A Firm Focus on Energy Independence

Thursday, December 10, 2015

Crude oil prices have been relatively low all year, but the countries of the Caribbean know they can’t count on that forever. In a region often buffeted by volatile oil prices—and by the all-too-real effects of climate change—the countries are keeping their eyes firmly focused on the need for more sustainable energy solutions. Whether wind farms, solar arrays, or geothermal wells, renewable energy projects are springing up in practically every Caribbean state.

“I have never seen this level of commitment to renewable energy in the region,” said Cletus Springer, Director of the Department of Sustainable Development of the Organization of American States (OAS). While it may seem “counterintuitive” that this heightened interest is coming at a time when oil prices have dropped, he said, the impetus has been building for many years. At the same time, he added, the costs of renewable energy have been falling dramatically, putting once-daunting investments within reach.

The results are evident from country to country, mainly in the electricity sector. In Jamaica, which already has considerable capacity for wind-generated power, the country’s first utility-scale solar energy power plant is expected to be connected to the national grid next year. A solar plant is also in the works in Barbados, long a pioneer in solar water heaters.

The twin-island federation of Saint Kitts and Nevis is making major strides in geothermal energy. As Ian Liburd, the country’s Minister of Public Infrastructure, Post, Urban Development and Transport, put it recently, “We are one of the few countries that are not just blessed with sunshine and the wind; we are blessed with two volcanoes.” Just last month, the Nevis Island Administration, the local electric utility, and a geothermal energy company signed a long-term power purchase agreement and announced that the first geothermal plant is expected to begin operations in 2017.

“It’s a very encouraging situation across the Caribbean,” Springer said. “All the indications are that it’s going to hold.”

At a ministerial meeting hosted by the OAS and the Caribbean Community (CARICOM) in October in Miami, Saint Lucia’s Minister of Public Service, Sustainable Development, Energy, Science and Technology, James Fletcher, said it used to be that most potential investors visiting his island nation wanted to meet with tourism officials to talk about golf courses or hotels. Now, he said, they want to talk about photovoltaic solar plants, wind farms, or geothermal plants. “The energy sector is really the new frontier of investment in our countries,” he said.

The region certainly has an economic incentive to turn to renewables. CARICOM officials often say that—with the notable exception of Trinidad and Tobago—the member states rely on imported oil and petroleum products to meet more than 90 percent of their energy needs. Twenty percent of the region’s GDP is spent on petroleum imports—even more when prices spike.

“For too long we have frittered away our resources to the importation of fossil fuels,” Dominica’s Ambassador to the OAS and the United States, Hubert Charles, said in an interview. “This is a serious leakage of resources going overseas that could well be assigned to infrastructure, social services, and certainly to investment in industry.”

An island state rich in rivers, Dominica produces around 30 percent of its electricity with hydropower, the rest with imported diesel. But it is on the path toward change: It has drilled geothermal wells and is laying the groundwork for its first small geothermal power plant. Eventually, Ambassador Charles said, the country hopes to partner with France to be able to export electricity via undersea cables to the nearby islands of Martinique and Guadeloupe.

Devon Gardner, Energy Program Manager at the CARICOM Secretariat, said the Caribbean countries’ growing attention to renewable energy and energy efficiency is coming both from above and from grassroots pressure.

“There is genuine interest from the political leadership, on the one hand, but also from the general citizenry,” he said in an interview. “It’s a pocketbook issue.” With electric bills that “are among the highest in the world”—a factor that drives up the costs of all goods and services—more people “have come to recognize that there are cheaper and more sustainable ways,” Gardner said.

For governments, clean energy is critical in the context of climate change (see related story), but also for basic economic reasons, Gardner said. “Sustainable energy options will be able to provide some foreign exchange savings that can be reinvested in economic growth and human and social development.”

Ambitious Targets

In 2013, the CARICOM Council for Trade and Economic Development adopted a region-wide Energy Policy, which they had been working on for more than a decade. It set ambitious targets for renewable energy as a proportion of installed power capacity: 20 percent by 2017, 28 percent by 2022, and 47 percent by 2027, up from about 8 percent now.

