Bethesda, Maryland -- Caribbean nations face an uncertain energy future. With an energy infrastructure designed in the era of low-priced and abundant oil, many of these nations depend almost entirely on petroleum to supply their electricity demands. With oil prices hovering between $90 and $110 a barrel and projected to rise, island nations reliant on heavy fuel oil for their electrical generation are being hard hit.
“The U.S. Virgin Islands (USVI) are almost 100 percent dependent on imported fuel,” says Adam Warren of the National Renewable Energy Laboratories (NREL). According to Bill Scanlon of NREL, in the USVI, electricity prices average US$0.35/kWh and are four to five times higher than prices paid in the continental U.S. Furthermore, there is a significant amount of price volatility; prices reached a peak of $0.50/kWh during 2008, according to Scanlon. Such electricity prices are crippling to USVI residents, who have an average annual household income of $22,000. The USVI are not alone. The islands of St. Kitts and Nevis are also fully dependent on petroleum imports for their electric supply and also suffer from high, volatile electricity rates. Even the larger islands struggle with high electricity prices. Puerto Rico uses petroleum to generate nearly 70 percent of its power, leading to electricity prices which are twice those of the U.S. mainland.
To look at it from another angle, Caribbean nations have, according to the World Bank, a per capita GNI of only $8,134, yet the average electricity price is a staggering $0.34/kWh with current data showing even higher prices. This is clearly not a sustainable model, particularly with the predicted demand growth in the next 20 years.
The lack of diversified power generation leaves Caribbean islands vulnerable to commodity market volatility, while the lack of new development leaves islands reliant on outdated, sometimes unreliable power plants. The key to reducing and stabilizing electricity prices on Caribbean islands is therefore to install a diversified and modern electrical generation portfolio. Some would argue that renewable energy systems should not be a part of the energy portfolio until they are cost competitive with fossil fuel generation. The notion that grid parity can or should be used as a benchmark is a fundamentally flawed standard, however. An electrical generation portfolio, similar to a stock portfolio, must be balanced to perform efficiently and without excessive volatility. A balanced energy portfolio can be achieved by carefully choosing both traditional and renewable generation to supply each island’s unique generation profile. While there will always be a place for traditional generation in a country’s power portfolio, the Caribbean islands provide a unique opportunity for renewables. Renewable energy can help to diversify electrical generation while stabilizing electrical prices and supply for islands; however, issues with scale, grid stability, and access to capital have to be overcome.
Many islands are planning or already have small scale renewable energy installations, including Puerto Rico, Barbados, Jamaica and Grenada. The USVI, which issued a request for proposals for solar photovoltaic (PV) projects at the beginning of 2011, recently announced the awardees that will install the first grid-connected utility scale solar power plants: SunEdison, Lanco, and Toshiba. However, there has yet to be effective large scale diversification of power sources or implementation of renewable energy projects in the Caribbean.
This is partially because many Caribbean islands lack an appropriate, consistent regulatory framework. Efforts are underway to help resolve this issue. The Caribbean Community (CARICOM) Secretariat’s Caribbean Renewable Energy Development Programme (CREDP) was founded in 1998 by 16 Caribbean nations to remove barriers to the use of renewable energy and thereby foster its development and commercialization throughout the Caribbean. CREDP has assisted with renewable energy policy reform in Jamaica, Barbados, Grenada, St. Kitts, Dominica, St. Lucia, and St. Vincent and the Grenadines.
The larger issue hindering large-scale renewable energy deployments, however, is scale. While Caribbean nations have quite significant renewable energy potential, most have small demand. The deployment of renewable projects at adequate scale will help to both attract international interest and to effectively diversify the energy portfolio. To build up enough scale, therefore, Caribbean islands must cooperate to form larger economic impact zones. Such cooperation has begun with organizations like the Caribbean Electric Utility Services Corporation (CARELIC), among others. Formed in 1989, CARELIC is a regional association of electric utilities comprised of thirty-three utility members from thirty countries in the Caribbean region. Even larger unions must be formed. By establishing cooperative measures, Caribbean utilities can take advantage of cheaper goods, gain access to cheaper capital, and pique the interest of independent power producers (IPPs) and developers worldwide. By creating economies of scale, Caribbean utilities can drive prices down, allowing for efficient investment in each island’s power sector.
If renewable energy projects are to be built at larger scales and contribute a greater portion of the Caribbean islands’ energy portfolio, grid operators on Caribbean islands must institute measures to support the integration of variable generation sources onto their grids. The majority of island networks are old, with the average diesel generators more than 20 years old. Furthermore, the power supply is relatively inefficient with high system losses. There is a need to identify technical criteria and designs that will allow grid stability to be maintained. Two power issues of particular concern are power output and frequency smoothing.
As a case study, consider Miyako Island of Okinawa, Japan. This island has a generation profile similar to many Caribbean islands, with a peak demand of 50 MW and 74 MW of gas and diesel power plants supplying the majority of its electricity. The island is promoting a microgrid project, integrating a 4.2 MW wind project and a 4 MW solar PV installation with 4.1 MW of batteries. Miyako Island illustrates the ability of batteries to provide power output and frequency smoothing. The batteries are able to ensure grid stability, helping to limit frequency fluctuations and accommodate varying outputs from the solar and wind projects. Future study on the island will attempt to determine the optimal ratio of variable generation to batteries to maintain grid integrity. More