The Caribbean faces significant energy challenges, as it is heavily reliant on fossil fuels and burdened by high energy costs. These costs have contributed to macroeconomic imbalances, undermining competitiveness and hindering growth due to an over-reliance on expensive imported petroleum products. New research from LUT University outlines a strategic pathway for the Caribbean to achieve carbon neutrality by 2050, emphasizing the need for high electrification and renewable energy sources. The research highlights the role of floating solar PV, e-fuel imports, grid interconnection, and the early decarbonization of the energy transition. The research offers unique perspectives on how the region can transition towards very high shares of renewable energy and strategically integrate advanced technologies to build a sustainable, low-carbon future. The research is split into two publications, entitled “A multi-sector, multi-node, and multi-scenario energy system analysis for the Caribbean with focus on the role of offshore floating photovoltaics,” published in Renewable and Sustainable Energy Reviews and entitled “Defossilising Caribbean’s energy system: Highlighting on e-fuel imports, grid integration, and accelerated transition,” published in IET Renewable Power Generation.
The analysis reveals a clear shift towards high electrification, reducing reliance on fossil fuels. Solar PV is projected to dominate, accounting for 67-94% of total electricity generation, with wind contributing 6-30%. Solar PV generation is composed of 12-13% prosumer PV, 28–81% onshore ground-mounted PV, and 1–45% offshore floating PV. This transition is central to the region’s transformation into a Solar-to-X Economy, where solar energy powers electricity grids and drives clean fuel production and industrial processes. The solar-to-X economy is a special case of the overall power-to-X economy that describes energy systems that are dominantly based on electricity for all kinds of energy demand across all energy sectors. The solar-to-X economy model provides a blueprint for other tropical island nations facing similar challenges and also heading towards very high shares of renewable energy.
Solar energy emerges as a dominant force, driven by the Caribbean’s excellent solar resources and improving economic feasibility, consistent with earlier findings for the energy transition of Puerto Rico. In the solar-to-X economy, solar PV will generate electricity and contribute to electricity-based e-fuel and e-chemical production, fostering energy security and economic growth. Supported by wind power, hydropower, and geothermal sources, this renewables-driven shift will address climate change and create new industries and job opportunities.
Image: LUT University
Electrification is pivotal in decarbonizing road transport, with the transition from combustion engines to electric vehicles proving highly efficient solutions. However, challenges persist in marine and air transport, requiring solutions such as e-hydrogen, e-kerosene, or biofuels. The Caribbean can achieve sustainable industrialization and a diversified economy by leveraging its low-cost renewable energy resources for complete decarbonization through direct and indirect electrification. The power-to-X approach enables deep decarbonization of hard-to-abate sectors. These studies highlight the importance of integrating storage technologies to address renewable energy variability and ensure a stable and reliable energy supply across all sectors, including those related to the power-to-X framework. Similar results have been found for the comparable case of storage as the key element in the Power-to-X Economy in Hawaii.
Storage technologies such as batteries, hydrogen, and methane storage are essential for balancing the variability in renewable electricity generation. Batteries offer daily flexibility, hydrogen storage provides buffer capacity for longer-term needs, and methane storage addresses seasonal demand variations. Vehicle-to-grid technologies help manage demand variations, enhancing the overall flexibility and resilience of the Caribbean’s energy system. These technologies are vital for maintaining the reliability of the solar-to-X economy.
e-Fuel imports are a critical component of the Caribbean’s energy transition. The limited available land area underscores their importance for developing the infrastructure necessary to achieve full decarbonization across all energy sectors, particularly in smaller islands. However, e-hydrogen imports are considered infeasible due to technical challenges and the high costs associated with shipping liquefied e-hydrogen. e-Fuel imports can reduce land use and system costs by 7–16%, while lowering fuel supply and electricity trade by up to 70% by 2050. Importing e-fuels reduces local resource utilization, shifting competitiveness, and investment requirements to exporting hubs. However, the additional flexibility provided by power-to-X processes will be lost. Despite this, e-fuel imports offer a strategic opportunity for archipelagos to reduce fossil fuel dependency and sustain economic growth. These studies highlight that the Caribbean’s transition to carbon neutrality is achievable without e-fuel imports, through enhanced use of indigenous renewable energy resources, reinforcing the region’s capacity to meet decarbonization goals, aligning with findings from an earlier study on Puerto Rico.
The research advances local and international perspectives on early decarbonization for archipelago countries. By adopting renewable energy technologies, such as solar PV, wind power, and batteries, early action can significantly reduce emissions and transition costs to a low-carbon economy. Although accelerated transitions incur 3–12% higher costs than complete defossilization by 2050, the long-term environmental and economic benefits far outweigh these short-term expenses, urging immediate action to avoid higher future costs.
Grid interconnection plays a crucial role in enabling the Caribbean's energy transition, offering substantial cost savings. The study demonstrates that interconnected grids can lower system costs by 11%, reduce the levelized cost of electricity by 14%, and lower CO2 emissions by 4%. Interconnections improve system reliability and flexibility, allowing islands to share energy resources, reduce reliance on fossil fuels, and optimize renewable electricity generation. Grid integration further enhances system efficiency, making renewable energy pathways 7-24% cheaper compared to fossil fuel alternatives. With grid interconnections, the Caribbean can maximize the use of its renewable energy resources, ensuring lower costs and greater energy security.
The research concludes that adopting renewable energy significantly lowers energy system costs. The PV-battery hybrid solution emerges as the most economical option for the Caribbean, and the possibility of this hybrid configuration dominating the future energy system is also echoed in earlier literature. In optimal policy scenarios, the levelized cost of electricity and levelized cost of final energy are projected to be 12-37% and 4-30% lower than alternatives by 2050, respectively. This demonstrates that renewable energy-based pathways are more cost-competitive than traditional fossil fuel options. Integrating solar PV-driven solutions in a solar-to-X economy provides both environmental benefits and substantial economic opportunities.
Looking ahead, the Caribbean's energy future will prominently feature solar PV, wind power, batteries, electrolyzers, and other power-to-X technologies, driving the region’s defossilization. This research underscores the critical role of low-cost renewable electricity, energy storage, and electrification in establishing a sustainable energy framework, with a clear trajectory toward carbon neutrality by 2050. e-Fuel imports, early defossilization, and grid interconnections are identified as key components of this transition, enabling the Caribbean to develop a more resilient, cost-effective, and sustainable energy system. These strategies offer a model for other island nations navigating similar energy transition challenges. The evolving power-to-X economy, through direct and indirect electrification approaches, plays a central role in ensuring long-term energy security and fostering economic growth.
Authors: Solomon Oyewo, Dominik Keiner, and Christian Breyer.
This article is part of a monthly column by LUT University.
“Research at LUT University encompasses various analyses related to power, heat, transport, desalination, and negative CO2 emission options. Power-to-X research is a core topic at the university, integrated into the focus areas of Energy, Air, Water, and Business and Society. Solar energy plays a key role in all research aspects.”
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