Positive Outlook for Renewable Energy in the Caribbean

Positive Outlook for Renewable Energy in the Caribbean

In many ways, the Caribbean is an ideal geographical region for renewable energy projects. With more than 210 days per year of sunshine, it has considerable potential for solar energy. Equally important, there are many relatively small islands in the Caribbean where the scale economies necessary for efficiency in traditional power generation are not possible. Fortunately, solar power can be scaled downward much more effectively.

Increasing Grid Resilience

The tragedies of Hurricanes Irma and Maria in 2017 and Hurricane Dorian in 2019 made the vulnerability of power grids in the Caribbean painfully clear. Some locations did not see power fully restored for months. However, Tesla was able to keep lights on in many parts of Puerto Rico with Powerwall solar-powered batteries. Even when renewables cannot yet produce all the electricity, they can still maintain critical services during a crisis.

Renewable energy generation facilities can help to create more resilient power grids in part because they do not require such long power lines. Fossil fuel-based power plants in the Caribbean also frequently depend on oil tankers that cannot dock when hurricanes destroy port facilities. Renewable energy equipment, such as solar panels, can often be maintained and protected by residents of the islands.

Reducing Dependence on Oil

With a few exceptions, such as Trinidad and Tobago, most Caribbean nations are dependent on oil imports for energy. It is generally not cost-effective to ship natural gas, coal, and other fossil fuels to small islands. The Council on Hemispheric Affairs reported that over half the energy capacity of most Caribbean countries comes from diesel or oil. This imported oil is often expensive, so electricity costs four times as much in the Caribbean as it does in the United States.

The price of oil also tends to rise when local business conditions are deteriorating. High oil prices make travel more expensive, negatively impacting the Caribbean tourism industry. Oil-related energy expenses go up at precisely the same time that tourism revenues are falling.

High Demand

The vulnerability of the Caribbean to oil price fluctuations, hurricanes, and climate change creates a high demand for renewable energy in the region. Much of the development in the Caribbean is along the shoreline, putting it at risk as sea levels rise. What is more, climate change may be responsible for the recent increase in hurricanes.

The people of the Caribbean are aware of these issues and generally in favor of clean energy. Furthermore, travelers are often drawn to the natural beauty of the area. Many tourists would be willing to pay more to stay at sustainable resorts that use renewable energy.

Making Progress in a Growing Market

The support for renewable energy in the Caribbean has led to significant progress. Barbados continues to make substantial investments in solar energy. Barbados Light & Power Company (BLPC) built a 10 MW solar plant at Trents in St. Lucy during the last decade and recently announced plans to expand renewable use.

Despite considerable oil reserves, Guyana has an ambitious program to switch all of the nation’s electricity generation to renewables. There has also been an increase in public-private partnerships (PPPs). For example, Jamaica completed several PPP renewable energy projects worth over one billion U.S. dollars during the last decade.

Increasing Economic Diversification

By pursuing renewable energy, Caribbean countries can dramatically reduce their dependence on imported oil, increase economic diversification, and stabilize the business cycle. When a country is too dependent on a single industry, such as tourism, finance, or even oil, economic fluctuations often create substantial unemployment and make imports unaffordable.

Hurricanes also devastate Caribbean countries and disrupt power with little warning. Renewable energy can make electricity almost as reliable as the rising and setting of the Sun, increasing both economic stability and diversification. Contact Kijana Mack at kmack@latamenergyadvisors.com to access the full report.