SUSTAINABLE ENERGY FOR ALL IN THE CARIBBEAN - ISSUE 2 / APRIL - JUNE 2016
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SUSTAINABLE ENERGY
FOR ALL IN THE
CARIBBEAN
ISSUE 2 / APRIL - JUNE 2016
FOCUS | 1
ABOUT ECLAC/CDCC
The Economic Commission for Latin America and the Caribbean (ECLAC)
is one of five regional commissions of the United Nations Economic and Director’s Desk:
CONTENTS
Social Council (ECOSOC). It was established in 1948 to support Latin Sustainable energy for all in the Caribbean 3
American governments in the economic and social development of
that region. Subsequently, in 1966, the Commission (ECLA, at that time) 4
Promoting energy efficiency policies
established the subregional headquarters for the Caribbean in Port of
Spain to serve all countries of the insular Caribbean, as well as Belize,
Guyana and Suriname, making it the largest United Nations body in the
Priority areas to guide energy efficiency policies 6
subregion.
Transitioning to Sustainable Energy – Financing a 10
At its sixteenth session in 1975, the Commission agreed to create the Major Caribbean Challenge
Caribbean Development and Cooperation Committee (CDCC) as
a permanent subsidiary body, which would function within the ECLA
structure to promote development cooperation among Caribbean
countries. Secretariat services to the CDCC would be provided by
the subregional headquarters for the Caribbean. Nine years later, the Regular Features
Commission’s widened role was officially acknowledged when the
Economic Commission for Latin America (ECLA) modified its title to the Recent and upcoming meetings 15
Economic Commission for Latin America and the Caribbean (ECLAC).
List of Recent ECLAC Documents and 15
Key Areas of Activity
The ECLAC subregional headquarters for the Caribbean (ECLAC/CDCC Publications
secretariat) functions as a subregional think-tank and facilitates increased
contact and cooperation among its membership. Complementing
the ECLAC/CDCC work programme framework, are the broader
directives issued by the United Nations General Assembly when in
session, which constitute the Organisation’s mandate. At present, the
overarching articulation of this mandate is the United Nations Sustainable
Development Goals.
Towards meeting these objectives, the Secretariat conducts research;
provides technical advice to governments upon request; organizes
intergovernmental and expert group meetings; helps to formulate and
articulate a regional perspective within global forums; and introduces
global concerns at the regional and subregional levels.
Areas of specialization include trade, statistics, social development, science
and technology, and sustainable development, while actual operational
activities extend to economic and development planning, demography,
economic surveys, assessment of the socio-economic impacts of natural
disasters, climate change, data collection and analysis, training, and FOCUS: ECLAC in the Caribbean is a publication of the
assistance with the management of national economies. Economic Commission for Latin America and the Caribbean (ECLAC)
subregional headquarters for the Caribbean/Caribbean Development and
The ECLAC subregional headquarters for the Caribbean also functions Cooperation Committee (CDCC).
as the Secretariat for coordinating the implementation of the Programme
of Action for the Sustainable Development of Small Island Developing
States. The scope of ECLAC/CDCC activities is documented in the wide
range of publications produced by the subregional headquarters in Port EDITORIAL TEAM:
of Spain. Director Diane Quarless, ECLAC
Editor Alexander Voccia, ECLAC
Copy Editor Denise Balgobin, ECLAC
MEMBER COUNTRIES ASSOCIATE Coordinator Omar Bello, ECLAC
MEMBERS: Design and layout Blaine Marcano, ECLAC
Antigua and Barbuda Haiti Anguilla
The Bahamas Jamaica Aruba
Barbados Saint Kitts and Nevis Bermuda Cover Photo
Belize Saint Lucia British Virgin Islands Stock image courtesy Pixabay
Cuba Saint Vincent Cayman Islands
Dominica and the Grenadines Curaçao
Dominican Republic Suriname Guadeloupe CONTACT INFORMATION
ECLAC subregional headquarters for the Caribbean
Grenada Trinidad and Tobago Martinique
PO Box 1113, Port of Spain, Trinidad and Tobago
Guyana Montserrat Tel: (868) 224-8000
Puerto Rico Fax: (868) 623-8485
Turks and Caicos Islands E-mail: media-pos@eclac.org Website: http://www.eclacpos.org
facebook.com/eclaccaribbean/
United States Virgin linkedin.com/company/eclac-caribbean
Islands
2 | FOCUS
Issue 2 / April - June 2016
DIRECTOR’S DESK:
SUSTAINABLE ENERGY FOR ALL
IN THE CARIBBEAN
Access to energy is one of the most serious challenges faced by the Caribbean. As
a result, it is important for the subregion to improve energy efficiency as well as to
promote the use of alternative sources of energy. Energy efficiency (EE) and renewable
energy (RE) are especially relevant to the Caribbean since the subregion holds substantial
renewable energy potential in relation to solar, wind and geothermal energy, but remains
highly dependent on fossil imports for its energy needs.
A
ccess to energy is one of the stimulated widespread socio-economic reforms. Among such adjustments
most serious challenges faced benefits, through the adoption of some are the decoupling of power
by the Caribbean. As a result, form of renewable energy technology generation and transmission in order
it is important for the subregion to in 164 countries as at mid-2015, with as to accommodate independent power
improve energy efficiency as well as many as 7.7 million jobs already created producers; strengthening of utility
to promote the use of alternative from EE and RE activities as of 2015. regulatory frameworks; adjustment of
sources of energy. Energy efficiency energy metering and pricing strategies;
(EE) and renewable energy (RE) are The Economic Commission for and changes in the fiscal and incentive
especially relevant to the Caribbean Latin America and the Caribbean’s regimes, especially with respect to
since the subregion holds substantial (ECLAC) engagement with countries energy use for transportation.
renewable energy potential in relation and stakeholders has revealed tangible
to solar, wind and geothermal energy, evidence to show that aspects of this While many Caribbean countries have
but remains highly dependent on fossil energy revolution are also taking place joined the global transition towards
imports for its energy needs. in our subregion. Antigua and Barbuda sustainable energy, this is such a
recently completed the installation of broad and all-encompassing subject
The last decade has seen an impressive its first solar power plant, with similar that comprehensive energy policies
evolution in the development and initiatives already operational in Saint are required in order to accomplish
application of energy efficiency (EE) Kitts and Nevis, and Aruba. Wind sustainable and clean energy security.
