time of year, along with blinking car lights one is even likely to see many of the various round-a-bouts brightly lit, not just for safety but also as part of a yearly celebration of independence and festivity. By day you would realize that the large sections of unlit areas are not in fact areas of poor electrical penetration or poverty, but are rural and agricultural lands with selective non illumination. Along with this you would clearly see the many solar powered water heaters on the roof tops of over one third of the houses, illustrating the most densely populated use of solar water heating technology in the western hemisphere; and finally you would see a state of the art tank farm safeguarding imported gasoline, diesel and the aviation fuel that will ultimately refuel the plane you are in. This picture paints a miniature view of the magnitude to which energy is used by the Barbadian society and its crucial role in Barbadian development. Energy is the fuel that drives the economy; its impact is reflected in the balance of payments, the retail price index, inflation, transportation costs, manufacturing, tourism and the household balance book. If we look back through the lens of time we can see that energy has a long history in Barbados and in particular, renewable energy. Examples of its use have their beginnings with the Arawaks and their use of biofuels in the forms of wood and wood chippings for heat, cooking, and protection; it is seen in the use of windmills to crush and process sugarcane into sugar and finally the conversion of radiant solar energy into hot water for domestic and commercial uses. We can then see that in reality it is not energy that most people are concerned with, but instead the services it provides.

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When one looks at energy through a social lens four elements can be identified; its accessibility, affordability, is there any disparity in its distribution, and its safety. Gender aspects of energy can also be assessed, for example through examination of the impacts on the workforce and the household. With respect to accessibility; currently electricity is available throughout the island, with no inaccessible areas. Additionally there is an extensive natural gas network that supplies approximately 16,700 customers, 16,100 being residential. Alternately bottled liquefied petroleum gas (LPG) is used by many households for cooking. An IADB study conducted in 1996 – 97 deduced that the poverty line for Barbados is US$5503 per capita per annum, and there are approximately 7000 households which fall within this bracket. It is within this bracket that there are households which use kerosene as their primary fuel. Affordability and any disparities can be assessed and evaluated through a survey to establish current baselines for habits, percentage of income used for energy costs, energy diversity and awareness. Finally with respect to safety, there are very few accident fatalities caused by the fuel chain including both primary and secondary energy sources. The vision of a sustainable energy policy is one that places the community it serves as the litmus test and focal point of its enfoldment. Thus for it to be successful, the goal must be clearly defined i.e. the provision of energy and energy services in the most effective, efficient, environmentally aware and economical means. It has been government’s policy to provide energy to the consumer at the least possible cost this must now be updated to include the above mentioned factors. The energy bills of consumers are highly related to their income, location, education and age. For those who live in the rural areas there is the concern of increased fuel consumption for private vehicles, and unreliability of service with public transport. There are the high initial costs of utilizing renewable energy sources for heating water or for electrical generation; appliances and home construction will either assist in lowering lighting and cooling costs or the opposite; and finally water use can be either efficient providing cost savings for the consumer or conversely wasteful and impacting the costs for its transmission, and use. It is government’s policy that by assisting that part of the population with the least ability to financially help themselves the social benefits of a secure and regular energy supply be experienced by all. To do this (upon completion of the survey) government will provide free energy audits for those members of the population who cannot benefit from the

11

$2000 Bds income tax rebate for energy efficient retrofits. It will also mandate that all government housing be audited and retrofitted for energy consumption and energy efficiency. The fuel of choice for the poor, kerosene will continue to be subsidized, and the ministry responsible for social transformation will ensure that energy services are available for those who desire them. Gender impacts on every sector within a nation state, and every sector has a gender component. As primary or secondary wage earners, bearers of children and primary care givers, in Barbados we have been fortunate to be able to provide the key elements with respect to energy services such that there is no major disparity between those who have access to those services and those who don’t. From working in an oil field, to pumping gas or climbing and servicing electrical systems gender diversity can be seen and its importance felt. In many developing countries access to the resources for cooking is limited, and it is through that, that women are disproportionately impacted by the availability of energy services. I.e. it is women that predominately do the cooking for households, whether single parent or otherwise and thus service the burden of finding means and methods to do so. This is not the case in Barbados where the availability of energy services such as electricity, for lighting and “micro business” opportunities, also provide the option for an additional source of income for women. In many cases this is seen through sewing, cooking and other home based businesses. Within this context we can see that the provision of energy services in their myriad ways, public transportation, electricity, and water are all not only services but social goods, and should be recognized as such. Their individual and collective impacts, particularly electricity and water, have a major affect on the stability and productivity of the national economy. The cost of energy resources makes its impact through the various sectors of the economy and thus on society as a whole. The transportation, industry, commercial and residential sectors are all sensitive to energy prices and respond accordingly. It is important that in assessing the role of energy and society, we must be cognizant of our developmental goals, and the steps to attaining them. A complex, contemporary and sustainable society is one where the resources are effectively and efficiently utilized. As a nation we have made similar errors to those of other developing nations and have not been as efficient in our energy use. This is especially apparent in our water use, as a water scarce country, and has led to a culture of waste.

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In the event that Barbados increases substantially its energy resources through the discovery of a large petroleum product find, the established principles of prudence and efficiency will still apply. In addition to the environmental and economic considerations, the possible social impacts of greatly reduced electricity and fuel costs must be soberly weighed. It is government’s policy to lead by example with respect to its energy use be it through transportation, electricity, water or otherwise. This commitment will be realized through its creation of an energy conservation unit which will advise government on the different means and methods to enhance its energy use. The ability for Barbados to continue to improve its telecommunications infrastructure is also dependant on energy. In a global economy where much of the information is transmitted electronically, reliable energy services enhance productivity. Although corporate entities are currently the major beneficiaries, it is government’s policy that those without the means, i.e. computers etc should also benefit through the provision of these services at schools and community centres throughout the island. As consumption patterns change, with increased infrastructure, e.g. highways demographics shift leading to cultural changes. It has been noticed that with the increase in 24 service stations there could be a concomitant change in employment patterns and shopping practices, leading to the decline of the traditional corner shop. Although this shift would have begun with the advent of the supermarket constant vigilance must be applied to secure that the general population is not adversely impacted by these changes. It is with this in mind that government will establish guidelines for the location of service stations based on a multilevel criterion that takes into consideration the various consequences, social, environmental or otherwise. These strategies in addition to the implementation of the complete recommendations outlined in this policy will enable Barbadians to accrue the full benefits of the energy value chain, from the well head to the household.

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2.0

REGIONAL AND INTERNATIONAL ENERGY ISSUES 2.1

Global Market Forces

Over the past four or five years, the price of oil, the primary source of energy in the world, has been rising steadily and has more than doubled, moving from US$30 per barrel to the unprecedented level of US$75 per barrel, with some industry analysts predicting that it will reach US$100 per barrel. The price increases are influenced by a number of factors including:-. x

x

x

x

The increasing world demand generally, but particularly from India and China. Currently 83 million barrels per day (BPD), and projected to increase to 93 million BPD by 2010. Geo-political conditions with unrest in the major oil production regions of the world, leading to market speculation. Perceived instability in Nigeria and Venezuela adds to the uncertainty. Limited production capacity to handle new production, and evidence of reduction of supply in major production areas. Limited additional refinery capacity with no new refineries built in recent years. This delicate refining situation is further exasperated by the potential of hurricanes activity in the Gulf of Mexico. High oil prices are unlikely to fall in the short or medium term and it is reasonable to assume that prices averaging between US$60 and US$70 per barrel will be with us well into the foreseeable future and as earlier indicated, some predict that it will rise to US$100/bbl. In spite of its high price, crude oil will continue to be the world’s dominant energy source well into the 21st century, since there are no other energy sources capable of replacing it over the next 25 to 30 years. Oil importing countries with open economies, particularly small developing ones like Barbados, must therefore devise and implement strategies which seek to minimise the impact of these high oil prices and chart a path towards the reduction of dependency on this energy source.

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2.2

Regional Initiatives

The National Energy Policy acknowledges initiatives within:x x

The wider Caribbean region including Venezuela CARICOM.

The fossil fuel situation in the region can be characterised as follows: x x

A small market with reduced opportunities for economies of scale Separation by sea The wider area is self sufficient in petroleum as Venezuela is a major producer of crude oil. The narrower region (excluding Jamaica & Bahamas) is also selfsufficient. There is production within CARICOM in Trinidad, Suriname and Barbados. Exploration efforts continue in Jamaica, Guyana and Bahamas. The Majors (Shell, ESSO & Texaco) have closed all of their refineries in the Region. Only Petroleos de Venezuela S.A. (PDVSA) and Trinidad remain. Within CARlCOM, refining capacity exists in Jamaica, Suriname and Trinidad. Regional product sources are : o PDVSA (Curacao) o Shell (Puerto Rico) o Petrotrin (Trinidad) o Hovensa (St. Croix) *Note: CET will apply because it is a non-CARICOM state x x x x

The Government’s policy has been and will continue to be to look to the Region for product first and only beyond if not available. The Government will participate actively in all regional initiatives against the backdrop of security of supply, pricing and environmental issues:

Venezuelan Initiatives The Petrocaribe proposal was introduced in 2004 as concessionary financing for oil purchase and developmental loans. There is a history of close co-operation between Barbados and Venezuela in the upstream petroleum sector under bilateral agreements. Oil

15

production, housing and rural development have benefited from concessionary Venezuelan loans acquired under the San José Agreement. Petrocaribe is not offering a price reduction. It offers concessionary funding for product purchase at market price and makes proposals for savings along the transactional supply chain. Prior to the existence of Petrocaribe, Government had implemented its own policies and programmes that were later suggested within the Venezuelan proposal. Barbados has raised the matter of access to the production of Venezuelan crude preferably as a CARICOM project and the refining of this crude to obtain product at affordable prices. So far nothing has happened. Venezuela has also advised of their interest in a Caribbean natural gas pipeline going all the way to Cuba.

