Caribbean solar market growth constrained - survey

The Caribbean solar power market represents just 2% of the Latin American sector as a whole and has the potential to expand, but remains constrained by factors such as financing and wide cost discrepancies, according to a survey.

Changes in policy in some of the island nations, competitive pricing and more accessible financing will spur growth, albeit slowly, according to the survey Solar PV in the Caribbean: Opportunities and Challenges,' compiled by GTM Research and Meister Consultants Group.

The report surveyed 30 solar companies active across the Caribbean region from the Bahamas to Trinidad and Tobago.

The results show that the cost of installing a residential solar array vary widely across the region, from US$1.50/W in Antigua to US$8/W in Jamaica, and within countries (Jamaica also has prices as low as US$2.50/W).

Installation costs of commercial solar systems averaged US$2.88/W across the Caribbean and are lower than residential costs due to multiple project bids and better access to capital, according to the report.

Half the countries surveyed have policies in place to support distributed generation, but factors such as transitions from net metering to net billing, market caps and uncertainties surrounding the integration of import duty exemptions have been cited by regional companies as policy changes.

In terms of financing solar projects in the Caribbean, these typically require collateral, have interest rates ranging from 7-20% and typical tenures of three to five years, and the high costs of capital and short debt terms are constraining market growth and weakening PV economics.

In March the World Bank added US$1.25mn to its financing pipeline for solar PV pilot projects and scale-up projects for member countries of the Organization of Eastern Caribbean States.

Other constraints hindering the sector's growth in the region are a lack of competition among the small numbers of installers, which face high interconnection costs, and a lack of market data,

The region "has all the right pieces in place in terms of insolation and high electricity prices, but hasn't really taken off yet," according to GTM Research solar analyst Adam James.

"Now all that is beginning to change as we see more financing and some policy support coming into the picture, although we still have a long way to go."

Last September, the EU, IDB and Spain signed a declaration reinforcing collaboration in renewable energy and energy efficiency in the Caribbean.

In the same month, the US and Grenada signed an MOU as part of the Caribbean Energy Security Initiative that includes encouraging private sector investment in environmentally responsible and economically sustainable technologies.