and renewable energy (RE) technologies. farms already dot the pristine Caribbean Energy efficiency and renewable
For example, in its 2014-2015 report, landscape in Jamaica, Aruba and Nevis, energy should be guiding principles
the International Renewable Energy while both commercial and residential to improve the performance of the
Agency (IRENA) notes that globally application of solar water heating is transport sector, to reassess the process
renewable energy power capacity has common place in Barbados, Saint Lucia of transportation and distribution of
grown by over 85 per cent over the and Grenada. The use of mini-hydro water, to address the complex nature
past 10 years. Additionally, IRENA power plants is now a proven technology of the water-food-energy nexus and,
analyses have shown a decline in the in Saint Vincent and the Grenadines; in general, to improve efficiency in
cost of renewable energy technologies while Dominica and Saint Kitts and consumption behaviors and production
by more than 70 per cent over the Nevis are on the way to tapping their patterns.
period, thereby making it possible geothermal sources of energy. The
to provide competitive utility scale application of Ocean Thermal Energy In this edition of Focus we highlight
electricity services from renewable Conversion technologies is receiving three issues of importance to energy
sources in many countries. In terms serious consideration in the Cayman efficiency and renewable energy in the
of investments, over US $270 billion Islands, and many other regional Caribbean, namely (i) the importance
were invested in renewable energy economies are already showing signs of of energy efficiency policies for the
technologies in 2014, which represents gearing themselves to confront these region; (ii) priority strategies to guide
a 15 per cent increase compared to changes. the transition to sustainable energy
2013, and more than five times that of and energy efficiency; and (iii) the
the early 2000s. According to IRENA, Countries have also undertaken progress made in the region based on
the global energy transition has also institutional, regulatory and policy the experiences of Dominica and Saint
(continued on page 14)
FOCUS | 3
PROMOTING ENERGY EFFICIENCY
POLICIES1 Omar D. Bello
Do Caribbean countries need energy efficiency policies? Most international development
institutions have claimed that Latin America and the Caribbean has one of the cleanest
energy mixes.2 in the world.3 This assessment could lead one to conclude that Caribbean
countries do not need to further promote energy efficiency as part of their national
energy policies. This conclusion, however, could be misleading. In order to gain a better
understanding of the issue at hand, it is worth taking a detailed look at the energy matrix
of countries in the Caribbean.
G
uerra (2016) found the following With respect to fact three, energy exemptions; (d) public demonstration
three stylized facts looking processes in Caribbean countries (mostly education and awareness); (e)
at a case-by-case analysis of are inefficient, with energy losses in restrictions on incandescent bulbs; and
the energy matrices of Caribbean electricity generation, transmission (f) appliance labeling standards. Among
countries: (1) most countries in this and distribution processes being these, tax reduction is the most likely,
subregion are net importers of some quite significant. The production of with one energy policy in the planning
form of energy; (2) most of the energy electricity in the Caribbean requires phase (usually promoting standards
supply comes from oil; and (3) energy more “energy inputs” than the Latin for building construction). That is, the
losses are significant. American region, (see Espinasa and typical Caribbean country (or territory)
Humpert, 2013). More energy inputs has only considered one out of six
With respect to fact one, the total needed to produce electricity suggest possible alternatives to promote energy
consumption exceeds primary energy inefficiencies during the process. For efficiency within its boundaries, (see
supply in every country with the the majority of countries in our region Table 1).
exceptions of Suriname and Trinidad of study, losses in the form of heat,
and Tobago. For example, in 2012 the waste and other sources exceed 60 per Moreover, out of 17 Caribbean countries
primary energy produced in Trinidad cent of the total amount of energy used and territories, four do not have a single
and Tobago was double the amount of to produce electricity for all Caribbean policy related to energy efficiency or are
its local consumption. This situation is countries, with the exception of Belize. in a planning phase, while another four
atypical in the sense that the median have only given consideration to one
Caribbean country consumes 25 per ENERGY EFFICIENCY POLICIES IN policy. It is therefore safe to conclude
cent more energy than its primary THE CARIBBEAN that in nearly half of these Caribbean
supply. As a consequence, it is countries no energy efficiency policies
important to analyze the energy matrix Given the current status of the energy have been promoted.
on a country basis rather than as a matrix of Caribbean countries, the
regional aggregate, in order to ensure promotion of energy efficiency policies include Jamaica and Saint Vincent and
that the analysis is not skewed by the should be seen as a priority. With this the Grenadines, who have at most three
case of Trinidad and Tobago (because in mind, it is important to understand policies currently implemented. Six of
of its size and unique circumstance). the experience of the subregion to date 16 countries are now considering new
in the implementation of these policies. measures to promote efficiency in their
With respect to fact two, nearly 81 per energy sector, Dominica, Saint Vincent
cent of the energy supply of Caribbean According to Guerra (2016), on average and the Grenadines, and Trinidad and
states comes from oil products. each Caribbean country (or territory) Tobago being those which have the
Specifically, most energy imports are has one of the following energy most visible efforts in promoting this
oil (refined) products. This fact makes policies in place: (a) energy efficiency type of initiative.
Caribbean economies vulnerable to standards for building construction; (b)
fluctuations in the price of oil on tax credits for the adoption of energy It is also important to note that this
international markets. efficiency policies; (c) tax reductions/ situation has evolved in a context of
1
A This article is based on Sergio Guerra (2016). Energy Efficient Policies in the Caribbean: A manual to guide the discussion.
2
The energy mix of a country refers to a quantitative representation of all energy available for use in various production processes. A similar concept
is that of Total Primary Energy Supply (TPES)
3
UNDP. (2015, February 24). UNDP, IDB, ECLAC to boost access to sustainable energy in Latin America and the Caribbean. Retrieved December 3,
2015, from http://www.latinamerica.undp.org/content/rblac/en/home/presscenter/articles/2015/02/24/undp_idb_eclac_to_boost_access_to_sus
tainable_energy_in_latin_america_and_the_caribbean.html
4 | FOCUS
Issue 2 / April - June 2016
Table 1: Energy efficiency
programs and policies in
the Caribbean countries
Notes: There is no official
legislative framework for
energy policies in Suriname.
n.a. means that this specific
policy is neither in planning
nor implemented in the
specific country.
