After the UN conference on climate COP30 in Brazil, Grenada, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines agreed to break the impasse in the thermal energy development and to bring down the electricity costs, which remain the world’s highest in that region. For the island countries, this is not only the climate issue, but an economic one: high electricity tariffs directly wreak havoc on family budgets and tourism competitiveness.
The mix of the energy systems in the Caribbean region is the key problem. Small isolated grids and obsolete diesel-fired power plants depend on expensive imported fuel, due to which the electricity price reaches USD 0.29-0.40 per KW*h, which is almost double of the average price level in the US. At the same time, according to the Organization of Eastern Caribbean States, the aggregate geo-thermal potential of the five countries makes circa 6,290 MW – more than enough to cover the existing needs and decrease the diesel fuel imports more than by 90% saving from 5 to 30 million dollars per annum for each country.
The proposed solution is based on cooperation and financial risks mitigation. The countries intend to join their expensive drilling equipment, to manage the exploration phase together and to clearly distinguish drilling and building power plants. It is drilling that is considered the most risky and capital-intensive stage, due to which many regional projects dating back to 1970s failed. Thus, Dominicana needed almost ten years to raise 68 mln USD to build a 10 MW power plant capable of covering up to 75% of the national demand for electricity after it is put on stream.
Taking this experience into account other island countries are adjusting their approaches. Saint Lucia reinforced its geo-thermal studies and revised the drilling contracts’ terms to avoid overspending. In Grenada the project is progressing at the expense of grants, which slows down its implementation, but reduces the risks for taxpayers; the country intends to launch a 15 MW power plant by 2033. On the contrary, Saint Kitts and Nevis secured financing in advance, increased the project capacity up to 30 MW and placed a bet on private power plant financed by the borrowed money. In case of the success, geo-thermal energy may not only help to reduce the tariffs, but also to improve financial sustainability of the Caribbean countries, facing hurricanes and disruptions of fuel supplies on a regular basis.