Trinidad & Tobago’s CARlCOM Proposal T&T’s proposal was developed to alleviate within the shortest possible time, the adverse impact of high energy prices on CARICOM member states economies while laying the basis for a more coordinated and rational development of the energy resources of this region. The proposal addresses the oil and gas sector only and does not offer better prices but access to grant funds. Specific components of the proposal are as follows: 1) Petroleum - Acquire crude oil from Venezuela, refine it in Trinidad and make product available to member states of CARICOM. All transactional arrangements to be handled through a regionally owned company - CARIPETCO. 2) Natural gas - Make natural gas available to region largely for power generation by LNG and pipeline. Where not economic, supply of electricity via underwater power cables. Guyana There is an undeveloped plan to supply electricity, generated from an abundance of hydro, to the region via underwater cable.

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Regional Task Force on Energy

x

CARICOM has created a Regional Task Force to make recommendations on an energy policy. The mandate is to specifically address the following matters from a CARICOM perspective:

x

x

Security of energy supplies Energy pricing policy and the impact of relative competitiveness in the CARICOM Single Market and Economy: and Purchasing and Transportation arrangements The Task Force’s mandate has been widened to include natural gas, renewable energy, investments in the energy sector, energy efficiency, environmental matters and a rationalisation of the regional energy sector.

Processing Agreement

x

x

Barbados has negotiated a processing agreement with Trinidad and Tobago with the following policy objectives: The refined products are the property of Barbados Maximisation of the oil and gas value chain

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3.0

GOALS, PRINCIPLES AND OBJECTIVES OF THE ENERGY POLICY

The primary goal of the national energy policy (BEP) is to contribute towards the sustainable development of the island. The policy is consistent with the following five principles of sustainable development, embedded within the Barbados Sustainable Development Policy2. 1. Principle # 1: Quality o f Life: Quality of Life is recognised as the overarching goal; the achievement of which requires the provision to all of sufficient clean water, food, shelter, sanitation, health care, communication, transportation, education, security, recreation and energy. 2. Principle # 2: Conservation of Resources: It is recognised that all fossil fuels are non-renewable resources. To achieve sustainability there must be efficiency in the use of non-renewables to extend their life and ultimately there must be a switch made to dependence on renewable energy sources. 3. Principle # 3: Economic Efficiency: The use of natural and man-made resources should be guided by appropriate incentives. All external environmental and social costs from resource use must be determined and internalised into cost benefit analyses. Economic instruments can complement conventional regulation in influencing behaviour including resource use. Tax rebates on solar water heaters is a successful example. The principle of economic efficiency also requires an informed society, with science and technology playing a central role. 4. Principle # 4: Equity: The concept of equity ensures equal access for both current and future generations to natural and environmental assets, services and opportunities. When this concept or principle is applied to the energy sector it implies that non-renewable energy sources should be exploited in such a manner as to allow at least partial transfer of these assets to future generations. 2

NCSD, 2004. The Barbados Sustainable Development Policy. Ministry of Housing, Lands and the Environment, Government of Barbados.

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5. Principle # 5: Participation: All major stakeholders are involved in the decision making process at all levels. True participation also implies shared responsibility with Government and Civil Society sharing equitably the commitments, burdens and benefits of development.

The national energy policy uses the aforementioned principles to inform the following objectives: 1. The provision of adequate and affordable energy to all sectors of society as a prerequisite for a decent quality of life. 2. Maximisation of the efficiency of energy use i n production, storage, distribution and end-use. 3. Reduced dependence on fossil fuels with more emphasis on renewable energy technologies as the primary energy sources. 4. Use of an integrated mix of regulation, economic and market-oriented approaches to promote competition within both the petroleum and electricity sectors and to promote the best industrial and environmental practices. 5. Promotion of research and development in energy efficiency, oil and gas exploration and renewable energy technology. 6. Increased exploration for oil and gas resources and usage of found resources in such a manner as to ensure at least 50% transfer of known reserves of fossil fuels to the next generation. 7. Increased private sector participation in a competitive energy sector. 8. The national energy policy will reflect the inputs of the major stakeholders and will be accessible to all.

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The strategies to achieve these objectives are detailed, in the following sections, under the following headings:

x

x

x

x

x

Ensuring security and stability of supply Maximising energy efficiency Creating a competitive market Achieving environmental sustainability Ensuring timely and effective implementation

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4.0

THE ENERGY POLICY

The national energy policy can be described as a series of measures to ensure a secure supply of energy, at competitive prices, with efficient use, in an environmentally sound manner. The promotion of the use of renewable energy technology and the development of a low carbon economy are at the centre of the Government’s energy policy and are key strategies to ensure sustainability. 4.1

Policy Issue # 1 – Ensuring Security and Stability of Supply

The strategies to ensure a secure supply of energy include: x

Diversification in the types of fuels used and having access to a number of suppliers Increased exploration for and production of our own fossil fuels Promotion of renewable energy Sound Electricity Generation Expansion Planning x x x

4.1.1 Petroleum Product Supply and Market Diversification The Barbados National Oil Co. Ltd. (BNOCL) will optimise the supply of the country’s petroleum product requirements, minimize the incidence of cost across the entire supply transactional chain and deliver product to the market at the most competitive prices. The following strategies will be utilised: x

Maximisation of the production of crude oil and natural gas in an attempt to reach Barbados’ requirements of approximately 8,500 barrels of oil per day (BOPD), not including aviation fuel. Access to crude oil recognises the fact that there are significant benefits to be gained from its introduction into refining at cost of production (Under US$20 per barrel) as against the international price of US$60+ per barrel.

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x

Increased domestic natural gas consumption from the current 15% of the population to 50% by 2025 and a change in the energy mix so that 25% of power generation is from natural gas by 2010, increasing to 70% by 2026.

The process of getting petroleum to the consumer can be divided into upstream (before refining) and downstream (after refining) operations. UPSTREAM The strategies to maximize the benefits from the upstream operations are as follows: a. Exploration and development drilling and the identification and application of enhanced recovery technologies aimed at the maximisation of production from existing wells. b. The exploration, development and production of Barbados’ off shore potential. c. The production from proven reserves abroad in association with suitable partners.

Onshore Production Given that Barbados is geologically complex, production of crude oil and natural gas over the years has provided significant challenges. The Government will seek to maximise onshore production, within the equity principle of only utilising 50% of proven reserves, by identifying and applying the appropriate technology. In pursuit of this objective, BNOCL will identify and forge alliances with strategic partners in production sharing and other arrangements where the risk is substantially carried by the Partner for a share of the resultant production. There has been significant drilling activity over the entire island over the past 100 years and some limited success has been achieved notably in the St. Andrew and St. Thomas areas. The major discoveries however have been in St. Philip, primarily in the Woodbourne area which has produced in excess of 10 million barrels since the discovery well was drilled in 1974. The field is therefore maturing and the need to find a new oil field on-shore Barbados is therefore highly desirable.

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In pursuit of this objective, the Government will seek an able partner to assist in the drilling of a minimum of three rank exploration wells over the next 3 to 5 years. If a discovery well is found, the company will develop the new field expeditiously. Given the nature of the deposits so far discovered in Barbados, it is also likely that natural gas will be associated with any new crude oil discovery. If this proves to be the case, the BNOCL will build the necessary infrastructure to ensure delivery of this product to the National Petroleum Corporation (NPC). However, as with all exploration wells it is unwise to seek to allocate any reserves to them. Offshore Drilling

x

x

x

x

x

x

x

The Offshore Barbados License area covers approximately 45,500 square kilometres. Conoco acquired the license in May 1996 in order to test a deepwater hydrocarbon reservoir concept in the Barbados Trough. The well drilled by Conoco/Phillips indicates quite clearly that there is potential for oil and gas production in Barbados’ territorial waters. With the heightened interest in global exploration, largely occasioned by the high oil prices, Barbados will move with haste towards awarding licenses to qualified companies to explore in its waters. Any company granted a license to explore must contain the following imperatives: Preservation of environment Use of players that have a record of good environmental stewardship Create a partnership between government and the players for: training, sharing of technology and protection of the environment. Prior to drilling and extraction, the company will ensure training is conducted to place Barbadians in a position to play a major role in the new oil industry. In addition, government will:Seek to reduce the impact of oil on the society and economy. Create programmes that train Barbadians for jobs in offshore oil. Be it Samuel Jackman Prescod Polytechnic or by providing scholarships to study abroad. Create a regime to promote public investment into the offshore oil industry as a means of raising capital.

