The transition to a mix of energy systems from regional electricity grids that are based solely on fossil fuels requires major strategic financing, according to bankers and energy officials.
Finance was as a key topic of discussion at the Fifth Caribbean Sustainable Energy Forum (CSEF V) held in The Bahamas in 23-25 January, 2017, under the theme ‘Future Energy 2027’, with key figures calling for appropriate means of funding energy transition.
One of the main objectives of the Forum was to propose actions to support the ability of Member States to attract the right type of capital that is capable of delivering sufficient financing for sustainable energy deployment. During one of the panel discussions on the final day of the energy forum, participants explored the structure and level of funding, and the kinds of partnerships required to move energy transition along. There was a clear call for more private sector involvement and for a special component at the next Energy Forum that would focus on engagement with the business community to shape the culture that has to evolve to attract investment.
— UN Climate Action (@UNFCCC) February 7, 2017
Financial viability, technical assistance and capacity-building, transparent procurement systems and absorptive capacity, were among the matters that participants felt were critical to attracting the kind of investment in energy in the Region.
The challenges they identified included the lack of energy interconnection, and the general perception of the Region being a high risk for investment; lack of economies of scale to attract private sector funding; insufficient awareness of the potential of public private partnerships, and insufficient project preparation.
Forum participants, however, acknowledged that financing alone was not the solution to the challenges the Region faced in energy. They argued that there was need to get ready in all kinds of ways and that preparation needed to be done concurrently. It was necessary to broaden the conversation, they said, to include others outside of the energy sector, since the sector was impacted by factors such as poverty, climate change, disaster risk, education, health, human rights and coastal and marine management. CARICOM Heads of Government also had to be clear about how the ambitious energy targets were going to be achieved.
With the recognition that access to secure, cost effective energy is key to its economic transformation, the Community’s Energy Ministers in April 2013, announced a goal to provide the Region with 47 per cent of its power requirements from renewable energy sources by 2027.
Funding opportunities and challenges
Ms. Tessa Williams-Robertson, Head of Renewable Energy and Energy Efficiency, at the Caribbean Development Bank (CDB), spoke at the opening ceremony of the Forum and was the keynote presenter of the panel discussion titled Innovative Financing Mechanisms and Tools: How to unlock “the appropriate quantity and quality” of capital for the region’s sustainable energy needs. She pointed to the need to promote and unlock financing towards the clean energy shift in the Region, and the significant role that the private sector had to play.
According to the CDB, the Caribbean needs at least US$15B in financing to achieve the 2027 target.
“As a Region, we face a number of constraints to accessing financing for sustainable energy development. These include our small market size and the perceived high risk of investing in the Caribbean,” said Ms. Williams-Robertson.
She said that to drive the right quantity and quality of investments, Caribbean governments needed to ensure that their legal frameworks allowed and supported sustainable energy financing; establish the feasibility and financial viability of the proposed projects; and determine if capacity-building or technical assistance was needed for implementation.
“Concessional financing is also critical to driving sustainable energy innovation in the Caribbean,” she added. “CDB is pleased to report that we have had successes in mobilising such resources to power a clean energy future for the Caribbean Region,” she said.
The CDB said that its Borrowing Member Countries now have access to grant and loan resources, and technical support that it has raised from a number of partners and agencies. They include funding from the Government of Canada; the European Investment Bank Climate Action Line of Credit; the European Union Caribbean Investment Facility; the Government of Germany; the Inter-American Development Bank; and the United Kingdom Department for International Development. Ms. Williams-Robertson also spoke of the efficacy of utilising the bilateral route and blending resources through the multilateral financial institutions (MFIs).
In addition to taking the appropriate steps to secure the right kind of financing, Mr. Joseph Williams, Sustainable Energy Adviser, CDB, encouraged attendees at the high-level forum to apply lessons learned as they chart a path to energy security.
“In addition to mobilising financing, we must learn from the lessons that have emerged, particularly during the past five years. We know that Caribbean governments need champions who can promote a clear vision for their energy sectors. As a Region, we must commit to practising good governance; and create more enabling environments if we are to achieve real progress on our renewable energy targets,” Williams said.
CDB, which co-hosted the 2014 CSEF, established energy security as a critical cross-cutting theme. Since 2015, the Bank has made renewable energy and energy efficiency a consideration across all its investments in all sectors and has recorded immediate results.
The subject of energy financing was a common thread running through the remarks delivered at the Forum’s opening ceremony that was held on the evening of Monday 23 January. Representatives of international organisations highlighted the areas in which they had provided support and where they were willing to invest.
Longstanding regional partner in the field of energy and CSEF founding partner is the German Ministry of Economic Cooperation and Development (BMZ), through the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ)-executed Renewable Energy and Energy Efficiency Technical Assistance (REETA) Programme. Mr. Glynn Morris, GIZ/REETA representative based at the CARICOM Secretariat, spoke briefly of the support to the Community. He told the gathering that last last year, GIZ was identified as the delegated implementation partner for the EU-funded Technical Assistance Programme for Sustainable Energy in the Caribbean (TAPSEC). The ten million Euro Programme, funded by both GIZ and the European Union, is to be implemented under the 11th EDF Caribbean Regional Indicative Programme (CRIP) over the four-year period from 2017 to 2020.
