78608 Got Steam? Geothermal as an Opportunity for Growth in the Caribbean June 2013 1 Authors: This note has been authored by Migara Jayawardena (Senior Energy Specialist, The World Bank), Laura Berman (Energy Specialist Consultant, The World Bank), Chandra Shekhar Singha (Lead Financial Specialist, The World Bank), Gerry Huttrer (Geothermal Resource Specialist Consultant, The World Bank), Mandkhai Bayarsaikhan (Energy Specialist Consultant, The World Bank), and Castalia Strategic Advisors. The Caribbean Knowledge Series is an occasional series that presents World Bank knowledge in an accessible format. It is meant to assist knowledge sharing across the region and trigger policy dialogue on topics relevant for the Caribbean. This note was prepared to support the participatory policy dialogue in the context of the Caribbean Growth Forum (CGF). The CGF is an initiative facilitated by the Inter-American Development Bank (IDB), the World Bank (WB), and the Caribbean Development Bank (CDB) in collaboration with the Canadian International Development Agency (CIDA), the United Kingdom’s Agency for International Development (UK AID), CARICOM Secretariat, the University of the West Indies, the European Union and Caribbean Export. It aims to facilitate a multi-stakeholder dialogue to identify practical solutions for the growth challenge in the Caribbean. To learn more about the CGF methodology and progress in each Caribbean country visit: http://caribgrowth.competecaribbean.org/ Disclaimer: This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Visit the entire “Caribbean Knowledge Series� collection at: http://worldbank.org/lac Design & Concept by Room Grupo Creativo | www.room.com.do Cover Photo: iStockPhoto 2 3 Promoting Growth in the Caribbean: Geothermal Renewable Energy The need for more stable, lower cost businesses. As an example, a recent hotel electricity in the Caribbean benchmarking study3 indicates that a guest night in a 50-100 room hotel can include an estimated The power sector is integral to economic $14 to $18 in electricity costs4. Given that tourism is development and inclusive growth in the a key economic driver in the region, such costs will Caribbean Region. The Caribbean economies make it harder for Caribbean countries to compete are looking to rebound from the recession the for tourist revenues. Hardship resulting from high region faced between 2008-10, and while some cost electricity is not isolated to businesses, but it countries have begun to post some sluggish impacts ordinary citizens as well. Given that average yet positive growth1, others have continued to residential consumers utilize anywhere from about contract2. Economies that rely on significant 113 kWh (Dominica) to some 173 kWh (Jamaica) in tourism have been particularly hard-hit, as it, developing islands in the Caribbean, at prevailing along with associated sectors in construction and tariffs, poor households5 can spend as much as 7 to transportation, make up substantial shares in the 11 percent of their income on electricity. Since the Gross Domestic Product (GDP) of many island poor represent anywhere from 20-40 percent6of economies. Services are another key driver of the population in most developing countries in the economic activity, particularly in the countries that Caribbean, the high cost of electricity imposes a are a part of the Organization of Eastern Caribbean considerable and disproportionate burden on the States (OECS), where it can account for 70 percent poor. or more of GDP. Many of these economies The high cost of electricity is largely a result of the that rely on tourism and services have faced Region’s heavy reliance on expensive, imported considerable hardship during the recent global fuel oil and diesel for power generation. In 2012, economic slowdown, while structural challenges around 95 percent of the electricity produced in in many have made it difficult for them to adapt. the Caribbean region was from fossil fuel sources7. Key among them are high levels of external debt, While a few islands utilize coal, natural gas, as well challenges accessing finance, and the extremely as hydroelectric power, the majority of the islands high cost of electricity, which erodes the region’s primarily uses expensive imported diesel or heavy economic competitiveness and stymies growth. fuel oil to generate electricity. This is particularly the case in islands that are members of the OECS, The high cost of electricity is undermining the as they do not have domestically available fossil- Region’s competitiveness and growth; and based resources and the relatively small size of each creating hardship for citizens. Electricity tariffs in power system does not allow importing coal or gas the Caribbean region are among the highest in the economically. Although hydro power, biomass, world. This is reflected in the fact that businesses in wind and