Enabling Frameworks for RE Investment

June 24, 2015Martinique

Presented to Islands Energy Transitions -

IRENA

Observations

ENERGY SUPPLY: Heavily Dependent on Petroleum, Limited

Use of Cleaner Fuels

• Petroleum is main fuel used for energy supply

• Limited use of cleaner fuels like natural gas and renewable energy

• Firewood is also used particularly in Haiti

Total Primary Energy Supply in Caribbean in

2011

Source: OLADE. Sistema de Informacion Economica-Energetica, Data for 2011

Note: Data only for Barbados, Belize, Cuba, Dominican Republic, Grenada, Guyana, Haiti, Jamaica, and Suriname

2

Natural Gas 8.8%

Other0.4%

Firewood21.4%

Coal 3.4%RE

9.8%

Petroleum 56.2%

Observations

Heavy Reliance on Costly Oil/Diesel as Dominant Source of

Power Generation• Most Small

Caribbean islands, particularly OECS, heavily reliant on oil/diesel

• Larger Islands better diversified with hydro and gas (& some coal)

• Trinidad, as significant oil and gas producer, generates most electricity from natural gas.

3

Fossil Fuel Share (%) in Electricity Generation Mix in Select Caribbean Countries

Source: The World Bank, World Development Indicators, 2011 and Bloomberg New Energy Finance Climatescope 2012 Report.

Trin

idad

&To

bago

Beliz

e

Dom

inic

an R

epul

ic

Suri

nam

e

Dom

inic

a

Hai

ti

St V

ince

nt&

the

Grn

ds.

Jam

aica

Guy

ana

Gre

nada

Antig

ua&

Barb

uda

Baha

mas

Barb

ados

St K

itts&

Nev

is

St L

ucia

0%10%20%30%40%50%60%70%80%90%

100%

Oil/diesel Natural Gas Coal Hydro Renewables

Observations

High Oil Dependency and Small System Size is Major Driver

for High Electricity Prices• Electricity prices well

above LAC average for most CAR

• OECS islands have highest prices due to highest oil dependency

• Lower prices where greater diversification in generation (DR, Belize)

• Electricity prices in Trinidad & Tobago, and DR also lower due to energy subsidies

Surin

ame

Trinidad

&Tobag

o

Baham

as

Dominican Rep

ublicBeli

ze

St. Kitt

s&Nev

is

Guyana

St. Lu

cia

St. Vince

nt&th

e Grn

dsHaiti

Jamaic

a

Antigua&

Barbuda

Barbad

os

Grenad

a

Dominica0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.05 0.06

0.150.18

0.22 0.220.24

0.27

0.320.35 0.35

0.38 0.39 0.390.41

LAC Average

4

Average Electricity Tariffs in Select

Caribbean Islands in 2011

Source: Annual Report, Caribbean Electric Utility Service Corporation (CARILEC), 2011, SIEE-OLADE, 2013 (2011), DOMLEC Annual Report (for Dominica).

Note: LAC Average tariff of US$0.19/kWh calculated by calculating the average of residential rates in 2011 using SIEE-OLADE, Carilec, and DOMLEC data.

Observations

High Oil Dependency for Generation also Leads to

Volatility in Electricity Prices

5

• Oil prices have fluctuated over last decade

• Led to volatility in electricity tariffs when oil prices passed through (i.e. OECS)

• More stable where greater diversification (i.e. Belize)

• Challenging fiscal burdens for Governments when oil prices not fully passed through (i.e. DR)

2002 2003 2004 2005 2006 2007 2008 2009 20100.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0

20

40

60

80

100

120

Resid

entia

l Ave

rage

Tar

iff U

S$/k

Wh

Aver

age

Annu

al C

rude

Oil,

Pric

e pe

r Bar

rel,

US$

Crude Oil Spot Price

OECS Average Tariff

SOURCE: CARILEC Tariff Surveys 2009-2011 (St. Kitts & Nevis excluded as insufficient data available); Crude oil spot price is Oklahoma WTI from US EIA.

Average Residential Tariff in OECS and Oil Prices (2002-

2010)

Observations

Political instability

Transportation

Corruption

Practices of informal sector

Customs and trade

Crime, theft, disorder

Tax Rates

Inadequetely trained workforce

Electricity

Access to Finance

3.4

4.3

5.2

7.4

7.5

7.5

12.5

13.3

13.4

18.2

Shortcomings in Electricity Supply Undermines Economic

Competitiveness & Equitable Growth• Central to

economic growth as electricity facilitates productive uses

• Critical for competitiveness as electricity costs and reliability affects business

• High costs constrain businesses and also create hardship for household consumers

6

Constraints to Business Success (% of Firms)

Note: The data is gathered for the Caribbean countries. Some indicators that is part of “electricity” include, but not limited to, electrical outages, duration of outages, losses due to electrical outages, avg loss due to outages, generators’ ownership, days to obtain electrical connection.

