23.04.15

Net Billing and Wheeling Important for Growth in Renewable Energy

Net Billing and Wheeling Important for Growth in Renewable Energy

As the price of fossil fuels sky-rocket or fluctuate, so do the cries of local industries, firms and households. The price of oil and, by extension, the price of electricity drives the cost of almost all goods and services. Industry experts, policymakers and their advisors have long declared that harvesting electricity from renewable energy sources is a critical component of Jamaica's economic viability and sustainable development.

A clear and efficient regulatory framework for net billing and wheeling are important drivers for the renewable energy sector. I am happy to see that the recently circulated Electricity Act Bill includes provisions that address these two issues. The provisions in the Bill should be carefully reviewed by stakeholders to ensure that the Act, when passed is of assistance rather than a hindrance to the renewable energy sector. Currently, the regulatory framework on wheeling and net billing are contained in the Office of Utilities Regulation ("OUR") "Revised Determination Notice in relation to Standard Offer Contract for the Purchase of As-Available Intermittent Energy from Renewable Energy Facilities up to 100kW" and the OUR Determination Notice in relation to Electricity Wheeling Framework, respectively. The Net Billing Determination Notice has been in effect for some time now, but the Wheeling Determination Notice is delayed in being promulgated.

The current regulatory framework for electricity, including the All-Island Electric Licence issued to the Jamaica Public Service Company Limited ("JPS"), does not prohibit or restrict self-generation. Self-generation occurs where a person generates electricity exclusively for his/her own use. Therefore, persons who acquire solar panels for generation of electricity for domestic use, or a firm which sets up the world's largest solar mill for its own commercial use (as Myers, Fletcher & Gordon my firm recently did) access renewable energy within the purview of the law.

Self-generators often remain connected to the JPS grid because the supply of electricity from renewable energy sources may fluctuate, or their facility is simply not adequate to meet 100% of their needs. However, they benefit from savings on their total electricity cost.

Net billing permits and regulates an arrangement whereby JPS would credit the self-generating entity or person for excess electricity generated at any particular point in time and supplied to the JPS grid, and JPS would bill for the JPS electricity used by the self-generating entity. The net electricity bill provided by JPS to the self-generating entity would be the difference between the charge for use of the JPS electricity and the total price paid by JPS for the electricity supplied to the JPS grid. The Minister of Science, Technology, Energy & Mining announced yesterday, March 24, 2015 at the PSOJ Breakfast Forum that he recently signed 300 net billing licences. This is indicative of the great demand in the island for net billing arrangements and augurs well for the future of adding small increments of renewable energy to the national grid.

Note that net billing is applicable to self-generating entities with relatively small amounts of excess capacity. A person or company that generates electricity in excess of 100kW for distribution via the JPS grid should apply for a Licence for the Generation of Electricity and enter into a Power Purchase Agreement with the JPS.

Excess electricity from self-generating entities ought not to be allowed to go to waste. Net billing for self-generating entities present opportunities for those entities to take advantage of economies of scale which would allow them to generate more than they need for marginal additional cost; thus contributing to diversification of the national energy mix.

While wheeling is also recognized by industry players, policymakers and regulators as being important to the growth of the renewable energy sector, the relevant regulation is still not in effect and is likely to remain that way for a few months or years (unless there's a conscious effort to expedite it). Wheeling is the transportation of electricity across the JPS grid by a party other than JPS. This would be beneficial to the self-generating entity who owns more than one property that he wishes to supply with electricity from a single source. For example, a manufacturing operation that has factory houses on separate parcels of land (even on adjoining lands) would need access to a distribution line to transport the electricity generated at point A to points B and C.

Even though the regulations for net billing, wheeling and renewable energy, generally, have been slow in coming on stream, it is important that we do not now lose momentum as we move towards our national goal of doubling electricity consumption by 2027 and adding significant renewable energy to the mix. Having a well-defined legal and regulatory framework is likely to improve the environment and the pace at which renewable energy projects come on stream, including by improving access to funding. In the meantime, the savvy entrepreneurs or investors in the renewable energy sector should press on and take advice from a commercial attorney regarding transaction structures that are compliant with current laws, while satisfying their clients' needs for cheaper and cleaner electricity.