Source: Guerra (2016) based on the
United States National Renewable
Energy Laboratory and the International
Renewable Energy Agency reports.
increasing oil prices, which is a positive Small Island Developing States (SIDS). window of opportunity to re-think
incentive for the adoption of energy and plan strategically its energy sector
efficiency policies. However, following According to the fund’s investment for the future. In order to transform
the boom phase of 1995 to 2009,4 policies, its objective is to finance its energy matrix to one that is greener
oil prices have declined significantly, projects and programmes with the and more efficient, besides (sizable)
with the possibility that countries may potential to promote a paradigm shift investments in the sector, a credible and
no longer be as keen to adopt energy towards low-carbon and climate- realistic commitment to develop and to
efficiency policies. resilient sustainable development. implement a master plan that guides
Additionally, policies mandate that only energy policy is also necessary.
In light of the challenges posed to revenue-generating activities can qualify
financing RE and EE strategies in the for loans by the fund. This condition References
Caribbean (which has been made more will also improve project efficiency,
difficult by their high debt burden), a as Caribbean countries would have to Acquatella, J., O. Bello, and F. Berríos (2016).
strategy to address their fiscal burdens, accurately measure the potential impact Evidencia estadística de Super Ciclos en las series de
and at the same time encourage energy of their proposals. precio de los metales y el petróleo 1900-2015. Mimeo.
policies may be helpful. One approach Natural Resources and InfrastructureDivision.
might be access to International Climate CONCLUSION ECLAC. Santiago, Chile.
Change Funds. This could provide a
welcome opportunity for the Caribbean The situation of the Caribbean Espinasa, R., and M. Humpert (2014) “Energy
to mobilize resources for financing subregion can be described as sub- Matrix Country Briefings: Antigua & Barbuda,
energy efficiency projects. For instance, optimal in terms of its energy matrix, Bahamas, Barbados, Dominica, Grenada, Guyana,
the Green Climate Fund (GCF), which meaning countries are net energy Haiti, Jamaica, St. Kitts & Nevis, St. Lucia, St.
operates within the framework of the importers, with imports coming Vincent and the Grenadines, Suriname, and Trinidad
United Nations Framework Convention principally from crude oil products. & Tobago.” Inter American Development Bank.
on Climate Change (UNFCCC),
was created as a mechanism to assist There are also serious inefficiencies Guerra, S. (2016) “Energy Efficiency Policies in
developing countries in the design of related to their processes of electricity the Caribbean: A Manual to Guide the Discussion”.
adaptation and mitigation practices to production, distribution and Project “Sustainable Energy in the Caribbean:
counter climate change. The GCF “will transmission, with little or no efforts in Reducing the Carbon Footprint in the
aim for a floor of 50 per cent of the terms of promoting energy efficiency Caribbean through the Promotion of Energy
adaptation allocation for particularly policies in the past. Efficiency and the Use of Renewable Energy
vulnerable countries, including Least Technologies”- Project Document. German
Developed Countries, Small Island Caribbean countries need energy Cooperation and ECLAC.
Developing States and African States.”5 efficiency policies, and the opportunity
In fact, one of the fund’s investment for improvement in this regard is
priorities is to enhance resilience in considerable. The subregion has a
4
See Acquatella, J., O. Bello, and F. Berríos (2016). Evidencia estadística de Super Ciclos en las series de precio de los metales y el petróleo 1900-2015. Mimeo.
Natural Resources and Infrastructure Division.ECLAC. Santiago, Chile.
5
http://www.greenclimate.fund/ventures/funding#how-it-works on February 25, 2016.
FOCUS | 5
PRIORITY AREAS TO GUIDE
ENERGY EFFICIENCY POLICIES
Leda Peralta
In 2014, Small Island Developing States (SIDS) adopted the SIDS Accelerated Modalities
of Action (SAMOA) Pathway as a guiding instrument to move the Sustainable Agenda
forward. Among other issues, the resolution incorporates sustainable energy as one key
persisting challenge due to the effects that dependence on imported fossil fuels have
on vulnerable economies. In addition, this dependence also hinders efforts to increase
resilience to climate change and natural hazards.
T
he SAMOA Pathway highlights Table 1. Energy challenges in the Caribbean.
the importance of transformative
and innovative measures to Technical Socioeconomic
increase access to modern energy services,
renewable energy and energy-efficient ü Isolated grid networks
ü High electricity tariffs
technologies, and to promote low carbon ü Small overall generation
ü Vulnerability to rising, volatile
development. The emphasis on these capacity
fuel prices
specific components of sustainable energy ü Inability to meet existing and
was later reaffirmed by the Sustainable ü Missed opportunities for
future energy demand
Development Goals (SDGs) as defined domestic investment and jobs
ü Outdated equipment
in the document Transforming Our ü Energy povertya
World - the 2030 Agenda for Sustainable ü Low efficiency
Development. The seventh goal focuses a
Energy poverty is defined as a lack of access to modern energy services. These services are defined as
on affordable and clean energy; and household access to electricity and clean cooking facilities (IEA). The CARICOM Energy Policy was approved
notes that access to reliable and modern during the XLI Special Meeting of the Council for Trade and Economic Development on Energy, held on 1
energy services needs to be supported March 2013 in Trinidad and Tobago.
by an increased use of renewable energy Source: CARICOM 2013.
(RE) sources and improvement of energy
efficiency (EE). Table 2. Regional sustainable energy targets.
