Bankable Power Purchase Agreements are an Important Element of Renewables Investments in Caribbean SIDS

Despite economic challenges caused by the pandemic, Small Island Developing States (SIDS) renewable energy capacity keeps growing towards the SIDS Lighthouses target of 10 GW of total installed renewables capacity by 2030. According to the International Renewable Energy Agency (IRENA)’s data, the SIDS currently account for almost 7 GW of installed renewables capacity.

The growth reflects SIDS’ commitment to accelerate the energy transition, but the pace of progress needs to be increased to ensure SIDS are safe from climate impact and global uncertainties. As the Caribbean SIDS strengthen their Nationally Determined Contributions (NDCs) and national energy targets, the need for investments to increase renewable energy deployment becomes more apparent.

Realising the role of Power Purchase Agreements (PPAs) in enabling investments, regulators and power utilities wishing to design bankable agreements are carefully adapting the clauses of electricity purchase contracts to local contexts and to the particularities of different generation technologies. The need to tailor contracts to different circumstances becomes even clearer when one considers the features of renewable generation technologies, varying local economic and finance landscapes, and regulatory regimes.

Understanding this need, IRENA through the SIDS Lighthouses Initiative (LHI) and with the support of the Organisation of the Eastern Caribbean States (OECS) organised a capacity building activity in Saint Vincent and the Grenadines, to enhance the capability of policymakers, power utilities and regulators to design, negotiate and implement bankable PPAs. The final goal of this activity is to secure an effective commitment of private capital for the deployment of renewable energy projects in the Caribbean SIDS.

The capacity building event for Caribbean SIDS started on 28 November 2022 with a roundtable discussion on concrete lessons from project development. The roundtable gathered representatives of project developers, investors, and the financial institutions.

Remotely opening the event from IRENA Headquarters in Abu Dhabi, IRENA Director - Country Engagement and Partnerships, Gurbuz Gonul said, “Establishing bankable PPAs offers more security and certainty over issues such as connection, guaranteed off-take, predictable long-term revenues and possible curtailment events within an appropriate regulatory framework, which enables countries to meet the renewable energy targets and objectives set out in their Nationally Determined Contributions under the Paris Agreement and national energy policies and plans.”

Ms. Judith Ephraim-Schmidt, OECS Programme Director of Sustainable Energy Unit, also noted, “that the Commission welcomes the opportunity to empower the relevant professionals with the knowledge and skills needed to draft and negotiate PPAs. She believes the training will support sustainable and viable renewable energy projects through fair and profitable business models that ultimately support the growth of the region.

Hon. Dr. Ralph Gonsalves, St. Vincent and the Grenadines PM, delivered the Opening Remarks at the event

In delivering the keynote, Honourable Dr. Ralph Gonsalves, Prime Minister of Saint Vincent and the Grenadines, expressed his government’s commitment to prioritise the deployment of renewable energy with a focus on energy access, pricing, and reliability. The Prime Minister highlighted the importance of best practices and lessons learned from the geothermal PPAs negotiations and the considerations of the government, utility, and private sector in the process.

The discussions that followed allowed the exchange of insights on Caribbean SIDS’ experiences in designing, implementing, and negotiating renewable energy PPAs. The event also provided an opportunity for IRENA to present the latest update to its SolarCity Simulator. Developed by IRENA to accelerate the deployment of rooftop solar photovoltaic (PV) systems in urban areas, the Simulator now also includes the high-resolution mapping of solar PV rooftop potential of the cities of Basseterre and Charlestown in Saint Kitts and Nevis. IRENA Programme Officer – RE Resource Assessment, Imen Gherboudj, presented the new addition in the SolarCity Simulator and showed how the Simulator works.

The event continued the next day with a four-day training on design and negotiation of bankable PPAs for renewables projects with in-person and remote participation of representatives of Aruba, Antigua and Barbuda, Barbados, The Bahamas, Belize, Dominica, Dominican Republic, Grenada, Guyana, Montserrat, Saint Lucia, Saint Kitts and Nevis, Trinidad and Tobago, Saint Vincent and the Grenadines. Representatives from Caribbean Electric Utility Services Corporation also participated alongside OECS, as SIDS LHI’s partners.