Conclusions about the Viability of Technologies for Renewable Energy

Table 5.3 summarizes our conclusions about the economic and commercial viability of renewable energy technologies in the TCI.

Table 5.3: Conclusions about the Viability of Renewable Energy Technologies in the TCI Technology Scale Economic Viability with Diesel at US$3.00/gal Likely economic viability in near future Commercial viability Explanation

LFGTE Utility    _{Provided there is sufficient waste stream available, LFGTE could generate electricity}

for as low as US$0.08 per kWh compared to all-in costs of US$0.23 or US$0.26 per kWh of Wartsilas and Caterpillars. Actual costs will depend on waste composition and volumes, and the cost to aggregate waste from all islands in one location. Gradual development in modules (small engines of 0.5MW) would be possible, but may increase costs. Generation costs would be lower than for WTE, but a much lower volume of waste would be actually eliminated as opposed to just landfilled.

WTE Utility    _{WTE through incineration would have higher generation costs than LFGTE (about}

US$0.12 per kWh), but still lower than the all-in cost of generation. However, based on our experience in other similar contexts a cost of US$0.12 per kWh seems low— further investigation is warranted. WTE would eliminate much larger volumes of waste, reducing space and costs required for landfilling residual waste, such that a small tipping fee might be justified. Synergies with recycling operations (particularly for the non-residential sector, businesses and hotels) would increase efficiency. Solar Water

Heaters Distributed

   _{Solar water heaters would clearly be economically and commercially viable for homes}

and businesses. They could be used instead of electricity at a much lower cost than the average system variable cost (US$0.12 and US$0.13, respectively as opposed to US$0.23 per kWh), saving money to consumers as well as utilities. The fact that most water heating in the TCI is currently done with electricity as opposed to gas or fuel oil increases their viability—although the transient nature of many customers reduces it.

Wind Utility    _{Utility scale wind represents an economically viable option to generate electricity in}

the TCI. Under a conservative estimate of 25 percent capacity factor, turbines

designed to withhold strong winds (‗Class 1‘) could generate for as low as US$0.12 per kWh—which is far less than the average system variable cost of PPC or TCU.

Lowerable or tiltable turbines are much more expensive, making them only just viable. Land availability is limited, but off-shore installations may be an option provided that higher capacity factors are ascertained to compensate higher installation costs. A rough estimate shows that if installation costs were 50 percent higher on the ‗Class 1‘ turbines, the LRMC would remain US$0.12 per kWh provided there were a 35 percent

Technology Scale Economic Viability with Diesel at US$3.00/gal Likely economic viability in near future Commercial viability Explanation

capacity factor. Precise resource assessments conducted over a sufficiently long period, however, need to replace speculations. Hybrid configurations with solar PV and batteries, or diesel fuel (fossil diesel, or biodiesel if cost-effective) may also be explored as TCU is doing, as they may help integrate wind‘s intermittent generation.

SWAC Utility    _{This technology is commercially proven and viable, but in practice its realization is}

very difficult—it would need agreement on a piping network linking at least six large users (such as hotels) close to the coast, and likely require a difficult planning and approval process. However, given the importance of the hotel sector in the TCI, it should not be discarded, especially as new construction is being developed.

CSP Utility x   _{At US$0.260.28 per kWh, CSP is not an economically viable option now—but it is}

expected to experience significant cost reductions in the future, especially in areas with abundant sunlight like the TCI. The ability of this technology to integrate energy storage makes it a particularly interesting candidate for the future. On the other hand, land availability and plant size may limit the practicality of this technology for the TCI—larger plants of several tens of megawatts are the ones that can contain costs.

Solar PV Distributed x   _{All solar PV technologies have come down significantly in cost in recent years.}

However, at oil prices of US$3.00 per gallon none are clearly economically viable in the TCI, and will need further improvements to become an option to reduce energy costs in the country. Most are commercially viable, which may make them attractive to customers (see below about the problems this poses). Larger installations operated at utility scale may achieve significant cost reductions, but would need enough land.

Wind Distributed x x  _{The capital costs of wind turbine technology, although decreasing in recent years, is}

still too expensive to make it viable in the TCI on a commercial or small scale. As we discuss below, there is a problem that distributed scale wind turbines cost less than the tariff, making them commercially viable even though they are not a least-cost solution.

The problem of technologies that are commercially but not economically viable Technologies that are commercially but not economically viable are a problem because they mean that customers have incentives to install technologies that are not least-cost solutions for the TCI.

As shown in Figure 5.1 and Figure 5.2 the following technologies are commercially but not economically viable:

 Solar PV, commercial and small scale—both solar PV technologies considered (thin film and high-efficiency panels), which range from US$0.28 to US$0.47 per kWh in cost, are cheaper than the residential and non-residential tariffs. While PV technologies may become economically viable as the cost of panels continues to fall (or if cheaper financing were provided—these calculations assume a 10 percent discount factor), there is a risk that electricity consumers in the TCI will have incentives to install them well before they are economically viable. At current costs, installing solar PV technologies is at least US$0.05 per kWh more expensive than the conventional alternative (average system variable costs, including losses)

 Distributed scale wind turbines (10kW)—new technologies for wind turbines of about 10kW in capacity allow electricity to be generated at a cost of US$0.37 per kWh. This is less than both the residential and non-residential tariffs in PPC‘s and TCU‘s service areas. Therefore, these units appeal to customers with steady loads of around 10kW or more at a single location, saving them between US$0.06 and US$0.12 per kWh. However, this technology is not economically viable and will unnecessarily incur a cost of US$0.14 per kWh more than the least-cost alternative (average system variable cost of US$0.23 per kWh, including losses). This problem of technologies that are commercially viable but not economically viable arises in TCI because all electricity consumers face a per kWh charge that covers not only the cost of generation, but also the costs of the distribution grid, and the stand-by capacity the utilities has invested in. This means that customers who install non-firm renewable generation, and so only use electricity from the grid occasionally, do not pay the full cost of the connection to the network—these customers would effectively enjoy a service they do not pay for. If such customers were charged a monthly connection fee that reflected the true cost of their connection, and faced a correspondingly lower per kWh charge, the non-firm renewable generation would no longer be commercially viable.

Rebalancing PPC‘s and TCU‘s tariffs so that they provide more cost-reflective signals would be necessary—this could be done by allowing utilities to split their tariff into a fixed charge to cover distribution costs and back-up services, and a variable charge that more closely reflects generation costs.