Bridging the Energy Gap: Chinese FDI in the Caribbean and the path to Renewable Revolution
The Caribbean, long dependent on diesel and oil for its energy needs, faces a pivotal moment in its quest for sustainability (see Figure 2). Despite renewable energy targets falling behind schedule (see Figure 1), a silver lining emerges with China’s growing influence in the region.
Last week I had the pleasure to moderate a panel discussion on the Caribbean-China Connection & Co-operation where the subject of economic diplomacy, developmentalism and tackling climate change with chinese FDI formed part of the discussion. As we plan ahead in this era where Climate Action is inevitable, I found that it was worth highlighting the presentation on “Tackling Climate Change in the Caribbean with Chinese FDI” by Yueshu Zhao.
Ms. Zhao reminded us of our vulnerability to climate change expressing the urgency for climate action, recognizing the challenges and opportunities in the energy transition and encouraged international cooperation to harness investment potential in our renewable energy market.
It is important to note that as the world witnesses China’s ascent as the leading producer of wind and solar power (see Figure 3), there is potential that China’s FDI may have a transformative impact on the Caribbean’s transition to renewable energy.
Figure 1: Renewable Energy Advancements in the Caribbean
Figure 2: The Current Generation Capacity
Positives and Negatives:
It is crucial to acknowledge the obstacles and advantages shaping the Caribbean’s energy landscape. Concessional oil pricing under the PetroCaribe arrangement and historical cost disparities between PV/wind and diesel plants have presented hurdles.
However, embracing renewables offers a multitude of advantages, including reduced electricity costs (see Figure 4), enhanced disaster resilience through distributed generation, and a diminished reliance on imported fuels to alleviate national budget deficits.
Figure 4:
Chinese FDI, a beacon of change?
China’s considerable FDIs in the Caribbean, particularly in infrastructure and the energy sector, mark a significant stride towards sustainable energy solutions. Notably, a landmark renewable energy project in Suriname stands as a testament to this commitment.
Suriname gives us hope with its Photovoltaic Microgrid Projects:
Initiated in 2020, the collaboration between the Surinamese government and China Power Construction Corporation resulted in the signing of an infrastructure agreement for two photovoltaic (PV) microgrid projects.
Following the successful completion of Phase I, PowerChina took the helm of Phase II, signing the Engineering, Procurement, and Construction (EPC) contract for five solar PV plants. This expansive venture encompasses the design, procurement, and construction of centralized microgrid PV power stations, solar panels, energy storage, high-voltage transmission lines, and low-voltage distribution networks.
Upon completion in 36 months, these five power plants are poised to generate 6.24 million kWh annually, benefitting over 15,000 local residents and underscoring the project’s significance in providing a continuous and reliable power supply to Suriname’s inland areas.
Considerations for accelerating change:
Scaling Solar Initiative and Public-Private Partnerships (PPP):Tailoring a Scaling Solar Initiative for the Caribbean, leveraging PPP models for finance mobilization.
Drawing inspiration from successful projects like Argentina’s Cauchari Solar Park, a part of China’s Belt and Road initiative, to expedite renewable energy adoption.
Directing Chinese firms and attracting FDI:
Focusing attention on the Caribbean region and utilizing existing facilities like eTecK’s Phoenix Park Industrial Estate in Trinidad and Tobago, constructed by the Beijing Construction Engineering Group.
Emphasizing the potential benefits of integrating Caribbean commodities for renewable energy production and mitigating policy uncertainties through localized manufacturing.
Commodities crucial for Renewable Energy Development:
Recognizing the evolving trend of Chinese FDIs towards commodities crucial for renewable energy, such as aluminum, with applications in the sector.
Figure 3: Wind and Solar Power Production Soars in China, Making it the Dominant Player in the Last 5 Years
Encouraging the Caribbean to capitalize on its rich deposits, fostering exports to China and solidifying its position in the renewable energy supply chain.
China is rising as the largest producer of wind and solar power over the past 5 years.
Conclusion:
As the Caribbean charts its course towards a sustainable future, it appears that partnership with China can emerge as a beacon of change. By implementing strategic policy recommendations, the Caribbean can harness Chinese FDIs, propel its renewable energy capacity, and usher in a greener and more resilient era.
Suriname serves as a symbol of what’s achievable when nations collaborate towards a shared vision of energy sustainability.