Percentage
Despite the inclusion of sustainable
energy in multiple development Year Renewable power CO2 emissions Energy intensityb
instruments,1 access to and promotion capacity reduction
of sustainable energy remains a challenge 2017 20 18 ??
in the Caribbean subregion. Besides 2022 28 32 ??
dependence on imported fossil fuels and 2027 47 36 33
its impact on national finances, which
restricts investment capacity, Caribbean Source: CARICOM 2013
SIDS face a variety of technical and b
Energy intensity: measure of total primary energy use per unit of gross domestic product (IEA). The energy
regulatory barriers that hinder the intensity target was established only for 2027.
implementation of renewable energy and
energy efficiency initiatives (see Table 1). costs in the world, low quality services and investment capacity, have deterred the use
The sector also faces governance issues, high technical and non-technical losses. As of renewable energy and energy efficient
such as data gaps, ineffective/inadequate a region, the Caribbean has not explored technologies notwithstanding the fact
policies and regulations, overlapping its full potential for interconnection - also that the Caribbean’s great potential for
mandates, outdated/inadequate affected by small and isolated national using renewable energy sources has
tariffs, inefficient administration and grids -, and strategies and policies have been vastly improved and that energy
maintenance, and monopoly over not been fully integrated. efficiency measures are often referred
transmission and distribution, which to as the fifth fuel, as they offer quick
result in some of the highest electricity These barriers, combined with reduced and cheap reductions in energy costs.
1
Energy related issues have been included in the Barbados Plan of Action (1994), the Mauritius Strategy of Implementation (2005), the SAMOA Pathway (2014),
and the Sustainable Development Goals (2015), as well as in initiatives such as the United Nation’s Sustainable Energy for All (2010).
6 | FOCUS
Issue 2 / April - June 2016
Therefore, in an effort to benefit from c. Minimize market distortions to facilitate the entrance of new energy
economies of scale, and to address the caused by subsidies and other disincentives technologies and to promote the exit
multiple barriers faced by Caribbean to EE and RE. of outdated high-energy consuming
SIDS, in 2013 CARICOM member States d. Facilitate private investments in appliances.
adopted an Energy Policy2 to increase energy efficiency.
regional cohesion and benefits.The policy The Caribbean residential sector
established a series of targets that would The IEA, in collaboration with ECLAC, consumes important volumes of
lead to a sustainable and efficient energy held the regional workshop Energy electricity which, combined with
sector (see Table 2). Efficiency Policies for Latin America and inefficient appliances and equipment,
the Caribbean in 2014, and participants exerts additional pressure on already
According to CARICOM (2015), energy added a few more actions to the list burdened and outdated electric grids.
efficiency measures should target sectors to adjust it to the regional context: (i) According to CARICOM, appliances are
that: i) account for a large share of the strengthen local expertise and capacity; cheap to acquire but expensive to operate,
economy’s energy consumption; ii) are (ii) strengthen coordination and planning given the lack of efficiency standards in
highly energy-intensive or inefficient; between Ministries; (iii) improve quality the region.
and/or iii) are central to the economy. and availability of data; and (iv) identify
These three indications are accompanied financing mechanisms for EE. In line The incorporation of labels and
by a variety of technical and regulatory with these recommendations, CARICOM standards for household appliances
measures that are further explored in observes that (nationally and regionally) and equipments could have multiple
the next sections using the International the Caribbean lacks a long term vision benefits in the Caribbean. First, energy-
Energy Agency (IEA) framework, which with clear and concise implementation efficient equipments would reduce
structures energy efficiency policies into mechanisms. Therefore, policies and energy consumption, thus contributing to
priority areas: (i) cross-sectoral policies; accompanying instruments remain energy conservation. This is particularly
(ii) appliances and equipment; (iii) inadequate as it is difficult to monitor relevant considering the inefficiency
lightning; (iv) buildings; (v) transport; (vi) and evaluate progress through imprecise of electric grids and the high technical
industry; and (vii) energy utilities. This is targets and actions. This situation has and non technical losses suffered in
an important framework which can help improved since all CARICOM member most Caribbean SIDS, which are then
promote better energy policies in the States adopted the regional Energy exacerbated by inefficient appliances and
region. Policy and have designed national energy equipment. Additionally, the introduction
strategies. However, the situation is not of such practices would encourage
CROSS-SECTORAL POLICIES the same for energy efficiency measures, widespread use of efficient equipments,
as less than half of CARICOM members contributing to changes in consumption
Cross-sectoral policies require important have established improvement targets or patterns. It is worth noting that labeling
public involvement since they affect strategies. should be accompanied by regulations
nearly all energy consumption sectors. and fiscal incentives that are attractive and
They are usually related to regulation In addition, the Energy Policy aims user-friendly.
and to accurately and timely measure the at strengthening cohesion within the
outcomes of energy efficiency policies. region by establishing common goals and Even though this practice is still incipient
benefiting from a regional approach to in the Caribbean, the region’s Energy
Cross-sectoral policies arise mainly sustainable energy. A regional approach Policy incorporates numerous activities
because of standard market failures: time- has the potential of creating economies to promote labeling and efficiency
inconsistent preferences, asymmetries of scale, producing energy locally or standards for lightning and appliances.
of information, non-competitive wherever it is cheaper, promoting Moreover, some CARICOM member
markets, externalities and public goods. investment in EE and RE, and reducing States have already started implementing
The International Energy Agency operation costs. mandatory labeling and standards, and
recommends the following actions: the Organization of Eastern Caribbean
APPLIANCES & EQUIPMENT AND States concluded the implementation of
a. Promote the collection of LIGHTING POLICIES the first phase of the Eastern Caribbean
reliable, timely and detailed data on Energy Labeling Project in Antigua and
energy end uses and market technologies. Policies oriented towards lighting, Barbuda, Dominica, Grenada, Saint Kitts
b. Regularly update strategies and appliances and equipment, target (but and Nevis, Saint Lucia and Saint Vincent
policies based on up-to-date evidence. are not limited to) the residential sector and the Grenadines. (continued on next page)
2
The CARICOM Energy Policy was approved during the XLI Special Meeting of the Council for Trade and Economic Development on Energy, held on 1
March 2013 in Trinidad and Tobago.