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Production Abroad BNOCL, recognizing that the evidence suggests that the potential for large finds onshore Barbados is limited, will explore the production of crude oil and natural gas abroad through association with relevant partners including other national oil companies. DOWNSTREAM The downstream processes comprise of refining, freighting, terminalling and distribution. The Government’s objective is to operate in these areas on the basis of least cost. The Government will seek to ensure that the value along the chain from a crude product to a refined marketable product accrues to the benefit of Barbados. The construction of a refinery in Barbados for the local market is not an economically viable proposition and accordingly all oil owned by Barbados will be refined at a regional refinery in pursuit of the value chain. However, the issue of a national refinery will be revisited in the event of a major hydrocarbon discovery offshore. The products will be freighted in tankers which offer the most competitive rates in the region and the product will be stored in the terminal owned and operated by the national oil company Terminalling Barbados is one of the few Caribbean countries with its own terminalling facility. The facility guarantees security of supply, and enables Government to control storage and distribution costs which can be significant. In addition, the new facility has effectively removed the trucking of almost two (2) million barrels a year of volatile products from the roads of Barbados. This is a positive impact on safety, reliability, and the environment, including the reduction of the importation of fuel required for and the pollution caused by the vehicles used previously for such purposes.

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Fuel Diversification A fundamental strategy to achieve energy security is to ensure that the right mix of fuels is used. Apparent choices are as follows: Natural Gas Natural gas is the fuel of choice in the immediate future. The lower carbon to hydrogen ratio of the components of natural gas makes it a relatively clean fuel, and global prices although rising appear to be less volatile than those for crude oil. Barbados has been given an approximate price of US$1.65/MMBTU (minus the transportation toll and with some small escalation over the 25 year contract.). The current prices of Bunker C (fuel oil) and diesel both exceed US$10/MMBTU. In addition, the efficiency of a natural gas driven plant is higher than that of a plant driven by fuel oil; i.e. 45-60% versus 34-45%. The combination of lower cost and higher efficiency would result in considerable savings. The annual savings, if natural gas was used primarily to produce electricity, has been estimated to be over BDS$40 million. The Government will implement the following initiatives to support the transition to natural gas as the primary fossil fuel: x

Minimize the incidence of venting of natural gas to the atmosphere and seek to make all natural gas available to NPC. Barbados uses its scarce natural gas resources efficiently. All requirements in excess of the demand of the domestic, commercial and industrial customers are sold to the BL&P on an interruptible basis for power generation at their Spring Garden Plant. x

The power generation industry and households will be further encouraged to shift to natural gas. The promotion of natural gas as a vehicle fuel is also being pursued. x

The demand for natural gas currently outstrips local supply and accordingly Government has agreed to the importation of natural gas and is currently examining the transport options under which natural gas may be imported. The trans-Caribbean pipeline proposed by Trinidad & Tobago is an attractive option.

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LPG All LPG in Barbados is currently sourced, freighted, bottled and distributed by the Majors. The Government is exploring the possibility of delivering the product at a more competitive price.

COAL It is recognised that coal is the most abundant fossil fuel globally. It is further recognised that Clean Coal Technologies are being developed along with ultra clean coals with very low sulphur content which can be used directly in combined cycle generators. However, this technology is not sufficiently mature to be considered as part of the fuel mix at this time. The Government will continue to monitor further developments in clean coal technology.

NUCLEAR ENERGY The use of nuclear energy will not be pursued due to high capital costs and the regulatory and institutional capacity that would be required to ensure safety. The Government will continue to oppose the transhipment of nuclear waste across the Caribbean Sea.

HYDROGEN Hydrogen is the ultimate clean fuel and the fuel of the future. It is the Government’s policy to support research into the use of hydrogen both in the production of electricity and in transport. However, it is not anticipated that hydrogen will be a significant component of the energy mix during the design period of this policy.

4.1.2 Renewable Energy The Government will ensure that adequate financial, technical, legislative and administrative capacity is provided to achieve the following targets: x

x

10% of electricity generation will be from renewable sources by 2012 20% of electricity generation will be from renewable sources by 2026

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The use of biodiesel and ethanol and other alternative energy sources will be encouraged in the transport sector and our success in solar water heating will be exported. The specific policy initiatives for each renewable energy source/technology are as follows: a. Wind Farms Wind farming is a mature and proven technology. Wind farms planned currently by BL&P (10 MW) will be ~ 3% of energy capacity. The Government will identify additional potential wind farm sites, including offshore. The target is to obtain approximately 20 – 40 MW of generating capacity from wind over the design period. b. Bio-fuels A 30 MW co-generation plant as a component of the Cane Industry Restructuring Project (CIRP) will be constructed by 2010. The feasibility of a second bio-fuel project using energy crops will be investigated. It is understood that BADMC is considering the use of gasification technology to improve the thermal efficiencies of the biofuel process. c. Ethanol The standard of 10% ethanol in gasoline will be implemented and under the CIRP approximately 14.7 million litres of ethanol will be produced annually to meet these requirements. The ethanol content in gasoline will be progressively increased over the 20 year design period, as ethanol feedstock becomes available. It is also recognised that ethanol can be used in the production of biodiesel. The Government will encourage further investment in ethanol production.

d. Biodiesel A 2% biodiesel content in all vehicle diesel fuels will be mandated by 2012. This will be increased to 10% by 2025. It is noted that currently, approximately 100 million litres of diesel are consumed annually, it is further noted that approximately 4.5 million litres of used cooking oil is generated annually. These cooking oils can be converted into biodiesel. The private sector will be encouraged through appropriate incentives to develop the biodiesel industry.

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e. Solar waters heaters The Government will continue to encourage the use of solar water heaters through appropriate economic instruments. All solar water heaters should be constructed to provide water from the tank when there is a water outage.

Solar Water Heater Global Programme The number of solar water heaters produced outside of Barbados is projected to exceed 10,000 per annum by the end of 2007. This amount should increase to 100,000 per annum within 10 years. The Government will continue to invest in this programme. The Government will also invest in developing and protecting the intellectual property rights (documentation legal cost and technical) of the Barbados’ solar water heater model. This will include the global advertising of this ‘model’ to other developing countries. Other applications of solar technology including solar houses, solar drying and solar airconditioning will be encouraged. In addition, the following policy initiatives will be implemented to support the transition to a renewable energy economy: x

Wind Water Pumping: Wind water pumps were a critical source of irrigation before they were replaced by diesel pumps. The agriculture investment fund will be used to finance wind pumps where feasible. x

Wind Turbines-Stand Alone: Stand alone wind turbines will be encouraged to support rural industrial development in high energy businesses such and cold storage of vegetables and ice production. x

Wave, Tidal, Ocean Current and Ocean Thermal: The Government will monitor these technologies and encourage any that reach mass production. x

Capacity Development/Renewable Energy: The Renewable Energy Centre will be built and staffed by December 2008.

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x

Education: An Associate Degree in renewable energy should be developed by the BCC/Erdiston College in collaboration with UWI. This will be the mandate of the Ministry of Education & Youth Affairs in collaboration with the Renewable Energy Centre. x

Renewable Energy Council: A renewable energy council consisting of public and private sector individuals will be mandated to review renewable energy policy and programmes. x

Renewable Energy Legislation: Legislation to facilitate the development and sustainability of renewable energy projects will be enacted. x

Rights to Sell Renewable Energy and Wheeling: The franchise to sell electricity will be extended to economically viable renewable energy producers. The right to sell electricity will be extended through the supply of electricity to the grid at the source of the renewable energy. This electricity can be collected by the end user at the point along the grid where it is needed (by the producer of the renewable energy). This facility is called ‘Wheeling’ and has been in place in the USA and Europe for over 20 years. x

Government Guarantee of Purchase Renewable Energy Electricity: The Barbados Government will guarantee the purchase of renewable energy electricity up to 10% of total electricity use, if the cost is within an acceptable range. x

Government Investment in Renewable Energy Companies: Government owns outright or is a major shareholder in all critical Barbados fossil fuel companies. Government will seek to become a major shareholder in renewable energy focused companies. x

Public Share ownership in Renewable Energy Companies: Government will facilitate public share ownership in renewable energy companies that it owns outright or has a major share ownership. x

Feasibility Studies: The Barbados government will seek to mobilise funding to pay for research and development geared to leverage investment in renewable energy.

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x

Carbon Tax: The Government will establish a Carbon Tax on green house gas emitting companies that is related to the global value of the emission traded under the Kyoto Protocol and other mechanisms. x

Green Power Investment Deductions: Income tax deductions will be extended to investment in government-sanctioned renewable energy projects. x

Renewable Energy Investment Fund: The Government will encourage and contribute to a renewable energy investment fund. x

Renewable Energy Department: Establish a Renewable Energy Centre.

4.1.3 Electricity Generation Expansion Planning The following section outlines the Government’s policy to ensure the reliable and costeffective generation of electricity with minimal environmental impact. The objectives of an electricity generation expansion plan should be as follows: 1. 2.

3.

The cost of electricity amongst the domestic, commercial and industrial sectors of Barbados is affordable. The electrical infrastructure maintains or outpaces the growth demand while at the same time ensuring that the installed capacity is sufficient to ensure coverage over the growing peak demand The most appropriate fuel mix is supplied to ensure that the best price is achieved for all sectors of the Barbadian community

The Present Situation The Barbados Light & Power Co. Ltd. (BL&P) presently generates electricity using the least expensive available fuel, over 90% of the fuel used by the company is heavy fuel oil. A small amount of natural gas (approximately 250 MCF/day) is supplied by the National Petroleum Corporation (NPC) on an interruptible basis.

