It is not a new observation that the Caribbean’s heavy dependence on imported fossil fuels contributes to the region’s high cost of doing business, increases its vulnerability to external sector shocks, and constrains economic growth and competitiveness across most Caribbean economies.
Nonetheless, the increasing cost-competitiveness of a host of renewable energy technologies with fossil fuels stands to address this long intractable challenge. Despite the remarkable uptake of renewable energy across Latin America, the Caribbean has had only partial success in adopting these new technologies, which have the potential to transform the regional economy.
Caribbean Energy Challenges
Caribbean economies continue to suffer from high energy costs associated with a reliance on imported oil. With the exception of Trinidad & Tobago and Suriname, Caribbean countries rely on petroleum products as the source of approximately 87% of primary energy consumption. Excluding Haiti, hydroelectric energy currently accounts for a mere 6% of regional electricity production, and biomass constitutes 11%[1]. As a result, oil importer countries in the Caribbean have reported spending up to 15% of annual GDP on fuel imports.[2]
This reliance on imported fuels is one of the most significant factors driving the extremely high electricity costs in the region, which remain substantially greater than the comparable average in most of the developed world, reaching as high as US$0.40/kwh in some Caribbean countries[3].
High costs and inefficiencies in the regional energy infrastructure have not, however, limited energy consumption. Access to the grid is near universal in the Caribbean, with energy consumption forecast to double by 2030. This increase in energy consumption by local consumers, coupled with the continued development of energy intensive industries such as tourism, agribusiness and manufacturing, means that Caribbean governments must break their dependence on imported oil if they are to achieve meaningful economic growth and competitiveness.
Renewable Energy Potential in the Caribbean
Moving away from fossil fuels would bring the Caribbean into line with a broader international shift towards renewables. This change is the result not only of environmental concerns, but also of the increasingly strong economic case in favour of developing renewable energy capacity. Renewable energy sources are now not only competing with conventional fossil fuel and nuclear energy sources, but beginning to undercut them.
This trend is particularly evident in wind and solar photovoltaics. According to the latest data, it is now possible for solar plants to generate electricity for as little as US$0.05/kwh.[4] By comparison, the US Energy Information Administration reported that the electricity generation costs at the average private sector power plant were US$0.05/kwh in 2015. The cost of wind energy is similarly competitive. Encouragingly, according to Worldwatch Institute estimates, Latin America and the Caribbean could generate sufficient energy from renewable sources to meet their energy needs many times over.[5]
Renewable Energy Successes in the Caribbean
The success of several projects in the Caribbean provides a solid foundation on which to build. In Aruba, for example, 18% of electricity is already derived from wind energy, and the island is on course to be 100% energy efficient by 2020.[6] Jamaica’s Wigton Wind Farm also stands out as the largest wind energy facility in the Caribbean, estimated to have saved Jamaica US$23.4m in oil imports since it came on line in 2004.[7] Such projects have the ancillary benefit of providing new, skilled job opportunities in rural communities across the Caribbean.
The potential of lesser known renewable energy technologies in the Caribbean is also significant. For instance, alongside the Centre for Process Innovation (CPI), The Caribbean Council recently conducted a feasibility study looking at the potential of Anaerobic Digestion (AD) in the eastern Caribbean. Such technology stands to provide a single solution to a combination of regional challenges, generating renewable energy while also addressing chronic waste management and sewage treatment issues. It can even be used to turn sargassum seaweed into energy.
Sugar producing countries in the region are also uniquely placed to benefit from electricity cogeneration. This process offers sugar producers a means of diversifying revenue streams through the production of ethanol and energy for export to the grid. For instance, Belize now meets 17% of its national electricity requirements from cogeneration from its sugar mills.
The Caribbean Council is engaging with regional and international stakeholders from government and the private sector to build on these successes, and to overcome challenges in providing greater energy security to the Caribbean. This includes identifying sources of financial and technical development assistance, as well as refining the policy and business environment in a way that incentivises investment and the development of Public-Private Partnerships (PPPs) across a range of renewable energy technologies.
Footnotes
[1] IMF Working Paper, 2016, ‘Caribbean Energy: Macro-Related Challenges’. Available at: https://www.imf.org/external/pubs/ft/wp/2016/wp1653.pdf
[2] John Vidal, 2014, writing in The Guardian, ‘Caribbean islands promised US$1bn in loans for move to clean energy’. Available at: https://www.theguardian.com/environment/2014/feb/07/caribbean-islands-loans-clean-energy-richard-branson
[3] IMF Working Paper, 2016, ‘Caribbean Energy: Macro-Related Challenges’. Available at: https://www.imf.org/external/pubs/ft/wp/2016/wp1653.pdf
[4] Derek Markham, 2015, writing on CleanTechnica. ‘Average Utility-Scale Solar Price in US Falls to 5¢/kWh’. Available at: https://cleantechnica.com/2015/09/30/average-utility-scale-solar-price-in-u-s-falls-to-5%C2%A2kwh/
[5] IDB, 2014, ‘Study on the Development of the Renewable Energy Market in Latin America and the Caribbean’. Available at: http://www.worldwatch.org/system/files/Study-on-the-Development-of-the-Renewable-Energy-Market-in-Latin-America-and-the-Caribbean_IDB%202014.pdf
[6] National Renewable Energy Laboratory (NREL), 2015, ‘Energy Snapshot: Aruba’. Available at: http://www.nrel.gov/docs/fy15osti/62709.pdf
[7] Tamara Bailey, 2016, writing in The Gleaner, ‘Wigton WindFarm Commissioned’. Available at: http://jamaica-gleaner.com/article/lead-stories/20160603/wigton-windfarm-commissioned
