Corruption and electricity costs: The bane of the Caribbean

Economic development in the Caribbean is hobbled by high electricity prices, a result of the subregion’s historic dependence on imported oil and gas and the troublesome reality that even on larger islands there are too few people to attract widescale foreign investment. 

Corruption also dogs many Caribbean energy markets. 

“Related to energy and corruption is the whole issue of the fact that the Caribbean has among the highest electricity costs in the world,” Marla Dukharan, chief economist at Bitt, told BNamericas. 

In Jamaica, roughly 12% of electricity is stolen via illegal connections, whereas in Haiti a whopping 65% of supply is lost to illegal connections and an outdated energy grid.  

Jamaicans last year paid about US$0.42/kWh for electricity, 3.5-times higher than that paid by the average US household. 

However, the exceptions are also illustrative.  

“Actually the energy sector is the most transparent sector in Trinidad & Tobago, simply because of the level of scrutiny and auditing,” Dukharan said, and “possibly related to the fact that Trinidad and Tobago has, in this region, among the lowest energy costs.”  

Trinidad power costs were about US$0.07/kWh in 2018. 

ELECTRICITY INFRASTRUCTURE

With hurricanes regularly destroying power plants and transmission lines, modernizing grids has become an ongoing challenge in the Caribbean. 

Increasingly, it appears the answer may lie in off-grid solutions, spelling an opportunity for the expansion of renewables in the electricity matrix.  

Last month Justin Locke, senior director at the Rocky Mountain Institute, told curbed.com that the Caribbean was “the only region where the entire renewable energy economy – solar plus batteries – is comparable or even cheaper than fossil fuels,” and hence: “That’s why we see the Caribbean as ground zero in the global energy transition.” 

“The challenge we're facing in many developed countries is that the grid infrastructure has largely been built around fossil fuel infrastructure,” Kijana Mack at Latam Energy Advisors, a US-based energy consultancy firm, told BNamericas. “Things like transformers, meters, and transmission lines need to be upgraded as renewable energy projects come online.” 

But, he added, “For the Caribbean – and many parts of Africa – they can go directly to the newer smart grid, smart metering, renewable energy-related infrastructure, without the political/corporate interests, and costs associated with it in developed markets.”

HAITI'S POTENTIAL

Haiti holds unique potential. “The lack of a central grid in Haiti means that the country could potentially leapfrog over conventional fossil fuel-based sources of energy directly towards renewable energy options. This could be done by strengthening local grid capacity and promoting off-grid energy solutions,” Patricia Eloizin of Latam Energy Advisors told BNamericas.

Haiti's electricity infrastructure involves nine separate grids, each of which includes one of the country's major cities.

Meanwhile, the Abaco Islands, where an estimated 90% of infrastructure was destroyed by the recent Hurricane Dorian, will share in a US$2mn funding campaign to build out a new power grid. 

The campaign targets the type of financing arrangements, many funded by the IDB or Abu Dhabi Development Fund, which Latam Energy Advisors says are necessary for renewables adoption in the Caribbean. 

Other islands are progressing because of greater regulatory clarity that facilitates off-grid solar energy generation. 

“I would point to Aruba and Barbados, which have the most advanced legal and regulatory framework,” Dukharan said. 

“In Barbados, for example, there are few households where there isn’t a solar panel on the roof. Most houses you would find that they use solar, at least for hot water,” she said, adding that some even use solar power for charging electric cars.  

According to the Barbados government, some 30,000 households on the island have solar panels installed for generating hot water.  

“Barbados’ legal framework around electricity generation allows for private producers to feed back into the grid and get paid by Barbados Light & Power,” Dukharan said.