In this interview, The Energy Republic talks to Melanie Chen, Founding Chair of the Caribbean Energy Chamber about the current state of the Caribbean energy sector, covering the challenges and growth opportunities for regional collaboration.
Chen will be speaking at the upcoming 2024 Suriname Energy, Oil and Gas Summit (SEOGS) 2024. She will be sharing extensive insights about the energy potential of the region and strategies needed to explore these resources for economic development. Excerpts:
TER: WHAT ARE THE MISSION, VISION, AND MAIN FOCUS AREAS OF THE CARIBBEAN ENERGY CHAMBER
Chen: The mission and vision of the Caribbean Energy Chamber (CEC) are “to ensure affordable net-zero energy security for the Caribbean”.
CEC recognizes that it will take a series of step changes and an energy transition which will take a period to complete before the region reaches this goal.
The initial main focus areas of CEC are therefore energy efficiency and public awareness; technical capacity sharing and regional build-out (financial, engineering, and technical); grid modernization and distributed generation; utility system diversification; de-risking and delivering “bankable” projects; and having a bundling national and/or regional approach versus a project-by-project basis.
TER: WHAT’S THE CURRENT STATE OF THE CARIBBEAN ENERGY SECTOR?
Chen: The Caribbean is faced with major issues such as climate change and global conflict which directly or indirectly affect the region. These issues hold significant importance.
Climate change has a disproportionate impact on the Caribbean and requires global collaboration to address its effects. Additionally, geopolitical tensions outside the Caribbean especially the recent conflicts have resulted in soaring food and energy prices, underscoring the volatility of the global market.
Within the Caribbean, there are stark differences in the energy landscape. The Southern Caribbean (Guyana, Suriname, and Trinidad & Tobago) has significant oil and gas reserves and much lower energy prices for their citizens.
However, the rest of the Caribbean is heavily dependent on imported fuels and has some of the highest energy prices in the world.
Most Caribbean countries have declared ambitious net zero targets but across the region, renewable energy (including hydroelectric power) is currently only approximately 9% of the energy matrix, and excluding hydroelectric 5-6%.
Given these concerns, CEC has optimism about the collaboration within the Caribbean itself as well as with the Caribbean and the global community, highlighting the importance of recognizing our differences while focusing on our shared values.
There is a role for an entity like the CEC to enable, on a consistent and sustained basis, more dialog and collaboration at a working level to advance at a more rapid pace actions related to the transition to a lower carbon future (net zero), energy security and affordability and resilience of energy systems.
TER: CAN YOU ELABORATE ON THE CARIBBEAN ENERGY POTENTIAL, WITH EMPHASIS ON THE ROLE OF OIL AND GAS IN THE REGION’S ECONOMIC GROWTH AND SUSTAINABLE DEVELOPMENT
Chen: Guyana and Suriname have significant new oil and gas discoveries which in turn have accelerated economic growth, especially in Guyana. Suriname has yet to start production of its discoveries but there is tremendous economic potential for the future.
The Trinidad & Tobago (T&T) energy sector when viewed through the lens of production of oil and gas and derived commodities such as LNG, ammonia, methanol, and smelted metals can best described as mature and with clear signs of decline.
However, Trinidad & Tobago has a sophisticated, best-in-class downstream sector that has spare capacity to be utilized starting immediately.
This is important given the effects that CBAM and IRA will have on the oil and gas and related downstream industries in the future.
This means that time efficiency in monetizing oil and gas reserves and derived commodities will be key for sustainable future economic development for the Southern Caribbean.
Natural gas is increasingly being used as a transition fuel and this can be sourced intra-Caribbean going forward. Strategic collaboration especially between Guyana, Suriname, and Trinidad & Tobago presents significant economic and operational synergies not only in these countries but the wider Caribbean.
The region is also committed to increasing renewable energy in its energy matrix so there is significant growth potential given that to date renewables penetration is limited.
However given technological and cost constraints, the region needs to find the sweet spot between sustainability, reliability, and affordability to get the best outcome of energy security for its citizens.
TER: THE TRANSITION TO A CLEANER ENERGY SOURCE IS BUILDING A FORMIDABLE FORCE ACROSS THE WORLD WITH NEW INVESTMENT FOCUS ON CLEAN ENERGY PROJECTS. WHAT’S YOUR PERSPECTIVE ON THE PECULIAR CHALLENGES FACING THE CARIBBEAN’S ENERGY TRANSITION JOURNEY? HOW CAN THE REGION ADOPT A JUST AND INCLUSIVE ENERGY TRANSITION AGENDA?
Chen: Across the Caribbean, countries are at different stages of development and therefore have different challenges in the energy transition journey. Parts of the Southern Caribbean that are more industrialized need to also implement a reduction in consumption, increased energy efficiency, and circularity.
Regions with low energy access, on the other hand, require higher consumption of energy initially and materials to improve living conditions for their communities, for example, rural electrification in Suriname.
