The Inter-American Development Bank and the Caribbean Development Bank have initiated the US$71.5 million loan and grant Sustainable Energy Facility package to fund renewable energy in six Eastern Caribbean countries.
The six countries are Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines. These are island states with small and isolated electricity markets, lacking the scale necessary to import cheaper fossil fuels, such as natural gas, and inadequate development of renewable energy potential.
The program aims to change the energy matrix of the beneficiary countries and increase energy security, which is critical for these economies to be competitive.
“This operation has the potential to trigger a radical transformation of the energy matrix of the Eastern Caribbean. Geothermal power plants established in each of the Eastern Caribbean countries with potential could have aggregate capacity of proximately 60 megawatts, which would substitute the equivalent amount of diesel and heavy fuel oil currently used for baseload power generation. This would displace an average of almost a million barrels of oil per year, which is equivalent to a 44 percent reduction in oil imports or US$56 million per year,” said Christiaan Gischler the IDB’s team leader of the SEF.
Gischler added that that public private partnerships could be a mechanism by which many of the energy projects could be successfully delivered. “Under SEF, Eastern Caribbean governments and geothermal developers will be encouraged to form public and private partnerships. The PPP approach will encourage private partners to assume the loans and minimize the risks associated with the geothermal development. Governments will be able to diversify their energy mix without increasing their debt load,” added Gischler.
A component of this facility is concessional financing from the Clean Technology Fund. The availability of these resources will catalyze the private sector capital and expertise required for developing sustainable energy projects in the region. Tessa Williams-Robertson, Head of CDB’s Renewable Energy and Energy Efficiency Unit, highlighted the critical importance of a Facility like the SEF that makes concessional resources available for investment in sustainable energy.
“A substantial focus of the SEF will be to provide seed resources to CDB’s GeoSMART Facility which is being established to support geothermal energy development in the region. GEOSMART will provide financing instruments appropriate to address the level of risk associated with each stage of the geothermal development”, she said.