FOCUS | 7
(continued from page 7)
PRIORITY AREAS TO GUIDE ENERGY EFFICIENCY POLICIES
Also targeting the residential sector, Additionally, updated and mandatory establish a realistic Regional Energy
countries such as Barbados and Saint building codes should guide any new Efficiency Building Code and Minimum
Kitts and Nevis have established loan developments and improvements to Energy Performance Standards in line
programs and/or tax exemptions to existing infrastructure. with the current energy policy. Both
promote the use of solar water heaters, instruments are expected to be presented
which are being widely used in the The CARICOM Energy Policy highlights to the Council for Trade and Economic
region. the importance of establishing efficient Development (COTED) in November
During the regional workshop on Energy building codes as well as performance 2017.
Efficiency Policies for Latin America standards accompanied with incentives
and the Caribbean (2014), participants to promote use of energy efficient TRANSPORT POLICIES
identified four recommendations to technologies and equipment. However,
move this issue forward: “(i) implement high initial investment costs and lack Transportation policies are complex
mandatory Minimum Energy of awareness of efficient technologies given the weight of the sector as one
Performance Standards (MEPS) and could hinder the materialization of of the main consumers of fuel, but also
energy labels for lighting, appliances and these savings. In this regard, CARICOM given its interactions with areas such as
equipment; (ii) phase-out least efficient (2015) identified five strategies that commerce, manufacturing, and tourism.
products through MEPS, taxation, could boost improvements in buildings
subsidies and regulations; (iii) engage in and their components: Even though transportation accounted
regional collaboration and harmonization for 36 per cent of the total energy
of standards and testing procedures to a. Establish performance consumption in Latin America and the
reduce compliance and testing costs and standards for cheap and readily available Caribbean in 2012, it remains under-
increase demand for energy efficient technologies, such as cooling, ventilation studied and there are important data
products; and (iv) promote market and insulation systems, and lighting. gaps which hamper decision-making
transformation policies.”Furthermore, Besides savings in energy, initial focus and a comprehensive understanding of
since lighting tends to be part of an on available and simple technologies the sector. In addition, transport-related
integral design system, building codes would encourage further changes in policies are so varied that they require
that promote the use of natural light consumption and production patterns. important investments and systemic
should be encouraged. b. Simplify permitting procedures changes, such as urban planning,
by establishing clear guidelines for users. development of public transportation
BUILDING POLICIES c. Implement tax incentives and alternatives, establishment of sectoral
encourage energy audits. emissions goals, introduction of tax
In 2012, the use of energy in buildings d. Fund case studies or pilot incentives to promote use of EE
represented 16 per cent of total energy projects. vehicles, and behavioral changes.
consumption in Latin America and the e. Use post-disaster situations Therefore, the International Energy
Caribbean (IEA 2015), and this share is to promote resilient reconstruction Agency (IEA) recommendations are
expected to increase with urbanization processes that incorporate energy less ambitious and (probably) less costly
in the region. efficiency and use of renewable energy. from the government’s perspective:
In order to improve efficiency in the Understanding the weight of this sector a. Adopt (and measure) vehicle
sector, the workshop Energy Efficiency in the total energy consumption, as fuel efficiency standards.
Policies for Latin America and the well as the impact that energy-efficient b. Provide incentives (labels,
Caribbean (2014) recommended that buildings and components could have in subsidies and infrastructure) to boost
attention should be given to improving the region, CARICOM member States vehicle efficiency.
energy performance of buildings and its held the workshop Energy Efficiency c. Adopt stricter standards in
components by establishing minimum Standards and Regulations in Buildings a vehicle’s non-engine components
energy performance standards (MEPS) in 2016 supported by several regional (particularly tires and A/C systems).
and an enabling regulatory framework. organizations. The meeting agreed to d. Take into account that urban
3
Körner (2012) suggests that governments need to implement a comprehensive strategy exclusively to gather useful information to guide energy efficiency policies in the transport
sector. According to the author, national statistical offices need a top-down and bottom-up approach to collect data on: transport activity, transport structure, energy intensity data
and, carbon intensity data. He also summarizes the complexity of the problem with the following idea. “The most energy efficient trip is the one that is not performed [and that] can
be addressed by: (1) land use planning, (2) parking policy (3) urban design and, (4) alternative work concepts” such as telecommuting. All proposed solutions require government
interventions at the national and subnational levels.
8 | FOCUS
Issue 2 / April - June 2016
planning should incorporate the vehicles to operate with sustainable must be able to rely on stable and
transport implications on energy fuels. Seven CARICOM member States efficient grids for their electricity needs.
demand. have established improvement targets Considering that many Caribbean SIDS
for the sector5 and Belize is part of have energy-intensive industrial sectors
Although transportation is the second the SIDS-DOCK initiative, which - such as construction, manufacturing,
most important consumption sector established a 20-30 per cent reduction cement, mining and oil - production
in the Caribbean, governments have in petroleum use in transportation by and storage systems must be scaled up
less degrees of freedom to effectively 2033 (CARICOM 2015). to meet total energy demand. Besides
promote policies in this area3 given the savings in energy and reduction
the complexity of the sector and the INDUSTRY POLICIES in operation costs, a stable grid would
unavailability of data for comprehensive improve the performance of industries,
analyses. Along with access to reliable Industry policies aim at promoting especially considering that access to
electricity, inefficient transportation the use of energy-efficient equipment and cost of reliable electricity remains
systems are also an important barrier and industrial systems, as well as one of the most important challenges
to development in the region, as identifying the barriers that hinder to competitiveness in the Caribbean. In
suboptimal systems increase the cost a more widespread use of efficient this regard, the Energy Policy underscores
of goods and services throughout the technologies and equipments. the importance of integrating industries
Caribbean. Furthermore, countries in to the energy transition movement
the region are currently under utilizing Like previous strategies, policies in through efficiency measures, but
public transportation, which could this area should promote investments also by promoting co-generation.
reduce the use of personal vehicles, through tax incentives, removal of Self-generation allows companies to
but requires urban planning and subsidies and access to finance. It is also overcome instability issues and would
implementation of attractive public important to differentiate enterprises boost the use of renewable energy.
