What role for renewable energy policy in the Caribbean power sector?

Responding to Peak Oil and Climate Change

Keron Niles Responding to Climate Change in the Caribbean 13-14 June, 2011. London, UK.

Outline
Caribbean Energy Consumption & Power Production

Peak Oil & Climate Change Impacts

Renewable Energy Policy in CARICOM Key Considerations

Summary

CARICOM Energy Consumption

Fossil fuel dependence (transport & electricity)
CARICOM Countries consume approximately 240,000 boepd and approximately 95% from fossil fuels (Draft CARICOM Energy Policy)

5%

2%

93%

Primary energy consumption in SIDS can be described as petroleum intensive Relatively high per capita consumption of petroleum products Limited use of Renewable Energy Sources (primarily hydroelectric power)

Oil

Natural Gas

Other

Primary Energy Consumption in the Caribbean (KEMA, 2010)

Electricity Generation in Selected SIDS (2005)

Gigawatt hours (G Wh) on Log Scale
10000

1000

Geothermal, Solar, Wind, Wood and Waste Nuclear

100

10

Hydro

St.Vincent and the

Kiribati

Cook Islands

Nauru

Tonga

Solomon Islands

Antigua and Barbuda

Vanuatu

St. Kitts and Nevis

Dominica

Grenada

St. Lucia

Samoa

Haiti

Barbados

Papua New Guinea

Trinidad and Tobago

Source: Energy Information Administration, 2006

Electricity Generation in SIDS can also be described as petroleum intensive

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Bahamas

Jamaica

Fiji

Conventional Thermal

Niue

WHY THIS IS IMPORTANT

Assessing Peak Oil & Climate Change Impacts in the Caribbean

Peak Oil
Refers to a transition from a period of easily attainable and affordable oil, to a period characterised by a declining annual supply of petroleum.

Not brought about by the absence of fossil fuels (that brings about a shortage of supply), but rather, it is the depletion of easily attainable petroleum, especially oil.
Historical supply of oil (from BP Statistics) suggests that supply of liquid fuels may have reached a plateau (at around 87 million barrels of oil/day)
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Peak Oil
Energy returned on energy invested (EROEI) for oil is declining Increasing Consumption in emerging economies & oil producing developing countries, accompanied by population growth (in spite of decreased OECD Consumption)
Data shows that increased income levels are usually accompanied by heightened levels of demand for electricity

Peak Oil Impacts

Declining oil supply could lead to price increases, which, by extension, can lead to global economic recession/collapse
Which often has notable impact on economies of SIDS (especially those primarily supported by tourism)

Likely to increase cost of electricity production Electricity tariffs in the Caribbean for commercial and industrial use are among the highest in the world
though residential rates in some cases depressed by government intervention (such as cross subsidies)
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Peak Oil Impacts

Diseconomies of scale may also lead to higher than world average fuel price increases for SIDS
Exacerbated by
fact that SIDS are price takers remote & relative geographic isolation can result in increased transportation costs especially in multi-island states

Many SIDS also do not own petroleum storage facilities

this can also have an inflationary effect on prices Affects their ability to keep large reserves (in order to reduce frequency of shipping)

Climate Change Impacts: Fourth Assessment Report of the IPCC

Small Islands have characteristics which make them especially vulnerable to the effects of climate change. Sea level rise: flooding, beach erosion Changed weather patterns: more intense/extreme weather (e.g. drought, floods), more intense hurricanes Coral Reef Damage, Biodiversity Loss SIDS are not large [absolute] contributors to the problem of climate change but are the group of countries estimated to be impacted the most (Nurse et al)
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Climate Change Impacts on

Energy Sector in SIDS
Implications of Climate Change Impacts include:
Infrastructural damage (due to increased intensity of hurricanes, and sea level rise)
Damage to power infrastructure e.g. electricity transmission overhead lines

Frequent hurricanes/cyclonic activity could increase cost of insurance for transport

Could also result in greater delays, in terms of fuel delivery which tend to be critical importance in responding to emergencies and natural disasters
to operate emergency earth moving and food distribution vehicles and equipment To generate electricity for emergency communications and to power hospitals
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Regional Strategies
Petroleum Supply & Optimization Study and Database Strategic reserves of crude oil Petroleum Supply & Pricing Arrangements
PETROCARIBE Eastern Caribbean Gas Pipeline

