Soaking up the sun

Opportunities and risks in the Caribbean’s renewable energy transition.

Renewable energy penetration in the Caribbean is surprisingly low with many countries in the region reliant on fossil fuels for energy generation. To make matters worse for several countries, 80% of their electricity is generated using imported fuels. With fossil fuel prices riding high, is now the time to accelerate the region’s renewable energy transition?

An energy executive in Jamaica was keen for the region to move faster, “The Caribbean has great renewable potential, especially for solar. Countries such as Jamaica, with some of the highest electricity costs, are particularly well-suited. Others, like Guyana, have specific problems around generation in remote areas that could be solved by renewables.”

In 2019, at COP 25 in Madrid, Caribbean countries set up the Renewable Energy for Latin America and the Caribbean Initiative (“RELAC”), with the aim of producing at least 70% of their energy requirement from renewable sources by 2030. This commitment has been followed by action with governments and policymakers working to develop energy transition plans.

One of the main barriers to the energy transition in the Caribbean is financing. “There are opportunities for large scale and distributed solar,” began a renewables investor in Miami, “but the cost of installation is high, getting a grid connection isn’t easy, the tendering process is expensive, there are often preferred bidders offering kickbacks and the regulatory environment is archaic. It’s a tough environment for foreign investment. The best opportunity currently is in community solar where you have a new residential block or gated community being built, the cost can be shared and the scale starts to make sense.”

“There are opportunities for large scale and distributed solar […]. The best opportunity currently is in community solar.”

Renewables investor, Miami

Realistically, the Caribbean’s renewable energy transition will need the support of international organisations such as the Inter-American Development Bank (“IDB”) and the International Renewable Energy Agency (“IRENA”). These institutions can assist regional governments in developing studies, identifying infrastructure gaps, planning investments and overcoming technical and regulatory barriers.

Importantly, there is no shortage of interest from these international organisations. Hyginious Leon, president of the Caribbean Development Bank (“CBD”), announced in May 2022 that the bank would launch a string of initiatives named ASERT to advance the energy transition in the region. He announced that CDB would support the deployment of new climate resilient sustainable roofs that embed solar, wind and water energy generation and storage.

In the meantime, Caribbean countries are working alongside other international organisations to develop their own renewable energy infrastructure. Barbados, is receiving assistance from the IDB to structure a competitive regulatory framework to procure large scale renewable supplies.

Regulation was another commonly cited challenge to the energy transition, summarised by the energy executive in Jamaica, “The region needs to build a fair and enabling regulatory environment. There isn’t a lack of interest, expertise or even finance for large scale renewable projects – the main problem is the regulatory environment. The fact that there have been no large scale renewables projects tells you the issue is either political or regulatory as the business case is clear.”

“The region needs to build a fair and enabling regulatory Environment. There isn’t a lack of interest, expertise or even finance for large scale renewable projects – the main problem is the regulatory environment.”

Energy executive, Jamaica

Many people we spoke to highlighted Guyana as a particularly interesting opportunity: the country has recently made several large oil and gas discoveries but also has excellent renewables potential. An energy specialist in Guyana said, “I would like to see the development of solar and wind alongside the development of oil and gas. Guyana is a blank canvas and there is an opportunity to reinvest the profits from fossil fuels to kickstart the countries renewables sector and leapfrog others in the region.”

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