The trouble with the status quo: energy security and development in the Caribbean

Fossil fuels come with a volatile price tag. For regions dependent on fossil fuel imports, energy can begin to hinder development rather than support it. In this article, Leo Marioni examines the problems posed to the Caribbean region by an over reliance on fossil fuels, and looks at how renewable energy generation might be the key to reigniting the region’s development.

When one imagines the Caribbean, a paradisiacal scene of calm azure waters, cloudless skies and golden sands may spring to mind. Such perceived serenity belies an insidious current of great change engulfing the region; a current which will either jeopardise the region’s development, or catalyse it, depending on how each Caribbean state now acts.

The Caribbean islands are slowly sinking under the weight of inertia. The region has become one of the most indebted in the world, relying on an under-diversified economy centred primarily around tourism, which is prone to downturns.

Travelbusy.com/Creative commons license

Travelbusy.com/Creative commons license

More problematic, however, is the lack of energy diversity. A majority of Caribbean states depend on a trade alliance with Venezuela, known as Petrocaribe, through which they can purchase most of their oil at a fraction of market value, with the remainder being paid over the following 17-25 years at less than 1% interest. This seemingly positive alliance has de-incentivised energy sector development, and led to increased debts in the region, despite Petrocaribe’s low interest rates (debts through Petrocaribe account for 20% Nicaraguan and Jamaican GDP, for instance). The results of this partnership sees consumers locked into a system with regional energy prices ranking amongst the highest in the world, a significant hindrance to development and prosperity.

With Venezuela’s economy hard hit by the fall in oil prices, Petrocaribe is slowly crumbling. Cuba, which relied on selling the oil it received from Venezuela, is being particularly hard hit, leading to unlit streets, lack of petrol, and a general malaise on growing Cuban businesses and economic activity. At present, oil prices are low enough that the remaining Caribbean states are able to purchase the fuel outside of Petrocaribe. Governments, however, are worryingly looking towards what will happen when oil prices once again recover, with a chance that there will be no Venezuelan imports to once again return to.
High energy costs and an economy highly reliant on tourism make for a set-up which both limits the island’s developmental potential and makes the region extremely sensitive to changes elsewhere in the world.

Fortunately, the future is bright, but each Caribbean state must act. There exists a vast wealth of untapped renewable energy resources at each islands’ doorstep which, if seized effectively, could slash energy costs, catalyse growth, and see the Caribbean sit amongst the ranks of the global leaders in renewable generation. Solar radiation potential alone is 200-300% greater than it is for the current European leaders in solar energy production, and will be a valuable resource despite the islands’ small land surfaces. So too will wave and offshore wind technologies be a valuable energy source for the island states. Some states can also harvest significant latent geothermal resources; using geothermal energy alone, Nevis is estimated to be capable of producing 15 times more energy than it consumes, which would drastically cut energy costs. Energy security is widely regarded as the key to reigniting the region’s development.

The great challenge that remains is finding the cash with which to make this transition. Investment is severely needed, but the islands’ small market size does not offer an attractive financial return to prospective investors. The island states, aware of the need for investment, are now looking towards regulatory changes to encourage private investment, in addition to early talks for a regional grid which would greatly expand the energy market.
In the meantime, Caribbean states might look towards ethanol production, which they can produce 31% more effectively than the USA. Given the growing demand for biofuels for transport, ethanol exports might provide a healthy income. So too might liquefied natural gas exploitation provide both energy security and revenue from surplus exports with which to finance the drive towards renewable energies.

Rodrigo Suarez/Creative commons license

Rodrigo Suarez/Creative commons license

On the other side of the coin lies the potential for grass-roots energy projects. Grass-roots solar panels are springing up across the islands, enabling business to take control of their energy costs. New feed-in tariffs, where individual producers can sell their surplus energy into the island’s grid, means local production can benefit the rest of the island. If this trajectory continues, energy security will be bolstered, pricey oil imports will no longer be a necessity, and small businesses may flourish, boosting the economy as a whole.

The immediate future seems rocky, and each Caribbean state now stands at a crossroads. Taking their energy security into their own hands, working towards encouraging investment, and increasing the drive towards renewables will allow the islands to inject a new lease of life to their developmental trajectory. Doing nothing will see the islands’ hindered by the ball and chain of fossil fuel imports, surrounded by the turbulent seas of the world economy.


The views expressed in this article are those of the author and do not necessarily represent the views of Development in Action.

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