Islands in the Lead toward a Clean Energy Future

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By Dr. Jon Creyts, Managing Director, Rocky Mountain Institute.

Islands are on the front line of the global climate challenge. With economies that are disproportionately linked to imported diesel and shorelines susceptible to the early impacts of sea level rise, islands are the first to face the consequences of our global fossil addiction. This truth was brought into sharp focus for the Carteret Islanders of Papua New Guinea, who earlier this year left their homes to become the first international refugees of climate change.

But what if rather than being victims of climate change, islands could instead help pioneer the solutions the world needs to avoid its most severe consequences? The Ten Island Challenge is seeking to do just that.

In the Ten Island Challenge, island leaders commit to an aggressive course toward an efficient and renewable energy future. In return, Rocky Mountain Institute, Carbon War Room, and other international partners commit to provide access to the counsel, financing, and capabilities to help shift the island economies to that future in short order. Aruba, for instance, is targeting a transition to 100 percent renewables by 2020. Others in the group hope to get there faster.

Why the race? The fact is, the economics of shifting to efficiency and renewables are compelling.

Based on current prices in the Caribbean, a typical diesel generator costs $0.24 – 0.36 per kWh produced. In comparison, many renewable generation options are significantly more economic today. Today, large-scale wind can be installed for $0.04–$0.10 per kWh, geothermal can be installed for $0.07 – 0.15 per kWh, and rooftop solar can be installed for $0.15 – 0.21 per kWh — all without subsidies. Energy efficiency, where applicable, is even cheaper than all of these supply-side options, with many options available at less than $0.05 per kWh. Tourism is a key industry driving significant GDP for most islands, and a typical hotel may spend as much as 30 percent of its operating costs on energy. Imagine the economic benefit of cutting that cost by two-thirds.

A typical hotel may spend as much as 30 percent of its operating costs on energy. Imagine the economic benefit of cutting that cost by two-thirds.

Distributed solutions like efficiency paired with solar can even ensure greater resiliency by helping to harden the grid against failure during hurricanes. And, as islands shift to these more economic sources, they find that a greater proportion of their income will remain within the islands, along with jobs to build and operate the new infrastructure.

If the economics are so compelling, though, why is this path not already being pursued? Yes, we are starting to see progress, but not as quickly as the economics might suggest. A number of potent barriers persist. First, capturing efficiency and renewables opportunities requires investing upfront capital for long-term benefit. With most island economies suffering from lower credit ratings and lagging behind the rest of the world in recovery from the recent recession, financing even compelling investments can be challenging. Luckily the Overseas Private Investment Corporation (OPIC) and others have stepped in with the Ten Island Challenge to help blaze a trail.

Even if capital is available, though, the shift may be limited by long-term agreements with diesel providers, utilities, or both. These deals were often cut without foresight into the trends of modern renewables, and lock islands into unsustainable long-term costs. The island of Bermuda recently repealed its monopoly guarantee to the local utility because its rates were out of line with available resources. Expect further turmoil elsewhere as islands wrestle with this conflict.

As we enter an age of cheaper natural gas, there is the temptation for islands to potentially shift toward that direction, too. But while promises of financing, infrastructure and cheaper commodity prices from supplier companies abound, this solution both repeats the financial stranglehold of the past and does little to address the existential threat that climate change poses for island economies.

As of now nine island-nations have committed to partner in the ambitious goals of the Ten Island Challenge. With lots of economical sun, wind, and often geothermal sources nearby, there is good reason to believe islands will lead the world on the path to a highly renewable future.

Dr. Jon Creyts is a managing director at RMI, where he leads international research and collaboration activities. He brings over 20 years of strategy, operations, and design experience to resource issues at the interface of markets and technology.

For more information, please visit www.rmi.org.