Development banks, U.S. DOE pledge to support renewable energy in the Caribbean

Share

Last Wednesday, heads of state from at least eight Caribbean nations met with the head of the U.S. Department of Energy (DOE), presidents of two regional development banks and the head of the Caribbean Community (CARICOM) to sign a memorandum of understanding which includes activities to support renewable energy and energy efficiency.

The MOU, which was signed by representatives of the U.S. DOE, CARICOM, the Interamerican Development Bank (IDB) and the Caribbean Development Bank (CDB) will provide a “framework for cooperation to promote programs and activities that transform the energy sector in the Caribbean”. This includes technical assistance and programs to promote knowledge exchanges and capacity building.

GTM Research Senior Solar Analyst Mohit Anand notes that this cooperation between the various parties is still in the early stages.

“What stands between this MOU turning into an agreement – that is a political question,” Anand told pv magazine. “Because the DOE stands behind this MOU this is a stronger than usual push behind it. And IDB is the leading development bank in Latin America. So these two players do give it a lot of weight.”

The vision for this transformation of the energy sector has many aspects other than renewable energy, and seems primarily focused on reducing petroleum-based generation.

“I think the key driver for that is that the fundamentals (for renewable energy) in the Caribbean are strong,” notes Anand. “These nations rely disproportionately heavily on oil-based generation, which is at the moment doing well, but historically is susceptible to the volatility, and we have seen sharp spikes in electricity prices.”

Perhaps the most concrete part of the agreement spelled out in a IDB press release is the commitment to financing. The MOU “seeks to promote collaboration for a potential Energy Co-financing Facility for Caribbean Sustainability”, which will be developed by the IDB and will be focused on efforts to attract international investors.

GTM Research’s Anand notes that such a move is strategically important for the region. “The big gap there is the financing gap,” explains Anand. “We have seen the IDB come forward with financing for projects, but it is not enough in the sheer volume of funding.”

“And development organizations do have their own timelines for funding. So the stage for funding to diversity a little bit, as is possible within this agreement, should improve that as well.”

CDB notes that a degree of institutional change and development may be necessary to attract financing in Caribbean nations, and that activities conducted under this MOU may assist in that. “We must also intensify efforts to address capacity constraints that could slow us down,” stated CDB’s President Warren Smith in the IDB press release.

“Grant resources could be available for capacity building and addressing institutional weaknesses. Legislative and regulatory framework weaknesses have to be addressed if we are to attract the type of private investment that is desirable.”

One of the areas of cooperation will be financing for non-diesel baseload generation, which could include natural gas. This is particularly notable as U.S. energy regulators are busy approving a large number of liquefied natural gas export facilities, a move which is backed by U.S. Energy Secretary Moniz.