The “biggest roadblock” to the investment in renewable energy projects in the Caribbean are the investor regulations that are in place, Martin Vogt, managing director of German investment and asset management company MPC Capital has said.
Vogt made the statement as part of a presentation in the Energy Chamber’s virtual conference during a session titled “Attracting capital for renewable energy projects.”
“As a foreign investor, we really prefer and like to invest in projects where we have also local capital in the capital structure, local equity and we can only do that if the local investment regulations allows local insurance companies, pension funds, and other institutional investors to directly invest in these projects and we see that in many cases the investment regulations for those parties is not demanded in a way that provides an enabling environment in order to deploy capital from resources,” Vogt said.
“I think it is very important because otherwise, it will create a situation where only foreign capital comes under the benefit of renewable energy projects and there is very limited retention of benefit in the country as dividends and basically the benefits, are being repatriated out of the region again,” he said.
Vogt said for an emerging market it is important that benefits stay in the region and with that also comes the investor experience.
Over the next two years, MPC Capital aims to raise US$90 million from US-based impact investors, institutional investors and foundations.
The money will be allocated to up to 15 renewable infrastructure projects in the Caribbean.
MPC Capital made its first investment in the renewable energy sector in the Caribbean in 2016 and has since then continuously expanded its local footprint and activities.
The projects, which total approximately 200 MW of installed capacity, will generate clean energy and reduce the region’s dependence on fossil fuel imports.
MPC Capital made this commitment with the Clinton Global Initiative Action Network and will depend on the engagement with CGI for partnerships to enable investments.
Alicia Taylor, investment management lead officer, infrastructure and energy division at the Inter-American Development Bank, said IDB Invest was committed to providing capital for the renewable projects once all the criteria are met.
“To attract capital for renewable energy projects it is important to have an enabling environment where developers feel that there is stability and investors feel that they can make a reasonable return it is also critical to have a strong EPC (engineering, procurement, construction) contractor, a bankable PPA (power purchase agreement) and a technically sound sponsor especially in T&T and the Caribbean we are prepared to support not just the large projects,” Taylor said.
Carlton Thomas from National Energy said now more than ever is a good time to accelerate the transition regionally clean energy.
“The potential for renewable energy and energy efficiency in the Caribbean is very strong,” he said.
“There are initiatives that can be undertaken to both spur growth in jobs and overall economic improvements while at the same time contributing to the reduction in harmful emissions and improve efficiency across the region,” Thomas said.
Thomas said that Caribbean states do not have sufficient financial resources to accelerate the clean energy transition at the speed that is required.
He said that a post COVID-19 world can be a riskier space for finance but that investors and governments can collaborate to address sector-wide risks.
Thomas said that more robust regulatory and environmental legislation can assist with the pace of the transition.
Scale is important to attract more competitive financing. Regional collaboration is important to realise scale.
BPTT’s regional president Claire Fitzpatrick said trillions of dollars would be needed if the world is to avert disaster from global warming.
According to BP’s statistical review of world energy global carbon emissions are expected to grow by 10 per cent in the next 20 years.
And in order to deal with global warming carbon emissions need to be reduced by half the current rate.
Fitzpatrick said the energy that is produced must therefore be kinder to the environment.
Renewable energy now provides 10 per cent of the power globally and is the fastest growing source of energy expected to ultimately become the largest source of power in 20 years.
BP is striving to become a net zero company in the coming decades.
Prime Minister Dr Keith Rowley announced that two major solar projects that will generate power in this country at a cost on par with current electricity prices.
He said the Roadmap to Recovery team recommended stimulating activity in the area of energy efficiency and setting ambitious targets for increased power generation from renewables.
“To this end, as you may be aware, the Ministry of Energy and Energy Industries (MEEI) recently announced the winning bid in response to a Request for Proposals (RFP) for Utility Scale Renewable Energy Projects. A consortium formed by Lightsource Renewable Global Development Ltd (Lightsource BP), Shell T&T Ltd and BP Alternative Energy T&T Ltd submitted successful proposals for two projects,” Rowley said.
“These projects will generate 92.2 MW of electricity from solar photovoltaic (PV) sources at Couva; and 20 MW of electricity from solar PV sources at Trincity, at a cost that is on par with the current electricity prices in T&T,” he said.
These projects form part of an overall plan by the government to reduce carbon emissions in this country by 2030.
“The aim of T&T is to achieve a reduction in overall emissions from the three sectors by 15 per cent by 2030 from Business as Usual (BAU), which in absolute terms is an equivalent of one hundred and three million tonnes of carbon dioxide equivalent,” he said.
In its Renewable Energy Market Update for May 2020, the International Energy Agency has noted that the Covid-19 crisis is negatively impacting the global growth in renewable power capacity.
“Now more than ever, renewable energy and energy efficiency initiatives are needed as we come face to face with a rapidly changing energy and economic landscape, combined with the threat of climate change,” Rowley said.
“However, in addition to looking to renewable energy and energy efficiency to secure a clean, sustainable future for generations to come, it is also our duty as the Government of the Republic of T&T to ensure that we are maximising the use of the country’s rich natural resources to the benefit of the citizens. We must, therefore, re-examine how we derive the greatest value from our natural gas,” he said.
Chief executive officer of the Energy Chamber Dr Thackwray Driver described Rowley’s announcement as a game-changer.
“I can’t help noting one thing in particular when you were discussing the utility scale solar your comment that we would be producing energy on par with local electricity costs, now that’s a big announcement because local electricity has been cheap and it has been historically cheap and if we’re able to produce solar on par with that that’s a game-changer,” Driver said.