By Kimberly Ramkhalawan
May 30, 2023
Heightened ways in which the Caribbean has embarked on its new energy transition away from fossil fuel dependence is having its moment weighing out the pros and cons, at least following this year’s conversation had at New Energy’s CREF (Caribbean Renewable Energy Forum) forum.
Post forum analysis saw several in the regional financing arena look at how it can impact small island developing states in the Caribbean and what it will mean long term. Kick starting the conversation, moderator, Racquel Moses, CEO at the Caribbean Climate Smart Accelerator, says with many partnered projects gearing up across the region, concerns revolve around the time frame in which it may take to commence and deliver. Christopher Burgess, Director of Projects for the Islands Energy Program says despite on the ground work in recent years due to COVID restrictions, says this year’s meeting allowed for a digging deeper at round the table discussions.
Leading one such discussion was Daniel Best, Director of the Projects Department at the Caribbean Development Bank (CDB), who noted that while CREF’s objective aligns with the CDB’s assert framework aimed at supporting borrowing member countries in advancing their sustainable energy transition through meeting three objectives, these being exercising thought leadership in areas related to the region’s sustainable energy transition, also by building and highlighting awareness of the work the bank is doing and ways in which it can support BMCs in achieving energy goals, as well as, engage in critical stakeholders, and hear from them their perspectives at meetings like CREF.
To Bruce Levy, President and CEO, BMR ENERGY, the biggest challenge currently posed to Caribbean nations is the integration of renewable energy into their grid systems as well as increasing the number of renewable in the road moving toward this new energy source. Nevertheless, he says there are lessons to be learnt from other countries in the region who have already begun taking that path.
One such country is Barbados, who is learning that they currently have enough renewables exceeding the demand that exists at the moment, all while learning how to solve those variables, which he says calls for sharing of information among government, utility providers, and businesses on the island as to ways it can be transferable to one another.
Burgess meanwhile remarks that the technical challenges in incorporating renewables in a high penetration market is there, but first needed is looking at the economics involved in the situation. He notes that currently many countries are facing technical problems including regulatory issues linked to oil and gas embargoes which calls for taking charge and willing to make the bold changes needed.
While the interest is there among regional BMCs, Best says disparities lie in the interest and the implementation, and undergirding is the regulatory disconnect to which he says push is being made to ensure there is a “minimum regulatory framework which looks at the policies, legislation along with the environment in order to mobilise resources all while developing system securities across the region”.
However, there still remains the question as to why regulatory frameworks are not allowing things to move faster.
According to Gillian Charles-Gollop, who is CIBC First Caribbean International Bank’s Executive Director, Corporate Investment Banking & Advisory, in order for an institution like theirs to finance a project, a strong Power Purchase Agreement (PPA) is often the first line of sight, because at the end of the day, whether it is multilateral or commercial bank, there needs to be some sort of reliability on cashflow. She says currently there are quite a number of projects before them in ‘limbo waiting’ for resilient energy systems and remarks that “if the needle is to be pushed, the investments, grant funding and sponsorships are what is going to require the regulatory mechanisms to actually work, and an example of that involves an ‘ease of doing business’ metric for the renewable energy transition”.
With many countries, particularly Dominica eyeing green hydrogen as their source of renewables to tap into the coming future, the BMR Energy CEO says, while it has its place along with significance, its commercialization process runs into a decade timeframe, as it calls for ensuring it is cost effective, all while building renewable energy plants to provide the energy to provide making the hydrogen, and then factor in its distribution models.
His concern focuses on the ten-year program, particularly with all hopes pegged on this upcoming hydrogen avenue, and expressed fears in possible stalling taking any other steps toward other renewable energies, with him going as far as saying that it may not have any application at the moment to go on, with the equipment needed that make it being somewhat underdeveloped, given the current technology.