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BL&P supplies electricity to the various sectors at rates ranging between US$0.18 to 0.21/kwh. This is a substantial price when compared to the T&T’s (Trinidad & Tobago’s Electrical Company) price which ranges between US$0.030 to 0.038/kwh. This price has been attainable over the years mainly because the Trinidadian electric company has utilized a lower price fuel, namely natural gas which is sold at approximately US$11.25/MMBTU. A lower price fuel will substantially impact local tariff rates since both fuel oil and diesel are priced around US$9.30/MMBTU and US$10.35/MMBTU respectively. Table 4.1: BL&P's existing Generating Units Description

Maximum Continuous Rating (MW)

Can be converted to burn Nat. gas

S1

Steam Turbine

20

YES

S2

Steam Turbine

20

YES

12

NO

12

NO

12

NO

12

NO

1.5

NO

29.7

NO

29.7

NO

2.2

NO

13

NO

13

YES

Plant ID

D10 D11 D12 D13 CG01 D14 D15 CG02 GT02 GT03

Low speed diesel generator Low speed diesel generator Low speed diesel generator Low speed diesel generator Waste heat turbine Low speed diesel generator Low speed diesel generator Waste heat turbine Gas turbine (Garrison) Gas turbine (Seawell)

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Plant ID GT04 GT05 GT06

Description Gas turbine (Seawell) Gas turbine (Seawell) Gas turbine (Seawell)

Maximum Continuous Rating (MW)

Can be converted to burn Nat. gas

20

YES

20

YES

20

YES

Total 237.1 capacity Source: Barbados Light and Power Holdings Ltd. 2006 Table 4.1 illustrates that BL&P has the ability to utilize their existing plant to convert to the cheaper fuel--natural gas, if it becomes available in the required volumes. The government of Trinidad and Tobago has reserved 40 MMCF/day to the eastern Caribbean and a technical team including the Ministry of Energy and Environment is to make a recommendation to the responsible Minister on the method of transport. NPC has computed that the local natural gas requirements will range between 22-46 MMSCF/day over a twenty five year period. BL&P has indicated that the project will only be feasible if BL&P uses natural gas to power most of its generating plant.

Expected Generation Expansion by 2012 Currently, BL&P has invested approximately BDS $800 million in the electric network. It has applied for planning permission to install a new 30 megawatt (MW) generation plant at Trents, St. Lucy. Current energy mix is approximately 90% fuel oil, 2.5% natural gas and the remainder diesel. Because of its many economic and environmental benefits, natural gas has become the fuel of choice for electricity generation. Gas-fired combined-cycle technology is the overwhelming choice in new generating plants. Combined-cycle plants offer extremely high efficiency, clean operation, low capital costs and shorter construction lead times. The efficiency of combined-cycle units is now approaching 60 percent compared with roughly 34 percent efficiency for traditional boiler units — regardless of the fuel source.

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As shown in Table 4.1, current generating capacity in Barbados is approximately 240 MW. Assuming 4% annual growth in peak electricity demand, Barbados will require approximately 520 MW of installed capacity by 2026. Within the next 5 years it is anticipated that approximately 40 MW of electricity will be generated by renewable energy (30 MW from biofuels, 10 MW from wind), representing 17% of current capacity or 7% of capacity in 2026. Within 20 years, it is anticipated that additional renewable energy generating capacity will be achieved as follows: x Additional wind farming (on and off-shore): 20 - 40 MW x Waste-to-Energy (landfill gas recovery) 5 – 10 MW x Other technologies 10 – 20 MW x Photovoltaics 0 – 5 MW x Second Biofuel project (gasification) 20 - 30 MW This is a total potential renewable energy generating capacity of 95 – 145 MW over the design period, representing 18 – 28% of the required generating capacity in 2026. Therefore, an achievable energy mix for electricity generation by 2026 could be as follows: Natural gas: Renewable: Fuel oil:

70% 20% 10%

Summary Government is seeking the best energy fuel mix for the generation of electricity and natural gas is the cheapest and cleanest fuel currently available. However, a portfolio approach to generation expansion planning dictates that all of our eggs are not placed in one basket. Therefore, although renewable energy sources will be prioritised, some fuel oil generating capacity will be maintained.

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4.1.4 Storage capacity and Contingency Planning The final area that impacts on the security and stability of energy supply is fuel storage capacity and contingency planning. The Barbados National Oil Terminal Company Ltd. (BNTCL) is responsible for the implementation of Government’s policy in this area. Barbados is heavily dependent on the following liquid petroleum products which, with the exception of LPG, are stored by BNTCL x x x x x x

Fuel Oil – used extensively in electricity generation and heavy industry. Diesel - the public transport sector is heavily dependent on this fuel. There are also commercial and industrial applications of this product. Gasoline – used extensively in the transport sector especially for personal transport. Aviation/Jet Fuel – used exclusively in the air transport sector. Domestic Kerosene – used predominantly in low income households. Liquid Petroleum Gas (LPG) – this fuel has both domestic and commercial applications, especially in the tourism sector where it is the fuel of choice for hotels and restaurants.

With the commissioning of the new BNTCL Terminal and a lease tankage arrangement with ESSO Holborn, the Government has sought to substantially increase the storage capacity for these critical products as noted below:

Product

Monthly Usage

Daily Usage

Tank Capacity

Gasoline Diesel Fuel Oil Jet Fuel

66,000 bbls 55,000 bbls 125,000 bbls 92,000 bbls

2170 bbls 1800 bbls 4100 bbls 3025 bbls

36 days 39 days 34 days 23 days

Source: Barbados National Terminal Company Ltd.

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This increased storage capacity has led to a notable increase in the average stock days for each product and in situations where market prices are low allows for the possible stockpiling of some products.. Contingency Planning To mitigate potential risks and to improve the reliability of supply, the Government will implement the following:

x

x

x

x

x

x

x

x

Expansion of on-island storage facility as required accommodating: o Less frequent shipments o Strategic stockpiling with legal reserve limits. Enlargement of Marine Berths to accommodate larger ship sizes. Re-engineering of terminal infrastructure to accommodate multi grade products and new products. Co-ordination of a fully integrated emergency energy response and disaster recovery plan with all stakeholders. Development of a suitable mechanism to monitor interregional disputes and events. Diversification of supply source points. Establishment of spot contracts with reputable product suppliers. Issues pertaining to the CET will be addressed in the context of contractual spot agreements. Continue to work with regional stakeholders on common product specifications.

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4.2

Policy Issue # 2 – Maximising Energy Efficiency

The second major issue addressed in the National Energy Policy is maximising efficiency in energy use. The following sections describe the strategies to be implemented to achieve this overall objective. 4.2.1 Fuel Storage and Distribution Objectives: x x x x

Efficiency in the location of fuel storage. Efficiency in the transfer of fuel products by distributors. Efficient, socially and environmentally friendly physical distribution network. Efficiency along the value chain.

Current Situation: Barbados currently stores the majority of its fuel products at BNTCL’s terminal at Fairy Valley. There are however, individual entities, which also store fuel products. Barbados has a network of gas stations spread throughout the island, placed where the owners consider them to be most beneficial financially. There is currently an understanding that no further issuing of approvals for the erection of Gas Stations be given by the Town Planning Department until a comprehensive study is carried out. In parallel with the opening of the new terminal facility, all road tankers of gasoline and diesel were remodelled to facilitate bottom loading in contrast to the top loading facility, which was at Needhams Point. This has greatly improved the efficiency of the loading of fuel products for Barbados. Added to that, the network of pipelines utilised by the new terminal has considerably reduced trafficking of fuel products on the highways of Barbados.

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Policy Initiatives: Maximise the use of BNTCL’s Terminal storage capacity by diversifying the type and quantity of fuel products to be stored on site to achieve greater efficiencies. 4.2.2 Electricity Generation and Distribution. BL&P currently has electricity generating equipment varying in age from the 1970’s to less than 1 year old. Thermal efficiencies vary in accordance with the age of the technology used with the steam turbines at Spring Garden being the least efficient. In 2001 the total installed capacity was 189.5 MW. By 2005 diesel had replaced gas turbines as the plant that provided the greatest capacity. The total capacity had also increased to 239.1 MW. 2001

2005

17%

21%

Steam

44%

35%

36%

Steam

Diesel

Diesel

Gas Turbine

Gas Turbine

47%

Figure 4.2: Comparison of the Installed Capacity by Power plant Type for 2001 & 2005

Source: Barbados Light and Power Holdings Ld. 2005 Annual Report BL&P has a relatively high efficiency in the generation sector as the low speed diesel generators (e.g. 2 x 30 MW) that have been installed have a thermal efficiency of 44%. This figure is comparable to combined cycle generators which are bench marks for thermal efficiency.

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Transmission and Distribution Transmission and distribution are already at a high efficiency level, with just 7% losses being experienced in 2005. Although not necessarily an efficiency issue, there are plans to bury all transmission lines by 2009. In distribution however, the fragmented nature of Barbadian neighbourhoods prevents the burying of distribution lines. It is only in newer neighbourhoods which have been planned out in their entirety that underground cables may be used. Burial of distribution lines for new residential and commercial developments will be mandated by the Government.

Policy Initiative: Conversion to natural gas combined cycle gas turbines when the proposed pipeline from T&T comes online. 4.2.3 Sectoral Energy Use and Conservation Over 20 years ago (1983), a World Bank funded energy conservation study estimated that the overall energy conservation potential of the country was 14 to 17 per cent of total energy used. The major recommendations resulting from this project, which are still relevant, are summarized below:

x

x

x

x

A study of the utilization of natural gas and wind for power generation directly to Barbados Water Authority (BWA) Pumping stations; The implementation of a conservation programme for the BWA by introducing metering and a system loss reduction programme; The training of the staff of the Energy Conservation Unit (ECU) and the Transport Board in measuring the results of a driver training programme (DECAT) and in the continuation of that programme; Consumer education and utility-provided information services to the consumer

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x x

Changes in the existing rate structure and the utility regulations, required to promote energy conservation through sending the correct price signal to the consumer Utility financing of the energy conservation projects.

