Depleting oil and gas resources, and a 79% growth in Trinidad and Tobago’s carbon footprint: these alone should provide enough impetus to resolve the many problems associated with renewable energy and energy efficiency
by Dr Zaffar Khan, Programme Director, UWI-Arthur Lok Jack Global School of Business
and Atiyyah A. Khan, Energy Consultant, Econsultants Limited
Published in CONTACT Magazine
For fifteen years, Trinidad and Tobago has been adversely affected by natural gas curtailment issues, despite recent increased production resulting from attractive capital allowances in the oil and gas fiscal regime.
In addition, the recently signed MOU with Venezuela for the supply of natural gas has its risks and challenges, especially in terms of security of supply and regional geopolitical considerations.
Trinidad and Tobago has the third highest energy consumption per capita in kilograms of oil equivalent in the world (Figure 1), and currently uses natural gas to generate most of its electricity. While natural gas is the cleanest of all the fossil fuels, it emits atmospheric greenhouse gases. This, coupled with the CO2 emissions from the transport sector, has led to a 79% growth in our local carbon footprint (Figure 2).
It is therefore essential for Trinidad and Tobago to urgently increase its use of renewable energy (RE) and develop its energy efficiency (EE) initiatives. These will provide the following benefits:
- lower levels of energy consumption, resulting in lower energy bills for residential, commercial and industrial consumers, which can improve the reliability of the electricity generation, transmission and distribution system
- reduced need for investment in new power generation infrastructure
- new employment opportunities, from research and development to manufacturing.
Barriers to RE and EE development
Despite its many benefits, the implementation of local RE and EE initiatives is challenging. The sector is hampered by several barriers (Figure 3):
- high capital and transaction costs
- the low price of electricity and fuel as a result of energy subsidies
- inability to implement appropriate legislation and regulations
- limited government support via fiscal incentives
- lack of public awareness
- limited access to EE technologies and measures
Source: UN Advisory Group on Energy and Climate Change 2010
These obstacles increase the financial risks associated with RE and EE investments.
Subsidised fuel and electricity prices
Trinidad and Tobago’s low electricity cost of US$0.06/kWh in some cases is at least ten times cheaper than other Caribbean and Latin American countries (Figure 5). This acts as an enormous disincentive to the development and utilisation of RE and EE mechanisms locally, making it uneconomical for RE and EE to penetrate the local energy market.
Culture, education, and lack of awareness
Popular attitudes towards energy, and its resultant wasteful use, have stemmed from its low cost. This, along with lack of education, supports a culture of “wastage and inefficient use of the natural gas that generates our electricity” (Energy Chamber of Trinidad and Tobago 2013), which is hostile to EE and must change.
Tackling the issues
These issues can be addressed through several measures: policy, legislation and regulation; standards; and mandated fiscal incentives and financing institutional capacity strengthening.
The 1994 United Nations Framework Convention on Climate Change (UNFCCC) and the 1997 Kyoto Protocol were developed to enable member countries to reduce their greenhouse gas (GHG) emissions and in turn decrease atmospheric GHG concentrations. Trinidad and Tobago is a ratified signatory under both of these mechanisms as a non-Annex 1 country: it is not obligated to reduce its emissions, but can do so on a voluntary basis.
A number of fiscal incentives (see sidebar) were introduced in the 2010-11 and 2011-12 national budgets, in an effort to promote alternative energy use and EE. A number of these incentives required revisions to the Customs Act, the Income Tax Act and the VAT Act (Energy Chamber of Trinidad and Tobago 2011).
In 2011, a draft RE policy was formulated, which recommended the implementation of various initiatives and fiscal incentives to promote the use of RE and increase EE locally. The framework also set a target of producing 5% or 60MW of the country’s peak electricity supply from RE sources.
Climate change policy
A draft climate change policy document was prepared and
discussed at public consultations before fin-
alisation. This covered GHG emission reduction via RE use and EE measures.
Carbon emission reduction framework
The Ministry of Planning and Development, UNDP and Factor CO2 consultants will embark on the formulation of a draft policy to address CO2 emissions from our power generation, industrial and transportation sectors.
The consultants will conduct policy reviews, design business-as-usual (BAU) emission trajectories, recognise low CO2 opportunities, and devise low CO2 scenarios for possible implementation.
The National Energy Corporation of Trinidad and Tobago has been mandated by the government to produce a draft EE policy targeting industrial plants within the Point Lisas Industrial Estate.
The UWI-Arthur Lok Jack Global School of Business offers an MBA in sustainable energy management, the only one of its kind in the Caribbean. It allows students to contribute to the successful “planning, execution and monitoring” of energy projects and organisations. It establishes a framework for the economic diversification and development of regional clusters, particularly in the context of reduced dependence on oil and gas revenues (ALJGSB 2012).
Recommendations to improve EE
There are plenty of low-hanging fruit which could improve local EE in the power generation, residential, petrochemical, transportation and manufacturing sectors (Energy Chamber of Trinidad and Tobago 2013).
In the area of power generation, for example, we can:
- improve the efficiency of existing power generation
- improve operational efficiency
- enable open access to the grid by RE generators
- reduce emissions
- improve efficiency of LNG production
- implement energy-saving opportunities and standards.
In the area of residential buildings, we can:
- implement electricity quotas: design homes to be more energy-efficient and to use less electricity
- improve the efficiency of existing households, reducing electricity consumption.
Future initiatives for both RE and EE must address issues related to feed-in tariffs, net metering, grid capacity, and infrastructure, as well as safety considerations.
Implementing these recommendations will benefit Trinidad and Tobago in many ways, by creating:
- increased energy security
- climate change mitigation
- conservation of domestic hydrocarbon supply
- greater petroleum product exports
- lowered dependence on petroleum imports
- increased employment opportunities
- compliance with COP 21 ratifications
- crucial support for national development
- technological progress.
Trinidad & Tobago’s fiscal incentives for energy efficiency and renewable energy
Solar energy incentives
- import duty reduced to 0% on regional imports of solar water heaters (SWHs)
- 0% VAT rating on SWHs
- 25% tax allowance on the value of SWHs up to a maximum of $10,000
- 150% wear and tear allowance on the cost of SWHs
- 150% wear and tear allowance on plant, machinery and equipment used to manufacture SWHs and solar photovoltaics (SPVs).
Wind energy incentives
- import duty reduced to 0% on imports of wind turbines and related equipment
- 0% VAT rating on wind turbines
- 150% wear and tear allowance on the cost of wind turbines and supporting equipment
- wear and tear allowance of 150% on equipment used to manufacture wind turbines.
Energy efficiency incentives
- 150% tax allowance on the cost of commissioning energy audits and the design and installation of energy-saving systems
- accelerated depreciation of 75% on acquisition of smart energy-efficient systems
- 25% wear and tear allowance on plant, machinery and equipment acquisition.