PRESIDENT of the Caribbean Development Bank (CDB) Gene Leon is encouraging regional governments to bite the bullet and make investments in renewable energy for the long-term benefits of such undertakings.

With Caribbean countries signing on to Conference of Parties agreements aimed at reducing global warming by 1.5 degrees above pre-industrial levels by 2030, many are considering measures to transition from oil to renewable energy. In fact, the region has long been touted, based on its geography, as ideal for energy generation from solar, wind, hydro and geothermal sources.

Responding to a question from the Jamaica Observer during the 2022 Annual News Conference last week, Leon said, “The rationale for going renewables in our region is more than just climate. There’s an economic rationale that says we can do better.”

Over the long term, he stated, countries stand to benefit from saving foreign exchange as well as generating energy at a lower cost per kilowatt hour when compared to the importation of petrol. The CDB president added that the technology which now exists facilitates the conversion of solar, wind, hydro and geothermal energies into electricity at a lower cost for consumption and industrial uses.

“But there is an even more compelling reason and that reason is in terms of energy security. If you have the means to do it from solar, and from hydro and from wind, you are no longer subject to the vulnerability and the volatility of the dependence on fossil fuel, and all of us know how much volatility there is in the price of petrol, the price of oil,” he commented.

Whereas the supply of oil is dependent on global producers of the commodity, the nature of renewable energy guarantees a constant supply and, therefore, energy security. This, Leon argued, gives the CDB borrowing member countries (BMCs) “distinct economic advantage, separately from potentially the lower cost”.

However, when asked about the heavy capital lifting needed to acquire and install sustainable energy infrastructure, Leon pointed out that, as with all infrastructure projects, governments have the task of weighing the cost of investing today with the direct and indirect benefits to be reaped over the long term.

“These things are long gestation, long reward ideas. So you never look at this as it’s gonna cost me $100 million or $500 million today. It is $500 million for what is to come, it is $500 million for what will provide an impetus to, $500 million for what it will catalyse,” the economist argued.

“And I haven’t even touched the cost of not doing it. Because the cost of not doing [means] staying in the same fossil fuel trap you are in now and all the costs that go with that,” he added.

While acknowledging that energy transition is a costly undertaking, Leon also posited that the journey may also require a policy shift. In this regard, he pointed to Barbados as a case study for constructing houses with solar water heaters.

According to the Climate and Development Knowledge Network, Barbados has seen over 50,000 solar water heater installations which have saved consumers as much as US$137 million since the early 1970s. Under the Fiscal Incentives Act of 1974, the Government of that country has exempted materials used in the production of solar water heaters from taxation.

Another measure that Leon proposed is the increased regional collaboration on policies. Using public transport as an example, he reasoned that if Caribbean countries were to utilise only electric vehicles in their public fleet, then together they could pool resources and purchase buses at discounted rates.

Agreeing with Leon, CDB Director of Projects Daniel Best emphasised the need to have policies that “dislodge the continued stubborn problem of overdependence on fossil fuels”. Moreover, he shared that a day earlier he met with stakeholders from 12 BMCs as part of a continuous revision of the Energy Sector Policy and Strategy (ESPS), first crafted in 2015.

The aim of the ESPS is the transformation of the energy sector to significantly increase energy security and sustainability while enabling economic growth. Since its inception, the CDB has approved the disbursement of US$244 million to 14 investment projects and 36 technical assistance projects.

Still, Best admits that the region’s transition to sustainable energy and energy efficiency “remains slow, with the region dependent on imported fossil fuels for over 90 per cent of its commercial energy supplies”, exposing Caribbean countries to the risk of oil price shocks.

“Since 2015, the cost of solar photo-voltaic (PV) equipment and installation has plummeted. Battery storage has plummeted. Grid interconnection studies now happen as a matter of course. These were things that weren’t really around when we started on this journey in 2015 or they were quite embryonic,” he told Caribbean Business Report.

“While we continue to fight with fossil fuel, the fact is that the access to this technology is just far more seamless today,” he lamented further.

Notwithstanding, Best is optimistic that the global move towards net-zero carbon emissions “provides unique prospects for most Caribbean countries to reposition their energy sectors”.

As such, the bank is supporting wind assessment studies in some BMCs and the integrated resource resilience plan proposed by the Caribbean Centre for Renewable Energy & Energy Efficiency. In St Vincent and the Grenadines, St Kitts and Nevis, and Grenada, the bank is supporting exploration of geothermal energy. Additionally, the CDB will be receiving financial support from Green Climate Fund to support grid utility services.

On the micro level, the bank is training practitioners in solar photovoltaic and electrical installation.

“We need absolutely need all of the renewable sources within the region and to do that we really need the expertise to unpack and deliver the kind of energy efficient results that we want to see,” Best underscored.