Guyana is one of the smallest and logistics infrastructure; insufficient into generators of more recent vintage. countries in South America. It access to affordable credit; bureaucratic The macro-economic impact of Gshares borders with Suriname red-tape; low productivity; and high the high cost of imported fuel and the and Venezuela, which are members energy costs. consequential high electricity price are of the Caribbean Development Bank So, the inability to compete stands reflected in deteriorating performance (CDB), and with Brazil, which is out as a major challenge for Guyana indicators in most BMCs. High levels expected to join shortly. and the region at large. of debt to GDP and depletion of Recently, this continent has been HIGH ENERGY PRICES AND foreign reserves are directly related attracting considerable global investor to this dependence on imported attention. Guyana, a founding member RELIANCE oil. High electricity prices erode of the CDB, is not being left behind in the Economists, both here and abroad, the competitiveness of the regional continent’s economic awakening. On have said time and again that we economies and, therefore, their ability that premise, it is ideal that we examine cannot transform the Caribbean’s to earn the required foreign exchange constraints to the competitiveness in competitiveness landscape without a to pay for imports, including oil. Unless Guyana and other Borrowing Member frontal attack on energy costs and the we can reduce our dependency on Countries (BMCs) of the CDB. generally poor state of our electricity imported fossil fuels, and unless we infrastructure. can substantially reduce energy costs, LACK OF COMPETITIVENESS Most will agree that electricity costs we will not succeed in improving our High rates of economic growth have in Guyana, and in the Caribbean region competitiveness and reducing our eluded the majority of CDB’s BMCs as a whole, are very high. In general, vulnerability to external shocks. for a long time. In fact, the region’s households pay between US$0.30 cents THE CARIBBEAN IS NOT ENERGY
economic expansion of 2 percent (%) and US$0.40 cents per kilowatt hour per annum over the past decade has (kWh). POOR been consistently below the global rate In addition to this, an enterprise According to the CDB, BMCs are of 3.8%; lower than the 4% average for survey conducted by the World Bank definitely not energy poor. The Bank other Small Islands Developing States in 2017 found that at least 30 (%) of notes that Guyana alone has enough (SIDS); and way below the average Caribbean firms identified electricity renewable energy potential, mainly
of 6% for emerging and developing costs as a major constraint to doing in the form of hydro-power to meet countries. business. all of its electricity requirements for The anemic growth performance is So, we are forced to ask why the foreseeable future; supply all of
further manifested in widening fiscal electricity prices in the Caribbean are the needs of immediate neighbours, imbalances; high debt ratios; and so high. Grenada and Trinidad and Tobago; declining levels of foreign exchange First, the CDB notes that the and still have enough left over to sell
reserves. combination of high diesel and to neighbouring Brazil. The situation is According to two reputable surveys heavy fuel oil costs and the inherent similar for Suriname. – The World Bank’s “Doing Business” inefficiency of diesel technology, Additionally, Dominica, Grenada,
Survey and the World Economic which accounts for the majority of the Montserrat, St. Kitts and Nevis, St. Lucia Forum’s Global Competitiveness Index generation in BMCs, are the principal and St. Vincent and the Grenadines – the Caribbean’s ranking does not contributors to these high electricity have great potential to generate their compare well with other countries in the prices. Further, these fuel prices are entire base-load electricity requirements area of competitiveness. For example, subject to the volatility of international from geo-thermal sources. out of 189 countries surveyed for the oil markets, which are highly responsive Although their domestic markets Doing Business index, the average to shifts in geo-politics. are quite small, technological advances ranking for the Caribbean is 100. The Second, small market size and the in the development of undersea rankings confirm that BMCs will have absence of economies of scale in the transmission cables would allow these difficulty maintaining existing markets generation of electricity compound the countries to exploit their relatively and penetrating new ones unless there problem. large geo-thermal reserves for export to is radical transformation in the way we Third, most generation facilities in neighbouring countries do business. the Caribbean are approaching the end Evolving renewable energy. Importantly, the two surveys of their useful life, many being more than technology and recent price reductions highlight several areas which need to 20 years old. These facilities, therefore, can potentially bring about a be addressed. These include inadequate do not benefit from the efficiencies transformation in the energy landscape transportation, telecommunication inherent in the new technologies built to the extent that all BMCs can now harness their available resources.
For example, Jamaica can meet up to 30% of its electricity needs from renewable sources, such as wind, solar, mini-hydro and waste-to-energy. According to a study by the Worldwatch Institute in the USA, Jamaica’s annual average solar insolation ranges from 5 to 8 kilowatt hours per square meter per day. In comparison, Germany, the global leader in solar photovoltaic (PV), has only a few locations with a capacity in excess of 3 kilowatt hours per square meter per day.
Jamaica’s situation is not unique. All BMCs boast similarly strong solar potential.
