Expensive electrons

The high price of electricity in the Caribbean should catalyse an energy transition, but it's not happening.

The Caribbean has some of the highest energy costs in the world, with great fluctuations due to global oil prices. Historically, Trinidad and Tobago, Suriname and Dominican Republic have the lowest average tariffs as they have managed to find efficient solutions to the region’s problems which include electricity generation and transportation.

“There are three main reasons for the high electricity prices in the region,” begins a sustainable energy expert in Barbados, “the forms of generation, economies of scale and politics and regulation. 80% of generation in the region comes from diesel and heavy fuel oil with the exception of Trinidad that has natural gas and continental Belize which has a connection to Mexico. Scale is another issue, Trinidad has industrial demand so scale isn’t a problem, but in many other places demand might be only 15 megawatts and finding a clean, reliable and economic solution to that isn’t easy. Finally, politics runs on a 5-year outlook so no long term investments are made and also there isn’t the regulatory framework or capacity within governments to support the sector. In some countries, the Ministry for Energy might be 3 people!”

“There are three main reasons for the high electricity prices in the region, the forms of generation, economies of scale and politics and regulation.”

Sustainable energy expert, Barbados

Many Caribbean countries, like the Bahamas, have set ambitious energy transition goals with the assistance of international organisations like the InterAmerican Development Bank (“IDB”). The region is also trialling and researching many potential sources of renewable energy generation including solar, wind, geothermal and tidal. The sustainable energy expert believes governments are underestimating the costs of their commitments, “In addition to new generation, there is a major infrastructure overhaul that is required to get the grid ready for renewables. Small countries don’t have the financing to do this.”

It is widely acknowledged in the region that the main challenge associated with a transition to renewable energy is the high level of investment required. A Director of a regional renewable energy trade body commented, “The cost of doing business in the Caribbean is high. For energy generators, you have the high initial capital cost but also the operating and maintenance costs end up being 75% of your revenue. For governments, you have the various subsidies and exemptions needed to drive adoption and then you have infrastructure upgrades too.”

“The cost of doing business in the Caribbean is high. For energy generators, you have the high initial capital cost but also the operating and maintenance costs end up being 75% of your revenue.”

Director, regional renewable energy trade body

Renewable energy costs are falling however, and it is expected that the region will see an increase in investment every year for the next decade as solar and wind prices continue to fall. Investors in the renewable sector in the Caribbean also see an opportunity in battery storage. In December 2020, Leclanché, a Swiss energy company, built the Caribbean region’s largest battery storage facility at a solar farm with a 45.7 MWh capacity in St. Kitts.

In March 2021, the IDB and the International Renewable Energy Agency signed a partnership to promote cooperation among Latin American countries towards a regional target of 70% of renewable energy installed capacity for power generation by 2030.

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