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INNOGEN and BL&P differ over impact of removal of diesel subsidy

One major player in the renewable energy sector is warning of a spike in electricity costs now Government’s diesel subsidy has been discontinued, but the country’s main electricity company is assuring Barbadians that any increase will be insignificant.

In fact, the Barbados Light & Power Company Limited (BL&P) told Barbados TODAY the net effect could be less than one cent per kilowatt-hour (kWh).

Effective April 1, as part of austerity measures to raise revenue and lower spending, Government removed the subsidy from diesel for manufacturers and farmers and instituted a 25 cent cess on gasoline.

Chief innovation officer of Innogen Technologies, Mark Hill, told Barbados TODAY the move would have a major impact on electricity bills and transportation costs in the coming months.

“It will mean there will be a spike in energy cost for Barbadians,” he said, adding that he anticipated the cost of manufacturing to also rise since the cost of production was going up.

“On the transport side the reality is that the cost of energy is going to really dig into people’s pockets. You also have to look at the removal of the subsidy for manufacturers, and the BL&P being a manufacturer, what is the impact on the electricity bills to the domestic and the business sector. So I think that is being ignored but it has to be discussed because, effectively, once you have done that you have actually pushed up the cost of living across the board. Energy, both diesel and gasoline, is input into everything that is being done,” Hill explained.

As a result of that, he’s predicting “a significant increase” in Barbadians going the route of alternative energy.

“Once people feel it in their pocket at the pump and once they feel it in their pocket in the Light & Power bill they are going to move to make decisions to reduce their energy cost across the board,” said Hill.

But in an emailed response to Barbados TODAY, the BL&P said the increase it was stuck with won’t see a major pass through to customers.

The price they pay for diesel increased by 23.18 cents per litre when the subsidy was discontinued.

“Light & Power uses diesel as part of its fuel mix for electricity generation. Diesel represents 7.4 per cent of the company’s total fuel use. Therefore, the impact on the electricity price to customers might be less than one cent per kWh,” the company estimated.

The utility company also utilizes heavy fuel oil and Aviation fuel as part of its fuel mix for electricity generation. Gasoline is not used by the BL&P for electricity production.

“Light & Power constantly monitors the price differential between the fuels used and adjusts the dispatch of its generating units to ensure that the overall cost of electricity to customers remains as low as possible,” it said.

BL&P said its strategic goals were to stabilize the cost of electricity to consumers and to provide a cost effective, safe and reliable service for the long term, support Government’s goal of 29 per cent of the island’s energy needs from renewable sources by 2029, and to support the new legislation which focuses on renewable energy and enhance the security and reliability of the supply of electricity.

Meanwhile, executive director of the Barbados Manufacturers’ Association (BMA), Bobbi McKay, said so far while a few members have expressed concern, it is generally not yet a challenge for manufacturers.

“But they understand it is a sign of the times. They understand it is not business as usual. They are monitoring it,” she said.

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