transportation options. based on their size and design measures However, this type of initiative must
to support energy efficiency in small be accompanied by the appropriate
The CARICOM Energy Policy and medium-sized enterprises. regulatory framework, cost-efficient
suggests improving vehicle fuel feed-in tariffs7 and other incentives, as
economy4 by promoting the use of Considering that this sector accounted well as by modern (smart) grids.8
fuel-efficient vehicles, establishing for 32 per cent of total energy
efficiency standards for new vehicles consumption in Latin America and ENERGY UTILITIES
and regulating the second-hand vehicle the Caribbean in 2012, it is critical to
market. Additionally, the region could establish performance indicators and Energy utilities allow governments to
benefit from using electric and/or promote benchmarking. This highlights access customers and their consumption
hybrid vehicles, the distance limitations the importance of data collection and behavior more directly. Utility
of these types of vehicles adjust well analysis, and monitoring and reporting. companies are expected to increase
to the small size of Caribbean SIDS. Energy management systems, such as efficiency and cost-effectiveness in
It is estimated that electric and hybrid ISO50001,6 support transition to more their operations. At the same time,
vehicles could reduce fuel consumption efficient processes and contribute to (targeted and non-targeted) customers
by 73 per cent and 47 per cent monitoring progress and identifying are exposed to energy-efficient
respectively (CARICOM 2015). areas of improvement. technologies and practices, and all these
changes are reflected in energy tariffs.
Several countries have started This sector poses an additional challenge
implementing tax incentives to in the Caribbean, as efficiency measures Therefore, this component is strongly
promote the use of hybrid and/or are needed for both the industry and linked with cross-cutting policies, such
electric vehicles, as well as measures to the energy sectors. This means that as those that address subsidies and
incentivize conversion of conventional energy-intensive industrial sectors other market distortions.
(continued on page 12)
4
Vehicle fuel economy: units of fuel consumed to travel a determined distance.
5
Antigua and Barbuda, The Bahamas, Grenada, Saint Kitts and Nevis, Saint Vincent and the Grenadines, Suriname and Trinidad and Tobago. Jamaica has also incorporated
measures to promote ethanol and biofuels.
6
ISO 50001 is a framework that considers the following requirements: (i) develop a policy for more efficient use of energy, (ii) fix targets and objectives to meet the policy, (iii) use data
to better understand and make decisions about energy use, (iv) measure the results, (v) review how well the policy works, and (v) continually improve energy management (www.iso.org).
7
A feed-in tariff (FIT) is defined as an energy supply policy that promotes the rapid deployment of renewable energy resources. A FIT offers a guarantee of payments to renewable
energy developers for the electricity they produce (NREL).
8
Smart grids are electricity networks that use digital and other advanced technologies to monitor and manage the transport of electricity from all generation sources to meet the
varying electricity demands of end-users (IEA).
FOCUS | 9TRANSITIONING TO SUSTAINABLE
ENERGY – FINANCING A MAJOR
CARIBBEAN CHALLENGE
Willard Phillips
This article examines the challenge faced by Caribbean Small Island Developing States
(SIDS) in transitioning from their current dependence on imported fossil energy to
greater efficiency in energy use, and a higher reliance on renewable energy sources.
F
or the past three decades, many The Global Sustainable Energy Islands describes the issue of project financing
Caribbean economies have been Initiative Consortium (GSEII), and the as one of the key considerations related
exploring sustainable energy United Nations Industrial Development to the preparation and successful
solutions through the implementation Organization (UNIDO) in this process. implementation of energy transition
of renewable energy, and more recently projects.
energy efficiency initiatives. The energy Both countries have also made
transition experience of Dominica and significant financial investments in CONSIDERATIONS FOR PROJECT
Saint Lucia is used in the elaboration of research, testing and pilot studies FINANCING
this analysis.1 in order to assess their potential for
renewable energy. In the case of Possibly one of the most important
Both countries are highly dependent on Dominica, for instance, the government challenges for Caribbean SIDS in
oil imports to satisfy their energy needs2. has already invested more than US $12 transitioning to sustainable energy is
Dominica imports approximately 1,000 million on geothermal explorations the issue of costs and financing. Given
barrels of oil per day, and uses as much (Muller, 2013). the generally small size of Caribbean
as 70 per cent of this for electricity energy markets, it is often difficult for
generation. Saint Lucia imports 3,000 Although these initiatives and efforts these countries to prepare bankable
barrels per day utilizing more than 95 have demonstrated the strong potential projects which can attract the attention
per cent of this to satisfy its energy of these countries to address energy of international financiers.
needs (ECLAC 2013a). issues, no significant and sustained
developments have been realized, partly Research under the ECLAC/GIZ
In terms of commonality of strategies, because these efforts have been short project identifies a broad schematic for
both Dominica and Saint Lucia have term in nature and have not addressed the preparation of financing proposals
identified geothermal energy sources as the core barriers to the development of for EE and RE through careful
a key element of their future sustainable renewable energy in the Caribbean. Most consideration of the following:
energy strategy. In both cases, National of these barriers have been identified
Energy Policies (NEP) and Sustainable under the ECLAC/GIZ project and are · Energy balance forecasting
Energy Plans (SEP) have been summarized in Box 1. It is worth noting and goals financing
prepared to strengthen their legislative that one important barrier is project · Interests of donors, funders
“armory” as they seek to develop their design and management, as projects are and sponsors
frameworks for RE and EE. Moreover, often prepared without clear objectives · Identification of intermediary
both countries have engaged many or implementation strategies, thus entities
partners including, but not limited affecting their overall impact. Based · Identification of financing
to, the Caribbean Renewable Energy on the experience of Dominica and lines of entities that offer
Development Programme (CREDP), Saint Lucia, it is clear that any attempt financing
Caribbean Development Bank (CDB), to improve the region’s ability to obtain · Documentation and
ECLAC, Deutsche Gesellschaft für funding for development must address formalisation
Internationale Zusammenarbeit (GIZ), this deficiency. The next section briefly
1
This article is based on the assessments of national energy status undertaken under GIZ/ECLAC project entitled “Sustainable Energy in the Caribbean: Reducing
the Carbon footprint in the Caribbean through the Promotion of Energy Efficiency and the Use of Renewable Energy Technologies.”
2
This profile is largely typical of Caribbean SIDS, with the notable exceptions of Trinidad and Tobago which is the region’s only energy exporter, and Suriname,
which already generates most of its electricity from renewable energy. sources.
