IDB and CDB provide $85m for geothermal development in the Caribbean
The Inter-American Development Bank (IDB) and Caribbean Development Bank (CDB) announce funding of $85 million for geothermal development in five Eastern Caribbean nations. The funding is for debt financing for plants and transmission, exploration drilling grants and capacity building efforts.
In an release today, the Inter-American Development Bank (IDB) and the Caribbean Development Bank (CDB) announce the expansion of the Sustainable Energy Facility (SEF) for the Eastern Caribbean. The $85.6 million programme is intended to fund geothermal power and institutional capacity projects in five Eastern Caribbean nations.
The Sustainable Energy Facility for the Eastern Caribbean (SEF-Expanded) is designed to reduce the financial, technical, and institutional barriers to geothermal energy development in five Eastern Caribbean nations. It will also aid in institutional strengthening and capacity building for those five governments and in partnering with the Caribbean Development Bank (CDB). The SEF-Expanded programme aims to help de-risk geothermal energy projects, making it more likely that geothermal energy development attracts private investment and expertise, leverages other commercial debt resources, and allows for electricity tariffs to reflect an appropriate mix of concessional finance, commercial debt, and equity. A line of credit to the CDB will include resources from different donors, which the CDB will make available on-demand to meet the financing needs of the five participating Eastern Caribbean nations for unlocking geothermal development.
High electricity prices in the Eastern Caribbean hinder economic growth and reduce public resources that could be used to fund other government services. In October of 2015, the Inter-American Development Bank (IDB) and the CDB jointly created the Sustainable Energy Facility, a US$71.5 million loan and grant package — drawing on resources from the IDB, the CDB, the Clean Technology Fund, and the Global Environment Facility — that has funded renewable energy and institutional capacity projects in six Eastern Caribbean countries.
The goal of the Sustainable Energy Facility (SEF)-Expanded for the Eastern Caribbean is to contribute to the diversification of the energy matrix in five Eastern Caribbean Countries: Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines. SEF-Expanded is a comprehensive effort to reduce carbon emissions, lessen dependence on fossil fuels, and minimize the cost of power generation and electricity tariffs by promoting geothermal power in the five Eastern Caribbean nations.
As a result of the SEF-Expanded programme, these five Caribbean countries will improve their energy security, promote their competitiveness, and enhance their fiscal and macro-economic stability.
Juan Carlos de la Hoz, the IDB’s representative in Barbados, emphasized that, “The Sustainable Energy Facility-Expanded programme has the potential to radically transform the energy matrices in the five Eastern Caribbean states. This will empower their citizens to choose reliable private sector partners to develop new geothermal projects without adding more public debt to their governments’ ledgers.”
Christiaan Gischler, the IDB’s team leader for the SEF, noted: “For every dollar invested in the Eastern Caribbean geothermal markets, the SEF programme leverages another ten dollars from other donors plus an additional 20 dollars from private sector energy developers.”
The SEF-Expanded programme is funded in three components totalling US$ 85.6 million, which will be executed under the auspices of the Caribbean Development Bank (CDB).
The funding includes US$ 60 million from the Green Climate Fund (GCF) for a 20 year term, with a 5.5 year grace period, and a concessional based interest rate to develop geothermal plants and transmission lines.
The second component is for exploratory drilling including US$ 16 million from the GCF in the form of contingent recovery grants as well as US$ 5.6 million in grants from the Republic of Italy’s Ministry for the Environment, Land, and Sea for geothermal exploration drilling.
The third component totals US$ 4 million from the GCF in grants to fund capacity building for geothermal analysis, environmental and social safeguards, and additional support for the CDB.
Source: IDB release