CARICOM ENERGY POLICY

JANUARY 2007

[DRAFT]

Member states will develop comprehensive national energy policies that seek to increase the use of commercially viable RE sources to 10% of primary energy by 2010

Increased uptake of Renewable Energy Integration of energy systems (particularly for cross border 13 electricity transmission)

National RE Policies - Quotas

Country Target Sector / Subsector
Electricity Electricity

Deadline
2015 2020

St.Vincent & 30 % the 60% Grenadines

St. Lucia

At least 5%
At least 15% At least 30%

Electricity
Electricity Electricity Overall Energy Sector Overall Energy Sector Overall Energy Sector Electricity - Installed Capacity

2013
2015 2020 2012 2015 2030 2015

Jamaica

11% 12.5% 20%

Guyana

32% Hydro Power 11% Bagasse 57 % Diesel 80% Hydro Power 10% Bagasse 10% Petroleum

Electricity Generation Mix

2015

St. Kitts & Nevis

100%

Electricity (Phase 1 - of Geothermal Project)

2011

National RE Policies (Non-quota)

Country St.Vincent & the Grenadines (GTZ Study, 2007) Jamaica (National Energy Policy ) St. Lucia (National Energy Policy) Policy Measure Components for RE systems exempted from customs duties on case by case basis Compact Fluorescent Lamps are fully exempt from excise tax and VAT Import Duty reduced from 30% to 5% on all RE devices Zero rating for GCT purposed on RE equipment Net metering: Regulatory Commission to determine specific rate to be paid by LUCELEC Reg. Commission also approves operation of IPPs (In cases of quotas not being met by LUCELEC Trinidad & Tobago (National Budget: October 2010 September 2011) Solar Water Heaters No VAT Tax Credit: 25% value of equipment (for Residential Use) 150% wear & tear allowance (acquired by Commercial enterprises) Wind Energy: No VAT or import duty on turbines & supporting equipment 150% wear & tear allowance (on turbines) Energy Efficiency: 150% tax allowance on cost of energy audit 75% accelerated depreciation on energy efficiency systems

RE Policy: Key Considerations

Renewable Energy (RE) Policy now on the Agenda, however:
Legal & Regulatory framework governing operation of IPPs still uncertain in many nations (reform ongoing) Fossil-fuelled electricity generation still subsidised in a number of SIDS Aims/objectives of energy and climate change policies: in some cases inconsistent or incompatible
energy planning and investments in energy technologies should consider adaptation to climate change.
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RE Policy: Key Considerations

RE proliferation motivated largely by fuel savings, rather than by government policy
Motivated by concerns related to competitiveness, not necessarily those related to the environment Peak Oil Impacts acts as natural incentive to invest in alternative energy technologies & in energy efficiency

Investments in Energy Efficiency & RE technologies as well as introduction of Independent Power Producers (IPPs) often due to budgetary pressures

Limited demand and diseconomies of scale makes investment in the power sector unattractive (even via Clean Development Mechanism).

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RE Policy: Key Considerations

Increased donor interest in Renewable Energy & Energy Efficiency in the Caribbean (and Pacific) is notable
Particularly for rural electrification
To build resilience to oil price volatility or technology promotion?

Power Sector Reform in and of itself an opportunity to boost transition to RE

Use of competitive & transparent Power Purchase Agreements with IPPs; a key mechanism to transition sector to RE Legislative reform necessary to diversify energy mix
Even more so for electricity market harmonisation to be realised in order to export or swap power.
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Summary
Caribbean nations are extremely dependent upon fossil fuels

Aligning aims of energy & climate change policies is critical.

Peak Oil & Climate Change Impacts likely to adversely affect energy security: along with electricity & other key sectors (such as Tourism) in SIDS

RE Policy on the agenda, but driven by concerns related to competitiveness (fuel shortages & price volatility)
Power Sector Reform is an opportunity to:
enhance the uptake of Renewable Energy to create an enabling environment to facilitate the operation of 19 IPPs