solar are available options that can be the Caribbean region cite electricity as the second useful in some of the islands, these renewable most significant obstacle to successful operation, resources are intermittent and seasonal (in case only surpassed by challenges they face in accessing of hydro and biomass), making them unsuitable finance, as illustrated in Figure 1. Since it is a less to meet base-load requirements throughout the significant factor across the entire Latin America year. Consequently, the high cost of diesel and fuel and Caribbean (LAC) region, electricity creates a oil in power generation is often directly passed regional competitive disadvantage for Caribbean through to businesses and residential customers 1 Mainly the commodity exporting countries of Belize, Guyana, Suriname, and Trinidad and Tobago. 2 The East Caribbean Currency Union (ECCU) saw output fall by 0.71% according to Caribbean Development Bank Annual Report, 2012 3 Caribbean Hotel Energy Efficiency Action Program (CHENACT) benchmarks, 2012. 4 Room night consumes an average 44 kWh of electricity, at tariffs that range from US 32-40 cents. 5 Defined by Economic Commission for Latin America and the Caribbean (ECLAC) as the households at or below the poverty line (monetary measure of the minimum consumption expenditure that is needed to meet basic food and non-food requirements of an average adult at prevailing prices). 6 Multiple sources: The World Bank; Caribbean Development Bank; Government of the Dominican Republic; University of the West Indies; Economic Commission for Latin America and the Caribbean.that is needed to meet basic food and non-food requirements of an average adult at prevailing prices). 7 Based on data from the “CREF-Castalia Island Renewable Ranking.�Castalia.2012. 4 FIGURE 1: Constraints to Business Success (Percent of Firms) Access  to  �nance   Electricity   Tax  rates   Inadequately  educated  workforce   Crime,  the=  and  disorder   Prac?ces  of  the  informal  sector   Customs  and  trade  regula?ons   Corrup?on   Transporta?on   Caribbean   Poli?cal  instability   LAC   0 5 10 15 20 25 SOURCE: Business Enterprise Survey, The World Bank Group alike through the electricity tariffs. For instance, in to enhance energy efficiency – that reduces energy 2011, the fuel pass-through represented between intensity and therefore demand for electricity 45 to 65 percent of electricity revenues8 in several – expanding renewable energy can provide a OECS countries9. Where governments cushion lower cost solution that will boost the regions’ this impact through subsidies, the fuel costs create competitiveness. Unlike fossil fuels that largely fiscal burdens that are also unpredictable given need to be imported, many Caribbean islands, the volatility in international prices for petroleum especially in the OECS, possess a rich endowment products. The unpredictability of electricity costs of renewable energy potential, including hydro10, makes it difficult for businesses and households solar, wind, biomass, and geothermal. Several to plan for future investments and expenditure as countries already generate electricity from well. these resources. However, the availability of most of these resources are either intermittent Geothermal provides an opportunity or seasonal making them poor substitutes for to diversify and optimize the power base-load generation11. Geothermal is an ideal generation mix renewable technology that, once developed, can operate reliably on a 24/7 basis. It is a clean It will be important to diversify the generation mix energy option that will significantly reduce local of power systems in the Caribbean and enhance and global environmental impacts; and where it energy efficiency in order to lower costs and is indigenous, geothermal power can serve as a increase reliability as a means towards improving natural hedge against the volatility of petroleum business competitiveness and promoting shared based commodity prices. economic growth. It will be essential to make a significant shift away from utilizing costly fuel oil and diesel, and move towards a more optimized generation mix. Renewable energy presents a useful way forward. When combined with measures 8 Calculated as fuel cost divided by electricity revenues, based on information from utilities’ annual reports. Cost-reflective tariffs are assumed to be a proxy for total cost of supply. 9 Dominica, Grenada, St. Lucia, and St. Vincent and the Grenadines. 10 Mostly small run-of-the-river hydro, with the exception of the Dominican Republic and other isolated instances where there are large hydropower stations with storage (reservoir). 