10 | FOCUSIssue 2 / April - June 2016
The energy balance forecast and goals and, within the Caribbean region heterogeneity of Caribbean countries
financing describes the amount of SIDS DOCK – 5Cs3 – SPREP4; and and the burden that high levels of debt
energy a country requires for the next the Caribbean Sustainable Energy pose in their investment capacity.
20 – 30 years. In order to prepare Roadmap and Strategy (C-SERMS).
feasible proposals, countries are advised Still, the global march towards more
to ensure that the purpose of sourcing Considering the identification of financing modern and sustainable energy use
financing is clearly articulated in the lines of entities that offer financing, it is means that the Caribbean subregion
project proposal – that is, whether it essential that project proposers are could greatly benefit from the
is to conduct a pilot study, undertake aware of the priorities of the respective momentum enjoyed by energy efficiency
social analyses, or design a commercial financing institutions. There may be and renewable energy initiatives.
project. It should be noted that the type in some cases a call for projects, which Numerous projects and funding
of work required for each of these usually has very definite objectives and facilities have devoted significant
projects is quite distinct. For example, priorities. resources to support this transition,
while pilot studies require a financial both in terms of technological
evaluation, social projects on the other Finally, there are specific prerequisites advancements and the building up of
hand need a cost-benefit analysis (documentation and formalisation) that national technical capacity. Countries
and commercial projects require must be satisfied in order to facilitate such as Dominica and Saint Lucia have
comprehensive technical, economic the release of funds, and financing used this opportunity to establish clear
and financial evaluations. opportunities are often closely aligned transition paths.
to the nature of the project. Therefore
Project proposers should also be careful examination of each stage of the Additionally, technological advances
mindful of the interests of donors, funders financing process is critical to securing have significantly helped reduce
and sponsors as these would frame the adequate funding. investment costs in certain technologies,
type of project each of these financiers such as solar PV. This global context,
would fund. Among these entities CONCLUSIONS combined with the financial restrictions
are government donors or sponsors; faced by the region, offer the
philanthropic institutions; national Notwithstanding the Caribbean’s Caribbean a great opportunity to access
or international financial institutions; challenge in transitioning to a more international technical assistance and
and other institutions. Often the latter sustainable energy path, the efforts funding to improve energy efficiency
act as intermediary bodies, or the of Dominica and Saint Lucia to date and promote the use of renewable
conduit between global or international indicate that this is certainly possible. energy sources. However, in order to
institutions. Indeed, Dominica can now boast that benefit from this transition, Caribbean
30 per cent of its electricity generation governments must continue to signal
With respect to intermediary entities, is being sourced from hydropower and their commitment to improving
there are projects that could find wind. energy efficiency and modernizing
commonality between national their systems to support further use
initiatives and multilateral regional There are many other examples of renewable energy sources. At the
programmes. There are also institutions throughout the region that also point same time, they must strengthen their
that address these kinds of projects, to this possibility, as Caribbean SIDS internal capacities to design sound
such as Sustainable Energy Initiative attempt to stabilize their energy security investment projects with clear goals
Organizations (SEIOs). Among the in providing a better future for their and implementation mechanisms. If
most well-known of these are: the nationals. A key challenge however this were to be achieved, the millions of
International Renewable Energy Agency remains the capacity to secure adequate dollars and the years of research to date
(IRENA); the Renewable Energy financing over a sustained period in order would not have been in vain.5
and Energy Efficiency Partnership to achieve the necessary investments
(REEP); the Global Sustainable Energy for such transition. This issue is even
Islands Initiative Consortium (GESII) more relevant considering the financial
3
Caribbean Community Climate Change Centre (5Cs)
4
Secretariat of the Pacific Regional Environment Programme.
5
A more comprehensive discussion can be found in the ECLAC documents lcarw13 and lcar14
FOCUS | 11(continued from page 9)
PRIORITY AREAS TO GUIDE ENERGY EFFICIENCY POLICIES
The IEA suggests the promotion Considering that this sector offers a international cooperation, however, this
of a competitive environment as a great opportunity for transformation, process must be triggered by consistent
way of fostering improvement and some Caribbean SIDS have already national efforts towards a greener and
modernization. Providers should deliver implemented net metering schemes,10 more efficient energy sector.
cost-effective energy by reducing losses, thus promoting the use of RE in
adjusting tariffs, and providing customers countries like Barbados, Grenada, The implementation of most of
with adequate information and Jamaica and Saint Lucia. CARICOM these measures can be managed by
technology. However, given that most suggests that increased participation of national governments if they take
countries’ energy sector is monopolized, Independent Power Producers (IPPs) advantage of international practices
independent power producers (IPP) and use of net metering or feed-in tariffs and lessons learned, benefiting from
of renewable energy have struggled to have proven to be effective measures to past experiences at the same time that
benefit from the sector’s transformation, promote the use of RE. IPPs could also they signal the subregion’s commitment
as many countries have not enacted increase the resilience of the system to sustainable energy. In view of the
enabling regulatory frameworks and by reducing costs and losses associated vulnerabilities faced by Caribbean SIDS,
even fewer have set (cost-effective) with movement of power over great it is fundamental to strategically design
tariffs to promote the use of RE and distances, and by promoting the use and structure energy policies in order to
improve EE. Additionally, administrative of decentralized systems. However, in allow an efficient use of financial and
processes tend to be time-consuming and order to mainstream the use of RE and technical resources, both from national
onerous, creating further disincentives. increase EE, it is necessary to upgrade and international/multilateral origin,
According to CARICOM (2015), electric grids and storage capacity within thus maximizing the scope and effects
“vertically integrated utilities tend to the region. of each policy or program.
resist measures that allow consumers to
connect distributed renewable energy Finally, interconnection within the References
systems and sell power to the grid”. region is largely underexploited
This problem is also exacerbated by regardless of the numerous benefits it Alexander Ochs et al. (2015) Caribbean Sustainable
the absence of regulatory bodies in could yield, such as economies of scale, Energy Roadmap and Strategy (C-SERMS):
many countries. Nevertheless, State reduced investment and operation costs, Baseline Report and Assessment. Washington, DC:
control over monopolies would allow and adaptation of reserve margins. A Worldwatch Institute.
the incorporation of structural changes study by Nexant already identified six
such as renewable portfolio standards, which economically and technically feasible CARICOM (2013) Caribbean Community Energy
mandate utility companies to obtain a interconnections: Nevis-Saint Kitts, Policy.Approved by the XLI Special Meeting of the
pre-determined share of their energy Dominica-Martinique; Dominica- Council for Trade and Economic Development,
from RE sources. Guadeloupe; Nevis-Puerto Rico; Nevis- 1 March 2013, Trinidad and Tobago.
