As more energy providers enter the Virgin Islands’ market, it’s getting more difficult to plan and maintain a stable grid, according to V.I. Water and Power Authority Executive Director Hugo Hodge.
Hodge made his comments at a meeting of WAPA’s board of directors Thursday afternoon at which several issues pertaining to the diversification of the authority’s energy portfolio were discussed.
The issue was raised while the board debated a change order to a contract issued to KEMA Consulting Services to study the technical hurdles of connecting large solar installations to the existing grid.
WAPA broke ground for such an installation in Estate Spanish Town on St. Croix earlier this month.
The completed report has found that the St. Croix and St. Thomas/St. John grids can only sustain a 20 percent penetration by intermittent renewable energy, such as wind or solar, before becoming unstable.
This number is higher than a previous study that estimated the territory could only handle 10 percent penetration. Board members agreed that, given the studies, the most realistic number may by 15 percent.
Hodge said there was “a little bit of concern” that between the renewable projects already contracted and home net metering systems, the grid may be pushing the limit of what it can handle, but he said WAPA was making engineering upgrades to allow as much solar and wind as possible.
“Hopefully we’ll be fine,” he said.
While often seen as a lower cost alternative to WAPA’s current power plants, Hodge warned that in some ways the renewable sites could raise costs.
He said that as more renewable energy came online, WAPA would need to throttle down some of its boilers and the first place they could cut production was from the heat recovery steam generators, which use waste heat from fuel-driven boilers to make additional electricity for essentially no cost.
He said no renewable site could produce electricity for less than the waste heat generators.
“I don’t care if they’re offering you five cents per kilowatt power, it’s five cents more than you would have paid with free power,” he said.
Board Chairman Gerald Groner said that WAPA had to contend with a general perception that more renewable resources were always better.
“We’re at the point where too much of it is not good,” he said.
WAPA only has so much control over how much renewable energy is added to the grid, however, as both the Senate and the Public Service Commission can mandate projects.
Hodge explained that once the PSC deems a power generating company a “qualified facility,” WAPA must enter into negotiations to buy power from them. If they cannot reach agreeable terms, the PSC has the power to set the terms itself.
Hodge also pointed out that the net metering program was mandated by law and that senators have weighed in on crafting WAPA’s renewable portfolio as well – things he said should have been handled by the PSC.
He added that a bill currently moving through the Senate would mandate that WAPA pay all solar providers 30 cents per kilowatt hour, a sum Hodge found unreasonably high as bids for solar energy have come in at between 15 and 19 cents per kilowatt hour.
“The problem we have, to be honest, is that we have too many people trying to design one system,” Hodge added.
“It’s a regulatory house that’s sort of cobbled together by people who don’t particularly have the depth of knowledge and skill sets to do it. And it’s shaky,” added Groner.
The board approved the contract change order to KEMA, raising the total project cost from $185,990 to $230,990. Voting in favor were board members Groner, Cheryl Boynes-Jackson, Juanita Young, Elizabeth Armstrong and Noel Loftus. Board members Karl Knight, Wayne Biggs, Alicia Barnes and Donald Francois were absent.
The board also voted to direct WAPA to only enter into “avoided cost” power purchase agreements with energy providers in the future.
These agreements would pay energy providers only what it would cost WAPA to produce the same amount of energy in its own plants at that time.
Groner explained that WAPA had formerly entered into fixed price agreements, which set the price WAPA would pay for electricity for up to 20 years. He said this could lead to bad deals as WAPA becomes more efficient and its avoided cost drops.
He said after WAPA completes its conversion to LPG, its avoided cost should drop from 28 cents to 18 cents per kilowatt hour.
“We want to make sure that over the term of the contract it will always maintain the cost to the rate payer or lower it,” Hodge added.
Voting in favor of the directive were board members Groner, Jackson, Young, Armstrong, Knight and Loftus. Board members Biggs, Barnes and Francois were absent.
In other business the board voted to:
– award a $561,900 contract to V.I. Paving to complete a water line upgrade at the Richmond Pump Station;
– award a $2,926,100 contract to Hamon Deltak Inc. to redesign the heat recovery steam generator on St. Thomas to utilize steam that had previously been used for water desalination for producing electricity. The upgrade is estimated to save WAPA $34 million a year;
– award an $843,239 contract to Power Systems Engineering to provide consulting services for the installation of WAPA’s automatic metering infrastructure;
– approve the payment of up to $1 million for legal, technical and professional services in connection with WAPA’s LNG and LPG conversion;
– award an additional $125,000 to the Public Resources Management Group to study ways to streamline and simplify WAPA’s LEAC filings to the PSC;
– change the personnel disciplinary policy so that employees will only have a single disciplinary hearing rather than two;
– award a $1,554,800 contract to Apex Covantage for the installation of the automatic metering infrastructure;
– pay Ernst and Young $289,905 to cover additional costs incurred while preparing WAPA’s 2011 and 2012 audits;
– and award a $2,613,350 contract to Dashiell Corp. to complete phase II of the Midland Substation construction project.