11 Power stations are designed to operate continuously throughout the day. 5 FIGURE 2: Preliminary Geothermal Potential Estimates in the Eastern Caribbean SOURCE: Data from various utilities, geothermal potential based on expert review of various preliminary estimates Preliminary assessments indicate significant these same Eastern Caribbean islands. Dominica unexploited geothermal potential, especially likely has the largest potential with a number in the Eastern Caribbean that can supply base- of geothermal fields that can be progressively load power for local markets and beyond. The developed. Resources at the WottenWaven/ Caribbean’s volcanic geology has created many Laudat field alone, which is already confirmed, far geothermal features, especially in the OECS region. exceed the generation capacity that can be reliably Figure 2 identifies seven Eastern Caribbean islands absorbed by the relatively small power system where there is initial evidence of geothermal power in Dominica. Several other islands face similar generation potential, which can be confirmed challenges where estimated geothermal potential with further exploration. Despite this potential, exceeds the relatively small base-load requirement only the French territory of Guadeloupe has in the respective domestic market. Several islands developed its geothermal resource by installing are exploring options for exporting electricity the 15MW La Bouillante power plant that is in generated by geothermal sources to neighboring operation. Although estimates of actual potential islands through undersea transmission lines. Such vary considerably since much of the geothermal efforts could lead to regional integration of power resources in the region are unexplored, expert systems within the OECS that would create new opinion suggests that the commercially exploitable markets for trading electricity. Over the long-term, potential can be as much as 850 MW in the Eastern there could be prospects for integration across the Caribbean islands depicted in Figure 2, which wider Caribbean region so that reliable and cost- exceeds the 770 MW of total current installed effective generation can benefit the entire region, capacity from all generation technologies in not just the islands endowed with the resources. 6 BOX A: Geothermal Development in Guadeloupe The 15MW La Bouillante plant in Guadeloupe is the only geothermal power plant in operation in the Caribbean. The initial reconnaissance work was undertaken by the French Bureau of Geological and Mining Research, which helped establish the presence of an exploitable resource at La Bouillante. In 1980, Electricité de France (EDF) constructed a 5MW power plant, which was later expanded to 15 MW of capacity in 2004. The initial 5MW operation performed well with average availability as high as 95 percent. Repairs to the site’s foundations and the installation of a brine reinjection system to preserve the geothermal resource quality have reduced its availability in more recent years. However, the repairs are expected to eventually increase the plant availability. EDF is planning to further expand the La Bouillante operation by possibly adding an additional 30 MW, although this plan is yet to be finalized. EDF is also considering potentially importing electricity generated from geothermal resources in the neighboring island of Dominica through an under-sea transmission line. SOURCES: Alstom, Bouillante I Case Study; EDF, 2012. BilanPrévisionnel de l’EquilibreOffre / Demanded’électricité; GéothermieàBouillante—50 Ansd’Histoire; International Energy Agency, Geothermal Implementing Agreement, 2010.Trends in Geothermal Applications; Délibération de la Commission de régulation de l’énergie du 22 juillet 2010. Greater integration of geothermal attempting to develop geothermal for the first time power in the generation mix can with limited experience. The initial developments reduce the overall cost of electricity are likely to be modest in size to match domestic supply making it more affordable, requirements, which will reduce potential for enhance energy security and improve economies of scale. The cost of financing large resilience, and provide local and investments in relatively small economies can also global environmental benefits. be high. However, as Figure 3 illustrates, even if the cost of geothermal electricity generation were Reducing the cost of electricity— Geothermal doubled to 20 US cents per kWh, it would still be electricity generation costs have been observed to an attractive lower-cost option compared with the be as low as 5-10 US cents per kWh, as illustrated high tariffs customers face today in many OECS in Figure 3. It is likely that the cost of developing countries. geothermal in the OECS islands will be higher for a number of reasons. Most countries will be 7 FIGURE 3: Geothermal Electricity Costs Compared to Selected Caribbean Electric Utility Tariffs 0.40   0.35   0.30   0.25   0.20   Geo.  high  +100%   0.15   ($0.20/kWh)   0.10   Cost  of  geothermal     0.05   ($0.05  -­�  0.10/kWh)   0.00   Florida     St.  Lucia   Grenada   St.  