By Herbert A Samuel

The facts about greenhouse gas emissions implicate the power sector in a large part of the problem of climate change: the global power sector is the largest single emitter of carbon dioxide, the most important of the human-influenced greenhouse gases.  For the Caribbean region, the situation is the same.

General consensus has been reached on the need to reduce greenhouse gas emissions, so the spotlight must shine on power companies.  The question is: how do we tackle the problem? 

Increased use of renewables by power utilities is one option, and many Caribbean utilities are now looking at renewables but overall, the move towards renewables has been slow.  For example: most of the Caribbean power companies looking at wind energy (the most popular of the renewable options) are at the resource assessment, pre-feasibility or feasibility study stage, so no wind energy will be generated at any of these companies for another several (3 to 5) years.  Some exceptions exist: in Curacao, the electricity company has been operating wind farms since 1993 (yes, for the past 15 years!) and has been steadily expanding their wind power capacity.  In Jamaica, the Petroleum Corporation of Jamaica (yes, an oil company!) has since 2004 operated a 21 MW wind farm that provides renewable energy to the electricity company for distribution to customers; they too are looking at expansion. 

But in the intervening years until other utilities get wind and other renewables up and running, their carbon emissions will continue to increase as demand for electricity grows.  So here’s a suggestion for an incentive to encourage – and hopefully accelerate – the move towards renewables. 

First, Caribbean power companies should be required to adopt a new performance indicator, to be added to the existing list of financial, operational and other indicators: something in the format of pounds of carbon dioxide equivalent per kilowatt-hour (unit) sold.  Whatever the final form, the aim of the indicator should be to factor in the effects of the utility’s fuel conversion efficiency; its technical and non-technical losses; own use; purchased power and renewables contribution.

Second (and here’s where the incentive comes in), financiers of power projects should require power companies to report on this indicator and should adjust interest rates on their loans to power companies accordingly – the higher the borrower’s carbon equivalent emissions per unit sales, the higher the interest rate on their loan. 

Governments and regulators should (at the very least) encourage commercial banks to adopt this approach, to ensure that those utilities that have the option to access private sector financing for large projects are covered.  In related news, it is encouraging to note that a group of leading Wall Street banks, in consultation with progressive US power companies has just announced the creation of the “carbon principles”, which seek to create an institutional approach to evaluating and addressing carbon risks in the financing of electric power projects.

The above-proposed incentive essentially translates general principles (such as are espoused in the US banks’ carbon principles) into a specific, measurable result.  The details of the proposed incentive would need to be worked out collectively among the governments, owners, utilities and financiers in the Caribbean - but now is the time to start the discussion.  After all, another five years worth of increasing carbon emissions is more than enough.

H A Samuel may be contacted at haz@greenislandinc.com or at mobile telephone number (784) 528-6974

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