With more focus on renewables, the Oxford Business Group is advising that financial institutions will be central to T&T’s transition away from traditional energy sources.
According to its latest report titled Is Trinidad and Tobago prepared for its green energy transition?—it emphasised that this country’s clean energy goal will only be successful with the support of financial institutions with climate finance lending and broader investment in green infrastructure.
Citing that T&T’s framework currently comprises climate funds, green bonds and additional support from multilateral sources, the report said banks and international organisations however, also have a role to play in setting the rules of the game.
But Marc Jardine, Vice-President of Business Banking, T&T and Lead of RBC’s Caribbean Environment, Social and Governance (ESG) Committee noted that while many individuals and businesses are interested in bringing clean energy solutions to the Caribbean market at both the domestic and the international level, in most instances, infrastructure and national agendas are not yet where they need to be.
Jardine who evaluated the push to achieve net-zero carbon emissions in the report said to bring many of these solutions to fruition at the industrial and commercial level, amendments are required from a macroeconomic perspective by governments with regards to interconnectivity and access to grids.
In addition, he suggested there’s an opportunity to explore subsidies other than duty-free classifications and machinery imports that are exempt from value-added tax.
Tangible tax credits to green energy producers should be considered, he added.
“The transition to net zero must be orderly and inclusive to be successful, recognising the changes that need to occur in our daily lives and economies in terms of how energy and resources are consumed.
“We believe that how we get there is just as important as the destination. In reality, because sufficient energy sources are essential for life and work, we cannot simply flip the switch to clean energy.
“That is why partnerships and collaboration throughout the industry are essential,” Jardine further advised.
Additionally, he said many types of energy solutions are needed to meet growing global energy demand, and the reliance on traditional sources of energy will realistically continue for some time to satisfy those needs.
According to Jardine, this is where sustainable financing can help with the transition by supporting clients that are involved in clean energy and other innovative projects that help reduce carbon emissions or enhance resilience against severe weather events.
And what ways can domestic businesses apply ESG principles to support the renewable energy transition in T&T?
Jardine said it is imperative for businesses to consider long-term value creation and sustainability.
But, in the current context, this cannot happen without examining the impact of social and environmental factors on a wider group of stakeholders, he said.
“There needs to be a long-term focus on customers, employees, communities, suppliers and shareholders, and a more inclusive approach to decision-making. ESG principles set a path for an organisation to do that, not least by identifying environmental guidelines that a business can incorporate into its policies, practices and products,” Jardine explained.
Further, he said the consideration of push and pull factors is critical when embedding ESG policies in a company’s operating ecosystem.
Jardine explained that businesses should understand that—in most cases—consumers gravitate towards sustainable products and services when they have a choice.
“As there currently are not many green energy sources available in T&T, local businesses must work towards developing their own and place additional emphasis on energy efficiency and conservation.
“ESG standards help set responsible lending practices for project funding, as well as aid in the development of product- specific initiatives such as personal and commercial solar power installations,” he further advised. The report however, noted that some progress has already been made regarding financing as Members of Parliament and CEOs of major banks in the country have highlighted the pressing need for loans that encourage the promotion of sustainable energy, as well as a period of mergers and acquisitions activity to restructure and create entities fit for a new energy landscape.
According to the report, globally, financial institutions and capital markets have already incorporated climate-change-related risks into their lending practices.
These, it suggested, can be leveraged in T&T to accelerate the move away from hydrocarbons, while still ensuring the buoyancy of the country’s existing mature energy sector.
“A top-down policy focused on sustainable energy is set to have substantial benefits for other sectors, as the economy looks to diversify away from oil and gas into fast-growing, more marginal industries,” the Oxford Business Group further advised.
It also suggested that a balanced approach between maintaining energy security and driving the sustainable energy transition forward offers a wealth of opportunities for the this country, which has explored solar and wind energy sources but has yet to implement a comprehensive renewable energy roadmap.
But where does this country stand in solar energy compared to other Caribbean countries?
Electricity generation mix in T&T is still dominated by fossil fuels, the report said, adding that there has also been a “significant lack of investment by foreign and domestic companies” in the country’s renewable energy sector, which has hampered the development of utility-size solar projects.
However, it noted that increasing demand for clean and stable energy, in tandem with wider finance initiatives, is expected to be the primary driver for the solar power generation market in the country.
“Trinidad & Tobago has been one of the most active countries in the region in terms of designing and prioritising policies for solar energy,” the report said.
In highlighting key developments of T&T’s solar energy progress the report noted that the country’s installed capacity for solar energy is forecast to register a Compound Annual Growth Rate (CAGR) of 109 per cent between 2022 and 2027.
Additionally, it said in February 2020 the Government floated a tender for 130 MW of solar power to attract foreign investors.
Regarding wind energy, the report said this is still in its infancy in T&T.
“Despite the fact that many companies are now active in the renewable energy sector, many of these firms are not yet focused on wind, and for those that are, their wind-related activities are often marginal,” the report explained.
Offshore wind energy it added, offers a promising alternative for islands like T&T which has limited land resources and expansive territorial waters.
While citing that in 2013 the Government- approved National Wind Resource Assessment Programme outlined five candidate sites for wind farm development across the islands, the report said there has been little concrete progress since.
Moreso, the report underscored that this country must incorporate a balanced approach to energy security and its economic diversification strategies which it said underpin the islands’ economic potential.
“Though the country’s fiscal situation before and during the COVID-19 pandemic was not optimal, economic growth prospects are positive and investment inflows are improving,” the report added.
And while T&T relies on hydrocarbons for electricity, it can emulate other island nations’ experience in transitioning to clean energy.
According to the report, lessons from neighbouring island nations’ experiences in renewable energy, particularly wind, can be integrated into the local energy mix.
This, it said would allow this country to export more of its natural gas to further fund energy transition efforts and wider ESG goals.
The report noted that this country relies heavily on natural gas for electricity generation, and has missed its target of meeting 10 per cent of energy needs with renewable sources by 2021.
But it maintained that lessons on how to increase its renewable energy capacity can be drawn from other countries and territories in the region, notably Barbados and Guadeloupe, with the former having committed to 100 per cent renewable energy use and carbon neutrality by 2030.
“Tapping into T&T’s vast wind and solar resources for domestic electricity consumption would allow it to export more natural gas and use the extra revenue to finance its broader, long-term energy transition plans,” the report emphasised.