Vincent   Dominica   (LUCELEC)   (GRENLEC)   (VINLEC)   (DOMLEC)   Cost  of  Supply  per  kWh  (avg.  tariff)   SOURCE: U.S. National Renewable Energy Laboratory (NREL);and US Department of Energy. Working as a natural hedge against commodity they find it difficult to plan future investments and price volatility — As Figure 4 illustrates, electricity other important functions. In contrast, geothermal tariffs in the Caribbean have followed a similar generation capacity, once developed, can supply path as the price of oil, which is determined by electricity reliably at a steady price increasing the international markets. This has led to the electricity resilience of businesses to electricity price shocks. tariffs rising significantly over the past decade, Similarly, it will reduce household vulnerabilities to mirroring the overall increase in international oil changing electricity prices. prices, which reached historical highs during the same period. During this period, oil prices have also been volatile causing the electricity tariffs to also fluctuate. Such volatility and uncertainty create significant challenges for businesses as FIGURE 4: Average Tariff and Oil Prices in Selected Caribbean Islands $0.40   $120   Avg. Annual Crude Oil, Price per Barrel, US$ $0.35   $100   Average Tariff per KWh, US$ $0.30   Average  Tariff   $80   $0.25   $0.20   $60   $0.15   $40   Crude  Oil  Spot  Price   $0.10   $20   $0.05   $0.00   $0             2   3   4   6   0   05 07 08 09 11 0 0 0 0 1 20 20 20 20 20 20 20 20 20 20 Average  Expense   Oil  price/  barrel   SOURCE: based on data from Caribbean Electric Utility Service Corporation (CARILEC) for selected representative Caribbean countries; Crude oil spot price is the Oklahoma West Texas intermediate crude price (Source: US Energy Information Agency) 12 Dominica estimate includes electricity exports to Guadeloupe and/or Martinique 8 FIGURE 5: Illustration of Potential Geothermal Benefits – Electricity, Fuel Savings, &Avoided CO2 Island   Est  peak  and  base   Est.   Est.  Annual   Est.  Annual   Est.  Annual   load  demand  in   geothermal   geothermal   savings  from   avoided   2023a   capacity  in   electricity   avoided  fuel   greenhouse   2023b   generation  c importsd   gas  emissionse   MW   MW   GWh/year   US$M/year   mil  tCO2e/year   Dominica   27   16   115  f   907   $  109  -­�  150  M   0.65  –  0.80   Grenada   49   29   29   229   $  28  -­�  38  M   0.17  –  0.20   Guadeloupe   371   222   20   158   $  19  -­�  26  M   0.11  –  0.14   Montserrat   4   2   2   16   $  1.9  -­�  2.6  M   0.01  –  0.01   Nevis  1 52   31   25   197   $  24  -­�  33  M   0.14  –  0.17   St.  Lucia   85   51   30   237   $  28  -­�  39  M   0.17  –  0.21   St.  Vincent   43   26   10   79   $  9  -­�  13  M   0.06  –  0.07   Totals     231   1,822   $  219  -­�  301  M   1.32  –  1.61     a Demand estimate for illustration, peak load forecast based on recent growth rates, base load assumed to be equal to 60 percent of peak demand b Future geothermal installed capacity is assumed to be lesser of base-load estimate or potential geothermal capacity; c Assumes 90 percent capacity factor for geothermal power plant operation. d Assumes generation efficiency of 19kWh per imperial gallon of fuel (based on LUCELEC’s efficiency as reported in annual reports); and oil price of US$80-US$110 per barrel. e Based on emissions factors of 91 grams per kWh for geothermal and 893 grams for fuel oil based generation, and range +/- 10 percent. f For Dominica, exceeds domestic base-load needs due to assumed electricity exports to Guadeloupe & Martinique Increasing energy security and improving the in greenhouse gases would contribute towards balance of trade by reducing oil imports— Figure 5 mitigation of global climate change impacts. illustrates that over 200 MW of geothermal capacity Generating geothermal power can also benefit could be absorbed into the power systems12 of the local environment. Geothermal power plants Eastern Caribbean countries over the next decade release less than 1 percent as much sulfur dioxide based on base-load estimates and geothermal (SO2) as the cleanest fossil fuel generation, and do resource potential. As an indigenous resource, not emit any nitrogen oxide (NOx) or particulate the development of geothermal would enhance matter14. Limiting local pollution and maintaining energy security by displacing an estimated 2.7 a clean environment are important for sustaining million barrels of fuel oil and diesel imports each tourism that is a key driver of economic growth. year. If the international price of oil is $80-$110 per barrel, it would result in total annual savings between $200-$300 million, as indicated in the table in Figure 5. Environmental benefits through reduction of greenhouse gas emissions and local pollution —Geothermal is a cleaner, renewable power generation option that emits only about 10 percent as much carbon dioxide (CO2) as diesel generation13. Based on potential geothermal generation estimates in Figure 5 and the potential displacement of diesel and fuel oil generation, the estimated reduction in CO2 emissions would be about 1.3 to 1.6 million tons per year. This reduction Fridleifsson, I.B., et al.,“The Possible Role and Contribution of Geothermal Energy to the Mitigation of Climate Change.