The growing renewable energy sector offers a significant opportunity for advancing green recovery and economic diversification in the Caribbean. The disruption occasioned by the pandemic could be a kickstart to speed up these shifts. Read more in this article, the first in a series on Renewable energy investments, from the Clinton Global Initiative and Resilience Capital Ventures.
The Caribbean is all too familiar with the public health and economic threats of climate-driven hurricanes and natural disasters. It is now faced with the unprecedented shock and economic impact of COVID-19. At present, 90% of hotels and tourism-related businesses have closed or are operating at reduced levels, hospitals are grappling with limited capacity as cases fluctuate, and it is predicted that one in four small businesses could shutter during the pandemic. Simultaneously, yet another highly active hurricane season serves as a reminder of the continued risks posed by our warming climate.
Island leaders have been forced to navigate three interlinked challenges — first, leading an immediate emergency public health response to the pandemic; second, addressing the severe economic impact of the pandemic and designing recovery and relief programs; and finally, protecting sustainability plans and targets that may seem less critical during an immediate crisis, but are absolutely critical toward addressing the long-term existential crisis of climate change.
The growing renewable energy sector offers a significant opportunity for advancing green recovery and economic diversification in the region. The disruption occasioned by the pandemic could be a kickstart to speed up these shifts.
The case for renewable energy in the Caribbean is well documented and the region is making progress at variable rates. The economic crisis that has caused general economic activity to plunge in the last six months means that the imperative has only grown stronger. Although fossil fuels are at historically low levels, there is still an incentive to move towards renewables since sharp fluctuations in the high price of imported fossil fuels make long-term budgeting difficult. The cost of solar and onshore wind have dropped 82% and 40% respectively since 2010, and as a result, renewable energy prices fall below the current cost of fossil fuel generation in most CARICOM islands.
Local renewable energy provides resilience to hurricanes and other extreme weather events as well, especially when co-located with energy storage and sited at critical facilities such as hospitals and health clinics. In Puerto Rico, for example, solar has been installed on at least 412 critical facilities since the 2017 hurricane season. When a series of earthquakes struck earlier this year causing blackouts across the island, these solar-powered systems provided much-needed backup power to the facilities and the communities they serve. The Solar Under Storm report highlighted that one source of renewable energy, rooftop solar, can survive in the face of major hurricanes and cyclones is achievable.
Barbados is also pursuing renewables at critical facilities. With a $30M loan from the InterAmerican Development Bank, the government will develop 11 MW of renewable generation and energy efficiency retrofits at public sector buildings, including hospitals, clinics, and other facilities, as well as expand its electric vehicle fleet. For many leaders in the Caribbean, pursuing a low-carbon strategy is also a core component of achieving the Paris Accord contributions, and demonstrating the continued leadership of SIDS in global decarbonization efforts.
The area of financing renewable energy is one area in which progress has been slow. Clean energy facilities are typically capital- and technology-intensive, and therefore investment at scale is required from as diverse a pool of capital as possible to enable the Caribbean to realize its energy transformation goals. However, there are many competing priorities, including emergency response to the pandemic and the socio-economic recovery needed to return battered societies to the new normal. Coming at a time when there were already very high levels of public indebtedness and limited access to concessionary grant funding, there is critical need for innovation in the design of new financial facilities for renewable energy. COVID-19 response has resulted in increasing levels of debt and exacerbated the problem of the small and shrinking fiscal space. These are challenging circumstance but there are many compelling reasons to promote investments in green and resilient infrastructure. Investments in renewable energy represent a particularly compelling opportunity for island nations to create good jobs and stimulate economic diversification. Solar installers and wind technicians are currently the two fastest growing occupations in the United States, and there’s no reason the Caribbean can’t take advantage of this trend. According to a recent report from the InterAmerican Development Bank, $7 billion in investments is needed to achieve current renewable energy targets and implement system resilience in the Caribbean, and achieving these ambitious goals will realize $16 billion in economic benefits.
Caribbean governments and their international partners can collaborate to establish innovative approaches to accessing and deploying investment, including private capital, to drive the growth of renewable energy in the region. Cooperation is necessary to make this a reality. Investors remain concerned about a lack of liquidity, the relatively smaller size of renewable energy deals, currency volatility, and credit-worthiness of off-takers.
These barriers are not insurmountable. Caribbean nations can embrace regional approaches to aggregate projects, streamline policy and regulation, and clarify clean energy ambitions to send signals to the investment community.