Some Caribbean countries are more advanced with their national policies and enabling regulations for incorporation of renewables in specific technologies, for example, Jamaica with solar and wind resources and Barbados with solar resources.
These countries’ advancements present the opportunity to adopt or adapt what has been developed thereby avoiding the wastage of resources in replicating what is already available.
While other Caribbean countries aim to implement an energy transition to a lower carbon future, they are much further behind in being able to execute an energy transition so implementing lessons learned from other more advanced parts of the Caribbean is the most efficient.
Overall, the Caribbean has had lower rates of penetration of renewables in its energy supply. Various barriers need to be resolved in addition to implementing regulatory frameworks (as outlined above), including the critical infrastructure of upgrading and building out transmission grids and building battery storage. There tends to be a focus on the supply of renewable energy generation but less of a focus on this critical infrastructure needed to increase renewable energy penetration.
This infrastructure rollout has significant costs which need to be financed which means that if the region were to go to 100% renewable energy it would radically increase the already high energy costs for its citizens.
“A just transition therefore requires public funds and holistic policy frameworks that address structural misalignment, inequality, and institutional constraints (IRENA, 2022a).
Public funds (domestic or international through collaboration) must flow through intermediaries such as governments, multilateral DFIs and bilateral DFIs, and global funds using a variety of instruments including:
•Government spending such as grants, rebates and subsidies, and capacity building.
•Debt, including concessional financing and guarantees.
•Equity and direct ownership of assets (such as transmission lines or land to build projects).
•Fiscal policy and regulations including taxes and levies, exemptions, accelerated depreciation, and regulations such as power purchase agreements (especially when the tariffs paid to producers – in addition to the cost of running the system – are lower than what is collected by consumers and the difference is paid through a government subsidy)(IRENA 2023a)”.
However, public-private partnerships will also be important to a just and fair transition which cannot be accomplished by public funds alone, given the incumbent debt positions of many Caribbean countries.
The investment flows of today, from whatever source, define which industries and jobs will emerge tomorrow. Therefore there also has to be alignment with future investment flows on training and education to build industries, infrastructure, and skills that meet future needs.
International collaboration should not only include the transfer of funds but also knowledge exchange.
The Caribbean needs investment not only in renewable technologies but also in education and training, research, infrastructure, environmental remediation, and community transition.
Proactive planning is required so that finance is allocated to deliver the results most beneficial to society to allow a just transition to affordable net zero energy security.
As a region, we therefore need more coordinated dialogue to close such gaps in the energy transition journey. CEC is therefore encouraging wide application for membership from all the various sectors, since a significant part of the value of CEC, is derived from the membership having a voice in defining what priorities should be addressed at a pan-Caribbean level by CEC to be more efficient in enabling tangible steps to execute the energy transition.
TER: WHAT ROLE IS THE CHAMBER PLAYING IN THE REGION’S ENERGY TRANSITION JOURNEY?
Chen: Energy transition is an intermediary phase to energy security which is what is a main objective of the region.
Energy security is also national security so as a region it behooves us to work together in a more united way given that it is international geopolitics that often disproportionately affects us as a region.
CEC is a formal but informal mechanism that allows us to meet as a region with the various energy stakeholders more frequently to address energy issues. The objective is to understand as a region where we are and then to enable tangible actions to move the energy security agenda forward.
TER: HOW IMPORTANT IS THE UPCOMING SURINAME ENERGY, OIL AND GAS SUMMIT (SEOGS) 2024 IN THE ENERGY SECTOR?
Chen: Suriname will be an increasingly important energy player in the global arena while at the same time, if managed successfully, it can continue to be one of the few net-zero oil and gas-producing countries.
SEOGS is therefore an exceptionally important forum to showcase the sustainable, economic potential of Suriname to a wider international audience.
TER: AS A SPEAKER AT THE SEOGS 2024, WHAT WILL BE YOUR MAJOR TALKING POINT AND PRESENTATION AT THE EVENT?
Chen: Strategic collaboration will be a key component of helping to accelerate the energy transition so that the region can attain affordable energy security. Collaboration and co-operation are often spoken of, but have challenges to implement:
An example of this is technical capacity rollout in a timely manner which is one of the key issues the region faces.
There are areas of the Caribbean where there are surplus amounts of technical and other capacities that can be deployed immediately.
CEC has therefore developed an online mechanism to allow the Caribbean government and relevant agencies, that need resources, to be able to access the pool of Caribbean technical, financial, and legal resources available from the various official engineering, legal, and other appropriate organizations.
With the advent of CSME, this should also make the movement of resources intra-region more efficient. This is also complementary to the technical capacity efforts from external donor countries and the multi-lateral institutions.
CEC is a regional, self-sustaining cooperative mechanism and we hope that this will help us to advance the Caribbean’s energy security and prepare the region to stand up to the challenges of today and tomorrow.