Source: Business Enterprise Survey, The World Bank Group

Observations

Goal

Pillar

World Bank: Strategic Priorities for the Energy Sector in Caribbean

Energy Efficiency

Clean EnergyClimate/Energy

Resilience

Save Energy and Cost through more

efficient utilization

Diversify Power Generation Matrix to

Lower & Stabilize costs

Enhanced resilience to climate change & extreme weather

events

Strengthen Institutions and Regulatory Framework

Integration and Expansion of Markets

7

Engage- ments

• Fuel Switching• Natural Gas Supply • Renewable Energy

• Resilient Planning & Design

• Recovery & Reconstruction

• Insurance & Hedging

• T&D Loss Reduction• Improved Utility Mgmt. • Demand-Side Mgmt.• Improve Tran. Efficiency

Observations

Expanding and Integrating Markets: Enhanced coordination, collaboration, & harmonization

to achieve greater scale & improved investment climate

Generate economies of scale for importing fuels & equipment to lower costs

Bulk Procument

Help stabilize impact of oil prices and reduce vulnerabilities by managing exposure

Increase market size, allow for energy (electricity, fuel) trade in future

Create economies of scale by increasing market size, streamline processes, and attract investors

Regional Interconnections

Hedging fuel prices

Regulatory Harmonization 8

Observations

Weak Regulatory Framework and Institutions for Facilitating

Investments and Operations in Sector

• No harmonized regulations to facilitate business (i.e. different rules across OECS)

• Limited regulatory capacity and weak institutions to oversee energy sector and implement existing legislation in several countries (i.e. no regulator in Grenada, St. Lucia, St. Kitts & Nevis, policy & regulatory institutions in DR & Haiti unable to enforce laws and regulations)

• Legal and regulatory reforms necessary to allow for increased renewable energy (RE) and energy efficiency (EE) investment (i.e. limited legislation for RE development/ system integration, interconnection)

9

Observations

Challenging Investment Climate Contraints Private Capital Flows

• Poor financial situation of some utilities limits ability to make or attract investment (i.e. Haiti, DR, St.

Kitts & Nevis)

• High financing cost in high risk countries require higher returns (i.e. Haiti, DR)

• Small energy markets reduces investment & flows come at higher cost (i.e. OECS)

• Lack of harmonized rules to easily facilitate doing business across islands (i.e. OECS)

10

2003 2004 2005 2006 2007 2008 2009 2010 20110

50

100

150

200

250Other Caribbean* Select OECS ** Total Caribbean

US$

mill

ion

Private Investments in Power Sector in Caribbean (2003-

2011)

*Other Caribbean countries include Haiti, DR, Jamaica, and Belize,

** Select OECS include Dominica, Grenada, St. Kitts and Nevis, and St. Lucia

Source: PPI Database, World Bank, 2011

Observations

ESEF Strategic Pillars are Well-Aligned with National Energy

Plans

11

Large Islands

OECS

Belize

2

1

3

10

5

6

78

9

Key Focus of National Energy Plans

• exploiting renewable energy (RE) resources

• diversification of power generation matrix (RE/gas)

2 5 6 7 8 9 10

4 5 8 10

• energy efficiency (EE)

• T&D reliability1 3 6 7 8 9

21 3 4 6 8 10

Clean Energy

Energy Efficiency

Climate/Energy Resilience

• energy security/oil import reduction

• Environmental/sustainability/ lower GHG emissions

41 3 5 7 8 9

1 4 6 7 9

Cross Cutting Goals

• Improve regulatory environment

• energy/electricity cost/loss reduction

21 4 7 9

1 3 4 6 7 8 9 10

Regulations & Institutions

Integration & Expansion

Observations

COTED

ENERGY MINISTERS

CARICOM Secretariat

CCS ENERGY UNIT

Financing

CDB

Technical Assistance

Capacity Building & Research

UWI

Information & Knowledge Mgt

Policy & Regulations

CCS EU

Country Focal Points

CCS ENERGY UNIT

CCREEE

CARICOM HEADS OF GOVERNMENT

CCREEECCREEE

WORLD BANK SUPPORTING CARICOM IN DEVELOPMENT OF C-SERMS PLATFORM

The C-SERMS Platform will constitute representation from the respective groups

EXECUTIVE BOARD

Technical Advisory Group