Some of these recommendations have been already implemented, and a concerted effort will be made to implement those outstanding recommendations that are still considered appropriate. To promote energy efficiency in building design and maintenance, the Government will implement the Barbados National Building Code for the construction of new and substantially renovated buildings above a certain size. This code sets out energy efficiency requirements in respect of mechanical ventilation, air conditioning, lighting, hot water systems and other services and equipment to be installed. To encourage energy conservation, Government will introduce legislation in the form of an Energy Efficiency Act by 2008. This legislation will support and regulate the introduction of energy efficient appliances and equipment to the market and develop standards for high using energy devices. In addition, fiscal incentives will be offered to support this effort. The Act will: x Insist upon mandatory energy efficiency standards for itemised imported products; x Improve appliance labelling; x Implement market based programmes which offer consumers and manufacturers technical support; x Place increased emphasis upon private and public Research & Development (R&D) to provide more efficient products.

Advocacy Effective development of energy policy and programmes is enhanced by the participation of the major stake holders and the public. The Energy Ministry has had a tradition of one

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week of focused awareness activities in November that includes radio, television and newspaper public service announcements, as well as competitions and distribution of energy tips. In addition to this a National Energy Conservation Programme will now be implemented. The Ministry plans the following activities: x x

Year-long energy awareness programmes Demonstration projects

Home Energy Efficiency The Government proposes to support the use of materials which keep houses cooler, such as thermal barriers, roof insulation, window tint and ceramic roof coatings. The use of home energy efficient systems/components may have to be legislated because reducing the import duty may only benefit the importer and not the consumer. It may be necessary to restrict the importation of products that do not meet agreed ene rgy efficiency standards.

Home Energy Audits The Government supports home energy audits by the provision of tax incentives.

4.2.3.1 Public Sector Energy Conservation Programme The Prime Minister in his Economic and Financial Policies in January 2006 stated that Government must embark on its own Energy Conservation Programme. He further stated that:

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‘If a National Energy Conservation Programme is to achieve maximum effectiveness, the Government will provide leadership. The Government should therefore embark on its own Energy Conservation Programme’.

This Programme will include:Vehicles In order to reduce government fuel costs and provide leadership in vehicle energy conservation, Ministries and Departments will do the following:(i)

Purchase vehicles with engine capacity equal to or under 1600 cc unless needed to carry out major loads as part of regular operations. (ii) Purchase diesel vehicles of engine size below 2500cc where the carrying of major loads on a regular basis is required. (iii) Ensure that vehicles are tuned within recommended periods. (iv) Consider installing legitimate fuel saving devices in all vehicles. (v) Vehicles over 2000cc should not be purchased for government offices unless approved by the Minister of Finance. (vi) Fuel consumption of each government vehicle (or vehicle supplied with fuel from the government ) should be monitored monthly by the accounting officer of the Ministry or their representative to ensure that effective fuel efficiency is practiced. (vii) Driver education for greater fuel efficiency will be conducted. (viii) The use of alternative vehicle power sources such as Natural Gas, Liquefied Petroleum Gas (LPG), Solar, Ethanol and bio diesel to be considered. Bio diesel will have to be quality assured by BNSI. (ix) The use of Hybrid Vehicles when available on the market should be considered. (x) The regular effective maintenance of air conditioners should be practised.

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Air Conditioner Programme There should be specific programmes related to air conditioners and refrigerators in government offices. All Ministries will be directed to follow the guidelines below: (i)

(ii)

(iii) (iv)

Effective numbers and correctly sized ceiling fans should be the preferred cooling method. In cases where appropriately sized fans are found to be ineffective, they should be replaced by air conditioners. Where air conditioners are unavoidable there should be energy efficient systems. All air conditioned rooms should be effectively sealed against air leakage. Air conditioners should be correctly sized according to room area and environmental conditions. Refrigerators should have their door seals checked periodically.

Government Buildings Existing Government buildings and high energy using institutions should be subject to periodic energy audits beginning in fiscal year 2006/2007. Any energy efficient retrofits (modification of building and equipment) that show a 3-year payback (the saving on the electricity bill is equal to the cost of retrofitting in three (3) years time) will be favourably considered. All new government buildings will be made energy efficient. This will be done through audit of designs and modification of architectural plans. Government will encourage private sector investment in energy efficient buildings by choosing them over other buildings to host conferences, meetings or accommodating Government offices.

Lighting Lighting in all government buildings should be provided by fluorescent bulbs or more efficient systems. This will apply to all new government buildings as well as existing buildings (replaced over 2 year period).

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Electrical Appliances Government departments should only purchase the most energy efficient appliances in order to reduce energy use. 4.2.3.2 Manufacturing Most manufacturers use diesel and electricity as their primary means of generating energy. A few use natural gas and fuel oil. The increased use of natural gas and/or renewable sources of energy such as biodiesel along with commercial energy audits and retrofits to enhance efficiency is recommended. 4.2.3.3 Retail The retail sector is powered by electricity supplied from the national grid. The increased use of renewable sources of energy such as biodiesel along with commercial energy audits and retrofits to enhance efficiency is the general recommendation for this sector. 4.2.3.4 Transport The transportation sector as a major user of energy has a significant potential for energy conservation. In 1994 transport accounted for 48% of the total final energy use of petroleum based products. Task (IV) of the energy conservation study sought to establish a driver training programme for Transport Board drivers. This programme should be extended to all public service vehicle drivers.

Policy Initiatives Government will therefore consider the following in the public sector: i.

the speedy implementation of the transport rationalisation study;

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ii.

on-going driver training programmes for all public sector vehicle drivers;

For private vehicles (cars) more emphasis will continue to be placed on smaller more fuel efficient engines.

A more rigorous inspection system will be put in place for buses, trucks and commercial vehicles as well as for cars over ten (10) years old. This will encourage fuel efficiency through improved maintenance. The Government will maintain a lower level of import duty on vehicles with smaller engines than on vehicles with larger engine sizes. The fuel efficiency of diesel powered vehicles ranges between 15-20% greater than that of the equivalent gasoline powered engines. Efforts will be made to increase the proportion of diesel-powered vehicles. Octane Enhancement of Fuel: With few exceptions there is no loss of performance in using the 87 octane fuel for motor cars. The Government will by way of public education, encourage economy through the use of appropriate fuel grades for motor vehicles. Constraints to the use of electric vehicles have been overcome through the use of hybrid vehicles. A hybrid vehicle integrates a gas engine and an electric motor to provide the power. Flexi vehicles use gasoline and biofuels, such as ethanol, in various proportions. In Trinidad and Tobago there are already over 3,500 vehicles utilising Compressed Natural Gas. The kilometre per litre performance of hybrid vehicles is approximately twice that of comparable conventional vehicles. Hybrid vehicles are currently more expensive but because of their lower operating cost, over their economic useful life, the cost per kilometre is competitive. The Government will promote the wider use of hybrid, flexi and natural gas vehicles through a discriminatory tax regime that favours fuel diversification and fuel efficient vehicles. The Government will encourage the further development and use of mass transit systems.

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4.2.3.5 Tourism The Tourism Development Act offers concessions for tourism facilities development and plant refurbishment and more specifically “energy efficient light bulbs and fittings”. An energy efficiency audit and Retrofit Fund of $10 million dollars has been established as a revolving loan fund for the tourism industry for the purchase of energy efficient devices and equipment, including solar systems.

4.2.3.6 Agriculture Biomass in the form of bagasse has been used in Barbados for centuries. The sugar industry has generated its own energy supply, and the excess has been sold to the utility company to be put into the national grid. As part of its plans to transform the sugar industry into a sugar cane industry, the Ministry of Agriculture and Rural Development through the Barbados Agricultural Management Company (BAMC) commissioned a Feasibility Study on a Fuel Cane Power Generation Project to generate 30 megawatts of energy. Energy Conservation in agriculture will be promoted through the use of economic incentives linked to Best Practices.

4.2.4 Demand Side Management Demand-side management (DSM) refers to the actions taken to influence the consumer, whether business or household, to change their amount or timing of energy consumption.

x

Elements of a Demand Side Management Programme will include: Public Sector Reform: Adopt exemplary energy efficiency practices within the public sector.

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Energy Conservation Programmes: Continued efforts towards consumer education will be pursued. x

Energy Rebate Program: Under this initiative consumers could receive a percentage rebate on their bills if they achieved a reduction in consumption. Innovative Peak Load Reduction Projects: effective collaboration between the Barbados Light and Power Ltd. and various institutions such as the Barbados Water Authority (BWA), regarding the development of a load management and capacity plan. x

x

x

Load levelling : These technologies are used to smooth out the peaks and dips in energy demand by reducing consumption at peak times ("peak shaving"), increasing it during offpeak times ("valley filling"), or shifting the load from peak to off-peak periods to maximize the use of efficient baseload generation and reduce the need for spinning reserves. x

Energy Storage Devices (ESDs): The use of ESDs will be explored. These devices would be located on the customer's meter and can be used to shift the timing of energy consumption. x

Load Control: Energy management control systems (EMCSs) can be used to switch electrical equipment on or off for load levelling purposes. Some EMCSs enable direct off-site control (by the utility) of user equipment.

