9 minute read
Small state, big potential
Martin Vogt, CEO, MPC Energy Solutions, the Netherlands, explores how decarbonisation can help small island developing states achieve energy independence, focusing specifically on solar photovoltaics and battery energy storage systems.
itigating climate change has become a top priority for countries worldwide. For those small island developing states (SIDS) who are the most exposed to climate change impacts, it constitutes a requirement for survival. The intensifying weather patterns present a climate emergency for these most vulnerable of lands, as hurricanes, flooding, landslides, and rising sea levels cause imminent threats to infrastructure, communities, and businesses. Although, on average, SIDS only contribute 1.5% towards the world’s greenhouse gas (GHG) emissions, this vulnerability to climate is galvanising SIDS’ governments to take action and mitigate emissions and decarbonise, including transitioning to cleaner energy generation.1
SIDS face a unique set of challenges, such as being burdened by some of the world’s highest energy costs, due to their remote locations.2 In fact, this has contributed to them being among the most indebted countries in the world.2 Many islanders are also among the estimated 10% of the global population that still does not have electricity, due to the challenging topographies of their homeland.3 Particularly in the Pacific Island nations, approximately 7.5 million people live without access to electricity.4
Additionally, despite being enriched with renewable energy sources such as sunlight and wind, SIDS are still heavily reliant on foreign oil and gas imported from exporting nations to meet growing power demands. Some islands already possess a significant share of hydropower or solar energy, such as Dominica, Papua New Guinea, and Kiribati; however, across SIDS, fuel imports constitute an average of 5 – 10% of their GDP.5 SIDS spend over 30% of their foreign exchange earnings per year on energy imports,6 which account for their highest share of imports, and their transportation and electricity generation is still almost completely contingent on oil imports.7
During a global crisis (such as those caused by the COVID-19 pandemic or the war in Ukraine), this reliance on fuel imports makes SIDS even more vulnerable to international supply chain disruption, volatility in oil and gas prices, and access to reliable supply. Furthermore, trade and business have been disrupted, with the tourism sector upended, productivity taking a hit, and, ultimately, causing major losses across revenue streams.
When taken together, island nations’ decarbonisation efforts, rising global inflation, potential disruptions to oil supplies, and exposure to unstable fossil fuel prices all make it imperative for SIDS to transition to green energy sources. Breaking with legacy fuels and taking advantage of solar power and energy storage systems will provide greater energy independence and continued sustainable development.
Renewable energy sources across the Caribbean and Pacific Island regions provide the potential to boost decarbonisation and green energy investment. There are clear, direct economic advantages to reducing imported supplies of non-renewables, increasing the role of solar photovoltaics (PV) in their energy mix and successfully transitioning towards a net zero emission future.
According to the policy institute climate analytics, in the world’s sunniest regions, 1 MW of solar power produces approximately 1.3 – 1.7 GWh/yr, with each GWh replacing 1 GWh of oil-based energy, for which 250 000 l of fuel are required at a representative cost of US$00.60/l. As a result, each 1 MW of solar power installed saves approximately US$150 000/yr throughout its minimum 25-year lifetime, compared to fuel-based energy.5
Additionally, between 2010 and 2020, the clean power industry reported a strong fall in overall generation costs, with electricity costs from utility scale solar PV decreasing by 85%.8 This means renewables are now more cost-effective than the cheapest fossil fuels, and the trend is expected to continue. Despite the initial CAPEX costs of solar PV infrastructure, the cost-benefit long-term analysis is extremely favourable. As an example, the cheapest source of power in Jamaica is a 51 MWp solar park. This solar park sells its power at approximately US$8.60/kWh, which is approximately 50 – 60% cheaper than the average thermal generation costs on the island. It is no surprise that Jamaica wants to expand its renewable energy capacity from approximately 120 MW today to 450 MW by 2025.
It is true that solar PV often cannot provide the level of baseload capacity that fossil fuels can. Energy generation from renewable sources can be unpredictable and output can vary depending on the availability of natural resources. In answer to this, variable energy sources can work in tandem with battery storage, which with dispatchable technology provides power stability by enabling the storage of excess energy produced by intermittent sources. Battery energy storage systems (BESS) can also increase renewables capacity potential and help grid operators balance supply with demand.
For the SIDS who struggle to secure universal energy access, such decentralised clean energy systems can prove a crucial ally to communities who live in remote locations without access to energy from a centralised electric power grid. Decentralised energy supply also usually means higher resilience in the event of adverse weather, such as hurricanes.
Many Caribbean islands have storage projects in the operation or planning stage. A ‘lighthouse’ project for the Caribbean is currently underway in St. Kitts and Nevis. This will become the first operational utility scale solar PV and battery storage hybrid project in the region. The nation is committed to diversifying energy generation away from the 94% of its electricity that comes from diesel. The small nation has an ambitious drive to boost its current 6% from green sources to one-third decarbonisation of the island’s energy supply, achieved through a 35.7 MWp solar PV and 18.2 MW BESS project.
The costs of battery storage have also seen a sharp drop in recent years. Solar PV combined with storage is already competitive with fossil fuel generation, considering the high fuel costs and often outdated power generation facilities in SIDS. BESS continues to hold major deployment and cost-reduction potential. There are clear opportunities for energy transition and investment in SIDS nations to be capitalised on. The utility in St. Kitts will save approximately 25 – 30% of annual costs receiving and storing power from its combined solar PV and battery project compared to the diesel-fuelled generators used to date.
