Renewable Energy Policy in the power sector in Small Island Developing States

(SIDS) Responding to Peak Oil and Climate Change in the Caribbean &

Pacific:

Emerging Key Considerations

OERC Symposium 2011

Keron Niles & Bob Lloyd24 November, 2011. Dunedin, New Zealand.

Outline

• SIDS & Energy

– Consumption

– Power Production

• Peak Oil & Climate Change Impacts

• Regional Strategies

• Key Considerations

• Summary2

• The Caribbean Community (CARICOM)• Population: approx. 15 million• Surface Area of Caribbean Sea: approx. 2,753,000 km2

• GDP/per capita: USD $4,409

• Languages spoken: English, Spanish, Dutch, French, and other Caribbean dialects

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• Secretariat of the Pacific Community (SPC)

• Surface area of Pacific Ocean: approx. 166.3 million km2

• Three distinct cultural groupings: Micronesia, Melanesia , Polynesia

• Official languages: English & French (but many indigenous languages spoken)

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Small Island Developing States (SIDS)

• Very diverse in nature– “range in size from about 12 km2 of land (Tokelau) to nearly

463,000 km2 (Papua New Guinea)

– No singular definition for the term

• Limited resource base (human, natural & financial)

• Quite dependent on external sources of finance

(remittances and foreign aid)

• Geographically remote & isolated – and face barriers

with respect to fuel supply (delays & transportation

costs)

• Particularly vulnerable to natural disasters 5

SIDS & Energy Consumption • Fossil fuel dependence

(transport & electricity) – Accounts for approximately

between 95 - 99% of national commercial energy use

• Primary energy consumption in SIDS can be described as ‘petroleum intensive’

• Relatively high per capita consumption of petroleum products

• Limited use of Renewable Energy Sources (mainly biomass and hydroelectric power)

2%5%

93%

Oil Natural Gas Other

Primary Energy Consumption in the Caribbean (KEMA, 2010)

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Electricity Generation in SIDS can also be described as ‘petroleum intensive’

Source: Energy Information Administration, 2006

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WHY FUEL DEPENDENCE IS IMPORTANT

Peak Oil & Climate Change Impacts on SIDS

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Peak Oil

• Refers to a transition from a period of easily attainable and affordable oil, to a period characterised by a declining annual supply of petroleum.

– Energy returned on energy invested (EROEI) for oil is declining

– Increasing Consumption in emerging economies & oil producing developing countries, accompanied by population growth

– Data shows that increased income levels are usually accompanied by heightened levels of demand for electricity

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Peak Oil Impacts on SIDS

• Declining oil supply could lead to price increases, which, by extension, can lead to global economic recession/collapse– Which often has notable impact on economies of SIDS

(especially those primarily supported by tourism)

• Likely to increase cost of electricity production– Electricity tariffs in SIDS for commercial and industrial

use are among the highest in the world• though residential rates in some cases depressed by

government intervention (such as cross subsidies)

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Peak Oil Impacts on SIDS

• Diseconomies of scale may also lead to higher than world average fuel price increases for SIDS. This is exacerbated by:

• fact that SIDS are price takers • remote & relative geographic isolation – can result in

increased transportation costs – especially in multi-island states

• Many SIDS also do not own significant petroleum storage facilities

• this can also have an inflationary effect on prices• Affects their ability to keep large reserves (in order to reduce

frequency of shipping) 11

Climate Change Impacts: Fourth Assessment Report of the IPCC

• Small Islands have “characteristics which make them especially vulnerable to the effects of climate change.”

• Sea level rise: flooding, beach erosion • Changed weather patterns: more intense/extreme

weather (e.g. drought, floods), more intense hurricanes

• Coral Reef Damage, Biodiversity Loss

• SIDS “are not large [absolute] contributors to the problem of climate change but are the group of countries estimated to be impacted the most” (Nurse et al)

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Regional Strategies

– Pacific Bulk Fuel Procurement• “Major Oil Companies have

been disengaging from, rather than entering the region”

– Synchronisation of energy standards

– Diversified and more efficient fuel use

IMF (2008):“several Pacific Island countries could deplete their foreign exchange reserves in a matter of weeks if prices remained high”

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Regional Strategies

– Petroleum Supply & Optimization Study and Database

– Petroleum Supply & Pricing Arrangements • PETROCARIBE• Eastern Caribbean Gas Pipeline

– Increased uptake of Renewable Energy

 

CARICOM ENERGY POLICY  

JANUARY 2007 

[DRAFT]

“Member states will develop comprehensive national energy policies that seek to increase the use of commercially viable RE sources to 10% of primary energy by 2010”

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Key Considerations

• National Energy Policies & Renewable Energy Technologies seem largely due to “donor push” rather than “recipient pull”.– Has been used to promote ‘unproven’ or prototype

technologies in the past

• Access to Human & Natural resources (in the form of expertise and land) is significant concern.– Communal ownership in the Pacific– Density/Competing land use interest in the Caribbean

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Key Considerations

• RE proliferation motivated largely by fuel savings, rather than by government policy

– Motivated by concerns related to competitiveness, not necessarily those related to the environment

– often due to budgetary pressures or loan requirements of International Financial Institutions

• Limited demand and diseconomies of scale makes investment in the power sector unattractive

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Key Considerations

• Renewable Energy (RE) Policy now on the Agenda, however:– Aims/objectives of energy and climate change

policies: in some cases inconsistent or incompatible

• Power Sector Reform in and of itself an opportunity to boost transition to RE – In Fiji, only IPPs using RE being considered by FEA– Legislative reform in the power sector currently

being considered in many jurisdictions

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Summary

• SIDS in Caribbean & Pacific are extremely dependent upon fossil fuels (especially for electricity generation)

• Peak Oil & Climate Change Impacts likely to adversely affect energy security: along with electricity & other key sectors, (such as Tourism) in SIDS

• RE Policy on the agenda, but driven by concerns related to competitiveness (fuel shortages & price volatility)

• Power Sector Reform is an opportunity to:– enhance the uptake of Renewable Energy – to create an enabling environment to facilitate the operation of IPPs 19