U.S. Virgin Islands; and Dominican
Another issue faced by utilities is related Republic-Haiti (CARICOM 2015). CARICOM (2013) Caribbean Sustainable Energy
to high levels of technical and non Roadmap (C-SERMS), Phase 1.Summary and
technical losses due to outdated and CONCLUSION Recommendations for Policymakers.
inefficient generation, transmission and
distribution systems, and theft and under The global context created by the various International Energy Agency (2015) Regional
billing, which cause losses between 7 and instruments of the 2030 Development Energy Efficiency Policy Recommendations: Latin
34 per cent in the region.9 This results Agenda provides an enabling financial America and the Caribbean.
in high electricity costs, which affect and technical environment for Caribbean
access and competitiveness, and impede SIDS to pursue a cleaner and more
investments to improve EE and RE use. efficient energy matrix and benefit from
9
Losses vary greatly in the region, countries with fewer losses include Barbados (7 per cent in 2009), Dominica (8.6 per cent in 2011) and Saint Vincent and the Grenadines (8.3 per
cent in 2008); while other countries experience elevated losses, such as Antigua and Barbuda (23 per cent in 2009), Guyana (34.2 per cent in 2008) and Haiti (approximately 50 per
cent) (CARICOM 2013).
10
Net metering is a billing mechanism that credits solar energy system owners for the electricity they add to the grid (SEIA).
12 | FOCUSIssue 2 / April - June 2016
BOX 1. BARRIERS TO IMPLEMENTING RENEWABLE ENERGY STRATEGIES
Prepared by Esther Kissoon
1. Regulatory frameworks and policies
Ownership structure of utility: most electrical utilities in the region are monopolies in electricity generation, transmission and
distribution and have not implemented net-metering or feed-in-tariffs which would encourage independent power producers (IPP).
Even where net metering is available and IPPs permitted, there are significant restrictions on their operations, such as onerous, long and
unclear application procedures.
Lack of institutional capacity: lack of capacity and expertise in the fields of energy efficiency and use of renewable energy has been
identified as an important obstacle. In addition, policies and other strategies lack clear implementation activities, as well as monitoring and
reporting, and other deficiencies in project development. Moreover, there are important data gaps that affect informed decision-making
processes, as well as establishment of realistic improvement targets.
Price distortions: fossil fuel subsidies can significantly reduce the price of energy thereby limiting the incentives to switch to cleaner
energy sources, Caribbean countries provided direct or indirect fuel subsidies which ranged from 0.1 per cent of GDP for Saint Kitts
to 2 per cent of GDP for Trinidad and Tobago. Such distortions can restrict the development of RE even if financial incentives exist.
This issue is exacerbated by monopolistic practices and vertically integrated utility companies that resist innovation through EE and RE.
Transaction costs: excessive bureaucracy is also a major impediment to the development of RE, as interested stakeholders are faced
with burdensome requirements and unclear procedures. In addition, lack of integration of RE initiatives in the region increase investment
and operation costs, hindering further penetration.
Inconsistent and short-term policy: several studies have identified inconsistencies in government policy which can generate uncertainty
with respect to the objectives of the government thereby limiting long-term private sector investment in RE. In order to mainstream RE,
countries should improve grid efficiency and storage capacity; although EE measures are not costly and provide quick wins, it still faces
serious challenges. Furthermore, national policies are not always aligned with regional targets or do not establish clear goals or expected
accomplishments.
Lack of regional technical cooperation: the development of the RE sector can be impeded by the lack of coordination between
the vast number of players and initiatives in the RE sector across the region. However, regional and international organizations have
promoted stakeholder interaction to raise awareness, increase technical knowledge and allow exchange of experiences.
2. Informal institutions
Strong traditional ties to conventional energy sources: the development of RE can prove difficult where there is a deep affinity with
fossil fuels. Such ties to fossil fuels are strongest in petroleum producing countries like Trinidad and Tobago.
Lack of knowledge and awareness: despite the fact that the cost of RE technology has fallen significantly and several studies reveal
significant economic and environmental benefits to RE development, many individuals still harbour reservations which sometimes stem
from bad experiences in the past.
3. Costs and financing
High initial costs: this barrier exists both at the utility and at the private sector levels and it is particularly acute where conventional
energy systems are already in place. Nevertheless, it should be noted that certain technologies have seen substantial price reduction over
the past years, signalling further reductions in the short and mid terms.
Availability of funding: given the high initial cost of RE technology, the availability of low-cost financing is also a major barrier. Most
financial institutions in the region provide inadequate financial products for investments in RE resulting in heavy reliance on financing
from international developmental agencies. At the national level, countries such as Barbados, Saint Kitts and Nevis and Saint Lucia have
implemented loans, tax exemptions and other measures to incentivize widespread use of residential RE technologies.
4. Market barriers
Small market size: the low energy demand and small size of Caribbean countries do not allow economies of scale from many RE
projects. The potential power generation of RE resources like geothermal power on several islands is greater than the current demand
thus limiting the incentives for their development. Regional interconnection is presented as an option to create economies of scale,
reduce operation costs, incentivize investment and strengthen a sustainable energy market.
Sources:
1
ECLAC (2013a) An assessment of the economic and social impacts of climate change on the energy sector in the Caribbean. LC/CAR/L.397
2
IDB (2014) Website, retrieved on December 6, www.irena.org
3
National Renewable Energy Laboratory (NREL) 2015, Energy snapshot, Saint Lucia. United States Department of Energy, Office of Energy Efficiency and Renewable Energy
Muller. N. What lies beneath: geothermal energy in Dominica, Caribbean Beat, Issue 124, November/December, 2013.
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