Cost-benefit conundrum
SIDS offer favourable conditions and considerable market potential for solar PV and storage systems. This type of hybrid project requires a detailed analysis of the application case and is ultimately a tailor-made solution to meet the local requirements of the utility grid operator and regulator. To create a win-win situation for all stakeholders, it may be challenging to find the optimum balance between their advantages and costs. Small states must consider a competitive usage of limited land and the system’s cost. It is also equally important to reflect upon the resilience of their energy systems, grid stability, flexible power production, and long-term planning. These are essential to meet higher energy demand, as well as guaranteed energy supply during events that change the typical consumption behaviours.
Technology such as BESS can have significant initial investment and infrastructure costs. Additionally, BESS allows a significant percentage of variable but cost-free natural resources such as sun, wind, or hydro to be integrated into the grid.
Independent power producers (IPPs) can play an important role in the deployment of hybrid systems. Across the Caribbean, including Jamaica, Barbados, and the Dominican Republic, the vast majority of renewable energy assets are owned by IPPs who often have significant experience in designing, financing, building, and operating renewable energy and storage facilities in their portfolio. Therefore, they offer economies of scale compared to standalone operations. For instance, the lower costs of debt financing, insurance, operations, maintenance, and asset management ultimately reduce the power and storage costs, resulting in the lowest possible levelised cost of energy (LCOE) and reduced prices for the end consumer. Private sector investment also helps local job creation and stronger community engagement.
Strengthening the regulatory environment
To create a favourable environment for hybrid energy solutions in SIDS, it is also imperative to establish encouraging market conditions for renewables or BESS as well as strong government support. Strategic long-term planning is needed here, including the formulation of clear roadmaps and stable, long-term oriented regulatory frameworks that encourage confidence among the private sector. Lifting regulatory barriers will also free small, clean power developers to plan and finance lasting projects.
Across SIDS, public-private partnerships are needed to enable investors to deploy private sector capital in battery system projects. This, paired with stable tax waiver policies, such as VAT exemptions for the import of renewable
Figure 1. CGI image of 35.6 MW solar energy plant and 44.2 MWh battery storage facility currently under development in the Basseterre Valley, St. Kitts.
Figure 2. The 35.6 MW solar energy plant and 44.2 MWh battery storage facility currently under development in St. Kitts will be able to convert intermittent renewable energy to baseload power through Leclanché’s energy management system (EMS).
energy systems, can offer great opportunities for IPPs looking to capitalise on the islands’ energy transition.
There is significant potential for further investment in the sector, which can be achieved by creating an attractive environment for foreign investors. By doing this, governments can lift the burden of public sector spending.
Crucially, clean energy empowers SIDS with greater autonomy and self-reliance, meaning governments can vastly reduce fossil fuel imports, thereby creating greater stability and resilience for the island nations. The Cayman Islands provides a fine example of opening new tenders through a recent auction scheme to stimulate an investment wave in solar and wind power production over the next 10 years. This is angled toward the islands achieving carbon neutrality and meeting a target of 70% of renewable energy by 2037.
Local opinion matters
The support and involvement of local communities is also absolutely essential to ensure the continued sustainable development of SIDS. In the path to a low-emission and climate-resilient future, decarbonisation provides a pathway to greater self-determination and freedom from the vulnerabilities of foreign-owned oil and gas. Conversely, it may be daunting and politically challenging to rely on a renewable energy system managed by foreign parties.
Private sector investors must therefore provide a compelling case for further investment into projects. They can achieve this by demonstrating how sustainable energy for all cannot only help combat climate change and promote sustainable development, but also provide a better standard of living by creating economic opportunities and eradicating poverty. A dialogue with the island public is essential, and priority should be given to transparency through, for example, public consultations, workshops, and training.
With a holistic approach, renewable energy projects are able to power entire island communities, aiding their transformation, reducing their overall carbon footprint, and sending a strong signal to the world that a zero-carbon future is possible.
References
1. ‘Climate change, small island developing States,’
United Nations Framework Convention on Climate Change, (2005). 2. FEINSTEIN, C., ‘SIDS – Towards a Sustainable Energy Future,’
World Bank Group, (June 2014). 3. ‘SDG7: Data and Projections – Access to electricity,’
International Energy Agency, (2022). 4. CAVANOUGH, E., ‘Islands of Opportunity: Stepping Up to the Pacific’s
Energy Challenge,’ The McKell Institute, (May 2019). 5. ATTARD, M-C., BRECHA, R., FYSON, C., KIM, J., SINDT, J., FULLER, F., and
JONES, D., ‘Long-term strategies in SIDS: blueprints for decarbonised and resilient 1.5˚C compatible economies,’ Climate Analytics, (May 2021). 6. ASARIOTIS, R., ‘Climate Change Impacts and Adaptation for Coastal
Transport Infrastructure in Caribbean SIDS – Background and introduction of the project objectives and context,’ UNCTAD National Workshop
Jamaica, (June 2017). 7. MEAD, L., ‘Small Islands, Large Oceans: Voices on the Frontlines of Climate
Change,’ International Institute for Sustainable Development, (March 2021). 8. ‘Renewable Power Generation Costs in 2020,’ International Renewable
Energy Agency, (2021).
