From Energy Trends Insider

For two decades, the United States has virtually ignored the geopolitics of the islands of the Caribbean: since the end of the Cold War, the region had changed from a playground of superpowers in America’s backyard to a place for vacations and little more.

Now, as I wrote in a previous column, geopolitics are bringing the US back to the Caribbean. The consequences of American inattention are clear: Venezuela stepped into the vacuum, providing cheap oil through its PetroCaribe program. In exchange, they received both tacit and overt support for Venezuela’s “Bolivarian Revolution” from Caribbean nations in international organizations like the Organization of American States and the United Nations. Even China, far on the other side of the Pacific, has increased its direct engagement with the Caribbean, as an increasing investor in energy producing countries like Trinidad and Tobago and in the much-discussed plans for a new canal across Nicaragua.

Today, with the Venezuelan economy collapsing due to mismanagement and low oil prices, there is a new vacuum – for the U.S. to step into.

The re-opening of official relations with Cuba will be a part of that, as are the imposition of sanctions by the U.S. on top Venezuelan security officials. American energy diplomacy is taking center stage, and the highest levels of the U.S. government are now engaged in this rebalance. In January, Vice President Biden hosted the Caribbean Energy Security Summit in Washington with leaders from across the Caribbean.

Secretary of State Kerry said in answer to a question at the Atlantic Council, about the geopolitics of energy and the collapsing price of oil: “If PetroCaribe were to fall because of events in Venezuela, we could end up with a serious humanitarian challenge in our near-neighborhood.”

He’s right. PetroCaribe, the subsidy program from Venezuela to select Caribbean countries, provides low-cost financing for these countries to buy fuel oil. In Jamaica, Haiti, and Nicaragua, these subsidies have added up to as much as 4% of GDP, and 10% of their government’s revenue. Ironically, these subsidies have not translated into cheap or reliable energy availability. In Jamaica, for instance, average electricity costs are about 33 cents per kWh (down from 38 cents in 2014), and the country ranks 112th globally for its power infrastructure. For comparison, electricity in Florida averages about 10 cents per kWh. PetroCaribe subsidies have been used by governments around the Caribbean for projects like bloated spending on infrastructure, acquisition of military hardware, unsecured development loans, or other spending not related to energy.

With Venezuela’s economy approaching collapse, it is not hard to see a case where the country’s leadership decides it would be easier to close the yawning budget deficit by reducing subsidies to foreign governments than to push more austerity on its own people.

This is why PetroCaribe is “More of a noose than lifeline” – while Venezuela can claim that it is an aid program to neighboring countries, it is a noose is around the neck – and if Venezuela were to withdraw the subsidies, the budgets and economies of many Caribbean countries would be left hanging.

On April 9 President Obama is scheduled to visit Jamaica to meet with Jamaican Prime Minister Portia Simpson-Miller and other CARICOM leaders. Energy security will be at the center of discussions.

All of this high-level attention to energy security issues is very important as oil prices have dropped to lows not seen in five years. This has reduced some of the short term financial incentives for countries to break their dependence on imported oil.

However, it is important for these countries to “fix the roof while the sun is shining” as Vice President Biden said at the Caribbean Energy Security Summit.

So, the leadership and the rhetoric is there, but are there actual ways of reducing energy security concerns in the Caribbean? In my next post on Caribbean energy, I will detail three ways that the US can help increase energy security, lower energy costs, reduce pollution and build international relations across the region, all with minimal costs to the American taxpayer.

IMAGE: Biden Energy

For more on this story go to: http://www.energytrendsinsider.com/2015/04/06/obama-biden-kerry-energy-security-is-needed-in-the-caribbean/

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A suite of options for how the U.S. can build Caribbean energy security

By Andrew Holland From Energy Trends Insider

In my last post, I showed that the highest levels of the American government have made engagement with the Caribbean a priority, and that they see energy security as one of the key ways to build that relationship.

But – what does that mean? Unlike the Venezuelan government, the US government is not about to provide subsidized oil directly to Caribbean governments: I’m sure that Congress would have something to say about that! When President Obama arrives in Jamaica on April 9, he will have a suite of options to present for how the US can help build energy security for the Caribbean, none of which will cost American taxpayers.

This is about U.S. government leadership and coordination. In a series of public-private partnerships, the US government will act more as a coordinator than a funder. There actually are many funders, whether its official development assistance from European, Canadian, or other governments, or whether it is non-profit foundations. However, there has been little coordination until recently. The unique convening power of the U.S. government can bring the right people to the table, who can then move projects from the planning stage to completion.