� 13 Report for the Intergovernmental Panel on Climate Change (IPCC), 2008. Boyle, Godfrey. “Renewable Energy.�(2004) and Kagel, Alyssa, et al. “A Guide to Geothermal Energy and the Environment.� (2007). 14 9 Although Guadeloupe is the only island with a three exploration wells, and is poised to advance geothermal power plant in operation, there are to the production drilling phase18. It is evaluating preparation activities underway in a number of options for trading electricity with neighboring the Eastern Caribbean islands to try and exploit islands. Montserrat also has exploration drilling the benefits of geothermal power. activities underway19. Some exploratory drilling took place in St. Lucia in 198820, but activity since • Expanding existing operations—Guadeloupe is then has been very limited21. considering expanding the installed capacity of its existing 15 MW power plant at La Bouillante15 , while, • Surface reconnaissance —Grenada has it is also considering, together with Martinique, to completed initial surface level reconnaissance, import geothermal electricity from Dominica. and is seeking a development partner to undertake exploratory drilling22. Some surface • Geothermal drilling—a private developer drilled reconnaissance has been completed on St. exploratory wells on Nevis in 200816, but the island Vincent23, but it has not advanced to the stage of administration is now seeking a new development exploration drilling. partner17. Dominica has completed the drilling of Figure 6: Geothermal Resource Risks and the Cost of Development High 100% Cost Project Risk Cumulative Cost Moderate 50% Risk Low 0 Pre-Survey Exploration Test Drilling F/S Planning Drilling Construction Start-up Operation & Maintenance Bankability SOURCE: Adapted from the Geothermal Handbook: Planning and Financing Power Generation, ESMAP, The World Bank, 2012. 15 Electricité de France (EDF), 2012 16 SKN Vibes, 2008 17 Think Geoenergy, 2013 18 The Government of the Commonwealth of Dominica, The World Bank, 2013. 19 Caribbean Journal, 2013. 20 Batocletti, Liz (for Sandia National Labs). “Geothermal Resources in Latin America and the Caribbean.� February, 1999. 21 In 2010 the Government and US-based company Qualibou Energy signed a development agreement, with interim funding for pre-construction activities announced in 2011; but no progress has been reported since. 22 National Energy Plan of Grenada, 2011. 23 Batocletti, Liz (for Sandia National Labs). “Geothermal Resources in Latin America and the Caribbean.� February, 1999. 10 Key challenges to developing project will be in a position to produce electricity geothermal as a viable power and earn revenues. As a result, private project generation option in the caribbean developers face considerable financial exposure that severely constrains their capacity to undertake Geothermal resource risks are a major barrier quick and significant expansion of green field during the early phases of development as it geothermal prospects. Since geothermal resource creates uncertainty surrounding the viability risks are a common characteristic of the technology, of the investment. The uncertainty at the early many other geothermal endowed countries have stages of developing a greenfield geothermal grappled with addressing this barrier in order site stem from limited knowledge regarding to develop the sector. A recent global survey the availability of sufficient steam resource (i.e. commissioned by the World Bank24 confirms resource base) and the cost of extracting the steam that the role of the public sector, in particular, to for generating electricity. Developers will seek to incentivize developers and catalyze investments overcome this shortcoming by conducting surface during the early stages of development, has proved level reconnaissance work followed by exploration to be critical in successful geothermal expansions. drilling in order to confirm the availability and Government interventions have varied, and have ascertain the characteristics of the geothermal included a range of options including extending resource. Although the investments needed at resource risk financing, public sector resource this stage, about $20-$30 million, are relatively confirmation prior to granting a concession to modest compared to the overall cost of a full-scale private developers, open access to early stage development, investors have few options to share surface level reconnaissance work, establishment the risks at this stage. So they typically have to of risk insurance facilities, and loan guarantees, resort to utilizing equity (i.e. risk capital) for funding to name a few. When implemented successfully, the exploration drilling. Commercial financiers do they have proven to be vital in attracting private not accept these early stage risks. There is also investments, and scaling-up and speeding-up reluctance with investors to fund this early stage of geothermal development. In almost all instances, development even when projects are predicted to there was some form of public support, especially be viable since it will be several years before the at the early stages that helped reduce investor risks and mobilize financing for developing the sector. 