Trinidad and Tobago – Renewable Energy Outlook

All over the Caribbean we are witnessing the beginnings of an energy revolution. Developed nations such as Germany, Spain, Italy, Greece, and even the US and Japan have already experienced a jaw dropping capacity of renewable energy installed primarily including Solar and Wind. In 2011, Germany registered 123.5 TWh of renewable energy on their grid or approximately 50% of T&T’s energy demand in 2012.

Now that the price of integrating clean energy technologies worldwide has dropped significantly, the Caribbean is up to bat. A region characterized by complete energy dependence with high, volatile fuel prices and abundant renewable resource offers a unique opportunity to interconnect renewables at grid parity without subsidy.

Aruba has even gone as far as to pledge 100% renewable energy by 2020. Barbados is currently amending their interconnection policy. Jamaica’s JPS has introduced a “net-billing” statute which allows residents to be billed on the difference between the power they consumed and the power they produced similar to “net-metering”, a widely adopted policy abroad. In each of these cases, the government will not spend tax dollars supporting the technologies. The return on investment is attractive without them. However, in USVI, solar and wind energy is even more lucrative considering the peripheral tax credits from the US with payback between 2-5 years.

Unfortunately, Trinidad and Tobago is behind the curve and not following suit. In T&T’s defense, it is not like the rest of the Caribbean. With a stable, domestic supply of oil and natural gas, electricity prices are low and stable making it impossible for renewable energy to compete with T&Tech’s current rates.

At first glance, it seems like an open and shut case, but there is more to the story. Having a domestic supply of oil and natural gas does not necessarily keep electricity prices low. There will always be an opportunity cost associated with the volatile market prices of not exporting. The cost between the “Reference Price” and the “Retail Price” was historically passed onto the consumer. In the 1970s, to protect consumers from this price instability, the government introduced subsidies to make up the difference. Initially the entire burden was placed on the oil companies. They would subsidize the difference out of their own profits. Since the early 90s, oil companies have only had to devote between 3-4% of gross income to the program. The government, and thus taxpayers, has been covering the excess cost ever since.

It is hard to speculate what would happen if subsidies were removed. What would the price of electricity be? How would that affect the adoption of renewables?

“The prices would go up and solar could compete, but there is still the issue of interconnection.” Says Ian Smart, CEO of Smart Energy, a clean energy solutions company based in Port of Spain.

An alternative policy to level the playing field is to offer incentives to renewable energy such as a Feed In Tariff (FIT) where residents and small businesses install grid-connected systems on their property and the government agrees to pay for the power at a predetermined rate for between 10-20 years. The income from the FIT can offset any increasing rates of electricity as the oil subsidies are phased out.

At any rate, T&T must begin to shift its focus away from a dying form of energy, fossil fuels, and begin to look towards the future. As a leading nation in the region, the responsibility to combat climate change and lower CO₂ emissions is immense and the widely accepted renewables adoption of its Caribbean peers imminent.