Enabling Frameworks for RE Investment June 24, 2015 Martinique Presented to Islands Energy Transitions - IRENA

Observations ENERGY SUPPLY: Heavily Dependent on Petroleum, Limited Use of Cleaner Fuels Petroleum is main fuel used for energy supply Limited use of cleaner fuels like natural gas and renewable energy Firewood is also used particularly in Haiti Total Primary Energy Supply in Caribbean in 2011 Source: OLADE. Sistema de Informacion Economica-Energetica, Data for 2011 Note: Data only for Barbados, Belize, Cuba, Dominican Republic, Grenada, Guyana, Haiti, Jamaica, and Suriname 2

Observations Heavy Reliance on Costly Oil/Diesel as Dominant Source of Power Generation Most Small Caribbean islands, particularly OECS, heavily reliant on oil/diesel Larger Islands better diversified with hydro and gas (& some coal) Trinidad, as significant oil and gas producer, generates most electricity from natural gas. 3 Fossil Fuel Share (%) in Electricity Generation Mix in Select Caribbean Countries Source: The World Bank, World Development Indicators, 2011 and Bloomberg New Energy Finance Climatescope 2012 Report.

Observations High Oil Dependency and Small System Size is Major Driver for High Electricity Prices Electricity prices well above LAC average for most CAR OECS islands have highest prices due to highest oil dependency Lower prices where greater diversification in generation (DR, Belize) Electricity prices in Trinidad & Tobago, and DR also lower due to energy subsidies 4 Average Electricity Tariffs in Select Caribbean Islands in 2011 Source: Annual Report, Caribbean Electric Utility Service Corporation (CARILEC), 2011, SIEE-OLADE, 2013 (2011), DOMLEC Annual Report (for Dominica). Note: LAC Average tariff of US$0.19/kWh calculated by calculating the average of residential rates in 2011 using SIEE-OLADE, Carilec, and DOMLEC data.

Observations High Oil Dependency for Generation also Leads to Volatility in Electricity Prices 5 Oil prices have fluctuated over last decade Led to volatility in electricity tariffs when oil prices passed through (i.e. OECS) More stable where greater diversification (i.e. Belize) Challenging fiscal burdens for Governments when oil prices not fully passed through (i.e. DR) SOURCE: CARILEC Tariff Surveys (St. Kitts & Nevis excluded as insufficient data available); Crude oil spot price is Oklahoma WTI from US EIA. Average Residential Tariff in OECS and Oil Prices ( )

Observations Shortcomings in Electricity Supply Undermines Economic Competitiveness & Equitable Growth Central to economic growth as electricity facilitates productive uses Critical for competitiveness as electricity costs and reliability affects business High costs constrain businesses and also create hardship for household consumers 6 Constraints to Business Success (% of Firms) Note: The data is gathered for the Caribbean countries. Some indicators that is part of “electricity” include, but not limited to, electrical outages, duration of outages, losses due to electrical outages, avg loss due to outages, generators’ ownership, days to obtain electrical connection. Source: Business Enterprise Survey, The World Bank Group

Observations Goal Pillar World Bank: Strategic Priorities for the Energy Sector in Caribbean Energy Efficiency Clean Energy Climate/Energy Resilience Save Energy and Cost through more efficient utilization Diversify Power Generation Matrix to Lower & Stabilize costs Enhanced resilience to climate change & extreme weather events Strengthen Institutions and Regulatory Framework Integration and Expansion of Markets 7 Engage- ments Fuel Switching Natural Gas Supply Renewable Energy Fuel Switching Natural Gas Supply Renewable Energy Resilient Planning & Design Recovery & Reconstruction Insurance & Hedging Resilient Planning & Design Recovery & Reconstruction Insurance & Hedging T&D Loss Reduction Improved Utility Mgmt. Demand-Side Mgmt. Improve Tran. Efficiency T&D Loss Reduction Improved Utility Mgmt. Demand-Side Mgmt. Improve Tran. Efficiency

Observations Expanding and Integrating Markets: Enhanced coordination, collaboration, & harmonization to achieve greater scale & improved investment climate Generate economies of scale for importing fuels & equipment to lower costs Bulk Procument Help stabilize impact of oil prices and reduce vulnerabilities by managing exposure Increase market size, allow for energy (electricity, fuel) trade in future Create economies of scale by increasing market size, streamline processes, and attract investors Regional Interconnections Hedging fuel prices Regulatory Harmonization 8

Observations Weak Regulatory Framework and Institutions for Facilitating Investments and Operations in Sector No harmonized regulations to facilitate business (i.e. different rules across OECS) Limited regulatory capacity and weak institutions to oversee energy sector and implement existing legislation in several countries (i.e. no regulator in Grenada, St. Lucia, St. Kitts & Nevis, policy & regulatory institutions in DR & Haiti unable to enforce laws and regulations) Legal and regulatory reforms necessary to allow for increased renewable energy (RE) and energy efficiency (EE) investment (i.e. limited legislation for RE development/ system integration, interconnection) 9

Observations Challenging Investment Climate Contraints Private Capital Flows Poor financial situation of some utilities limits ability to make or attract investment (i.e. Haiti, DR, St. Kitts & Nevis ) High financing cost in high risk countries require higher returns (i.e. Haiti, DR) Small energy markets reduces investment & flows come at higher cost (i.e. OECS) Lack of harmonized rules to easily facilitate doing business across islands (i.e. OECS) 10 Private Investments in Power Sector in Caribbean ( ) *Other Caribbean countries include Haiti, DR, Jamaica, and Belize, ** Select OECS include Dominica, Grenada, St. Kitts and Nevis, and St. Lucia Source: PPI Database, World Bank, 2011

Observations ESEF Strategic Pillars are Well-Aligned with National Energy Plans Large Islands Belize Key Focus of National Energy Plans exploiting renewable energy (RE) resources diversification of power generation matrix (RE/gas) energy efficiency (EE) T&D reliability Clean Energy Energy Efficiency Climate/Energy Resilience energy security/oil import reduction Environmental/sustainability/ lower GHG emissions Cross Cutting Goals Improve regulatory environment energy/electricity cost/loss reduction Regulations & Institutions Integration & Expansion

Observations COTED ENERGY MINISTERS CARICOM Secretariat CCS ENERGY UNIT Financing CDB Technical Assistance Capacity Building & Research UWI Information & Knowledge Mgt Policy & Regulations CCS EU Country Focal Points CCS ENERGY UNIT CCREEE CARICOM HEADS OF GOVERNMENT CCREEE WORLD BANK SUPPORTING CARICOM IN DEVELOPMENT OF C-SERMS PLATFORM The C-SERMS Platform will constitute representation from the respective groups EXECUTIVE BOARD Technical Advisory Group