What's holding back the renewables tide in the Caribbean?

The Caribbean representative of the European Investment Bank (EIB), René Pérez, has identified several likely reasons behind the region's weak embrace of renewables.

A perception by banks that there are high capital risks is one, he said, adding that a need to increase capacity quickly – for which thermo plants tend to be seen as the solution – to meet growing demand is another.

The cost of generating power using renewables is still considered expensive in the subregion and the low fossil fuel price environment also means that the use of such energy sources remains attractive, Pérez told BNamericas ahead of a renewable energy conference.

Those projects seeking EIB financing must meet several criteria, he added.

"In the case of a project being granted to a private investor by means of a license or public concession, it will be necessary to guarantee that this process has been established according to the current regulation and in case of a public concession that it has been granted following a transparent and competitive bidding process," he said.

"The land will have to be freely available and the project will not lead to a disproportionate environmental or social impact that doesn't have a fair and acceptable solution. An independent environmental impact study would demonstrate this," he added.

He said that only projects involving developers, technology suppliers and operators experienced enough to reduce construction and operational risks would be accepted, and developers and investors must have a minimum capacity to accept risks by providing minimum capital of around 30-35%.

The EDB, he said, also seeks assurances that the proposed developer has a power purchase agreement and that it can meet its supply commitments and that the buyer has sufficient commitment capacity.

But despite the challenges, Pérez said there is reason for optimism in the area of renewables in the subregion.

"There is a growing feeling in the countries of the Caribbean towards a more sustainable development that takes into account the problems of climate change and a safe and cost-effective energy supply without exposing itself to the conditions that are regulated in international markets. For that reason, Caribbean countries that suffer particular isolation conditions are interested in developing such resources when conditions are favourable," he said.

In 2009, the member countries of the global alliance of small island states (AOSIS) – which is a negotiating voice within the UN system – launched an initiative to provide what are known as the small island developing states (SIDS) with a collective institutional mechanism. The aim of the mechanism, according to information on the SIDS website, is to "assist them [SIDS] transform their national energy sectors into a catalyst for sustainable economic development and help generate financial resources to address adaptation to climate change."

The UN initiative is called SIDS-DOCK and is described as a "docking station" to connect the energy sector on the islands with the global market for finance, sustainable energy technologies and with the EU and the US carbon markets, allowing the islands to trade the avoided carbon emissions in those markets.

Bahamas joined the SIDS-DOCK initiative in September 2014.