LatinFinance - July/August 2016 - 29

Yet the switch from fossil fuels could cost
as much as $20 billion - a staggering amount
for the region's debt-laden countries. The
exact cost is unknown. But in June, the IDB
began studying the costs and hopes to have
preliminary numbers early next year.
Pinpointing the cost could help unlock
financing, which is difficult for the heavilyindebted smaller Caribbean island nations to
access. The private sector has been reluctant
to put money into projects, says Gischler.
Officials say Caricom's goal is ambitious,
involving local and international factors
outside its control - oil prices and advances
in electric vehicles among them - but achievable.
"We are on a learning curve, and it is a
pretty steep learning curve, to transition to a
different way of operating that will challenge
governments, utility operators and investors," says Peter Williams, managing director
of Emera Caribbean, a subsidiary of Canada's
Emera Inc., which operates on four Caribbean island nations.
Already several projects are underway,
and if successful they could also help attract
further financing, says Gischler.
Volcanic power
A project that could be a model for the region
is the development of the first major geothermal plant in the Eastern Caribbean on
Saint Vincent and the Grenadines. Accessible
geothermal resources and rule changes that
facilitate public-private partnerships ( PPPs)
opened the way to the project.
The 10MW to 15MW plant would supply
more than half the country's power and has
been described as "game-changing" by the
IMF. The government, multilateral funders
and the private sector, including Emera Caribbean and Iceland's Reykjavik Geothermal
(RG), are involved.
The first step, rare in a region where states
tend to manage public services, was drafting rules for PPPs . That led to the formation
of the Saint Vincent Geothermal Company
by the government, Emera Caribbean and
RG. The PPP is not only a model for Saint
Vincent, but for the region as whole, says
Ellsworth Dacon, head of the government's
energy unit.
"If you have a public-private partnership
from the beginning, there is a higher level of
commitment to the ultimate success of the
project," he says.
The new company is planning to drill the
first test well to gauge the scope of Saint Vincent's geothermal resource. The rig should
be moved into place in the coming months

and drilling should begin in late 2016 or
early 2017. If the drilling works as planned
- mapping studies have already established
potential - the project could be delivering
power in 2018.
The initial investment is around $30
million, which is coming from a varied mix,
including a grant-loan blended instrument
approved in May by IDB. The total cost,
including the power plant, is $80 million.
It is the first project of its kind under the
Sustainable Energy Fund created last year
by the IDB and the Caribbean Development Bank (CDB). The project includes a $5
million grant and a $10 million contingent
recovery grant, which would only be repay-

able if the geothermal project becomes
a power plant. The government has also
secured funding from the United Arab
Emirates and the United Kingdom.
Trent Philips, director of the Americas
for RG, says geothermal development is the
smartest move for Caribbean countries.
Geothermal power not only lowers the
price of energy, he says, but provides price
predictability and establishes a base to
which other renewable sources, such as
solar and wind power, can be added.
"It is one of the best ways of stabilizing
the power price," he adds."Even though the
price of oil is low today, we are still at a scale
that will provide significant energy and
economic security, as well as eliminating
Outsized costs
emissions. Every megawatt we generCaribbean countries' fuel expenses, % of GDP
ate replaces a megawatt that is dieselCountry
Percentage of GDP
generated."
Saint Vincent not only has tremenAnguilla
18.3%
dous geothermal potential, but also
Antigua & Barbuda
12%
could add hydroelectric and solar projAruba
16%
ects to transition fully away from diesel,
Bahamas
11.4%
Williams says.
The IDB-CDB facility focuses primarily
Barbados
6.9%
on geothermal development with other
Dominica
5.0%
components looking at energy efficiency.
Grenada
18%
"Geothermal is the power source that
Monserrat
24.9%
has the lowest levelized cost, therefore
Saint Kitts & Nevis
3.99%
if you have geothermal there is really no
need for solar or wind," Gischler says.
Saint Lucia
16.45%
Saint Vincent & the Grenadines
Source: US Department of Energy

10%

Growing importance
Saint Vincent spends around $30 million
a year, equivalent to 4% of its GDP, on imported fuel for power generation. Outlays
have dropped thanks to lower international
prices, but that has started to change.
Oil prices are creeping up and some projections have them stabilizing around $70 a
barrel. That would effectively double what
Saint Vincent shelled out last year for fuel.
Worst still would be an end to PetroCaribe, the program under which Venezuela
sends subsidized crude to its allies. According to the IMF, Saint Vincent's debt to
Venezuela through PetroCaribe was 8.7%
of its GDP.
Other countries considering geothermal
are Dominica, Grenada, Monserrat, Saint
Kitts and Nevis and Saint Lucia, all of which
appear to have the conditions that would
facilitate construction of geothermal plants.
The initial investments could rise to as
much as $300 million if five countries in
the eastern Caribbean with geothermal
potential wanted to develop 10MW generating plants, says Tessa Williams-Robertson,
head of the renewable energy division at
July/August 2016 - L ATINFINA NCE.COM 29
http://www.LATINFINANCE.COM
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