Zia Mian, Guest Columnist
The Caribbean consists of small and large economies with diverse resource endowments, economic bases, and market sizes. Except for Trinidad and Tobago (T&T), all other countries of the region rely on imported liquid fuels to meet their energy needs.
The cost of petroleum fuels, as well as electricity in these countries, is high, making it difficult for them to compete in the regional or international markets. Dealing with the volatility of petroleum prices has remained a single major challenge to these economies. Most economies do not possess institutional capacity to develop policies or strategies to deal with the challenges of the energy sector and develop solutions to lower the cost of energy.
To better cope with the challenges of globalisation, under the Revised Treaty of Chaguaramas (the Treaty), the region has organised itself into an economic bloc, the CARICOM Single Market and Economy (CSME). The establishment of CSME aimed to help the region in dealing with the emergence of larger trading blocs, and the disappearance of preferential arrangements previously granted to small developing economies.
Except for T&T, the region mainly depends on imported fuels to meet its transport and electrical energy needs. For the energy-deficient countries of the region, the immediate and longer-term sustainability of development depends on facilitating the advancement of enabling environments that would allow increased domestic productive capacity and production of goods and services at competitive and affordable costs.
Cost of electricity
A key to the realisation of this objective is the cost of input, particularly of electricity and transport, and the competitiveness of regional products in the international markets. The accompanying chart compares the price of electricity in the region for the year 2010 and shows that the cost of electricity varies widely, and in the energy-deficient countries, is extremely high (Source: CARILEC). At present, the cost of electricity in Jamaica is about US$0.40/kWh.
The members of the Organisation of Eastern Caribbean States (OECS) face special developmental challenges because of their openness, small size and vulnerability to natural disasters, and other external factors, such as oil-price volatility and the low prices for their export commodities, as well as the size of their electricity generation capacity. Their size, dependence on imported energy, and the volatility of petroleum prices, coupled with concerns about instability in supplies, continue to adversely affect their economies.
Energy issues for the region are:
The objectives of the Revised Treaty of Chaguaramas, among others, included:
The treaty mainly focused on industrial, agriculture, transport, trade and some other sectoral policies. Article 6 (a) of the Treaty provided for a "full integration of the national markets of all member states of the Community into a single unified and open market area". However, the treaty remains silent on the most important aspect of these economies, the energy sector policy and strategy.
Article 86 of the treaty provided for the establishment of the Common External Tariff. They were applied on the petroleum products and benefit only an old refinery in Jamaica (which was built in 1964 should have been scrapped a long time back) and a refinery in T&T (which is dependent on imported crude oil).
T&T rightly believes that the energy sector is not subject to the treaty rules. As T&T is not a natural supplier of energy to Jamaica, the nature of energy sector dictates that it remain outside the artificial barriers imposed through CET. The imposition of CET on petroleum fuels increases the cost of electricity in Jamaica at the least by five per cent.
Not having a regional energy policy, a general lack of technical capacity at the CARICOM secretariat for the development of a regional energy policy and strategy, and non-inclusion of energy in the treaty as a distinct sector makes it difficult for the energy-deficient countries of the CSME to benefit from T&T's robust energy sector or develop viable alternatives.
Capacity and competence
The regional governments neither have competent technical staff nor capacity to address the national or regional energy sector issues on a comprehensive basis. Under Article 22 of the treaty, the University of the West Indies "enjoys important functional relationships which contribute to the achievement of the objectives of the Community" and is "recognised as associate institutions of the Community".
In addition, the 'vision' of the University of the West Indies (UWI) states that "by 2017, the university will be globally recognised as a regionally integrated, innovative, internationally competitive university, deeply rooted in all aspects of Caribbean development and committed to serving the diverse people of the region and beyond" (emphasis is mine).
Owing to the special nature of its relationship with the Community and in furtherance of its vision, the UWI owes to the region to assist it in meeting national and regional energy challenges by establishing a Regional Centre for Energy Policy Analysis, Regulatory Research and Training. The centre could assist the regional governments in formulating policies, strategies, programs and projects through public- and private-sector participation in the energy sector and regulated utilities in order o meet long-term development challenges.
The proposed centre could identify and provide assistance in accessing opportunities for cooperation, develop regional and national databases (including single algorithm for electricity transmission a la European Union), and provide necessary skill mix to prepare policies, strategies, structure financial engineering, and assist in identifying projects that will help lower the cost of energy and enhance fuel diversification as well as develop renewable options.
While the energy-sector agenda for the region is wide, the initial work programme of the centre might include:
I developed and proposed a business plan to the UWI for the establishment of such a centre at the Mona Campus. Unfortunately, the administrative vision of the university does not coincide with its published vision, and the project did not see the light of the day. I am now sharing a similar vision with the Lower Mekong Sub-region where I am training the regulators under Secretary Hillary Clinton's 2009 Lower Mekong Initiative.
Zia Mian, a retired senior World Bank official, is an international consultant on information technology and energy. He writes on issues of national, regional and international interest. Email feedback to firstname.lastname@example.org and email@example.com.