11 Attracting credible and experienced developers USA and Momotombo field in Nicaragua. Given is essential for developing the resources in line the nascent state of development and the relatively with proven industry practices, and in compliance small scale of expansion, it may be challenging to with international standards. Given the limited attract top global developers to partake in the geothermal experience in the Eastern Caribbean Caribbean geothermal investments. The overall islands, it will be important to attract globally investment climates can also deter investors from experienced geothermal developers who have some countries. Therefore, it will be important to the technical and financial capacity to efficiently have a credible process for selecting developers exploit the resource. Improper adherence to and awarding concessions in a fair and transparent common industry practices has led to excessive manner in order to attract experienced developers. depletion of the steam resource and degradation of the field causing permanent damage. Examples of such instances include the Geysers field in the 24 An Assessment of Geothermal Resource Risks in Indonesia (including a Global Survey), by GeothermEx for Private Participation in Infrastructure Advisory facility (PPIAF), the World Bank, 2010. BOX B: Geothermal Development in Dominica Preliminary estimates suggest that Dominica has the largest exploitable geothermal resources in the Caribbean due to the volcanic geology of the island. Of the several potential sites, the Wotten Waven/ Laudat (WW/L) field in the Roseau Valley is the most advanced in terms of preparation, although the development has not reached the stage of power generation yet. Several development partners, including the World Bank are supporting the Government of the Commonwealth of Dominica (GoCD) with this effort. The GoCD is interested in attracting a reputable private investor to develop the WW/L project, but saw the need to provide enough confidence to prospective developers regarding the sufficient availability of the steam resource as well as the commerciality of the investment. Therefore, GoCD, with the support of development partners undertook surface level reconnaissance work and drilled three exploration wells at WW/L field. This effort has had a significant impact. It has helped confirm the existence of the resource and work is now underway to prove its commercial viability. The GoCD is also taking efforts to ensure that the development is undertaken in line with industry practices and compliant with international standards – something vital for the “bankability� of the WW/L project. As a result of this ongoing work, there has been interest from international developers to participate in the operation, an discussions are underway to not only construct a small power plant to meet domestic needs, but to also scale-up development for exporting electricity to neighboring islands of Guadeloupe and Martinique. SOURCES: GoCD, The World Bank, 201; photo credits – Migara Jayawardena, The World Bank. 12 Following successful geothermal resource included in Figure 7 have only managed to attract confirmation, there will be continued need to a mere $17 million per year on average in private mobilize greater levels of financing to complete financing in the energy sector over the past five the remaining development. Once geothermal years. Therefore, it will be a challenge for many resources are confirmed in a field, there will be less of the OECS countries to mobilize the necessary risks and greater certainty regarding the overall financing in order to develop their geothermal viability of the development. However, the amount resources. As an example of the challenge they of financing that is required for implementing the face, the relatively large power plant for export in next stage of development can be significantly Dominica may require financing that is comparable higher, particularly for larger developments. to the entire GDP of the country. Furthermore, the Unlike conventional power schemes, geothermal limited availability of financing will likely require development requires funding to develop