Islands may provide a relaxing getaway from civilization, but their remote location has its drawbacks. In Anguilla, for example, electricity prices have soared to $0.63 per kilowatt-hour (“kWh”), compared to between $0.11 and $0.12 in the United States (“U.S.”) or European Union (“E.U.”). These prices are particularly problematic given that they exist in countries where per capita gross national income (“GNI”) is only $8,134, according to data from the World Bank.
Whereas the U.S. and E.U. generate power from coal or natural gas, most island nations are forced to import fuel that’s burned to create energy. In fact, the U.S. Virgin Islands are almost 100% dependent on imported fuel, while even larger islands like Puerto Rico generate approximately 70% of their energy from petroleum. The high price and volatility of the crude oil-based fuels makes the electricity prices in these nations very problematic.
Embracing renewable energy
There are many technologies that could reverse these trends, including solar power, wind power, biomass/algae and others. By using natural elements to generate power, these technologies avoid the use of fossil fuels for either burning or transportation, and thereby help lower energy costs over the long-term. But, the technologies also rely on upgrades to the energy grid and a change in the status quo that’s difficult to achieve politically and economically.
The Caribbean Community (“CARICOM”) Secretariat’s Caribbean Renewable Energy Development Program (“CREDP”) was founded in 1998 by 16 Caribbean nations to remove some of these barriers to entry and support the development of renewable energy projects. In 2011, the U.S. Virgin Islands even began the implementation its first grid-connected utility scale solar power plants. However, these projects have experienced difficulty reaching scale.
Biodiesel bridges the gap
BioFuel Aruba has taken somewhat of a different approach by focusing on biodiesel, which can run in unmodified diesel generators, but is derived from clean domestic sources. Founded by life-long biodiesel activist Gregory Fung-a-Fat, the company’s technology uses used cooking oil generated by Aruba’s restaurants that’s captured and processed into biodiesel, with the goal of eventually creating an island nation that’s energy independent and fully sustainable.
Towards this end, the company recently signed an agreement with Methes Energy International Ltd. (NASDAQ: MEIL) in the U.S. to provide one of its Denami 600 biodeisel processors. The technology will be used to scale up its biodiesel production capacity as early as the third quarter of 2013. BioFuel Aruba also entered into a pilot project agreement with the Aruba Airports Authority and the public transit company Arubus BV to implement biodiesel blends.
A blended approach
Caribbean nations may be best off taking a blended approach to sustainability, according to many experts. The countries should begin by transitioning to biodiesel fuels and then expand their electric grids to include power from other renewable sources like solar or wind. Diversifying these energy sources will not only lower the cost of electricity, but could also help improve the reliability of national electric infrastructures.
At the same time, initiatives like CARICOM’s CREDP are helping to improve the regulatory environments for renewable energies. These regulations are permitting independent power producers, re-designing electricity supply regulation, and even developing the beginnings of carbon trade and financing. In the end, these lower transaction cost and revenue risks for renewable energy companies could be the push needed to bring down island energy prices.
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