“Every CARICOM member state exhibits significant and largely unexploited potential for developing renewable energy resources,” the Caribbean Sustainable Energy Roadmap and Strategy (C-SERMS) asserts. CARICOM recently released the report, which provides baseline data and analysis to build on existing efforts and provide “a coherent strategy for transitioning to sustainable energy.”

The new Caribbean Centre for Renewable Energy and Energy Efficiency (CCREEE), which was officially inaugurated in October in Bridgetown, Barbados, will serve as a resource for developing technical capacity and sharing knowledge to help meet the global 2030 objectives established this year through the United Nations Sustainable Energy for All (SE4ALL) initiative. This effort is supported by the UN Industrial Development Organization, the Sustainable Energy Island Initiative, and the Austrian Development Agency.

At the opening, Prime Minister Freundel Stuart cautioned that the institution would not be a panacea but would help “set the tone” for meeting the region’s goals for sustainable development, energy, and climate change. “It may well become one of the ironies of Caribbean history that when oil prices were at one of their lowest points, one of the most successful institutions dedicated to the promotion of alternative energy was established,” he said.

Over the last decade, many countries in the region have received help with their oil bills. Twelve of the 15 CARICOM member states are parties to the Petrocaribe Agreement, which Venezuela established in 2005 to provide preferential long-term financing and other benefits to Caribbean countries for importing Venezuelan oil.

Dominica’s Ambassador Charles said the program has provided valuable support, especially since some of the profits remain in Dominica and have been invested in schools, health facilities, and other social endeavors. “It is for us an excellent stopgap to our long-term goal of energy independence,” he said.

Lower oil prices this year have been welcome, but the region is continuing to focus on developing its own resources, especially for power generation, Ambassador Charles said. “We want to ensure that the lower prices do not distract us from the long-term goal—greater reliance on our own indigenous supplies of energy.”

This is something the countries have been working toward for many years. The OAS was “the first entity to begin to work with the small states to determine how to go about establishing a regime for renewable energy,” Ambassador Charles said.

The Department of Sustainable Development’s Cletus Springer even ventures to say that “the transition that is happening now would not have happened if the OAS were not involved in the nascent stage.” By promoting dialogue, building awareness, and providing support for countries to develop national energy policies and plans—including through the Caribbean Sustainable Energy Project (2009-2014), funded by the European Union—the OAS helped set the stage for the groundswell of activity today, he said.

Financing and technical support for green projects is more widely available than ever before in the region. In October, for example, the Inter-American Development Bank and the Caribbean Development Bank announced the creation of a $70 million fund to help Eastern Caribbean islands develop their sustainable energy potential through public-private partnerships.

Ultimately, the potential for investment is massive. “Within the next few years, a large wave of energy infrastructure investment is required within the power sector to simultaneously replace aging, inefficient power plants with more modern, efficient alternative energy options while increasing the available generation capacity,” CARICOM Assistant Secretary-General Joseph Cox said at the Ministerial and High-Level Institutions’ Meeting held in October. While the price tag for this could be as high as (US) $20 billion, Cox stressed that this doesn’t have to happen overnight.

“Let us not let the numbers daunt us,” he said. “This is achievable, but it is a process and we have to do it in time.”

Of course, many challenges remain. At the ministerial meeting, held on the sidelines of the Caribbean Renewable Energy Forum, several ministers talked about some of the thorny issues that still need to be resolved, from outdated government regulations to financing constraints for debt-strapped countries. In a region where the electricity sector is for the most part in the hands of the private sector, governments are finding that renewable projects sometimes require public-private partnership arrangements, with all the complexities that entails. In some cases, electric utilities have a monopoly on the power grid under long-term contracts, and governments need to provide incentives for them to incorporate renewable energy into the grid. Other potential investors also have to know they can make a reasonable return on investment, which can be especially challenging in countries with very small populations.

At the Caribbean Energy Security Summit held in Washington, D.C., in January 2015, U.S. Vice President Joe Biden recognized the challenges ahead but talked about the need to “seize this moment” brought about by a combination of plummeting renewable energy costs and relatively low oil prices, which he said give governments “a little space to breathe.”

“There’s an old saying: The best time to fix a roof is when the sun is shining,” Biden said. “The sun is shining now, figuratively speaking. The time is now.”