SETTING THE SCENE
The post-COVID-19 global economic environment will be defined by a prolonged recession, high levels of unemployment and reduced travel and tourism – all as countries worldwide seek to re-ignite their economies. In the midst of the COVID-19 pandemic and ensuing economic recovery, governments will have a unique, once-in-a-generation opportunity to reset their economies and support the underlying structures that enable sustainable development. Leaders with both the vision and political courage needed can help their countries recover better during the economic stimulus that will take place by integrating sustainable energy strategies to build more robust energy infrastructures and resilient economies that are less susceptible to global externalities.
COVID-19 has devastated tourism-based, import-dependent economies across the Caribbean. For example, in just one day, Saint Lucia lost 13,000 jobs – approximately 7 percent of the total population and 16 percent of the total labour force, which is estimated at 79,700. Some Caribbean power utilities reported a 50–60 percent loss in electrical load in March alone, a clear indicator that the economy is depressed. Recovery from such devastation may be slow but it can also be revolutionary.
Of the fifteen Caribbean Community (CARICOM) Member States,2 seven have energy access deficits, with Haiti having the largest deficit. Of the seven, four are expected to close the gaps by 2030 if they continue to deliver access to energy at the current rate of improvement.
The Caribbean power sector is characterized by its heavy dependence on imported fossil fuel that results in some of the highest electricity costs in the world. One of the biggest sustainable energy challenges for the Caribbean region is to transition from fossil fuel- based economies to cleaner, more resilient and more abundant energy resources. By increasing the percentage of renewable energy in their energy mix, Caribbean countries have an opportunity to also increase their energy resilience and security.
In addition to their high costs for electricity, the predominantly centralized electricity systems in the Caribbean have shown themselves to be weak during hurricanes seasons and other extreme weather events with devastating effects. For example, two months after Hurricane Irma struck Puerto Rico in 2017, more than half the population still had no access to electricity. Off-grid systems, such as solar based mini-grids, can keep communities’ lights on when the centralized system fails and ensure delivery of critical services, including for health facilities.
This sustainable energy guide highlights the opportunities and benefits that will help leaders guide their countries onto a sustainable long-term development trajectory. Furthermore, delivering sustainable energy for all paves the way for Caribbean countries to recover better while building resilient economies and demonstrating their unwavering commitment to the Paris Agreement.
The global economy of the future will be based on increasingly renewable sources of energy and countries that take advantage of this moment to re-think their energy supplies will develop a competitive advantage.
Caribbean countries should pursue significant investments in renewable energy and energy efficiency as an impactful way to immediately recover jobs that have been lost during COVID-19. These investments will also provide benefits in support of diversifying local economies and allow developers to expand into emerging sectors.
- We could imagine countries aspiring to invest 25 percent of their stimulus budgets for on-grid and off-grid renewable energy (a combination of solar, hydro, geothermal and wind)
- Investment in distributed energy resources will benefit electricity systems as well as communities and help diversify economies. Tourism is central to the economies of Caribbean countries and building back through investment in local renewable resources can enhance competitiveness, lower energy costs, build resilience and unlock opportunities that stimulate local industry.
- Investing in energy efficiency by upgrading outdated equipment and greening facilities can bring immediate benefits from energy cost savings to solid job creation opportunities.
- Caribbean countries rely heavily on imported foods for as much as 80 percent of food requirements by some estimates. By investing in distributed energy, farmers will have access to improved technologies, lower energy costs and an opportunity to expand markets and, importantly, enhance food security. By strengthening local food production, the tourism sector will be able to increase its income, avoid the loss of valuable foreign earnings, and at the same time improve its resilience.
- Governments should target direct and indirect investments that can bring down the cost of renewable energy systems considerably. Direct investment includes loan guarantees or contributing capital for the upfront investment. Indirect investments that should be considered include reducing or eliminating import duties and value- added taxes (VAT).
Countries that pursue the opportunities of recovering better with sustainable energy for all will achieve a range of key benefits:
Investments in sustainable energy have a significant GDP multiplier that will benefit the country and the economy.
- For every US dollar invested in the transition towards renewable energy, an additional 93 US cents of additional GDP growth above business as usual is expected to occur.
- Investing in renewable energy in the Caribbean can produce ~USD 633 million in overall additional GDP impact.
There is significant job creation potential from both investing in renewable energy and investing in the supply chain and local content associated with renewable energy. Further, introducing (and enforcing) improved energy efficiency standards for buildings (and retrofitting existing building stock) will trigger the construction industry and cost less than large infrastructure investments.
- An econometric study of government spending on energy technologies showed that spending USD 1 million on renewables creates 7.49 full time jobs, five more jobs than a similar investment in fossil fuels (2.65 full time jobs).
- Every 1,000 customers connected to decentralized energy solutions (solar home systems or solar mini-grids) supports approximately 25 jobs.5
- For every USD 1 million invested in retrofitting buildings, 16-21 jobs are created.
Cheaper energy provision:
Increasingly, renewable technologies cost the same as or less than fossil fuel alternatives.
- Levelised cost per unit of electricity from new utility-scale solar photovoltaic (PV) power plants has dropped about 90 percent over the last decade.7 Renewables are now the most cost-effective source of electricity in almost every country worldwide.
- Because of being highly dependent on imported fossil fuels, the retail electricity price in Jamaica is around USD 30 cents/kWh. A renewable energy project, Paradise Park, has produced clean energy at USD 8.5 cents/kWh.9
- An estimated USD 9 billion in fuel costs would be saved annually by transitioning all 31 countries in the Caribbean to 90 percent clean energy by 2030.
TAKING THE RIGHT NEXT STEPS
The benefits of recovering better with sustainable energy for all are clear: a demonstrable return on investment, a more resilient economy, energy security, healthier people and a cleaner environment.
Governments across the Caribbean are taking unprecedented steps to respond to the immediate health and economic impacts of COVID-19. Today’s decisions will impact tomorrow’s ability to recover better over the long term. There are important measures governments can take to recover better by delivering sustainable energy for all while also growing resilient economies and creating new green jobs. Moreover, every investment to recover better reflects greater ambition towards the Paris Agreement that can be reflected in the 2020 review of Nationally Determined Contributions (NDCs).
These ideas can be turned into action with committed leadership and drive towards greater long-term competitiveness. Governments in the Caribbean can begin by providing a whole-of-government mandate to prioritize and implement the enabling measures necessary to recover better. This includes empowering Ministries of Finance, Budget and Planning to make the necessary investments in sustainable energy projects that create jobs and that can jump-start their economies.
Source: Sustainable Energy for All, 2020 (www.seforall.org)