With year-round sunshine and exorbitantly high electricity prices, the island nations and territories of the Caribbean offer great potential for solar projects. High irradiance and high prices not withstanding, each island is home to a unique set of pros and cons when it comes to the expansion of solar development.

With the exception of oil- and gas-rich Trinidad and Tobago, the Caribbean islands are poor in conventional energy resources and their location hundreds of miles away from the mainland necessitates the costly importation of fuel (mostly oil) to generate electricity. The result is retail electricity prices several times higher than the $0.12 per kilowatt-hour (kwh) paid on average for residential electricity in the 50 United States .

Electricity prices in the U.S. territory of Puerto Rico fall in the middle of the Caribbean range, with the island’s electric utility, Puerto Rico Electric Power Authority (PREPA), charging residential customers an average of $0.28 per kwh as of March 2012. Like many of its neighbors, the bulk of Puerto Rico’s electrical generation — 68 percent in 2011 — comes from imported petroleum, with imported natural gas (16 percent) and coal (15 percent) comprising smaller shares, and hydroelectric contributing just 1 percent.

With dependency on expensive fossil fuels making electricity bills the biggest share of living expenses for the island’s 6.9 million inhabitants, seeking out cheaper energy sources has for years been a priority for Puerto Rican citizens and policymakers. Just weeks ago, this focus on bringing down energy prices led to the groundbreaking of what will become the Caribbean’s largest solar installation, a $265 million project funded by CIRO Energy Group, One Planet Caribbean, and GCL Solar Energy Inc. Around the same time, ground was broken on a smaller solar project—the Salinas Solar Farm, a $36 million effort funded by partner companies Sonnedix and Yarotek that is slated to generate 10 megawatts (MW).

Vocal support for these and other renewable projects are coming from prominent island politicians, so it is clear that political will to bring more solar power to Puerto Rico is strong. That support underlies a raft of incentives in the Economic Incentives for the Development of Puerto Rico Act (EIA), which passed in 2008. Highlights of the EIA include a 4 percent fixed income tax rate for 15 years, a tax credit equal to 50 percent of material costs, a tax credit of up to 50 percent of research and development costs, and a 90 percent exemption from real and personal property taxes for 15 years (for more details on these incentives, visit dsireusa.org). Puerto Rico also has a renewable portfolio standard (RPS) that mandates 20 percent of electricity generation from renewable sources by 2035.

The 110,000 residents of the neighboring U.S. Virgin Islands (USVI) face staggeringly high electricity rates of $0.47 per kwh, thanks to nearly 100 percent reliance on foreign oil for electricity generation and desalination operations. In response, the USVI partnered with the National Renewable Energy Laboratory (NREL) to draw up plans for cutting fossil fuel consumption on the islands by 60 percent by 2025 However, the plan calls for solar power to replace only 3 percent of fossil fuel usage, as the USVI’s small geographic size and inflexible electrical grids are inhospitable to utility scale solar projects.

On the other hand, demand for residential solar in the USVI appears to be strong and growing. The Virgin Islands Energy Office reports that about 100 residents are participating in the islands’ net metering program in cooperation with the territory’s Water and Power Authority (WAPA).

Outside of U.S. territories, many Caribbean island nations are in the midst of political and commercial pushes toward embracing solar power. Just last month Solaris Energy Ltd. Opened the Caribbean’s newest solar equipment manufacturing facility in the St. Phillip, Barbados. The factory marks the latest expansion by the 20-year-old Solaris, which is based in Barbados but has branched out to other islands including Trinidad, Jamaica, and Grenada.

Barbados has a long way to go before it can claim a large and robust solar energy sector. While net metering legislation is in the works in Barbados, it has yet to be submitted, approved, and implemented. Nevertheless, solar expansion in Barbados will likely accelerate in the next few years as the government strives toward its goal of 29 percent renewable electricity generation by 2029 .

The islands of the Caribbean have many reasons to invite and incentivize solar development — lower electricity prices and reduced fossil fuel use confer valuable benefits upon island citizens. Publicity surrounding these benefits in recent years has built a strong desire for more solar electricity generation throughout the region. Sol Systems has seen the most sophisticated market so far developing in Puerto Rico, but is optimistic that other island nations will present strong investment opportunities in future years.

Lead image: Carribbean map via Shutterstock