the developers to contribute more equity in order to upstream steam field as well as the downstream carry out investments while looking to leverage power generation operations. Comparatively, commercial financing, when available. The it requires more up-front financing than a Governments’ can also finance some undertakings, conventional power project, which can lead to but high national debt levels in many Caribbean prohibitive or high financing costs to cover the countries will likely limit such contributions towards production drilling, develop the steam gathering leveraging financing. system, and to construct the power plant. A 20- 30 MW development may require anywhere from $70-$150 million in financing depending on a number of factors; while the total private investment in the entire energy sector in a selected number of Caribbean countries depicted in Figure 7 has averaged no more than $125 million per year. If the commodity exporting countries with larger economies and more robust growth are excluded, then the five selected OECS countries FIGURE 7: Private Investments in the Energy Sector for Select Caribbean Countries 200   150   US$  million   Other  Caribbean*   100   Select  OECS  **   Total  Caribbean   50   0   2003 2004 2005 2006 2007 2008 2009 2010 2011 * Other Caribbean countries include Belize, Dominican Republic, and Jamaica **Selected OECS include Dominica, Grenada, St. Kitts & Nevis, and St. Lucia SOURCE: Private Participation in Infrastructure (PPI) Database, The World Bank, 2013. 13 Special consideration is needed for integrating Geothermal developments largely beneficial geothermal power into relatively small and for the environment and local communities—and isolated island systems in the Eastern Caribbean. following industry practices and international The small scale of the electricity networks will pose standards will adequately address its potential a number of challenges, including limiting the impacts. Geothermal is a clean, renewable ability to absorb geothermal capacity, requiring energy that is environmentally friendly with smaller unit sizing in power plants and adequate generally positive impacts. However, as with the backup to maintain system reliability, and the need development and operation of any power plant, to strengthen existing transmission and distribution it will be important to comply with internationally networks to accommodate the influx of geothermal accepted environmental and social standards such power. It will also be important that the policy and as the Equator Principles. This will ensure that regulatory environment is adequately designed to potential water, air quality, noise, and other impacts integrate geothermal power. Developers will want are adequately addressed so that investments to ensure that their investments are secure, that continue to be sustainable. Internationally they can receive a return commensurate with the compliant safeguards practices are also an integral costs and risks associated with the development, part of a project’s “bankability� as it is increasingly and that there is sufficient recourse should issues becoming a requirement for securing financing arise. It is also common for investors to seek from international investors and banks. Therefore, agreement regarding the power off-take and it will be important for each jurisdiction to mandate pricing. These and other factors that enhance its own environmental and social standards based the overall investment climate in the sector will on international best practices; and monitor to be crucial for mobilizing private investments to ensure compliance with those standards by project develop the geothermal sector. developers. Inter-island transmission interconnections provide an opportunity to exploit the Eastern Caribbean’s full geothermal potential; and promote regional integration. Many of the small power systems in most Eastern Caribbean islands do not allow the full geothermal potential of the region to be exploited. However, this challenge could be overcome by integrating regional power markets through the development of transmission interconnections. A submarine transmission link is being actively considered to connect Guadeloupe and Martinique to Dominica to exploit the full potential in the WottenWaven/Laudat geothermal field and beyond. Nevis and Montserrat may also have geothermal potential in excess of domestic needs, and may benefit from an interconnection with other islands. However, developing and operating submarine transmission lines can be costly and complex, likely requiring international expertise that is not available regionally. Moreover, interconnecting different jurisdictions will require regional cooperation. Although no transmission interconnections exist in the Eastern Caribbean today, the future may bring greater energy trade and regional cooperation. 14 15 worldbank.org/lac 16