Caribbean Ripe for DER and Microgrid Development but Needs Financial Boost
The Caribbean is ripe for microgrid development because of the challenges of hurricanes and COVID-19, but financial constraints are getting in the way. The Rocky Mountain Institute (RMI) is proposing some solutions.
This year’s hurricane season is expected to be worse than usual, while the islans are still coming back from the impacts of Hurricanes Dorian, Maria and Irma. Meanwhile, the region, like most areas, is struggling to recover economically from the effects of COVID-19.
But lack of funding is a challenge, and a new RMI report, “Green Stimulus in the Caribbean” provides policy and funding suggestions to help boost both distributed energy resources (DER) and microgrid development in the region.
One option is to “backstop credit” so utilities gain access to financing for DERs. While utilities might not have funds on hand for capital expenditures, they are selling electricity to customers and collecting funds monthly.
“You could wrap that income into a guarantee of being able to make payments,” said Kaitlyn Bunker, RMI principal and one of the report’s authors.
An international funding institution could also provide guarantees.
Clean energy lines of credit
A similar option is clean energy lines of credit that could allow for lower up front payments.
Again, the income that comes from utility customers would provide a guarantee that loans would be repaid. A government-owned utility could enter into a long-term agreement with a financing institution.
Lines of credit could be provided by international financing institutions such as the World Bank. “The government doesn’t have to put up its own guarantee but could work through a line of credit,” she explained. The line of credit could be a loan, with payments over a certain period of time.
“But if something happens, it’s backed up by essentially a loan,” she said.
RMI also made policy recommendations for increasing deployment of DERs and microgrids. Chief among them is governments establishing targets to nail down commitments. This might include, for example, ruling that importing internal combustion engines won’t be allowed, but only electric vehicles (EV) can be imported. “That sets a clear pathway,” said Bunker.
Another recommendation is to reduce duty and import fees on DER components, including storage, electric vehicles and the materials needed for solar installations.
“This is happening on quite a few islands already,” said Bunker.
Embracing new business models to showcase their effectiveness also could boost DER and microgrid development. These models wouldn’t change existing policies but would likely involve a group of utilities, government agencies and regulators coming together.
“One example would be a utility owning the microgrid resources that fit within their technological capability and comfort zones, and maybe siting them on another property, perhaps owned by the government.”
In these scenarios, the utility would own resources outside of its “fence line” and operate them in partnership with a government entity that owns a critical infrastructure site such as a water treatment facility.
“You could quickly pilot that and test it and see how it impacts ratepayers,” said Bunker.
With such pilots, regulations and funding options in place — and with a focus on DERs that achieve resilience — the Caribbean can better address its dual challenges of COVID-19 and hurricanes, said the report. The COVID-19 crisis has shined a spotlight on the importance of resilience, not only as preparation for outages, but for steeling islands against crises such as economic and public health system shocks.
Solar project in Saint Lucia. Photo courtesy RMI
Wind, sun and microgrid development
Erik Svanholm, vice president, non-wires alternatives, S&C Electric, said the frequency of destructive storms in Puerto Rico and the Caribbean highlights the benefits of deploying resilient microgrids and DER.
“The abundance of sun and wind provide excellent opportunities for deploying renewable energy systems, but capital-intensive investments, like microgrids, can be challenging for communities and industries to pursue given local financial constraints,” he said.
Bunker said that microgrids and DERs are the heart of the report’s focus. “They offer longer term opportunities in increased resilience,” she said.
Critial infrastructure offers a starting point to increase resilience in the Carribean. That means siting DERs and microgrids at hospitals, water treatment facilities and other critical facilities so they’re connected to the grid during normal operations but island during grid outages, she said.
“Community microgrids are a first entry point to be able to provide benefits across the board,” said Bunker.
Creating green jobs to counter Covid-19 losses
The report also highlights how green energy can create jobs to offset about half of those lost by the pandemic.
“In addition to putting people back to work now, incorporating DERs supports long-term priorities, including improving system resilience and supporting economic development through a diversified economy,” said the report. The Carribean’s experience can inform other areas, it said.
The Carribean’s electrical system now is mostly made up of centralized, fossil-fuel based systems. But DERs can provide less expensive, local energy sources at lower costs — as the islands are beginning to learn, said Bunker.
Many islands are taking charge and trying to move more toward decentralized, clean energy.
“The clean energy transition already happening in many islands should not stop because of the pandemic, and in fact shaping stimulus and recovery efforts to center on accelerating the energy transition will result in many layers of benefits in both the near and long term,” said RMI in the report.
Track news about microgrid development in the Caribbean. Subscribe to the free Microgrid Knowledge newsletter.
