The Caribbean’s Untapped Renewable Energy Potential

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by Martin Vogt

The global strategy for mitigating climate change is no secret. Most countries have embarked on an initiative to transition to clean energy sources. According to a study by scientists from the universities of Oxford and Utrecht, we will almost certainly pass a point of no return for dealing with global warming if governments worldwide don’t transition away from fossil fuels, such as coal and natural gas, towards renewable energy by 2035. This would mean that renewables would need to see their total share of power generation increase by at least two percent per year.

In other words, if we don’t act now, we will face potentially devastating consequences. Changes in the rainy seasons, longer droughts and the increasing intensity of hurricanes have already begun to negatively impact global economies, particularly those of smaller countries which are vulnerable to the changes in weather. In some cases, the impact of climate change threatens these countries’ very existence.

A particularly suitable instrument to support small islands in adapting to the consequences of climate change consists in investing in the development and establishment of an efficient renewable energy infrastructure. These kinds of investments can not only increase resilience, but also promote synergy and strengthen regional cooperation.

In the Caribbean region, solar power is advantageous not only because of its abundant sunlight but also because solar has seen a tremendous drop in installation prices and ongoing maintenance costs.

The Caribbean Is Ideal For Renewable Energy

Today, the Caribbean economy – except for Trinidad and Tobago – is almost entirely dependent on diesel fuel or natural gas. Renewable energy only plays a minor role, even though the region’s conditions are ideal for leveraging green energy. Sun and wind are abundant and geothermal energy and hydropower could free the islands almost entirely from fossil fuels. 

Solar energy holds, perhaps, the most promise as a future power source. With about 217 days of sunshine a year, the Caribbean has excellent solar resources enabling solar PV plants to generate electricity at similar or less expensive costs than conventional power plants do. In addition to that, solar PV technology is ideal for the smaller islands in the Caribbean. The technology can be installed in small units like on roof-tops, be combined with conventional gensets to create a “hybrid” or be complemented with battery storage for a 24/7 power supply. This reduces power generation costs and dependency on fuel imports. 

Solar power is, therefore, particularly efficient when it is deployed as part of an integrated energy solution. 

Unique Needs And Challenges 

Each individual country faces distinctive challenges when it comes to establishing and implementing green energy projects. Hence, in many cases, developing an efficient renewables infrastructure – be it decentralized or centralized – is associated with the need to meet or rather adapt to specific requirements. The Caribbean is no exception in that regard. There are a variety of factors that need to be considered before realizing alternative energy generation in that area.

The scattered islands’ sparse electrical grid infrastructure, for example, has a major impact on power generation. Isolated regions often only have a weak grid infrastructure or no infrastructure at all, which makes alternative power generation solutions even more relevant. In this respect, renewable energy installations, such as distributed solar PV systems, are crucial for supplying affordable energy in remote areas.

In addition to that, the Caribbean, as already mentioned above, depends heavily on fossil fuels for the generation of electricity, making the region vulnerable to oil price fluctuations. According to World Bank data, oil still provides more than 90 percent of primary energy needs. Yet, the majority of the Caribbean islands, with the exception of Trinidad and Tobago and Guyana, don’t have any petroleum or natural gas reserves. However, even these countries seek a green future for their economies.

The government of Barbados, for example, has provided millions to support the country’s transition towards renewable energy. Solar water heating is used by more than 30,000 homes on the island. Minister of Energy, Wilfred Abrahams, promised that by the end of 2018, 2.6 MW of solar PV capacity would be installed across 16 public government buildings.

While Barbados is still in the early stages, when it comes to green energy transition, Guyana has been promoting renewables on a more aggressive level. Thus, the government has developed a Green State Development Strategy (GSDS) that aims at replacing 100 percent of the country’s power supply with renewables by 2025.

Oil imports, in general, cost Caribbean states up to ten percent of their GDPs. Energy imports are, therefore, a massive cost factor – not only for the governments, but, ultimately, also for citizens who suffer from some of the highest electricity prices in the world.

This is precisely why the Caribbean countries need investors. With their own resources, renewables infrastructure could only be expanded very slowly in most cases, even if the investments would pay off after just a few years.

The Time To Invest Is Now

Public-private partnerships (PPPs), on the other hand, provide an opportunity to finance, build and operate clean energy projects that can then be completed sooner or even made possible in the first place.
 
 The Caribbean is a prime example of how traditional public procurement of infrastructure services can fail to deliver value for money. The use of PPPs in the region offers the chance to build innovative and less expensive clean energy solutions like solar farms and wind parks. However, a lack of government capabilities to prepare, procure, and manage such projects has made it more difficult for some Caribbean countries to enjoy the benefits international investments can provide.

Jamaica, for instance, had to go through an extensive review program that resulted in a variety of structural reforms – which eventually led to a remarkable progress. Thus, the country has completed five projects. Three of them were in renewables, with a total investment value of approximately US$ 1.3 billion since the implementation of its PPP policy in 2012.

The future is certainly looking “green” for investments in alternative energy. The switch to renewables is inevitable if we want to tackle one of the most radical changes in the history of humankind – and the Caribbean is ready to make the switch. 


Martin Vogt is Managing Director at MPC Renewable Energies, which is the exclusive Investment Advisor to MPC Caribbean Clean Energy Fund. Most recent investments include the 21 MW operational wind farm Tilawind in Costa Rica and the 51 MWp Solar PV in Paradise Park, Jamaica. MPC Renewable Energies is a 100% subsidiary of MPC Capital, an international investment management firm for real assets, that develops and manages real asset investments and investment products for international institutional investors, family offices and professional investors. 

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