Reducing Island Energy Costs
Could the Answer, My Friend, Be Blowing in the Wind?

June 12th, 2015
by Robert Armstrong

Ron Griffith's house on a hill above Gravel Bay is fully powered by a 1.5-kw wind generator and four PV panels mounted together on a free-standing pole.

(This article originally appeared in the Voice in March 2013.)

Ask most any Bay Islander and they’ll probably tell you they pay too much for electricity. Ask what should be done about it, though, and the consensus probably breaks down.

A quick perusal of recent utility bills of Voice staff shows a residential customer on Roatan using 210 kilowatt-hours a month paid 39 US cents a kilowatt-hour (kwh). That’s more than three times the average US rate, according to the US Energy Information Administration, and the cost on Roatan rises to 45 cents for those consuming more than 500 kwh, according to the Roatan Electric Company (RECO) Facebook page.

On Utila, an UPCO customer using 247 kwh paid a rate of 40 cents. And on Guanaja, the Boyacca Electric Company (BELCO) published residential rate is more than 50 cents.

With such high costs for service that is frequently unreliable and unstable, it’s no wonder people on all three islands complain about their electric utilities. However, a review of data from other small islands in the Caribbean reveals this problem is hardly unique to the Bay Islands. Except for a few places where energy is heavily subsidized, residential rates typically range between 30 and 50 cents per kwh.

The core problem is that these islands are too small to take advantage of economies of scale in conventional power generation. According to Ron Griffith, a US/Canadian citizen who has lived on Roatan many years and analyzes energy costs for Fuentes de Energía, a renewable energy company, the Caribbean islands, with slight variations, built their electric grids based on small diesel generators. These generators were added to and tied together as energy demand grew, resulting in “very unstable” and “very unpredictable” systems that in recent years have become “very expensive” as well with the rise in international oil prices. In addition, virtually all used the prevailing regulated monopoly model to build their grids.

That model, and the sunk cost in fossil generation, now stands in the way of developing more sustainable and cost-effective energy based on the resources the islands possess in abundance – sunshine and wind – said Griffith, who, it must be said, markets off-grid solar/wind hybrid systems on the Bay Islands. The islands enjoy “extraordinary solar hours per year,” he said, and “rich wind resources” that are “negatively correlated” with the sun (trade winds blow harder at night).

Griffith’s own house, which sits high on a windy hill above Gravel Bay and uses 450-500 kwh a month, is powered entirely by a 1.5-kw wind generator and four photovoltaic (PV) panels, with only a small gasoline-powered generator and two car batteries to keep the lights on in the event there is neither adequate sun nor wind, or if he needs to use his power tools.

However, RECO’s general manager, Richard Warren, said Roatan as a whole was only “average” for wind-energy potential. Furthermore, he said, wind in general can provide only “supplemental” power, because it requires a backup in case the wind doesn’t blow.

“If you have 100 MW of wind, you have to have at least 100 MW of something else,” said Warren. “That gets expensive.”

RECO received an environmental permit from the Honduran Central Government in February, for which it had waited two years, to begin constructing a 3.9-megawatt wind farm above Loma Linda, near the airport. Warren said the project, which still requires a municipal permit, should become operational within a year and would “meaningfully” reduce electricity costs for RECO customers.

“It will lower the cost of energy enough that you would notice,” Warren said in response to a reporter’s question at a February 15 ceremony marking the receipt of the permit. But he said he could not be more specific.

The 3.9 MW capacity of the 26 wind turbines would represent about a fifth of RECO’s total generating capacity and about a quarter of the Roatan grid’s peak power demand, during Semana Santa. However, RECO expects the wind generators on average will operate at only about a third of their potential, so the wind farm will probably produce only 10-12 percent of RECO’s total output. Thus, assuming the wind power costs about half what the current diesel power costs to generate, the effect on what customers pay for a kilowatt-hour would probably be only about  2-3 cents.

RECO’s main strategy for reducing electricity costs on Roatan appears to be a 22-MW coal-fired plant for which it is still seeking permission and which it claims will reduce costs by a “two-digit percent.” Of course the coal, like the current diesel fuel, would all have to be imported. But RECO claims the price would fluctuate less than diesel.

Griffith, however, thinks RECO is underestimating the potential of wind power on the Bay Islands. He claims small hybrid wind/solar systems like he has at his own house, and that his company has installed for other residential customers on Roatan, can pay for themselves in reduced utility costs in 3-5 years. But there are two major impediments.

The first impediment is financial. Even if the costs for the equipment and installation can be paid back in 3-5 years through reduced RECO bills, the cost of financing the initial investment can be prohibitive. Honduran banks are currently loath to lend money for more than three years, and interest rates on unsecured loans top 30 percent.

The second major impediment is regulatory. Honduras currently has no policy or mechanism to allow independent power producers to sell their surplus energy back to the public utility grid (so-called net metering). This is particularly problematic for solar, as the Voice reported last April. Unless a user’s power consumption coincides perfectly with the strength of the sun, a solar energy system is going to produce excess power that will be wasted unless it can be efficiently stored or sold to the grid.

This 5-kilowatt wind generator at a residence in Sandy Bay, Roatan, is part of a hybrid wind/solar system that, when fully operational, is expected to save the home owner $800-1,000 a month in electricity costs, paying for the system within 3.5 years.

This 5-kilowatt wind generator at a residence in Sandy Bay, Roatan, is part of a hybrid wind/solar system that is expected to save the home owner $800-1,000 a month in electricity costs, paying for the system within 3.5 years.

Sarah Klinetob of Penn State University, who will lead a team to Roatan in March to install a solar PV  system, donated by Vegas Electric, at the Roatan Day Care and Learning Center in Coxen Hole, said that if the equipment and labor had not been provided for free, the system would take 13 years to pay for itself with net metering. Without net metering, she said, the cost-recovery period could be considerably longer.

In addition to making independent renewable energy projects easier to finance, net metering has the potential to reduce rates for conventional consumers as well, as the price the utility would pay for the energy would likely be less than what its diesel energy costs, and regulations would require it to pass those savings along to customers.

Griffith also suggests Bay Islands municipal governments require new construction on the islands to incorporate solar collectors in the roofs, noting that some Caribbean islands have greatly expanded their solar energy usage in recent years and that solar can be particularly effective for water heating.

“There is no science to lower the cost (of energy) on Roatan,” said Elsia Paz, an associate at Energy Solutions Partners and former president of the Honduran Association of Small Renewable Energy Producers. “You just need intensive political will.” Paz, who has executed renewable energy projects all over the region and whose former business partner, Ron Turner, has been tapped to build the wind farm on Roatan, says she has found such will to be “non-existing” on the island.

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