Investors looking for green financing opportunities should turn their attention to the Caribbean, where new projects in alternative energy are making significant gains.
Eastern Caribbean islands are moving forward on projects to tap into their volcanic history and harness geothermal power. A partnership between the Inter-American Development Bank (IADB) and Caribbean Development Bank (CDB) could channel up to $500m in investment in geothermal development.
“Geothermal is big,” said Tessa Williams Robertson, head of the CDB’s renewable energy division. “It would be a game-changer for highly indebted countries that rely on expensive imported fuel to generate electricity.”
The IADB estimates that geothermal power potential on the countries of the Organization of Eastern Caribbean States is 160MW, easily satisfying their needs. Countries under review include Dominica, Grenada, Nevis, Saint Lucia and St Vincent and the Grenadines. A long term goal would be to attract investment to create an interconnected grid system to export power.
The first project ready to emerge is on St Vincent, where the initial loan is scheduled for disbursement in May. The project, which will require up to $80m, would generate around 15MW, which would cover close to 70% of the island state’s needs. It should be operating in 2018.
The long term savings are significant with St Vincent, like other Caribbean islands, spending heavily on imported fuel. St Vincent spends around $26m annually on imported diesel for power generation. This represents around 4% of GDP. The bill is lower today thanks to slumping oil prices. The cost of a kilowatt hour in the first quarter averaged $0.25, down from $0.44 when oil prices were high.
“St Vincent is quite a remarkable example. It is a public private partnership that will serve as a model,” said Leslie Labruto, who leads the resilient communities work in the Caribbean for the Clinton Climate Initiative (CCI).
The CCI has worked with the government on the legal and regulatory frameworks to make the public private partnership possible. The geothermal project links the country’s power company, VINLEC, with Canada’s Emera Caribbean, Iceland’s Reykjavik Geothermal and state-owned VINLEC.
The CCI does not provide financing, but technical assistance, “helping to de-risk projects by getting different financiers comfortable from the start,” said Labruto.
Christian Gischler, lead energy specialist in the IADB’s energy division, said the St Vincent project worked “because of the way the procurement has been done, the way environmental issues have been addressed, the consultation with the community, the partners they chose and the financing”.
The project is also innovative on the IDB side. The financing will use the terms for the public sector, but apply them to the private sector. “This has not happened before. It is the first time the IDB is transferring rates and terms for the public sector to the private sector,” he said.
Williams Robertson said the project had “transformative potential, not only from a financing and technical standpoint, but also for our governments, which are having to work in a real way on public private partnerships, changing the way they normally do business”.