Update Country Report Curaçao 17 Aug 2018

One year after the devastating hurricanes that hit the Caribbean in September 2017, causing major damage to power grids, the electricity supply in the region remains limited. As Caribbean islands continue their reconstruction programmes while gearing up for the commencing 2018 hurricane season, some are looking to renewable energy as a way of diversifying their power supply and potentially increasing hurricane resilience.

Renewable energy investment is not a new trend in the Caribbean. Some countries have been investing in green energy projects for some years, in an effort to reduce their reliance on costly fossil fuel imports that have traditionally comprised the bulk of electricity generation across the region. This has now become a more urgent consideration, as Venezuela's economic turmoil has reduced the amount of oil that it has provided to Caribbean countries under preferential financial terms as part of its decade-old PetroCaribe programme.

In addition, with the exception of Trinidad and Tobago there are few major oil and gas producers in the region, despite exploration plans in Jamaica, Barbados and Cuba. However, what the Caribbean does have in abundance is sun and water, making it a feasible location for solar, wind and hydro-energy projects.

Investing in renewables has region-wide support

As a result, there are a number of renewable energy projects currently underway in the Caribbean, backed by a combination of government and aid funding, as well as private investment. The Dominican Republic is the leading investor in the region, providing US$360m in 2017. In early August the Asociación Dominicana de la Industria Eléctrica, the Dominican electricity association, announced that the country will add 240.3 MW of renewable energy to the national grid by the end of the year, reflecting a US$500m investment. The additions will comprise five wind and solar projects, with the former adding capacity of 182.3 MW and the latter 58 MW. In an indication of investor contributions to such projects, a 116 MW solar farm being operated by Montecristi Solar is co-funded by the Dutch development bank, Belgium's development bank and a German firm, DEG. In addition, a Danish firm, Vestas, is financing the construction of a 48 MW wind farm in Puerto Plata.

This investor interest is broad-based across the Caribbean, with other projects underway in Jamaica, St Lucia, Antigua and Barbuda, the Bahamas, and Cuba. Jamaica's US$64m Paradise Park solar project is expected to be one of the largest plants in the region, with a tariff of US$85 per MWh-one of the cheapest electricity rates in the country and set to reduce costs for consumers over the 20-year supply deal with the government.

Meanwhile, construction is underway at the Herradura wind farm in Cuba, which will provide an initial 51 MW, with a nearby Herradura 2 project supplying a further 50 MW. This investment forms part of Cuba's long-term goal of sourcing 24% of its total energy supply from renewables by 2030.

Beyond the hurricanes

As well as strategic moves towards renewables, post-hurricane reconstruction programmes are incorporating renewable energy into energy grid re-construction plans. In part this is because the cost of renewable energy has come down in the last decade, while initiatives such as the US Agency for International Development's Caribbean Clean Energy Programme aim to promote and support adoption of renewable energy. In addition, governments may feel that incorporating alternative energy supply could provide greater resilience in the event of potential natural disasters. For example, solar projects may be quicker to restore following hurricane damage, allowing islands to maintain some generation capacity.

Antigua and Barbuda has been successful so far in incorporating renewable energy into its reconstruction plans for Barbuda, which experienced major hurricane damage in 2017. The UAE has provided a grant from its UAE-Caribbean Renewable Energy Fund to construct a US$3.1m solar and lithium battery storage plant on Barbuda, which will provide 800 KW in solar energy and 800 KWh in battery storage.

Bright future for renewables in the region

Ongoing investor interest in renewable energy projects is set to continue boosting clean energy capacity across the Caribbean. Although traditional fuels will remain the dominant source of energy, diversifying into renewable energy will improve energy security across the region and help to reduce import costs in the longer term.

Ongoing challenges to this diversification are technical capacity and the potential implications of climate change. In terms of technical capacity, this is required at an early evaluation stage in which islands can assess their energy needs and strategy, and what type of renewable projects would be best suited to their environment. If sufficient technical skill is lacking domestically, governments may need to commit to a potentially costly out-sourced evaluative process, which could deter some cash-strapped countries from going down this route.

Moreover, it is unclear as yet how climate change may affect the Caribbean. Early indications suggest that extreme weather events such as category-five hurricanes could become more common, while rising water levels and increased rain could mean that hydro and solar plants are less productive than planned.

Such considerations do not appear to be deterring potential investors at this stage, although climate change impacts are increasingly likely to be factored into project proposals. The current wave of renewable energy investment could therefore form part of climate change mitigation strategies in the longer term.