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4.3

Policy Issue # 3: Creating a Competitive Market

Barbados’ energy sector is a regulated sector with central Government exercising control over the pricing of petroleum products (gasoline, diesel, kerosene, and liquefied petroleum gas); electricity and natural gas pricing are regulated by the Fair Trading Commission. Barbados’ energy sector is comprised of the monopolistic production of crude oil and natural gas, as well as the importation of kerosene, gasoline, diesel and fuel oil; Liquefied Petroleum Gas (LPG) is imported by a duopoly. The distributive petroleum sub-sector is dominated by four companies while the retail sub-sector is comprised of independent dealers who operate under franchise and licensing arrangements. It must be stated that in the distributive petroleum sub-sector, there are strong elements of vertical integration as can be seen where the distributors are involved in the retail of petroleum products. The electricity sector is a monopoly regulated sector with only one company involved in the generation, distribution and transmission of electricity. The effort to develop a competitive market will evidently be informed to the extent to which such a policy initiative will result in competitive prices to the consumer, and where consumer bargaining power will improve as new entrants operate in the deregulated market. The objective of the policy is to give the consumer as wide a choice of products and services as services, whilst maintaining stability and compatibility with national development objectives. The result of these broad objectives would be the decreased cost of living and the contribution in a substantial way to the macro-economic well-being of the country. In view of the limited reserves on-shore Barbados and the complexity of the geological conditions, the Government does not propose to open the production of the on-shore sector to other entities but will seek to ensure that the national oil company, who operate exclusively in this sub-sector, enter strategic partnerships with other market players to exploit Barbados’ on-shore potential. With respect to Barbados’ off-shore petroleum acreage, the Government will pursue a policy of competitive bidding with a view to ensuring that this hydro-carbon potential is fully exploited in the quickest possible time.

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The Government will deregulate the import petroleum sub-sector to allow any entity the opportunity to import approved petroleum products. The requisite legislation will be prepared to give effect to the new regulatory environment for the importation of petroleum products. However, in the interest of public good, the Government will maintain regulatory control of the storage to ensure that all petroleum products (gasoline, diesel, fuel oil, crude oil and kerosene) pass through the approved central terminal facility on the payment of the requisite throughput fees. The Government considers that there is the need for an improved regulatory environment for the petroleum distribution subsector and in this regard, the legislation will be revised to establish, inter alia, new standards for the marketing of products. With respect to the retail petroleum sub-sector, the Government will use legislation, policy and administrative instruments to allow new entities to enter this market. This sub-sector will be liberalised on the basis of a new regulatory environment, which will include criteria for the establishment and relocation of gas stations, including environmental and safety standards. With respect to pricing, the Government currently sets the wholesale and retail prices of kerosene, diesel and gasoline. Government is cognisant of the reality that the petroleum market in Barbados is relatively small. The market contains few players and therefore there is a strong likelihood that prices can be influenced by a single player under a deregulated regime. Additionally, other entrants in the market may be encouraged to join what could be considered as a quasi cartel. The potential for dominant players to abuse the market is more likely to occur in small markets such as Barbados. The Government will therefore maintain its regulatory oversight in setting prices. To maintain Government’s regulatory oversight does not reduce the choice of products and services. It does, however, maintain stability of price and a price policy that is in the interest of the consumer. The Government has in the past attempted to shield consumers from high oil prices by adjusting the tax take. The Government recognises that it will be unable to do so when the price of oil reaches prohibitively high levels. The Government will determine the optimum level at which the tax take will not be able to be adjusted and will create a new tax regime that will be revenue neutral. The electricity sector in Barbados is vertically integrated with one service provider, Barbados Light and Power Co. Ltd, who is responsible for generation, transmission and distribution of electricity.

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The legislative instruments regulating the electricity sector are: The Electric Light and Power Act Utilities Regulation Act Electricity is generated primarily by the use of fuel oil, diesel and aviation fuel by the use of steam turbines, diesel low speed generators and gas turbines. Barbados Light and Power Co. Ltd is the only entity that has been granted permission to sell electricity to the public in accordance with the provisions of the Electric Light and Power Act. This legislation does not mandate this company to buy electricity from independent power producers although the company can do so through negotiated contracts. The Third Schedule of the Electricity Act gives the Barbados Light and Power Co. the right to supply electricity for public and private purposes for a period of 42 years from 1986 although these rights are not exclusive rights. The Government now considers that the changing international energy environment prescribes the need to end the monopoly of the Barbados Light and Power Co. in the generation of electricity. The volatility in the international energy sector and the high prices of crude oil has caused countries throughout the world to explore and use renewable forms of energy for electricity generation. The Government has set a target of 30% of the use of renewable energy by 2012; this target will only be achieved if renewable energy is used in significant quantities for power generation. Many countries throughout the world have competition in the area of generation such as the United States and Jamaica where independent power producers are allowed to sell to the grid at wholesale prices. Such a system can encourage efficiency and innovation as suppliers are forced to make their prices competitive in order to maintain their markets. Barbados is well placed to exploit renewable energy technologies blessed as the island is with wind, solar, bio-mass and bio-gas. Even where the cost of production is higher than the cost of fossil fuels, the fact is that the issue of environmental sustainability and

49

positive externalities through the use of clean energy such as solar and wind power would be in the public good. The Government will therefore liberalise the generation of electricity to allow renewable energy Independent Power Producers (IPPs) to sell electricity to the national grid and will use administrative, financial and legislative instruments to achieve this objective. These IPPs could include the following example, individual households with photovoltaic systems on their roofs selling electrity back into the grid via reverse or net metering. It is recognised that the strategy to be developed may have to include subsidies for the use of renewable energy, a mandate to the dominant distributor of electricity to purchase a stipulated percentage of renewable energy and the establishment of a regulatory environment guiding the contractual arrangements between independent power producers and the dominant company. The Government will through this policy objective seek to have 20% of electricity generation from renewable energy by 2026. The Government will also pursue a policy of allowing net metering and reverse metering which would allow customers to be credited for electricity that they generate on site in excess of their electrical consumption. These policy initiatives will be guided by the vision of transitioning Barbados from a fossil-based fuel economy to an economy in which the dominant sources of energy will be from natural gas and renewable energy sources.

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4.4

Policy Issue # 4: Achieving Environmental Sustainability

The way a country manages its energy resources and imports can impact significantly upon the environment. This energy policy has been assessed for its potential environmental impacts and the following issues have been identified in an initial scoping exercise. In 1999, the use of lead as an anti-knocking agent was replaced by MTBE. The energy industry allows for a maximum of 15% MTBE in gasoline. Barbados’ current operating policy allows for 2-4% MTBE in gasoline. MTBE is a suspected carcinogen, it is mobile in soils, and relatively persistent making it a potential health risk to drinking water quality. Sulphur is the main chemical constituent in diesel that is subject to control owing to its potential environmental implications. A maximum sulphur content of 0.5% (5000 ppm) in diesel is used as the national policy. It is noted that the international trend is for standards for sulphur content in diesel to be significantly lower than that used by BNTCL (e.g. < 15 ppm in California in 2006, < 50 ppm in Europe, decreasing to10 ppm in 2009). Modern diesel engines are very sensitive to sulphur content. The Government’s policy of increasing the diesel vehicle fleet will not achieve its environmental objectives unless the sulphur content in the diesel currently imported is significantly reduced. Emission standards need to be developed for electricity generation plants and for vehicles. Petroleum storage sites are potential sources of contamination. Marine and/or terrestrial oil spills could be extremely detrimental to the environment and the economy. The following specific environmental mitigation measures will be implemented by the Government: x

x

Phase out the use of MTBE by 2010. Lobby for the establishment of regional standards for fuel composition and the retrofitting of regional refineries to achieve internationally accepted standards for sulphur content by 2012.

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x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

Enact enabling legislation and regulations to control vehicular emission standards by 2009. Enact enabling legislation and regulations to control stack emissions resulting from the combustion of petroleum hydrocarbons standards by 2009. Continuously review the National Oil Spill Contingency Plan. The Government will also support CDERA in response to regional oil spills. Development applications must be in compliance with the provisions contained in the PDP and the relevant conditions of operation that may be attached to the approval. Particularly as these relate to Special Industry Development, Resource Extraction, and Wind Energy Development Compliance with the provisions of the CZM Plan for developments proposed within the coastal zone management area. Compliance with national policy guidance for operation of petroleum facilities. In the absence of such this should be in compliance with the recognized industry standards that seek to guard against deliberate and/or accidental environmental discharges and pollution. Promote the use of clean technologies and sustainable development practices in order to reduce the negative external consequences of development activity Ensure that appropriate development standards are used to build resilience against the increasing intensity of natural hazards associated with the effects of climate change, as well as eliminating practices which lead to Global Warming Develop programmes to expand the supply of renewable energy. Use non-renewables that the least damaging to the environment e.g. natural gas. Explore the use of solar power and compressed natural gas in public and private transport vehicles. Expand energy efficiency standards and the labelling of energy using products to ensure increased energy efficiency Promote greater energy conservation Reducing fuel consumption in electricity production and diversification of energy sources. Reduction of CO2 emissions from the cement industry Recovery of Methane Gas from Mangrove Pond Landfill Increased support for Research and Development Offshore oil and gas exploration and production should conform to internationally recognised best practices.

