What are the main challenges the Caribbean region faces in its energy production?
With the exception of Trinidad and Tobago, the Caribbean region is largely dependent on imported fossil fuels for the generation of electricity and for its transportation services.
Even with the relatively lower cost of petroleum these days, electricity produced from oil products - whether diesel or heavy fuel oil - remains expensive given their relative inefficiencies in terms of their electricity productivity. Many of the countries have electricity tariffs between US $0.20 and US $0.50 per kWh, which is around 3 to 4 times what we pay in the US or in some other developed countries. So, first I'd say is a high cost associated with this type of electricity generation of.
Another challenge would be social costs. In recent years the oil imports have drained hard currency resources and have cost the countries as much as 10% of their GDPs in expenditures and outlays for importing oil.
Finally we have the environmental impact of using oil products. There is a high carbon footprint associated with petroleum products for power generation and the Caribbean countries themselves are very vulnerable to the impacts of climate change. The Caribbean countries are certainly not responsible for the effects of climate change that we are seeing given their very low carbon emissions, but they do have an opportunity to set an example for the rest of the world of using carbon-friendly resources for power generation.
What are the alternatives for the region?
The Caribbean countries are blessed with an abundance of renewable domestic natural resources, which can be used to produce electricity, such as:
- Ocean or marine resources.
The costs associated with these alternative energy systems have fallen dramatically over the past decade, to the point at which they are, in many cases, the most cost effective options for power generation.
How are these being used in the Caribbean?
Multiple renewable energy solutions are increasingly being deployed throughout the Caribbean. We are seeing numerous examples of wind farms, solar photovoltaics, solar hot water heating and other renewables.
For example, nearly half of the households in Barbados already make use of solar hot-water heating systems, which use the sun to heat water for household and commercial applications. Additionally, these are cheaper to produce - cheaper than electric water heaters today- so companies originating in Barbados are now doing business around the region, creating jobs and of replicating opportunities throughout the Caribbean.
Solar photovoltaics (SPV) - which produce electricity directly from the sun, as opposed to solar hot water which uses the thermal energy to heat water – have dramatically dropped in price over the last decade, to the point where the electricity produced is very competitive with the existing grid-network supply.
Likewise, prices have fallen dramatically for wind technology and we are seeing more wind-farms in the region. With over 50 MW of installed wind power in Aruba by the end of this year, combined with solar photovoltaics, waste to energy and aggressive energy efficiency measures, Aruba hopes to be generating half of its electricity from renewables by the end of this year, increasing to 100% by 2020. It’s a very aggressive target.
Finally, numerous countries in the region have significant geothermal potential. The only active geothermal power plant online today in the region is in Guadeloupe, but islands of volcanic origin, such as St. Lucia, St. Kitts and Nevis, Dominica, St. Vincent and the Grenadines, and Grenada are aggressively pursuing geothermal as a clean, renewable, baseload power option.
In addition to renewables, what other sustainable energy solutions may be critical for the Caribbean’s energy future?
There are other fossil resources which may contribute to the energy security and sustainability in the Caribbean, including the use of natural gas, which may be increasingly available for the Caribbean to import and use in its power systems.
Natural gas is an excellent transitional fuel. Its carbon output is more than 25% less than diesel and heavy-fuel oil - which they are using today - and is potentially a more cost-effective solution.
Secondly, energy efficient solutions should certainly be combined with other sustainable power generation solutions. That means using less energy for the activities that we use electricity for, for example: higher efficiency air conditioners or other appliances; high-efficiency light bulbs; conservation by customers and higher-efficiency in generation services.
What is the potential for mass adoption across the region?
There’s tremendous interest in adopting renewables across the region, but we still see a number of obstacles limiting uptake. For example:
- Policy and regulatory frameworks which aren’t necessarily attractive to investing in these technologies.
- Limited access to financing and the resources necessary to take on these technologies.
- A continued need for knowledge sharing and capacity building to help us understand better how these technologies can be deployed in the region.
- Being relatively small countries, the costs are sometimes higher than they would be in a larger country. There may be some added benefits to demand between multiple countries in the region, so that orders are larger or that projects developed are on a larger scale.
What is the Bank doing in this context?
Ultimately, the Bank's primary interest is in providing technical assistance and financing to countries in the region to enable the development and use of sustainable energy solutions. Recognizing the many barriers that are still there, we're offering to work with the countries, with other multi-laterals, bi-laterals and with the non-governmental community to identify solutions to the obstacles which currently inhibit the use of these solutions.
The World Bank Group is already active throughout the region providing support to countries, such as the regional project for energy regulation in the Eastern Caribbean (ECERA), work on energy efficiency and alternative energy in Jamaica, support for improved electricity distribution in the Dominican Republic, and assistance for geothermal power generation in St. Lucia and Dominica
How does energy security in the Caribbean impact the wider American community?
The Caribbean is in a unique situation given their heavy dependence on imported fossil fuels. Many of the other countries - from Canada down to Argentina & Chile - have the benefit of fossil fuel resources and/or cross-border interconnections where they can share electricity and resources easily across land.
Not only do the island nations not have access to abundant fossil fuels, they are also isolated in terms of their lack of interconnectedness.
Secondly, through sea-level rise, increased frequency, propensity and strength of hurricanes and other natural disasters, island nations are potentially the most vulnerable to the effects brought on through climate change. I think we have a moral obligation to support the Caribbean, as with SIDS around the world in both addressing their energy needs, and adapting to the challenges that they are facing due to the increasing threat of climate change.
The Americas are interconnected. Not just in terms of people, but also economically and as a trade partner, all of the Americas stand to benefit from stronger economies in our region, including in the Caribbean.