Friday, April 19, 2024

THE ISSUE: Energy complacency too risky for region


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I Have low oil prices caused complacency about renewable energy goals?

In recent weeks oil prices have been increasing. This is something that officials in Barbados and the region would have taken note of considering the breathing space the low price of fossil fuels afforded the Caribbean over the last two years.

The elbow room was so significant that some individuals have voiced concern that the more affordable hydrocarbons have caused countries like Barbados and its neighbours in the Caribbean to become complacent. In other words, they have reduced their enthusiasm for renewable energy because they are saving millions of dollars on oil imports.

But what does the international picture reveal? The United Nations Environment Programme’s Division of Technology, Industry and Economic teamed up with Frankfurt School of Finance & Management and Bloomberg New Energy Finance to produce the Global Trends In Renewable Energy Investment 2016.

It found: “Renewable energy set new records in 2015 for dollar investment, the amount of new capacity added and the relative importance of developing countries in that growth. All this happened in a year in which prices of fossil fuel commodities – oil, coal and gas – plummeted, causing distress to many companies involved in the hydrocarbon sector.

“So far, the drivers of investment in renewables, including climate change policies and improving cost-competitiveness, have been more than sufficient to enable renewables to keep growing their share of world electricity generation at the expense of carbon-emitting sources.”

The report added that “last year saw global investment in renewables rise five per cent to US$285.9 billion, taking it above the previous record of US$278.5 billion reached in 2011 at the peak of the “green stimulus” programmes and the German and Italian rooftop solar booms”.

At a time when oil prices were low, the report said, renewable energy investments in 2015 were six times more than 2014’s figures. Investments in renewables were “running at more than US$200 billion per year for six years now”. Wind energy led the way, followed by solar photovoltaics.

While China was the investment leader, the Americas, which includes Barbados and other CARICOM countries, saw a near ten per cent decline in investment last year, the report stated.

Last month the International Renewable Energy Agency released a report in which it examined how the Latin America and the Caribbean renewable energy sector performed last year.

It stated: “In relative terms, renewable generation capacity increased by 6.6 per cent in 2015. Solar photovoltaic capacity increased the most (+166 per cent), followed by wind energy (+42 per cent) and geothermal energy (+17 per cent). Bioenergy and hydroelectricity capacity increased by seven per cent and three per cent respectively.

“Overall, renewable generation capacity has increased by about one-quarter over the last five years (+40 mega watts), with most of this growth coming from new hydropower and wind energy installations. This increase is about the same as over the previous decade (2000 – 2010), indicating that capacity is now expanding at faster rate.”

The Caribbean Development Bank’s Dr Warren Smith is one Caribbean official who thinks that the Caribbean is not doing enough to embrace renewable energy.

“The major barrier, in my view, to rapid expansion of renewable energy generation in the Caribbean, remains that of the monopoly control over generation by the incumbent integrated electric utilities in several instances,” he said while delivering the Fair Trading Commission’s 2016 lecture.

“Across the region the potential for electricity generation from a range of renewable sources cannot be realised because of the lack of network access.”

He did, however, point to some success through legislative and regulatory reforms in countries, including  Barbados, Belize and Jamaica.

An International Monetary Fund paper on the macro-related challenges facing the Caribbean energy sector, released in March, said “reducing energy costs in the Caribbean could help improve growth in the region and strengthen competitiveness”.

“However, regional policymakers face conflicting objectives. On the one hand, investment in an effective energy reform strategy would have long-term benefits. On the other, few countries have fiscal space to embark on ambitious investments to reform the energy sector,” it added.

The study also concluded that “the substantial decline in oil prices since mid-2014 does not obviate the need for energy sector reform”.

It said: “Any gains from recent oil price declines should be seen as a temporary breathing space that gives the English-speaking Caribbean some time to catch up with the cost reductions needed to compete successfully in a more open region.”


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