The energy revolution in the US – in both renewables and fossil fuels – also gives the US the market to provide the support for building energy security.

First, the Caribbean may be the world’s best natural environment for renewable energy. While the Caribbean islands may be short on natural resources in the traditional sense, they are rich in wind and sun. We know that the sun shine and the trade winds are consistent and predictable. When combined with the high prices for consumer electricity, the Caribbean is one of the few places in the world that renewable energy doesn’t need subsidies for operations.

However, what it does need is financing. Finding the start-up costs to replace existing power plants is a challenge. The Overseas Private Investment Corporation (OPIC) has helped to finance a number of power projects throughout the Caribbean, ranging from fossil plants to a series of clean energy investments. For example, projects like the Blue Mountain Renewables wind farm in Jamaica will provide an installed capacity of 34 Megawatts of electricity. Such a wind farm would only be a small percentage of the 5,177 MW installed in Iowa alone, but in Jamaica it will provide up to 5% of the country’s electricity and reduce imports of fuel by a commensurate amount.

In the long term, with sustained investment in renewable energy production, a more reliable grid, and regulatory reforms, countries could approach a point where they are independent of imported fuels. Even now, the Carbon War Room, a non-profit started by Virgin’s Richard Branson, has initiated the “Ten Island Challenge” that seeks to run islands entirely on renewable energy.

However, deployment of renewables not going to be fast enough in the region to wean the majority of countries off their dependence on Venezuelan imports immediately. That’s where the U.S. shale revolution can also provide an alternative to oil dependence. Generating electricity with modern natural gas turbines is significantly more efficient and less polluting than the fuel oil generators currently used in most islands. In addition, natural gas turbines work very well with renewables because they can “ramp” up or down their power generation in response to the variable power provided by solar or wind power. As the Department of Energy has finally accelerated the approval of Liquefied Natural Gas (LNG) export facilities, there soon will be a new supply of energy.

At first appraisal, it would seem that an appealing match-up would be to pair the growing LNG export capacity with Caribbean importers. Already, the Dominican Republic hosts one LNG import facility and is building another. Currently the Dominican Republic imports its gas from Trinidad and Tobago, but could also bring in imports from the US.

However, LNG import terminals require significant investment (though nothing like the billions of dollars required for an LNG liquefaction export facility) and the isolated nature of small islands means that the potential demand for LNG is often not large enough to warrant the investment. In addition, the scale needed for LNG facilities means that one terminal could fuel their entire power sector on many islands – an infrastructure dependence that creates an energy security vulnerability, particularly in a region prone to natural disasters. For these reasons, LNG imports are really only valuable for the largest islands, like the Dominican Republic and (perhaps one day) Cuba, until the technology and infrastructure develops to make smaller ships and facilities more economically viable.

Fortunately, there is another option, which is also growing thanks to the natural gas revolution in the US: propane. Often extracted as a byproduct from shale gas operations, in the U.S., we only think of propane as a source of heat or cooking fuel, but it can also serve as a source of power. In the summer of 2015, the US Virgin Islands Water and Power Authority (WAPA) expects to complete a conversion project that will allow the islands of St. Croix, St. Thomas, and St. John to generate their electricity from propane instead of fuel oil. WAPA estimates that the conversion will lower fuel costs by 30 percent and decrease greenhouse gas emissions by about 20 percent. Already, the savings are being felt as electricity rates have fallen from more than 51 cents per kilowatt-hour in September 2014 to 39.2 cents per kilowatt-hour.

Tropigas, a Puerto Rican company, has proposed a similar conversion project to PREPA, the Puerto Rican utility. No action has yet been taken, as PREPA remains close to bankruptcy and in negotiations with its creditors. Similar projects around the Caribbean could take hold, as there will be supplies of propane available from the US. Since 2009, the US has increased exports of Propane and Propylene from 85 thousand barrels per day to 423 thousand barrels per day, an astounding increase of almost 400%.

This suite of resources from the US: renewables, LNG, and Propane, accompanied by American political leadership and financing, can help to build real energy security for islands across the Caribbean, while underscoring American intentions to rebuild alliances and support economic development. There are few “win-wins” in politics: this is one of them.

Andrew Holland is a Washington-based expert on energy, climate change, and infrastructure policy. He currently serves as Senior Fellow for Energy and Climate

Policy at the American Security Project, a non-partisan think tank based in Washington, DC.

For more on this story go to: http://www.energytrendsinsider.com/2015/04/09/a-suite-of-options-for-how-the-u-s-can-build-caribbean-energy-security/

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