All of these renewable options have the potential to lower electricity costs and increase foreign exchange reserves from reduced energy imports.
With such considerable potential to enhance regional energy security, save foreign exchange, improve the competitiveness of Caribbean economies; and with falling prices of renewables, including solar energy technologies, what prevents us from taking advantage of the opportunity to create a Shakespearian-type “sea-change” in the Caribbean’s energy landscape?
It is the view of the Bank that the legislative and regulatory environment is a major hindrance to the pursuit of a new energy paradigm for our Region. It notes, however, that there are two priority areas for urgent government action.
One, the Bank says that we need to change the legislative framework, at the national level, in order to facilitate access for renewables by altering the monopoly on generation where this exists in BMCs. Revisions in the framework should ensure equitable pricing for supply from independent power providers or small distributed renewable generators of electricity.
It is noteworthy that CARICOM’s Energy Ministers have already adopted “net-billing” as a feasible mechanism for “ensuring equitable pricing”.
As a matter of urgency then, the Bank has insisted that all BMCs should follow the lead set by Barbados and Jamaica, which have already enacted the supporting legislation.
Two, the Bank said that an appropriate regulatory framework needs to be established for each BMC to ensure that equitable tariffs and rules for optimal performance are in place and to make certain that the interests of consumers, investors and governments are balanced. Given the constraints of market size and the availability and cost
of specialised skills necessary for the effective administration of the regulatory function, it makes sense for a collective approach to be adopted.
It is for this reason that CDB recently welcomed the Eastern Caribbean Energy Regulatory Authority initiative; applauded those OECS countries that have already committed; and looks forward to the full participation by other member countries.
A successful energy efficiency programme, incorporating appropriate tax incentives, would reduce household expenditure on electricity and other forms of energy, thereby increasing disposable incomes. Businesses, especially the critically important micro, small and medium-sized enterprises (MSMEs), would also see improvements in their efficiency and their competitiveness.
The fight against high energy prices could, potentially, also open the door for the emergence and growth of new non-traditional businesses that promote the use of energy efficiency technologies and services to reduce energy consumption.
The growth of industries producing and/or installing solar water heating systems are the most familiar of the new industries that have emerged in our region as a response to high energy prices.
In the new energy paradigm, we should expect an expansion in new industries around a range of energy services and the manufacture and installation of PV and other renewable energy systems and energy saving devices.
ROLE OF CDB
The inevitable question which you must be asking at this stage is, “What role does CDB play in helping the Region to address the competitiveness challenge and to make the transition to the new energy paradigm?”
Promoting poverty reduction through inclusive and environmentally sustainable growth and building resilience to external shocks and natural hazard events underpin all of CDB’s development financing and technical assistance to its BMCs.
Within that broad framework, the Bank has been intensifying its focus on renewable energy and energy efficiency.
Its flagship programme, the Basic Needs Trust Fund (BNTF), has been a useful mechanism for encouraging the use of renewable energy at the community level.
In Guyana, the largest beneficiary of this programme, CDB has used BNTF successfully to achieve this
objective. With its extensive hinterland, its dispersed population and the consequential challenge of electricity supply, Guyana is ideal for the continued roll-out of renewable energy solutions.
Over the last three years, the BNTF Project in Guyana has been including PV components, where relevant, in social infrastructure sub-projects. PV systems are often the solution of choice in remote areas where diesel is moved by river transport at relatively high cost.
Under BNTF 6, ten sub-projects, which included PV systems, have been completed, for a total installed capacity of 7.3 kilowatts. It is estimated that these 10 sub-projects have changed the lives of nearly 5,000 citizens.
Through the BNTF, therefore, CDB has been creatively using renewable energy solutions to improve the quality of life of the poor. In the private sector, the Bank has also been working with MSMEs, mainly in the OECS countries, to improve their efficiency and their competitiveness.
Additionally, CDB has financed electricity generation, transmission and distribution facilities in its BMCs virtually since the Bank’s inception.
It is estimated that as much as US$10 Billion investment in new generation capacity could be required within the medium term if the region’s electric utilities are to benefit from efficiencies associated with the new technologies and for them to maintain adequate reliability. To radically transform the energy generation landscape, the investment requirements could exceed US$20 Billion.
CONCLUSION
The majority of BMCs are caught in a vortex of low growth and stagnant or declining living standards. In contrast, many of the SIDS are out-performing us; and the newly emerging countries of Africa, Asia and South America are either catching us or rapidly leaving us behind.
The energy challenge is not a new one! We have known about it for at least 40 years, since the first oil shock in 1973. What is clearer today is that we do not need to continue as helpless victims of the vagaries of the international oil markets. Nor do we have to remain uncompetitive because electricity prices are like an albatross around our necks.
Our leaders of the 1930s -1960s fought tirelessly for our political independence. It is time for today’s leaders to move towards securing all aspects of our nationhood; and one critical area is energy security.