INTER-AMERICAN DEVELOPMENT BANK

Why We Need a Long-Term Strategy for Investment in Clean Energy

Therese Turner-Jones

Miami, October 18, 2016

The Caribbean region is highly vulnerable to the effects of storms and flooding

Estimated Cost of Climate Change in the Caribbean (in the absence of adaptation) in US$ Billions

Source: Source: Bueno et al. (2008)

The effects of climate change could cost the region up to 5% of GDP in 2025 and almost 22% of GDP by 2100.

Reducing the carbon intensity of energy and investing in resilient infrastructure is fundamental to mitigate the long-term consequences of climate change, which pose a particularly acute threat to small-island states and low-lying coastal nations.

CARICOM has adopted an ambitious strategy for transitioning to sustainable energy.

Achieving these targets will require:

•Long-term commitment with prioritizing the transformation of the energy sector •Capacity to mobilize substantial investments

•Effectiveness of regulation

•Addressing critical challenges associated with the generation, distribution, storage and use of energy in the short run.

Caribbean Sustainable Energy Roadmap and Strategy (C-SERMS)

We have estimated that the required investments would amount to about 7 % of regional GDP.

The good news is that these investments would:

•Increase economic growth•Improve the competitiveness of products and services•Increase household disposable income•Improve the region’s macroeconomic performance

Economic growth and cost-recovery would offset the cost of the debt needed to finance such ambitious reforms.

Significant investments are needed to:•Expand and upgrade existing power plants •Improve generation efficiency and reduce system losses•Introduce renewable energy sources •Implement energy efficiency initiatives

Private

Investment1

Public

Investment2Total

Investment

Total Investment

(%GDP)3

The Bahamas 441 70 511 6.0Barbados 324 115 439 10.1Belize 59 - 59 3.5Jamaica 720 140 860 6.3Suriname 288 90 378 7.8ECCU4 0 0 379 8.6

Antigua & Barbuda - - -Dominica - - 52 9.9Grenada - - 87.5 9.6St. Kitts and Nevis - - 86.5 10.2St. Lucia - - 66 4.7St. Vincent & Gr. - - 87 11.9

Region Total 2062 1255 3696 11.5

Source: IDB.1/ Includes estimated costs of converting existing plants to natural gas, building and upgrading

power plants, regasification facilities, and wind and waste-to-energy renewables investments.2/ Includes some renewable investments which also could be done by the private sector.3/ 2014 data.4/ Includes estimates only for 10MW Geothermal energy.

The Caribbean: Energy Investments Needs (in millions of USD)

• Caribbean energy consumption in transportation significantly exceeds the global average.

• High energy costs negatively impact the overall cost of goods and services.

• Technological advancements in the transportation have increased the feasibility of a number of options for fuel switching and fuel replacement.

• There is ample opportunity to introduce underutilized public transportation measures.

Significant investments are needed and the reform should not focus only on the electricity sector, but also on transportation and tourism

Projects implemented in Barbados, Bahamas and Jamaica, show that air conditioning alone accounts for 48 % of total electric consumption by hotels. Savings potential of 30-40% in energy and 40-50% in water.

The adoption of energy-efficient technologies can improve the competitiveness of the tourism sector.

Tourism presents unique opportunities for rapid and significant impact because of its high energy

consumption

• Public-Private Partnerships.

• Independent Power

Producers.

Caribbean authorities need to pursue private financing of energy investments, particularly for projects that require significant upfront capital

investments.

We must all find innovative ways to contribute to the effective transformation of energy in the Caribbean and invite you all to consider the following four propositions:

The Caribbean has a problem: well-developed strategies but serious financial restrictions

First, we need to be inclusive; we need to make sure that all the Caribbean countries can access resources to implement their energy strategies.

Second, we need to ensure that fiscally strapped heavily indebted countries can actively engage in this transformation.

Third, the international community should join forces to provide sufficient financial and technical resources to support the energy transformation of the Caribbean.

Fourth, the private sector, including private banks and technology developers should rise to the challenge.

The region is moving forward and we have good examples to celebrate

Next week, the 120 MW Bogue power plant in St. James, Jamaica will start running on natural gas.

Replacing diesel with natural

Developing geothermal energy

Private Equity for Renewable Energy and Energy Efficiency

Last week, MIF approved a US$ 63 Million Caribbean Basin Sustainable Energy Fund (CABEF), dedicated to provide private equity and venture capital financing for renewable energy and energy efficiency projects.

Without a long-term strategy for investment in the transformation of the energy sector we will not materialize the potential benefits to change radically the energy sector of the Caribbean. This is crucial for more stable macroeconomic conditions, higher competitiveness of local products and services, more disposable income for household and to contribute to building an inclusive, sustainable and resilient future for Caribbean people.

THANK YOU