The EU TAPSEC complements the existing GIZ REETA Programme and these programmes will jointly seek to enhance the institutional capacity in the region with an emphasis on the establishment and operations of the Caribbean Centre for Renewable Energy and Energy Efficiency (CCREEE).
Innovative financing was also a recommendation from the Canadian Government representative, Mr. Matthew Straub, First Secretary-Development, of the Canandian High Commission in Barbados. In his remarks, Mr. Straub pointed to the need for strong long-term strategies and innovative financing to move on clean energy. Canada, he said, was a firm supporter of the renewable energy agenda in the Caribbean Region, and possessed an abundance of expertise in that area. He said that his government was pleased to support the Region through the Cdn$5M Canadian Support to the Energy Sector in the Caribbean Fund delivered by the CDB. The Fund aims to strengthen government capacity in renewable energy and energy efficiency, and to develop and implement related policies and solutions.
“As a founding member of the Caribbean Development Bank, we are confident in its capacity to bring energy solutions to the region and… we are equally confident in the CARICOM Energy Unit and its ability and efforts to coordinate regional energy planning,” he said.
Ms. Lisa Johnson, Charge d’Affaires, US Embassy in The Bahamas pointed to the Caribbean Energy Security Initiative that the US launched in 2014. The Initiative is aimed at working with leaders in the Region, energy partners, and the private sector to enhance access to financing, improve energy governance and promote greater regional coordination on energy.
“Together, we have made exciting progress. For example, we ha regional and multilateral partners to implement the Caribbeaough this platform, CARICOM is creating a more systematic approach to energy policy implementation and project planning. The United States has allocated more than $2 million to support this platform. “Our joint efforts also have led to multi-million dollar investments in the region, such as gas and wind projects in Jamaica, geothermal projects in St. Kitts & Nevis, and in the not-too-distant future, potential battery storage projects,” she said at the opening ceremony.
She alluded to the energy deals in the Caribbean that the Overseas Private Investment Corporation financed in 2015 to the tune of US$120M. The deals included a 36-megawatt wind farm and a 20-megawatt solar PV installation in Jamaica. Also in 2015, she said, the US government launched a Clean Energy Finance for the Caribbean and Central America, which provided $10M in its first year to catalyse greater private and public sector investment in clean energy projects. Jamaica and Belize benefitted under that programme.
“Through the Caribbean Clean Energy Programme, the United States, in coordination with CARICOM, provides resources to accelerate clean energy development in Jamaica and the Eastern Caribbean. The program has an estimated total public and private investment of $15 million over five years. “The opportunities are endless, and together we can create the conditions necessary for a stronger, more sustainable, and competitive energy sector in the region,” she said.
Other energy partner, the Inter-American Development Bank (IDB), has set aside some US$13B for loans next year of which 30 per cent will go to agriculture, climate change and renewable energy. Twenty per cent of that money will go to the Americas for climate change and renewable energy projects.
“I think we are putting our money where our mouth is when it comes to us as a partner with CARICOM and us as a partner with the other entities that work with us,” Mr. Jerry Butler, IDB Executive Director said.
The bank’s efforts, he underscored, were focused on improving the socio-economic lot of citizens in the Americas. Focus on the Caribbean was continuous, and Mr. Butler added that the economic sustainability, competitiveness and job creation potential of the Region could be unlocked by focusing on generating its indigenous type of renewable energy.
Agriculture, climate change, renewable energy to benefit as IDB carves out $13B for lending #CSEFV #FutureEnergy2027 https://t.co/TFv026kIfN pic.twitter.com/CfY2blVHls — CARICOM (@CARICOMorg) January 24, 2017
“…our focus on the Caribbean is not stopping – whether it be smart financing programmes in Barbados, whether it be programmes associated with renewable energy and energy efficiency in Jamaica, or whether it be programmes in Guyana off-grid or on-grid – we try to do everything that we can to bring resources, technology, intelligence and at the same time best practices to everything that we do when it comes to the topic of renewable energy,” he said.
Representatives of the World Bank and the Organisation of American States (OAS), who are also energy partners with the Region, participated in the panel discussions and provided examples of their support to the transition to clean energy in the Caribbean. The World Bank is a key partner on the C-SERMS platform and is providing support to several Member States in their quest for clean and sustainable energy. It has invested more than US$600M in the Caribbean, Mr. Mark Lambrides, Senior Energy Specialist at the Bank said.
The OAS plays a central role in helping CARICOM Member States to build on and utilise the C-SERMS platform through the support of the US Department of State.
CSEF was established in 2008 as a biennial sustainable energy event in the Caribbean Community (CARICOM). The CARICOM Secretariat event was organised this year in collaboration with the Government of The Bahamas. Support for the staging of the Forum was provided by: the US Government, through the Organisation of American States (OAS); the German Ministry of Economic Cooperation and Development (BMZ), through the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) executed Renewable Energy and Energy Efficiency Technical Assistance (REETA) Programme; the CDB, through the Canadian Support to the Energy Sector in the Caribbean Fund; the IDB; and the World Bank through the SIDS DOCK Support Programme.
The Forum facilitates dialogue and actions towards the adoption of more robust policies and the transfer of appropriate technologies in renewable energy and energy efficiency in CARICOM. It seeks ultimately to enhance stakeholder support and contribution to diversification of the regional energy supply from its current fossil fuels base to a mix that includes significant renewable sources.