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5.0

ENSURING EFFECTIVE AND TIMELY IMPLEMENTATION 5.1

Introduction

It is the Government’s intention to ensure that the policy recommendations contained within this document are implemented effectively in a timely manner. The following constraints to implementation of the BEP have been identified: x

Outdated legislation: An uninformed public Underdeveloped regional infrastructure Inadequate human capacity x x x

5.2

Fiscal Policy & Economic Instruments

The Government’s will use fiscal policy and economic instruments to: x x x x x x x x

promote conservation of non-renewable resources encourage exploration for further resources increase efficiency in energy use promote the use of renewable energy facilitate research and development of alternative energy sources and technologies value environmental and social externalities create a competitive energy market protect the poor and vulnerable

At times, the above objectives may seem to conflict. For example, a free market approach would see the costs of rising oil prices fully and immediately passed on to the consumer, higher fuel and electricity prices would promote conservation but would impact severely on the poor and disadvantaged and reduce the profitability of the productive sectors. A balanced and flexible approach will be required with constant monitoring.

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Policy Initiatives: x Strengthening of the Energy Division, which, inter alia, will have responsibility for recommending and reviewing the performance of economic instruments. x Creation of an Energy Fund by December 2007 (expansion of the fund announced in the 2006 Budget) which will be used to finance economic incentives.

5.3

Legislative Framework

Legislation to enable the participation of renewable energy independent power producers (IPPs) including individual households in a competitive but regulated market will be essential. Enabling legislation and secondary regulations will also be required to: x x x x x x x x x

Make energy efficiency labelling mandatory for appliances Mandate energy audits and reporting for major energy users Set standards for fuel quality (e.g. sulphur content) Set standards for vehicle emissions Set standards for occupational health and safety within the energy sector Regulate the exploration for and exploitation of resources (onshore and offshore) Prescribe penalties for non-compliance, including environmental damage Ensure stakeholder participation Create and regulate a “liberalised” and transparent energy market

Policy Initiative: A National Energy Bill will be drafted by December 2007.

5.4

Education and Research

It is recognised that public education and awareness programmes will be required to affect behavioural changes towards conservation and energy efficiency. It is further recognised that exposure to and research into leading edge technology will provide a competitive advantage.

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Policy Initiative: A Renewable Energy Centre is developed, staffed and adequately funded by December 2009.

5.5

Institutional Reform & Capacity Building

Currently, responsibility for national energy policy development and implementation is fragmented between the Energy Division – Ministry of Energy and the Environment, statutory corporations (BNOC, BNTCL, NPC), the Ministry of Agriculture, a private utility and the Fair Trading Commission. Policy Initiative: It is proposed that a strengthened Energy Division will have overall responsibility for periodic review of the energy policy and monitoring its implementation. The Energy Division will also have responsibility for overseeing the liberalisation of the energy sector and in particular for ensuring that the equitable participation of Independent Power Producers is facilitated. The Energy Division will be responsible for energy demand forecasting and for producing and periodically updating the National Portfolio Electricity Generation Expansion Plan. It is recommended that an Energy Council is formed with participation from the private sector as a mechanism to allow further analysis as required, of the policy initiatives recommended in this document.

5.6

Investment and Industry Promotion

The Government of Barbados wishes to encourage further private sector investment in the energy sector. In particular, investment in offshore oil and gas exploration, in renewable energy technology, and in energy efficiency will be encouraged by the provision of economic incentives and ensuring that the necessary legislative and institutional capacity is provided. The following projects have been identified, inter alia, as investment opportunities: x

Waste-to-energy (including landfill gas recovery)

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x x x x x x x

Wind farming Co-Generation Fuel cane Biodiesel Ethanol production Ocean Thermal Energy Conversion (OTEC) Hydrogen as a fuel source

Investment in regional energy projects that are of national interest will also be encouraged. Standardisation of regional specifications for petroleum products may be a prerequisite for a coordinated approach. 5.7

Targets and Indicators

Clear, attainable targets with timelines will be set in the key policy areas. For example, 30% of energy usage will be from renewable sources by 2012. Energy Intensity and per capita energy consumption will be used as national indicators and will be published in the Annual Central Bank’s Report. It is further recommended that the ten (10) largest electricity consumers, including public sector entities like the Barbados Water Authority, be required to audit their facilities and report annually on their energy conservation efforts

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6.0

SUMMARY OF POLICY INITIATIVES

The table below contains a summary of all the policy recommendations enclosed in the above policy document. Table 6.1: Action Plan for the National Energy Policy No. 1

2

Policy Initiative Reduce GHG emissions: - Increase the use of cleaner fuels in electricity generation (natural gas) - Reduce energy demand in industrial, commercial and residential sectors by promoting increased energy efficient technologies - Reduce CO2 emissions from cement production - Increase the use of renewable Energy (e.g. landfill gas, wind farms) - Replace government vehicular fleet with hybrids and electric vehicles, provide fiscal incentives for rental agencies and dealerships to provide electric and hybrid vehicles - Reduce disposal of organic material at landfills

4

Responsible Agency MEE MEE

MEE MEE and MOF

Maximise production of crude oil and natural gas to 8 500 bbls/day while utilizing only 50% of the reserves - Drill at least 3 exploratory wells

3

Deadline

MEE 20092011

Increase utilisation of natural gas, 100% utilisation of domestic production - Increase domestic natural gas consumption to 50% - 25% Power generation from natural gas - 50% Power generation from natural gas

2025 2010 2025

MEE MEE MEE

Renewable Energy (RE) - 10% of national energy usage from renewable sources - 20% of national energy usage from renewable sources - 14-22% of generating capacity from renewable sources: 20-40 MW of generating capacity from wind energy 5-10 MW waste-to-energy (landfill gas recovery)

2012 2026 2026 2026 2026

MEE MEE MEE MEE MEE

57

No.

Policy Initiative 0-5 MW from photo voltaic energy 30 MW co-generating plant (CIRP) Possible 30 MW plant gasification 10-20 MW from Other Technology - E10 standard of 10% ethanol in gasoline - 14.7 million litres of ethanol produced annually - Increase to E85 (85%) ethanol - 2% biodiesel in all vehicle diesel fuel - 10% biodiesel in all vehicle diesel fuel - Solar water heaters should provide water during outages - Modify electric utility law to allow sale of electricity into grid, a reverse and net metering study will be conducted - Provide training in solar dryer development - Solar air conditioners will be used in government buildings - Agriculture Investment Fund will fund wind water pumps where feasible - Rural high energy projects such as cold storage will be encouraged to use stand alone wind turbines - Renewable Energy Centre built and staffed - Associate Degree in RE offered by BCC and UWI - Offer evening courses in solar, wind, etc at BCC, Erdiston and SJPP - Create a Renewable Energy Council consisting private and public sector - Profit guarantees for RE businesses - Continue duty waivers on renewable products and have a zero rated VAT on solar electric systems - Create tax instrument that allows accelerated depreciation on RE and energy efficient equipment - Enact legislation to facilitate the development and sustainability of RE projects - Franchise to sell electricity will be extended to economically viable entities, wheeling will be facilitated - Government will guarantee the purchase of RE electricity up to 10% of total electricity use

Deadline

Responsible Agency

2026 2010 2026 2026

MEE MEE and MOA MEE and MOA MEE MEE MEE and MOA MEE MEE MEE

2026 2010 2025

MEE

Dec, 2008

MEE and Cabinet Ministry of Education MOE MEE MEE and MOF

MEE and MOF

58

No.

Policy Initiative

Deadline

Responsible Agency

- Government will guarantee loans of up to $200 million for RE projects - Government will invest $50 million in RE focussed companies - Public share ownership in RE companies owned by government - Assess which RE services productions should be owned by Natural Ownership - $300 000 annually allocated to feasibility studies in RE, geared toward leveraging $5 million yearly investment in RE. - Levy a Carbon tax on Green house gas emitting companies - used to fund Green projects - Income tax deductions for investing in RE projects - A RE Investment fund will be created, contributed to by government and BNOCL. Private sector involvement would be encouraged - 2% of all cars will be solar powered 5

6

7

Energy Mix - 70% Natural Gas; 20% Renewable Energy; 10% Fuel Oil Contingency Planning - Expand on-island storage facilities Less frequent shipments Creation of legal reserve limits (stockpiling) - Enlarge marine berths to accommodate larger ships - Re-engineer terminal facility to handle new and multi-grade products - Diversify supply point sources - Develop mechanism to monitor interregional disputes and events - Co-ordinate an integrated emergency energy response and disaster recovery plan with all stakeholders - Develop common regional product specifications with regional stakeholders - Establish spot contracts with reputable product suppliers. CET issues will be addressed in the context of contractual spot agreements Energy Efficiency - Diversify types and quantity of fuels stored at BNTCL for increased efficiency

20062013

MOF

2016

MEE

2026

MEE MEE MEE MEE MEE MEE MEE MEE MEE MEE MEE MEE and MOF

MEE

59

No.

Policy Initiative

Deadline

- Initiate a comprehensive study of existing fuel distribution network in order to reduce cost by utilising dedicated pipelines - Create an independent advisory body to monitor and evaluate all aspects of the energy supply chain inclusive of major capital expansion programmes 8

9 10

MEE MEE MEE

Electricity Generation and Distribution - Shift electricity generation fuel to mainly natural gas - Government investment in PV cell manufacture in Trinidad Structural requirement for building above a certain size to incorporate PV technology into the structure to facilitate electricity generation - End BL&P monopoly on generation of electricity - Allow companies and individual households to become renewable energy IPPs - Demand Side Management should be promoted for reducing electricity consumption Create an Energy Fund from proceeds of an electricity sale surcharge Implement findings of the World Bank energy conservation study

MEE MEE and BL&P MEE and MOF

MEE MEE MEE

Implement National Building Code for building above a certain size - Set out energy efficiency requirements (e.g. lighting, air conditioning)

11 Enact the Energy Conservation Act - Insist upon mandatory energy efficiency standards for imports - Improve appliance labelling - Implement market based programmes to assist consumers and manufacturers - Emphasize R&D in energy efficient products by private and public sector

Responsible Agency

MEE and

2008 2008 2008 2008 2008 2008

MEE MEE MEE MEE MEE MEE

12 Implement a National Energy Conservation Programme - Year long energy awareness programmes and demonstration projects

60

No.

