IN Part 1 of this commentary, I argued that the Caribbean MUST pursue renewable energy (RE) more aggressively as this is the only way to avoid the severe social and economic disruption that sudden and sustained energy price hikes can cause.
Unfortunately, the region has not embraced this clear and powerful logic with the requisite commitment. Usually, interest in RE piques when oil prices spike and declines when oil prices drop. There are several reasons for this. There is a palpable lack of will. But power companies have their own logic for not switching to RE. Most, if not all of them have excess “installed capacity.” Thus, only if/when that capacity is exceeded by a surge in current or future demand would they need to increase it. The expectation is that If/when this happens, or if aging generators must be replaced, that a power company might seize the opportunity to invest in RE. But this has not happened because of the power companies’ reasoning that in the short run, it’s easier and cheaper to install more diesel generators than to set up an RE facility. For starters, there’s no need to buy large tracts of land from speculative landowners. Moreover, in most countries the enabling conditions for a quicker transition to RE have not been established.
But often–and certainly in the case of energy–what makes financial sense in the short run does not hold in the long term. Once a solar, wind or wave energy facility is set up, timely maintenance is all that’s required. There’s no need to import fuel and the social and economic upheaval that goes with it.
Costa Rica and Uruguay
Costa Rica and Uruguay are clear examples what’s possible when WILL triumphs over challenge. It must be assumed that at some point, power companies in both countries would have been faced with similar challenges to those in our region. But consider this. In 2018, 98% of Costa Rica’s electrical energy came from hydroelectric, geothermal, solar, and wind energy. In 2020, RE supplied nearly 100% of Costa Rica’s energy output. These stunning gains have enabled Costa Rica to become entirely “carbon neutral,” meaning it has achieved a balance between the carbon it produces from other sources, like transportation and agriculture, and that which it is removing from the atmosphere by using RE. Uruguay is on track to attain a similar standing as Costa Rica. A decade ago, Uruguay met 40% of its energy needs from RE sources. Now it receives 100% of its electricity from RE. This performance has helped to make it one of the wealthiest countries in Latin America.
In citing these examples, I accept that the population of Costa Rica (5.2 million) and Uruguay (3.4 million), gives these countries relatively larger domestic energy markets and better economies-of-scale to pursue RE projects. Still, Jamaica with a population of nearly 3 million people and an average of 2 million visitors per year, gets only 11% of its energy from renewable sources.
In much of the Caribbean, two major challenges to leveraging RE power are cost and risk. The smaller the market in these countries, the higher the per capita cost and associated risk of RE projects. These are among the main reasons why St. Kitts and Nevis has not been able to generate geothermal energy from a capped steam well-head in Nevis. It also explains why Saint Lucia had to turn to a consortium of financial partners for a package of grants and soft loans for its geothermal exploration project ongoing in Soufriere. Simply stated, without this support, Saint Lucia could not have attempted this project. Most readers would know that Saint Lucia went looking for commercially viable steam in Soufriere at least thrice before and came out empty handed. We may say, “nothing ventured nothing gained.” But the fact remains that these were costly projects. Now, Saint Lucia is at it again.
The financial risk associated with RE geothermal projects is linked to the uncertainty of its outcome. There is no guarantee drilling will produce commercially viable steam; and so, some of that risk must be passed to one or more entities. It is unlikely that insurance companies are lining up to provide such coverage.
Grasping this reality, a few years ago, CARICOM Heads of Government instructed the CARICOM Development Fund to explore the feasibility of creating a Credit Risk Abatement Facility to stand-up partial guarantees in participating local banks. The good news from CEO of the CDF, Rodinald Soomer is that “…the Facility is gaining traction and has received solid commitment from some potential contributors to the Facility” but that more money would be needed to allow the Fund to support the RE ambitions of all CARICOM member states.
A Sensible Approach
A sensible approach would be for Caribbean countries to prioritise RE options that don’t carry as much risk as geothermal energy. The sun will always shine, the wind will always blow, waves will always be active and ocean temperatures will always fluctuate at varying depths. Granted, not all these options directly contribute to “base load” electricity as geothermal energy.
There’s always been much unease whenever ocean thermal energy conversion (OTEC) is mentioned in our region. The prevailing view is that this technology—which is used in Japan and Hawaii—is costly and has not evolved enough to be adopted in the Caribbean. Caribbean delegates at the Second International SIDS conference which was held in Mauritius in January 2005, were visibly impressed with a full-scale working model of an OTEC plant which was set up in the lobby of the conference centre. Based on that interest, a group of investors from Japan visited the region offering to build OTEC plants at no financial risk to Governments. That offer was declined in every country. I had hoped that at the very least, a small scale OTEC plant might have been set up at UWI for research purposes, as was done at Saga University in Japan. My hope was sired by the presence (since 1984) of a SLOWPOKE-2 Research Reactor at the International Centre for Nuclear and Environmental Sciences (ICENS) at the Mona campus of UWI. I reasoned that if it could have been done for nuclear energy, it could have been for OTEC. Alas!
Now, the region will have an opportunity to participate in a wave energy initiative being piloted by SIDS-DOCK—a UN-recognised international entity established in 2015 to connect the energy sector in SIDS with global markets for finance and clean energy technologies. Wave energy technology is well established and is being used all over the world, including in Ghana. My hope is that every Caribbean country—especially my own—will embrace this low-risk initiative when it is offered.
Caribbean countries have often lamented the lack of ambition of developed countries in setting and achieving their carbon emission targets. I lament the lack of ambition within the region to build long-term resilience to energy price shocks. My position is this: If we say we’re vulnerable to such shocks, then either we do something about it or stop bellyaching about it.