Renewables and Energy Transitions in Small Island States

By Kalim U. Shah, Energy and Environmental Policy Program and the Island Policy Lab, Joseph R. Biden Jr., School of Public Policy and Administration, University of Delaware

Challenges to Energy Security

The vast majority of Small Island Developing States (SIDS) are net energy importers of fossil fuels and have historically been so (Timilsina & Shah, 2016; Niles & Lloyd, 2013). Being heavily economically indebted, fuel importation takes a decisive toll on national budgets – for example, Palau (28% of GDP), Guyana (21%) and Maldives (19%) (2013 data, Raghoo et al., 2018). The main energy utilization continues to be power generation and transportation sectors. Many islands with tourism and hospitality dependent economies require high energy intensities to sustain these industries and others such as manufacturing and agriculture.

In the traditional framework, energy security is discussed in terms of availability, affordability, accessibility, and acceptability. Coupled to this traditional framework, experts point more and more to the concept of energy resilience, which could be defined, in the simplest form, as the ability of an energy system to recover from adversity (Roege et al., 2014). In this context, “adversity” refers to global climate change and the tremendous acute climate induced impacts that islands experience including hurricanes, typhoons, flooding, winds, and extreme temperatures, for which ensuring energy resilience becomes a major concern. Another focal point of interest becomes critical energy infrastructure and how to “harden” such infrastructure in the face of natural and climate induced disasters. Taking advantage of natural endowments of indigenous energy resources seems to be an obvious option. Indeed, most SIDS are well geographically and geomorphologically placed to potentially benefit from solar potentials, wind potentials, tidal and oceanic energy sources, and sometimes geothermal and hydropower (UNEP, 2014). In many SIDS cases, too, while centralized utility scale energy production, transmission and distribution systems are coveted, decentralized, off grid and mini-grid system options can also play meaningful roles in energy security (Berthau and Cader, 2019).

Current State of Affairs

Despite the Covid-19 pandemic, SIDS continue striving to address their energy challenges and foster sustainable economic development pathways. Renewable energy technologies combined with steadily improving energy efficiency can achieve transformational socio-economic impacts (Timilsina & Shah, 2016; Shah et al., 2021). That said, the gap between fossil fuel dependency and more diversified energy portfolios or even full renewable transition is significant. The total installed capacity of renewables from all SIDS accounted for approximately 5.3GW at the end of 2019, of which about 30% was installed since 2014. These new installations include more than 1.1 GW of solar photovoltaics, 380 MW of wind, 60 MW of hydropower, and 215 MW of bioenergy.

Aterridge and Savvidou (2019) analyzed whether energy aid to tackle climate change supported more renewable energy deployment and found that it was unevenly spread between SIDS, on a total and a per capita basis, with little correlation between the allocations made to individual countries and either their income or energy access gaps; improvements in electricity access still with low disbursement rates, suggested implementation problems. In sum, throwing more finance at the challenge has not been an answer.

While there remains significant work to do, there has been increased acknowledgement by the international community that the clean energy transition in SIDS can be accelerated through both technical and financial cooperation:

through capacity building for local policymakers, utilities, private sector, and financing institutions;
by access to platforms to share information, knowledge, lessons learned, and good practices;
through enhanced policy, regulatory and advisory services for greater uptake of renewables through roadmaps, resource assessments, grid stability analysis, project planning, identification and execution; and
through investments in terms of ensuring project bankability, which in turn attracts more investors to support energy transformation (Timilsina & Shah, 2016; ESMAP, 2015; Lucas et al., 2017; Michalena & Hills, 2018; Crossley & Sprague, 2014).

Many SIDS have enhanced their voluntary Nationally Determined Contributions (NDCs), which are climate action plans to cut emissions and adapt to climate impacts that each Party to the Paris Agreement is required to establish every five years. Increasingly, country’s approved NDCs are being tied to access to global climate funding and also serve as a market signal to donors and investors about the long-term commitment of governments to clean energy transitions. Again, the level of ambition varies. On the ambitious end, one might cite Barbados, which seeks to be the first 100% green and fossil–fuel free island–state in the world, while Jamaica is targeting 25% reduction in emission by 2030 (without international support) and 29% emissions reduction with international support (Government of Barbados, 2021; Government of Jamaica, 2020). SIDS are also engaged on the clean energy transition front through the mechanisms of the 2030 Agenda for Sustainable Development (SDGs) and the SAMOA Pathway, which places emphasis on sustainable energy and efforts to connect the energy sector in SIDS to global market finance and technology that can transform national energy sectors.

Opportunities and Barriers

Generating utilities scale clean energy implementation continues to be the highest priority for SIDS but also the greatest opportunity for sustained energy security. Capacity building of the power generation sector is ongoing to strengthen power utilities and regulators in the design and negotiation of bankable power purchase agreements (PPAs) and contracts. These will lead to the effective commitment of private capital to the deployment of renewable energy projects. Bankable PPAs constitute long term contracts between sellers and buyers of electricity to facilitate investment by defining each parties’ rights, responsibilities, risks, and remedies. PPAs are essential in the electricity industry for all generation technology types and particularly so for new renewables (Timilsina and Shah, 2022). The challenges in most islands are establishing guaranteed take-off, stimulating confidence in predictable long-term revenues, and mitigating possible curtailment events within an appropriate regulatory framework (Timilsina and Shah, 2022).

