The Caribbean Region needs to increase renewable energy uptake to reduce high energy costs and reduce greenhouse gas emissions. Energy costs in the Caribbean are four times more than the average price in many developed countries. According to the Caribbean Development Bank (CDB), 19 countries in the region import more than 80% of their energy supply, about seven percent of their overall pre-COVID GDP, making the Caribbean particularly vulnerable to oil market shocks. Also, the energy sector accounts for 42% of the region’s greenhouse gas emissions1. Switching to renewable energy in the Caribbean is essential for improved fiscal management, long-term economic and social stability, and climate change adaptation.
To advance the energy transition, the Caribbean Development Bank (CDB) developed the Accelerated Sustainable Energy and Resilience Transformation Framework (ASERT) 2030. As part of the ASERT program, CDB engaged Castalia to identify barriers to renewable energy investments in the region. We identified the lack of regulation for renewable energy in the region holds back economically viable energy resiliency projects from being implemented. A clear set of regulations creates confidence among investors and utilities to implement renewable energy projects.
To address the barriers to renewable energy investments, with the support of the CDB, Castalia developed a Minimum Regulatory Framework. The framework proposes a minimum set of regulations that, if put in place, would enable private and public investors to implement renewable energy projects. The MRF’s regulations give investors and utilities certainty of access to sites and resources needed to develop projects. Also, the proposed regulations provide certainty to investors for the costs of their investment, including earning a return in capital.
The MRF is recognized by experts as an excellent option to scale renewable energy in the Caribbean. Castalia presented the Minimum Regulatory Framework as a potential solution to financing resilience at the Island Resiliency Action Challenge (IRAC) during the 15th Annual Caribbean Renewable Energy Forum (CREF) on April 26th of 2023. The challenge asks Caribbean stakeholders to identify the region’s most pressing challenges, pitch solutions, agree on the best solution, and act on an immediate action plan to implement it. This year’s challenge question was, “What is preventing the development of resilient energy systems in the Caribbean?”. The audience voted for the MRF as the best solution to enable renewable energy and energy efficiency projects.
The MRF is a set of components needed to enable large-scale deployment of renewable electricity generation (both grid-scale and distributed generation). The MRF helps countries to identify gaps in enabling environments for RE financing and deployment and provides the components in a form that can be easily adapted for and implemented in each country. The MRF components include regulations and frameworks for:
- Integrated resource and resilience plan that tells countries what resources to procure.
- Procurement and financing mechanisms to facilitate the selection, solicitation, and payment of projects.
- Access to the site, resources, and environmental permits to enable the development of projects.
- Distributed generation framework mechanism that allows customers to develop renewable energy plans at their homes and businesses and sell excess electricity into the grid.
- Revenue mechanisms component that allows project investors to recover the cost of investment through the provision of services by applying cost-recovery tariffs. The tariffs also allow utility companies to build their creditworthiness. Creditworthy utilities can finance projects on their own and procure private investors to develop and finance projects with.
Of course, implementing the MRF will be a challenge. Many Caribbean nations have limited financial, human, and technological resources to roll out development projects. Additionally, each country has its own unique political, economic, and social systems. MRF implementors must consider the unique needs and circumstances of each nation. Countries will also require technical assistance to implement each component. Country governments, the CDB, and donors must coordinate quick and sustained action to effectively implement the framework.
To support the efforts to implement the MRF, Andrew Sprott, Practice Leader at Castalia, developed the action plan and will lead an implementation task force comprised of representatives from Caribbean governments and banks, development agencies, and other Caribbean energy sector stakeholders. During the next twelve months, the task force will work closely with four Caribbean countries that have agreed to start implementing the MRF: Montserrat, Dominica, Saint Kitts and Nevis, and Saint Lucia.
The task force will help each implementing country overcome the challenges with support from the Caribbean Development Bank. MRF components can be adapted to the context of each country, facilitating the regional implementation of the framework. The first step will be to help each country identify gaps in enabling environments for renewable energy financing and deployment. The task force will then move on to implement the MRF and reach procurement for renewable energy projects in implementing countries.
Ultimately, the MRF will help Caribbean countries establish regulations that attract investment to implement renewable energy projects. Implementing such projects enable the region to change its energy profile into a resilient sustainable one by cutting back dependency on imported fuel. We are excited to see the MRF implemented in support of the Caribbean region’s energy system transformation.
Chris Straughn (Caribbean Development Bank), Clive Hosten (Grenada Electricity Services), David Ehrhardt (Castalia Advisors), Devon Gardner (Caribbean Centre for Renewable Energy and Energy Efficiency), Eric Salamanca (Turks, and Caicos Islands Government), Faith Corneille (U.S. Department of State), Gillian Charles-Gollop (CIBC First Caribbean International Bank), Haniff Woods (St. Kitts Electricity Company Ltd.), Hon. Otis Morris (Turks and Caicos Islands Government), Jonathon Kelly (St. Kitts Electricity Company Ltd), Marcus Cyrus (Weatherford Trinidad), Marsha Atherley-Ikechi (Fair Trading Commission, Barbados), Shonette Harrison (Regulatory Authority of Bermuda), Veronica Lizzio (Castalia Advisors), Jeane Nikolai (The Government of Bermuda), Tisha Marajh (Republic Bank), John Selby (Graph Energy), Lyndon Francis (Antigua Public Utilities Authorities), Bertill Browne (Skelec), Kimberly Lewis (AEG).