Caribbean Utilities Company, Ltd. (“CUC” or “the Company”) has received the final determination from the Utility Competition and Regulation Office (“OfReg” or “the Regulator”) concerning the Company’s Certificate of Need (“CON”), which CUC submitted to the Regulator in June of 2024. The CON is defined as “a certificate that the Licensee prepares and submits to the Authority, which sets out the Licensee’s requirement for the incremental amount of capacity for which the Authority would solicit to meet future demand.”
CUC’s Transmission and Distribution (“T&D”) Licence calls for CUC to issue a CON to the regulator when CUC identifies the need to procure firm capacity resources needed for the reliability of the grid. In the most recent submission made to OfReg, the Company, with the assistance of a third-party expert consultant, identified four different pathways that would ensure the stability of the grid, three of which that included new renewable generation that provides Grand Cayman with the opportunity to meet the outlined objectives of the National Energy Policy (“NEP”).
The preferred option highlighted in CUC’s Certificate of Need issued to OfReg called for 100 megawatts (“MW”) of utility-scale solar plus battery storage and 36MW of thermal generation. This option would ensure the delivery of reliable and safe service, position renewable energy as the primary source on the grid, and offer significant cost savings to customers. OfReg has chosen to decline this proposal in favor of the business-as-usual scenario of 90MW of thermal generation. This was the only scenario that did not progress NEP objectives and represents new thermal generation equivalent to over half of CUC’s current North Sound plant generating capacity. As a result, this perpetuates reliance on fossil fuels as the primary generation source for Grand Cayman’s energy future.
In the CON, available on CUC’s website here: https://www.cuc-cayman.com/regulatory-submissions , CUC highlighted the pros and cons of each option presented. The pros and cons of the thermal generation pathway, chosen by OfReg, are highlighted in the table below:
Pros
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Cons
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Lowest procurement and development risk
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Highest emissions (though LNG switch would materially reduce emissions from 2019 levels)
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Lowest upfront capital investment
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Least renewable energy penetration and high likelihood of not meeting NEP goals
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Lowest interconnection risks and costs
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Highest projected operating costs
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Although the pros outlined in this table offer some potential benefits, concerns remain regarding the high operating costs that will be passed on to customers, the limited integration of renewable energy, the failure to meet NEP goals, and the high levels of emissions associated with this option. In the cost modelling done by CUC’s consultant to support its Certificate of Need submission, the option that OfReg has selected carries one of the highest energy costs for consumers.
The market-driven fluctuations in diesel fuel costs continue to impact customer bills. In response, CUC has conducted extensive studies on the potential benefits of utility-scale solar energy, the most cost-effective source currently available on the grid. According to CUC’s projections, had the utility-scale solar plus battery storage option been approved, customers could have realised fuel cost savings of approximately $25 million annually.
CUC stands behind the CON submission and all submitted options were fully consistent with its T&D Licence requirements to meet capacity and provide a reliable system, each with differing pros and cons. In the Executive Summary of OfReg’s independent consultant report, included as an appendix to the Final Determination, it was determined that the options provided by CUC were reasonable and aligned with industry standard practices. CUC maintains the position that any option for additional generating capacity, whether renewable energy or otherwise, must be cost-effective for customers. The option outlined by CUC that included both renewable and thermal generation was felt to be most beneficial to customers, stakeholders, and the environment. Given the imperative of consumer affordability and the advancement of renewable energy, we look forward to engaging in dialogue with OfReg to determine a solution that will be to the greatest benefit of the people of Grand Cayman.
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