Caribbean electricity prices are among the highest in the world. If you’re reading this now, the odds are good that you know this, and lament it. In Saint Lucia, recent years have seen an average price of around 34 cents (US$) per kilowatt hour (PKH). Compared to the average of 33 cents seen around the Caribbean, that is not a big difference.
A 33 cents average when compared to the US average of 12 cents PKH though? That’s a different story. Even when cost estimates vary – and prices go up and down when variables like renewable energy sources are introduced into a nation’s power grid – whichever way you look at it, the region is expensive electrically.
The price gap, and the great frustration surrounding the untapped potential of the Caribbean as an energy epicentre, especially with further innovation, is what makes this such a big story. Let’s look now at this in-depth.
WHY IS IT SO EXPENSIVE?
The geography of the Caribbean is a blessing for many industries. Unfortunately, power generation is not one of them. In the absence of a strong coal or oil reserve in its territory, an island nation has traditionally needed to import energy. Distance and borders bring higher costs.
The shift towards renewable energy offers the potential to change this dynamic. But it also comes with new complications. Firstly, the effective transition of a nation’s energy sector from traditional to renewable energy, while minimising disruption to employment and the economy.
Secondly, the minimisation of any price rise in electricity costs, if price rises are indeed ultimately required, as a result of the shift from fossil fuels to green power. If only for its own future, any government will be wary of any new policy that will see a direct hit to a voter’s hip pocket. Sustainable energy costs emerging as key election issues in many nations, globally shows this.
WHAT DOES IT MEAN FOR CLIMATE CHANGE?
The Caribbean also sees the ongoing use of traditional energy directly linked to the immense risk that climate change poses to the region and its economies. Put simply, as a maritime region with abundant coastline, the Caribbean has as much ‘skin in the game’ when it comes to climate change as any other region around the world. And in many ways more.
It’s true that the efforts of our region to address the shift may seem small when compared to giant powers like the US and China. Nonetheless, challenges like rising sea levels can be met with apathy from some other countries who also retort, ‘What is your nation doing about it?’
When it comes to energy efficiency the Caribbean has no choice but to be ‘all in’ on change. Developing local energy is a complex challenge but the equation is simple: if the region can do it, it can lower prices.
BRINGING ALL PARTNERS TOGETHER
If the starting problems are clear, what issues are regularly encountered in addressing them?
For Caribbean nations, a shift to greater renewable energy is often a mix of work, timing and luck. This was seen in 2017 here in Saint Lucia. At the start of this year the prospects for construction of a wind farm with multiple stakeholders was looking promising. Envisioned to have a potential output of up to 12MW, the farm was to be created in Dennery.
Then in March progress was stalled as a private partner – WindTex Energy – withdrew. This experience may be frustrating to many Saint Lucians but it is not unique. It is reflective of the challenges in pursuing progress within the renewable energy sector, itself subject to political and economic headwinds like any other area‚ that can make the sustainable energy sector unstable.
The setback notwithstanding, there are other avenues for other energy sources. The Chastanet Government spent much of 2017 working towards a target date of 2018 for drilling to begin on a geothermal project. Such an experience could suggest the shift towards sustainable energy is the case of ‘when a door closes, a window opens’.
In reality it’s a balancing act. As with other issues in business within the region, the core risk is that progress doesn’t come fast enough. Past performance is no guarantee of future behaviour; one need only look at the dramatic shift on focus that Washington has made since US President Donald Trump was elected, repealing the Obama Administration’s climate change plan and dropping climate change as a US national security priority.
Nonetheless‚ the core risk would come with a gradual approach to change. Even if the people of the Caribbean are more conscious than many others around the world about the immediate dangers of climate change, it is still easy in the back and forth of day by day political debate to see something put into the ‘later’ basket.
In January 2016 a barrel of oil was US $29. As we look to January 2018, it is double that at $58. The most severe effects of climate change may remain at a distance to some – and the good work done now could well arrest some of them before they arrive – but the economics of Caribbean energy could quickly become far more difficult.
Setbacks notwithstanding, the tremendous work of the public and private sector in the region cannot be overlooked. Regional governments have been leading supporters of UN action on climate change, many ratifying the UN Paris climate agreement on the day it came into effect on 22 April 2016.
On a national level, a number of nations like Bonaire and Barbados already have green power, Bonaire utilising wind, and Barbados solar energy. LUCELEC is set to open its 3MW solar farm in the spring of 2018. The differences in these technologies show that while there are no quick fixes or magic answers, a variety of solutions is on offer.
In the private sector, as our region is home to many large resorts, the capacity for these destinations to lead as large self-sustaining businesses is considerable. In fact it’s already been done by St. Maarten’s Westin Dawn Solar Resort and Spa.
Action on energy prices can bring action on climate change. In energy policy in this region at the start of 2018, it’s an ideal time for a surge of momentum. The old adage ‘the best time to fix a hole in the roof is when the sun is shining’ rings true. A nation that pursues energy security will help lower prices in its territory‚ and drive action on lowering prices across the region.
Strong action to stop climate change across our nations will keep pressure up globally for further action on climate change across all nations. At home and around the Caribbean‚ electricity cost and innovation will be a core issue of the year ahead.