Policy Initiative

Deadline

Responsible Agency

13 Legislate the use of energy efficient systems/components for buildings 14 Provide tax incentives for home energy audits 15 Continue Implementation of the Public Sector Conservation Programme

2009

16 Increase use of natural gas and renewable energy sources e.g. biodiesel in manufacturing retail sectors 17 Institute commercial audits to promote energy efficient retrofits for manufacturing and retail sectors 18 Increase energy efficiency in the transport sector - Institute training programmes for public sector drivers - Promotion of smaller, fuel efficient engines - Tax concessions for automotive energy saving devices - Make a very rigorous inspection process for buses, trucks, commercial vehicles and cars over 10 years old - Document all vehicle imports by fuel type - 30% of all vehicle imports should be diesel powered - Improve fuel grades available in Barbados - Create a tax regime that favours fuel diversification and fuel efficient vehicles 19

Continue the Tourism Development Act - Concessions for energy efficient light bulbs and fittings for tourism plants - Establishment of energy audits and a $10 million retrofit fund

20

Utilize best practices to promote energy conservation in agriculture

2016

61

No. 21

22

23

Policy Initiative

Deadline

Create a Competitive Market - BNOCL use strategic partnerships with market players to exploit onshore oil - Competitive bidding for offshore oil exploration - Deregulate petroleum importation, maintaining BNTCL monopoly on storage thus developing throughput fees for the storage. - Revise legislation pertaining to standards for marketing of product - Create Legislation, policy and administrative instruments to liberalise the petroleum retail sector - Allow other entities to enter the petroleum retail sector - Continue to regulate prices of kerosene, gasoline and diesel - Create a new tax regime that will allow tax to remain revenue neutral - Liberalize Electricity generation Achieve Environmental Sustainability - Phase out the use of MTBE - Establish regional standards for fuel composition - Retrofit regional refineries to produce internationally accepted standards for sulphur content in diesel - Enact legislation controlling stack emissions from fossil fuel burning - Gas station survey to determine the implications of operation on the marine environment - Review the National Oil Spill Contingency Plan - Support CDERA in the event of a regional oil spill - Ensure all applications for development meet the Physical Development Plan - Ensure all coastal development complies with the CZM Plan - Make sure all operations comply with national or industry recognized standards Create a National Energy Authority - Review and implement energy policy - Oversee liberalisation of the energy sector - Create energy demand forecasts and least cost expansion plans

Responsible Agency MEE and MOF MEE and MOF MEE MEE MEE and MOF MEE MEE MEE and MOF MEE

2010

MEE MEE

2009

MEE

2008

MEE

62

No.

Policy Initiative

Deadline

Responsible Agency

24

Create an Energy Fund, with at least $20 million to finance economic incentives

Dec, 2007

MEE

25

Draft a National Energy Bill

Dec, 2007

MEE

26

Promote private sector investment in RE projects

MEE and MOF

27

Promote investment in: regional pipeline; regional refinery; regional terminal; regional tanker fleet

MEE and MOF

28

Publish energy intensity and per capita energy consumption in the Central Bank Annual report

29 Require the 10 largest electricity users to audit their facilities and report annually on their energy conservation efforts

63

7.0

APPENDIX 1

Table 7-1: Comments Received from Stakeholders

Policy Issue Expansion Planning

Even with the promotion of energy conservation and efficiency, per capita energy consumption will increase by ~ 4% annually. Percentage contribution of CO2 from road transport Processing Agreement with Trinidad and Tobago Security of Supply

Comments Received BL&P x Governments shouldn’t be involved in micromanagement of an already well operated private sector company. x Government does not currently have the capacity and it would be a waste of time and money for government to acquire that capacity. x There of blurring of liability because the obligation to serve by BL&P is lost during liberalisation. Native Sun NRG x Is that not too high if there is an effective electricity saving programme BL&P x There is a phenomenon that occurs where if energy efficiency increases then the actual usage will increase as well x Percentage contribution of CO2 from road transport has increased by 14% (1997) and this data should be updated. Further questioning whether the data were relevant in 1996 BNOC x A processing agreement is already in existence x

A 70% reliance on natural gas for electricity generation defeats the strategy of securing supply via diversification (recognising that the turbines can also utilize distillates, but the price of this would be exorbitant. i.e. security is maintained but price is affected). BL&P x The sunk cost of the pipeline makes less efficient single cycle turbine more cost effective than combine cycle turbines x

A strategy must be developed for what will be done if natural gas is not available in Barbados x

Wind farm installed capacity of 10 MW

The intention is utilize more than 70% natural gas in the generation, as this is the most cost effective fuel. Note* Renewable energy output is variable; therefore the capacity that is quoted is a peak value rather than the constant operational capacity. 64

Policy Issue Renewable Energy Targets:

Biofuels

Ethanol plant

Solar Water heaters

Biodiesels

Expected generation capacity by 2026

Energy efficiency

Comments Received William Hinds x Need for 2 sets of renewable energy targets: One for overall renewable energy and the second for electricity generation x Within the second target, there should be installed power capacity (MW) and total energy produced (kWh). x Quantifying renewable energy targets are not needed. A qualitative desire to use as much s possible x Overall renewable energy consumption targets would be: 30% by 2012 and BL&P and CIRP x Plant will produce in total either 24 or 35 MW depending on the type of cane used over a 9 month period x Net output to grid would be 15-20 MW x A 2nd biofuel project is possible not based on expanded acreage but on gasification to significantly increase outputs. ESSO x Why are we building a new ethanol plant to produce the amount that can be obtained from one tanker. BWA x Solar water heaters must be redesigned to reduce the amount of water that is wasted before hot water exits the tap x Concerns about sediment impacts on quality of water from solar water tanks Handel Callender x In 2003 100 million litres of diesel was consumed nationally. Assuming similar figures in 2012, 2 % biodiesel would require 2 million litres of biodiesel. There are 4.5 million litres of used oil currently, therefore a 50% recovery efficiency of used oil would make this target achievable William Hinds x Remove specific reference to OTEC and replace with ‘Other technologies’ x Include 2nd biofuel project at 30 MW Aquasol x Photovoltaic figure is too low BL&P x Steam turbines are at Spring Garden and not Seawell x Overall efficiency is 7% (transmission and distribution) not just transmission x Burial is not an efficiency issue but an insurance one. *However this is only because non-technical losses are not 65

Policy Issue

Manufacturing

Vehicle Duties

BWA becoming a self generator

Demand side management Phased liberalisation of petroleum pricing

Comments Received an issue in Barbados William Hinds x We have a hybrid electrical system of 110 V and 50 hz does not occur anywhere else. BL&P x Answer: retailers importing 50hz appliances which are readily available worldwide BL&P x In early 2000’s several manufacturers switched to self generation using diesel due to cross subsidies reducing the price of diesel. This subsidy should be removed as this may help one sector but may disrupt or impact negatively on other sectors. x Similarly, electrical tariff structure where commercial subsidizes residential consumers is an unnatural state of affairs and should be removed. i.e. they could provide cheaper electricity to manufacturers if the subsidies and tariff structure were removed. BL&P x Vehicle should taxed based on efficiency of engine rather than price of vehicle so as to promote hybrid BWA x They cannot pump offpeak due to hydrological considerations x If BWA installed standby capacity at the pumping stations they would not want these assets to sit idly and would be used to pump continuously BL&P x Understand BWA’s point, BL&P wishes to own and operate the gen. sets. BL&P could benefit from energy storage devices as they currently have a 70% load factor Sol x Phased approach to regulating price of petroleum products may not be practical. x Government should either regulate or allow free market to govern price

Liberalisation of BL&P electricity generation x Government has not shown where competition in the generation sector has resulted in an improved service. x More in depth analysis is required before government pursues a policy of introducing competition in the generation sector that could affect the reliability of supply. x Things have worked well in the past, so why change things now. 66

Policy Issue

Comments Received FTC x

Achieving environmental sustainability Ensuring effective and timely implementation Institutional reform and capacity Building

Targets and Indicators

FTC acts as a proxy for competition currently, however FTC does not set policy in enforces policy directives from government, therefore for example does not stipulate renewable energy targets for BL&P. Therefore this capacity is currently lacing in government.

BL&P x Several regional and international examples, e.g. Guyana and California where deregulation has resulted in less reliable service and has not necessarily resulted in price reduction either. x Policy does not address the liberalising of the transmission and distribution sectors x Correction to the policy – where it says ‘a mandate to the dominant generator of electricity’ should read ‘a mandate to the dominant distributor of electricity’ x Maximum sulphur content is not 0.05% but 0.5% (5000 ppm) Correction to 1st slide x Change Underdeveloped infrastructure to ‘Underdeveloped Regional infrastructure’ and add ‘Inadequate human capacity’ x Strengthening the energy division must be kept x Policy should be a ‘living document’ therefore an Energy Council should be created as a mechanism for ongoing consultation. x Energy Council’s job is to adapt the policy as required based on in depth analysis and to monitor its implementation x Debate about whether Policy should contain targets and figures or should be more generic in nature

67