Basse-terre, Guadeloupe, 23 January 2015/ BizClim/ ACP: A Conference themed “Sustainable Incubation & Development Fund in support of business in bio and renewable energy in the Caribbean” was held in Guadeloupe on January 20-21, 2015.

This event was organised by the Caribbean Export Development Agency and the Conseil Régional de la Guadeloupe with the support of the ACP Business Climate Facility (BizClim). It brought together about 100 participants from region, as well as from Europe, Africa and the Pacific.

At the opening session, H.E. the Ambassador of Vanuatu – also in his capacity of future chairman of the ACP ambassadors’ committee – expressed important leadership thoughts around key issues, including access to available financial resources and cooperation between the Caribbean and the Pacific regions.

Renewable energy challenge

Access to electricity in the Caribbean countries is almost universal, with rare exceptions such as Haiti. However, the electrical supply across much of the Caribbean is generated by expensive and polluting oil or diesel-fired generators, prompting many of the governments across the region to look for alternative sources of energy. The average cost of electricity across the Caribbean ranges from $0.30 per kilowatt hour (KWh) to $0.65/KWh – roughly three to six times the price paid in the continental US. The high cost of imported oil uses up scarce hard currency reserves, reduces competitiveness and diverts funds away from social and economic development.

Although the Caribbean is blessed with abundant natural resources, including sun, wind, tidal, geothermal, hydro-power and biomass (bananas and sugarcane), a dismal percentage generated in the region comes from renewable sources. Geothermal energy has considerable potential and geothermal exploration and negotiations for the rights to explore have increased in Eastern Caribbean region since 2010. Grid-connected wind power has not yet been widely developed in the Caribbean. Biofuels, particularly ethanol, have potential in the Caribbean given the region’s tradition of sugarcane production and expertise in converting sugar into alcohol. Hydro power remains underexploited in the region.

The main obstacles to the Caribbean realizing its potential in alternative energy generation are the small size of the region’s markets, the scarcity of capital and the lack of a regulatory framework. The business and investment climate was prominent among the burning issues faced by the sector. In general, the Caribbean countries lag behind in terms of adopting renewable energy policies and translating them into regulations and concrete measures. There are no incentives to generate clean energy and no sanctions for polluting. Developing renewable energy in the Caribbean will thus be challenging.

Call for action

The representative of the Caribbean Renewable Energy Development Programme (CREDP), acknowledged that regional initiatives to promote green power have been slow to get off the ground. CARICOM sought to develop renewable energy and energy efficiency through the CREDP, by removing barriers for the use of Renewable Energy and application of Energy Efficiency measures in the Caribbean Region.

Participants called in particular for urgent action to put in place an appropriate legal and regulatory framework and to start making an inventory of investment opportunities in each and across countries. To a large extent, this is paramount to engaging the process championed by the SE4ALL initiative. In this regard, the designation of national coordinators is recommended as a matter of high priority.

Participants identified a number of investments in the sector that have a pay-back period of no more than 4 years. It appears that the energy efficiency area is one of those high-return investment opportunities, but some hurdles need to be overcome. In the short term, the main driver behind renewable energy growth in the Caribbean will be self- or micro-generation, which is already taking place, with the hotel industry likely to be the next area of growth. The tourism industry is indeed one of the region’s largest energy consumers and an obvious sector to lead the drive into renewable energy.

The importance of energy efficiency gains has been confirmed by audits made by the Caribbean Hotel Energy Efficiency Action Programme (CHENACT), an initiative launched by Inter-American Development Bank to perform energy audits on hotels across the Caribbean with a view to formulating energy policy and encouraging micro-generation within the sector. But the global slowdown has reduced occupancy levels across the Caribbean and at present hotels are likely to shy away from capital expenditure even though it has the potential to lower their energy bills.

Role of Energy Service Companies (ESCOs)

In the respect, the promotion of ESCOs is seen as a commendable solution that can be supported by a dedicated fund. A recent Carbon War Room report indicates that the Energy Efficiency project uptake has been minuscule in comparison to its potential, but the situation is about change worldwide, due to variety of innovations in finance, technology and policy. Financial innovations include Property Assessed Clean Energy (PACE), On-Bill Repayment and Energy Savings Agreements. New proposed structures include investment vehicles such as Master Limited Partnerships and Real Estate Investment Trusts for Energy Efficiency. With the right legal and regulatory base, ESCOs could play a significant role.

The proposal to establish an incubator and a seed & early-stage fund was well received in principle by participants. However, only a general recommendation to work towards its realization was retained. Clearly, this was most probably due to the absence of relevant partners – e.g. Caribbean Development Bank. Yet, project promoters and investors are pushing for further discussions.

For Further information, please visit the website at www.caribbean-re-devfund-conference.eu