Still, due to SIDS’ small size, renewable energy projects also tend to be relatively small and may not attract ideal developers. The expected pipeline of future renewable energy projects also becomes limited, with most considered as stand-alone, reflective of high costs and low financial sustainability. There is also limited access to financing security or guarantees that pose risks for renewable energy deployment by the private sector. Limitations in credible and reliable energy data for planning and forecasting also makes investors uneasy to commit (Ioannidis et al., 2019).

Most SIDS are theoretically able to leverage a number of renewable energy technologies well suited to limited space, their geology and climate. Solar and wind energy are the usual suspects and well justified (Timilsina and Shah, 2016). For example, Jamaica is continually expanding wind energy, starting with 20.7 MW in 2004 to 62.7 MW in 2016, accounting for six percent of the grid’s installed capacity. Hydropower also holds potential in mountainous islands as do some already cultivated biofuels feedstocks such as coconut palm oil (Kuang et al., 2016). Ocean, tidal, and wave energy may also have good potential. Geothermal energy is being actively developed in some tectonically well positioned islands such as those of the Eastern Caribbean (Koon et al., 2021).

Meeting the Challenges

Although we continue seeing the cost of renewable energy technologies decrease over the last decade, relatively higher capital costs still represent a barrier to scaling them up in SIDS. There are needs to tailor international funding options to SIDS contexts and remedy the lack of available data to prove the bankability of new renewable projects. The Climate Investment Fund and partners such as the International Renewable Energy Agency (IRENA) as well as regional bodies such as Pacific Community and Caribbean Community (CARICOM) have moved forward with the setup of investment platforms. These platforms are designed to connect registered project proponents and governments with financial partners. The Caribbean Center for Renewable Energy and Energy Efficiency (CCREEE) is an example of this that coordinates and implement programs in the areas of capacity and policy development, information and data sharing, and investment and business promotion activities in the Caribbean.

Capacity building is ongoing in SIDS across the value chains needed for clean energy transitions and including local financing institutions, technical and vocational training, and skills development for technicians and with various government ministries and communities to deploy renewables across multiple sectors such as agriculture, tourism, and hospitality. Other global entities have been set up to assist with the effort. Sustainable Energy for All (SEforALL) brings together the United Nations, governments, and private sector to drive faster action towards the achievement of Sustainable Development Goal 7 on clean energy, in line with the Paris Agreement on climate change. It has, for example, assisted the Seychelles government to integrate climate project financing in annual budget making. In Mauritius, it has assisted in enhancing the regulatory agency capacity to develop renewables strategic plans.

The transportation sector in SIDS as elsewhere is dominated by fossil fuel consumption that contributes significantly to energy import dependencies. Among other factors, a relatively compact road network and low commuting distance can contribute to a faster take-off of EVs and hybrid vehicles in SIDS (Shah et al., 2022). The land transport intensive tourism and hospitality sectors that are so important to some SIDS economies is also a sector that can benefit from EVs and hybrids. Charging infrastructure and lack of utility policies for such, remain areas in need of work. In oceanic and cargo transport, reductions in fuel usage are being actively pursued both in terms of shipboard technologies but also in efficiency of shipping routes and maritime logistical planning (Huang et al., 2016; Julia et al., 2020). For example, the Pacific Islands Development Forum with several international environmental NGOs has committed to a 40% reduction in shipping emissions by 2030.

Where SIDS continue experiencing climate induced extreme weather events including hurricanes, typhoons, and flooding on near annual bases, energy infrastructure is often critically damaged and energy supplies disrupted. This includes land-based infrastructure including fuel bunkers and transmission lines as well as fuel vessels and berthing ports. These incidents continue to show us that building resilient energy infrastructure and systems able to withstand such extremes is becoming more and more important in light of expected climate impacts on SIDS. Renewables infrastructure can play a useful role in pre and post disaster electricity supply through the development of off-grid and mini-grid or community grid projects (Montoya et al., 2013). These systems reduce dependencies on central utility driven supplies and can be utilized when utility supplies are impacted by disasters. For centralized grids, the possibility of modernizing infrastructure to accept multiple connections to renewables could improve resilience in the face of disasters when fossil fuel supplies may be cut off from generator plants and transmission and distribution lines are damaged. Puerto Rico is exemplary in this field. After Hurricane Maria in 2017, where the island’s power grid was fully restored after eleven months, non-profits are installing solar PV on community centers to ensure quick electricity supply in the case of a blackout.

Looking Forward

The traditional energy security paradigm has changed as the world faces the climate change onslaught coupled with increasing risks and uncertainties of pandemics and wars that ripple their effects to every locale, including SIDS. Energy resiliency is the name of the game, and adds to concerns of accessibility, affordability, availability, and acceptability, which are all magnified in SIDS contexts (Bundhoo et al., 2018). Weaning off fossil fuel import dependencies will also depend on institutional and policy changes that are evolving as well as consumer demands and political will. Still, fossil fuels are likely to be part of the overall SIDS portfolio for some time, still critical for economic sustainability and national security functions. Achieving Sustainable Development Goal 7 – Affordable and Clean Energy – will not happen overnight in SIDS, but clearly the technologies for transition are becoming more and more available, attractive, and accepted as necessary for their sustainable future.

This article was written for Perry World House‘s 2022 Global Shifts Colloquium, ‘Islands on the Climate Front Line: Risk and Resilience,’ and made possible in part by a grant from the Carnegie Corporation of New York. The views expressed are solely the author’s and do not reflect those of Perry World House, the University of Pennsylvania, or the Carnegie Corporation of New York.

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