2017 saw two cataclysmic hurricanes pile into the Caribbean and, although recovery is well underway, some islands – Puerto Rico and the USVI, for example – are still licking their wounds. Paired with a banner year for renewable energy with record setting PPAs and first technology commissionings for multiple islands, 2017 was a roller coaster ride for the Caribbean energy sector. So, what do experts anticipate for 2018?
1. Strong economics for solar PV will drive growth of utility scale and distributed solar
As solar PV costs continue their downward trend (62% drop since 2009), the Caribbean is well positioned to take advantage. Jamaica’s record setting 8.5 cents/MW project is in the beginning stages of construction and the budget is on track. Will 2018 see even lower PPAs? Will distributed energy play a larger role?
Developer Bruce Levy, CEO of Virgin-backed BMR Energy, agrees that solar costs will continue to drop which will have a direct impact on the Caribbean. “Lower costs will drive increased deployment of solar PV by end-use customers to reduce their energy costs and increase resiliency”, said Levy. “Rising oil prices will also revive interest in some Caribbean countries to deploy utility-scale renewables, some with batteries, to reduce energy costs.”
More specifically, the favorable economics of solar will drive growth of larger scale solar projects. “Whether utility owned or independent power producer (IPP) owned, a long list of Caribbean grids and customers will benefit from larger scale solar in 2018,” said Chris Burgess, Director of Projects for Islands Energy Program at Rocky Mountain Institute – Carbon War Room. “The economics are stronger than ever for utilities and quick win solar projects help governments meet their renewable energy and emission reduction targets.”
2. Markets will favor flexible and adaptable energy system design
The devastation of Irma, Jose and Maria had an immediate impact on energy sector planning and investment across the Caribbean. Islands exposed to extreme weather must have systems that are better able to withstand these events, but exactly how is still up for debate. What is clear is that the new-found priority on flexible and resilient power systems isn’t a short-term trend.
“In 2018, the markets within the region will favor systems such as renewable energy-driven water supply designs and interconnected microgrid designs that are capable of responding effectively to changes in demand and supply dynamics,” said Devon Gardner, Program Manager for Energy at the CARICOM Secretariat. He continued, “The success of Jamaica in securing long-term, cost-effective LNG supplies at scales that had been previously classified as “too small to make economic sense” also provides useful insight into how some countries – such as The Bahamas and Haiti – can increase the flexibility of their energy systems by replacing less flexible liquid-fuel based options for generation (diesel and fuel oil) with gas.”
Microgrids will be an important piece of this puzzle, according to both Burgess and Levy. “The Caribbean will move toward microgrids at critical facilities in 2018. Solar and battery storage prices have plummeted and hybrid microgrids can keep the lights on and ensure critical services during prolonged outages and fuel shortages,” said Burgess. In addition to resilience, Levy suggests that microgrids can also “address cost issues for industrial energy users throughout the Caribbean.”
3. Increase of distributed energy and battery storage
What will drive the distributed energy market? Gardner suggests that policy and shifting utility business models will be the primary drivers. “As utilities seek to adjust to a more demand-driven approach, shifting many of their services ‘behind the meter’, there will emerge a robust market for distributed generation, especially rooftop solar PV, storage and other energy services, including electric mobility, that had previously been limited by capital access,” said Gardner. He continues, “The possibility of on-bill financing will open both supply and demand sides for this segment of the energy markets.”
Another anticipated driver for distributed energy will be from consumers said Robert Blenker, President and CEO of WRB Energy. “Across the region, it seems that consumers/prosumers will continue to look for ways to offset electricity bills by installing their own generation,” he said.
Will 2018 be the year of utility battery storage? Burgess thinks so. “The utility battery may just become standard equipment for the typical Caribbean utility in 2018,” he said. “Utilities have found the operational and economical business case of battery storage with and without intermittent renewables.” Not only are batteries useful in filling the gaps in solar and wind energy, but they can also aid diesel gensets in running more efficiently, saving fuel and maintenance expenses.
4. More islands will tackle energy efficiency
Energy efficiency is always described as the low-hanging fruit. In the Caribbean it may be low-hanging, but it has been infrequently picked. Will 2018 be the year that islands prioritize EE programs and projects? LED lighting programs have helped some islands lower their electricity bill, and with financial support on the table from the multilaterals, this trend is likely to accelerate.
“In 2018, we should expect to see an increase in street light retrofit programs,” said Tessa Williams-Robertson, who heads the renewables division at the Caribbean Development Bank. “This trend is in line with CDB’s recent experience, with more governments seeking financing for such projects in order to reduce their dependence on fossil fuels and improve energy security.”
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“2018 is clearly a very significant year for Puerto Rico”, said President of the Puerto Rico Energy Commission, José H. Román Morales. “The future of our grid is at stake. We need to present an aligned vision and a robust regulatory environment to potential investors. Confidence is key and we can and will deliver.”
The multilaterals, amongst them the CDB, The World Bank and the IDB, have ramped up their support for geothermal in the Caribbean in recent years. Of the need for financing in 2018, the CDB’s Williams-Robertson anticipates that, “demand for concessional resources to support geothermal energy development will continue to grow as countries prioritize this resource,” She emphasizes that the CDB “will continue to mobilize such resources not only for investment but also for capacity building.”
Robert Blenker of WRB belives that, “regulation is the new frontier”. He continues, “As intermittent generation becomes reality, solving the challenge of how grid services are managed (and paid for) will be the key to opening the floodgates for sustainable energy sources. Who gets paid for what and how do we ensure the viability of the electric system in a dynamic environment? That’s the question.”
Renewables as the new normal
“Normalization of renewables remains one of the most important trends in the market,” said Dane McQueen, Senior Advisor on Development and Humanitarian Affairs at the UAE Ministry of Foreign Affairs and International Cooperation. “Even in [the UAE’s] short time in the Caribbean region, we have seen the residual bias that system change is complicated or expensive further weaken as more renewable energy projects come online, spurring actors to ramp up deployment commensurate with the business case.”