Transitioning Fully to Renewable Energy

Author(s): Central Bank Of Barbados

Created 05 Aug, 2022
Categories General Press Release
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In 2021, Barbados updated its commitment to alleviating global climate change by announcing an enhanced effort at climate change mitigation. In view of this commitment, Barbados has indicated its intention to reduce its dependence on fossil fuel imports, both to contribute to the global greening initiative and to address the effects of high oil prices while lowering air pollution. The target is for the island to become 100 percent renewable and carbon-neutral by 2030[1]. The current spike in oil prices, though short of the peak of US$134 per barrel in 2008[2], underscores the financial benefit of shifting away from reliance on petroleum products towards alternative energy. 

Policy Initiatives

Photovoltaics, electric vehicles, wind energy, biofuels, etc. represent the energy sources of the future. To encourage businesses and individuals to invest in renewable energy, lower the consumption of fuel, and strengthen the country’s energy security, Government has introduced several fiscal incentives. Investing in renewable energy enables households and businesses to benefit from the decrease or removal of import duties and value-added tax (VAT) and/or the reduction in the amount of income tax and corporation tax payable[3].

These policies incentivise the private sector, but Government has also invested directly into the production of renewable energy. Under the Public Sector Smart Energy Programme (PSSEP) sponsored by the Inter-American Development Bank (IADB) and European Union (EU), Government has retrofitted many of its existing buildings with renewable energy and energy efficient technology[4]. Government has also purchased electric buses for the public transportation system, and is in the process of replacing the existing fleet of other public sector vehicles with electric vehicles (EVs), where feasible.

Transportation represents a focal point of the transition. In 2018, the Ministry of Energy estimated that 33 percent of energy consumed was in the transportation sector. Government’s transition to EVs complements private sector efforts, but the uptake has been slow. Masson and Perez (2021)[5] estimated that there were over 430 EVs on Barbados’ roads, but this only represented a fraction of the more than 120,000 vehicles in use island-wide.

In the March 2022 Budgetary Proposals and Financial Statement, Government announced an excise tax and VAT holiday for the purchase of electric vehicles, and reduced import duties for used electric vehicles to 10 percent, equivalent to what is charged on new electric vehicles. Additionally, the tariff on both battery electric and solar powered vehicles (new and used) will be reduced to 10 percent. Effective August 1, the import duty on hybrids will also be lowered, though not to the same level as EVs. Government officers are being incentivised through increased interest free loans to purchase either battery electric or hybrid vehicles.

The Smart Energy Fund complements these initiatives by providing financial and technical support to renewable energy and energy efficient projects via a combination of low-cost loans and grants. Enterprise Growth Fund Limited and Fund Access serve as the fund managers, with Fund Access providing loans up to $150,000 and EGFL up to $2 million.

Imports of Renewable Energy (RE) Vehicles

The incentives are expected to increase the ratio of electric and hybrid vehicles imported. The quantity of RE vehicles as a share of the total number of vehicles imported has been steadily increasing over the last two years, equivalent on average to about 17 percent of all cars imported. However, this growth is primarily linked to an increase in the domestic demand for hybrid vehicles. Out of the total alternative energy vehicles imported, 74.6 percent were hybrids, 24.7 percent were battery electric and the remainder were either fuel cell or natural gas vehicles.

Figure 1: Import of RE Vehicles

 

Source: Barbados Statistical Service

Renewable Energy Generation and Imports of Photovoltaic Systems

Photovoltaic systems are increasing in popularity to negate high electricity prices. On average between 2017 and 2021, the quantity of photovoltaic systems imported expanded by 76 percent. Over the last five years, the amount of RE generated by customers gradually increased from 20 GwH in 2017 to 69 GwH. A  rise in investment by businesses and individuals in the installation of PV systems is responsible for this expansion. At the end of 2021, the total estimated energy consumed by customers was 904 GwH, where an estimated 9 percent was generated from renewable resources.

Figure 2: Quantity and Value in BDS Millions of Photovoltaic Systems (PVs) Imports

   

Sources: Barbados Statistical Service and Barbados Light and Power

 

[1] Ministry of Energy, Small Business and Entrepreneurship. Barbados National Energy Policy (BNEP) 2019- 2030. 2019.

[2] U.S. Energy Information Administration (EIA).

[3] Division of Energy and Telecommunications. Renewable Energy and Energy Efficiency Fiscal Incentives Booklet for Individuals and Companies.

[4] The objective of the programme is for public sector to install and use Renewable Energy (RE) and Energy Efficient (EE) tools and products.



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