With this the CCSA CEO says when it came to green hydrogen, Levy was preaching to converted on this prospect, while CDB’s Best shared that what concerns Levy, excites him, seeing it from the perspective “green hydrogen removing the constraint on the local demand and allow for countries to maximise their Re-potential, by possibly flipping the script and nations dependence on fossil fuel energy”, with grand move toward energy sovereignty, with the potential for development and demand within a regional scope.
While he agrees that the technology to fully harness this into energy sources is still underdeveloped, getting in at the ground floor of the entire green hydrogen space, and likened it to the discussion which once surrounded the solar industry, beginning at the end. Best lauds the CCSA in keeping in mind regulatory framework and environmental issues in getting this off the ground with blueprints being developed in the eventuality of owning energy sovereignty for generations to come, all while the CDB continues to support the geothermal, wind and solar projects.
Levy countered this with stating that there was a trend among Caribbean islands that often opted to choose the cheaper route when it came to procurement with a focus on the lowest price. He adds that to date, no firm has been able to put forward the lowest price, and while it is the best way to get rid of fossil fuels, it will come at a hefty price tag, with the question of how much is the Caribbean willing to fit this bill, paying more, for the long term of being energy independent.
To this Moses says perhaps is part of the challenge faced in the region, and does not think Caribbean nations can become so distracted with hydrogen to forget other energy sources.
Charles-Gollop went on to remind her colleagues of the time when LNG was once the fixation among the islands, and turned out not being the cheapest, causing many states to rethink its outlook on renewables in the face of climate change. Looking at it from the Caribbean H2 perspective and for this new venture to hit the ground running, it won’t be something financial institutions like hers would be so keen to hit the road running “unless it is bankable, when compared to multi-lateral institutions like the CDB, coming together to invest in the venture or grant funding needed to build up such areas, with the need for a cost benefit analysis for regulators to gauge how much it will really reduce the cost of energy or whether it will be something to be passed on to the consumer”.
As a lender, she notes that benefits are often closely looked at from the standpoint of huge initial costs, but developed energy solutions long-term, something she admits has not been fully analyzed to country benefits, and goes to further to add that countries in the region still have issues when it comes to their waste management, as an area that they ought to be exploring and focusing a lot more toward at this time.
Best added that his optimism comes from what the region has all lived through, while Moses says who is to say why not go after what she has long described as a ‘moonshot’ without being distracted on what needs to happen now.
The CDB Director went on to the further add to include more of the policy makers at government levels meeting with the younger generations to participate and share their voices to drive this, while heads of government make known what is needed from the financial sectors to make this space a reality, as well as to ensure the energy transition occurs and includes all segments of societies, as energy underpins everything done at all sectors. With this he calls for infrastructure industries like ports, working agencies to be present at the discussion to be included in the driving process of making renewables an actionable force.
An interesting point CIBC Executive Director Charles Gollop raised included how much this move toward renewable energy was taking away from governments’ earning capacities, as often fuels came with a tax dollar attached to the price tag, and questioned whether this was also a hindering point in moving the policy framework forward. She adds whether steps can be taken to ensure that a gradual move away from fossil reliance is reduced, with goals set at oil imports lessened by a percentage annually.
And while this conversation has been one ongoing for more than a decade, many countries remain at the same place, while the CCSA CEO says many countries with the hundred percent targets remain at a stalemate not making much progress, while nations with minimal targets are now taking bigger leaps to fulfill those ambitions set out.
Burgess however admits that with the push for technology, there is no doubt that the Caribbean will be onboard just like it has come on with revolutionary technology in the mobile communications sector.
Mr Best, however, says they are actively developing a model that can be mobilized all while deploying financing to drive the energy transition. To Best, what happens next is implementation, geared at “quadrupling implementation capacity of sustainable energy solutions within the region and remains optimistic in solving the regulatory functions that would enable financiers to move money into the region for any distributed energy solutions be at hand”, putting it the crux of the matter at the “driving point of implementation capacity for sustainable energy solutions, and thinks this is where CREF should see itself” move forward, being the solution oriented space it has been long term.