A Bold New Caribbean

Saint Lucia Solar Farms

The solar farm was designed to generate 7 million kilo- watt-hours (kwh) of electricity per year (at a capacity factor of 26.6%), which represented about 1.3% of the electricity generated from LUCELEC’s Cul De Sac Power Plant (the only other power plant on the island), at the time 4 . Therefore, it was projected to reduce the annual fuel volume purchased by LUCELEC by more than 300 thousand imperial gallons and CO2 emission by 3,800 metric tons. To date, it has produced 24.7 million kWh of electricity, leading to a fuel savings of 1.27 million imperial gallons and cost savings of EC$9.1 million (ap- prox. USD 3 million). The company is working on Phase 2 of the project, which will see the installation of a 7.5 MW/3 MWh utility-scale battery storage to support the existing photovoltaic (PV) plant as well as to install an- other 10 MW solar PV plant with battery storage on the east coast of the island. Despite the progress made in the sector, renewable energy projects are still defined by high investments and maintenance costs, complex construction, and unpredictable economic returns. These factors present significant hurdles in attracting foreign direct investment and renewable energy adop- tion. It is, therefore, necessary to explore mechanisms that can help overcome this challenge, particularly in the financing phase. Strategies must be developed and implemented to forge long-term, lasting investment in various regional projects. There must be a concerted effort by governments and relevant and responsible national and regional stake- holders to drive investment toward businesses and proj- ects that accelerate the adoption of renewable ener- gy facilities. The World Bank posits that foreign direct investment (FDI) is central to closing the financing gap and an essential tool in addressing the growing energy needs of developing countries. Besides financing, FDI brings abundant knowledgeand industrybest practices, allowing for more excellent knowledge and technology transfer. To begin, the economic and investor climate must be suitable for renewable energy to significantly play a role in developing the economies of the Caribbe- an. There must be a greater focus on the frameworks that govern the adoption of renewable energy, improving their national policies and regulations, promoting industry best practices, and incentivizing its adoption by private sector stakeholders.

Creating incentive structures, tax exemptions, and feed- in tariffs works to develop investor-friendly climates. Fortunately, the Caribbean has a high degree of trade openness and, as such, already possesses many of these incentives, ultimately facilitating the ease of doing busi- ness within the region. Private sector firms are the drivers of transformational change in the region. Changing policy and practice to improve private sector access to finance and resourc- es, build capacity, and facilitate collaboration among developmental support agencies and entrepreneurs can help SMEs drive transformation to more environ- mentally sustainable and socially equitable economic development in the Caribbean. Securing their support or buy-in is paramount to successfully adopting re- newable energy facilities, as SMEs are heralded as the drivers of economic development and transformation change in the region, contributing more than 60% of gross domestic product (GDP) to national economies 5 . Public Private Sector Partnerships (PPP) have been rec- ognized as important tools for unlocking the region’s re- newable energy potential. For example, through techni- cal assistance and targeted investments, the World Bank has launched a regional initiative to “scale up private investments” within the sector 6 . Both international and regional collaboration will allow for the harmonization and standardization of documentation and processes. In contrast, bundling of investments can help attract additional private capital to support the clean energy transition. Additionally, entering into long-term con- tracts with private investors mitigates the risk involved in investment; legal mechanisms such as joint ventures and localization have played a key role in driving investment into renewables, especially in the case of solar andwind 7 . The investment potential and apparent opportunities of the Caribbean renewable energy sector are unique; they present a high return on investment and, if leveraged correctly, can catalyse greater economic development in the region. Growing interest, public and private sec- tor partnerships, and aggressive targets set by politi- cal agendas serve to accelerate its adoption. Looking ahead, what is needed is a resolute decision to both in- vest in and actively seek investment for transformation. Working together, the renewable energy sector can lead towards a sustainable, transformational, and more resil- ient Caribbean.

CARIBBEAN INVESMENT FORUM

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