CARICOM ENERGY POLICY

Transcription

1 CARICOM ENERGY POLICY JANUARY 2007

2 TABLE OF CONTENTS PAGE NO ACRONYMS and ABBREVIATIONS 04 INTRODUCTION MANDATE/TERMS of REFERENCE 05 OUTLOOK on ENERGY and the ECONOMY (i) Global Perspective 07 (ii) Regional Setting 08 CARICOM ENERGY POLICY POLICY GOAL 11 OBJECTIVES OF CARICOM ENERGY POLICY 11 CHAPTER 1.0 SECURITY OF SUPPLY 13 CHAPTER 2.0 DEVELOPMENT and DIVERSIFICATION of ENERGY SOURCES and MARKETS PETROLEUM SECTOR Specifications for Petroleum Products Transportation of Petroleum and petroleum-related Products NATURAL GAS SECTOR Optimize Use of Natural Gas Transport and Trading of Natural Gas CHAPTER 3.0 RENEWABLE ENERGY Renewable Energy Sources 3.1 Development of Hydro Power 19 2

3 CHAPTER 4.0 ELECTRICITY SECTOR Power Generation 4.2 Transmission and Distribution of Electricity 4.3 Electricity Regulation 22 CHAPTER 5.0 ENERGY CONSERVATION AND EFFICIENCY 23 CHAPTER 6.0 ENERGY INVESTMENT 24 CHAPTER 7.0 INTRA-COMMUNITY TRADE IN ENERGY Petroleum 6.2 Natural Gas 6.3 Pricing 26 CHAPTER 8.0 ENERGY and the ENVIRONMENT 27 CHAPTER 9.0 ENHANCEMENT of HUMAN and INSTITUTIONAL 28 CAPACITY 8.1 Human Resources Development 8.2 Institutional Strengthening 8.3 Research and Development Public Education and Outreach 30 CHAPTER 10.0 ENERGY AND POVERTY ALLEVIATION 31 CHAPTER 11.0 CONCLUSION 32 ~.0~0.~0.~ 3

4 ACRONYMS AND ABBREVIATIONS ALBA Boepd BTU CAIC CARICOM CARILEC CEIS CET CREDP CROSQ CSM CSME HOVENSA IADB IPP LNG Mts Mmbtu OPEC PETROCARIBE PETROTRIN PDVSA SHELL SOL WTO WTI Bolivarian Alternative for the Americas Barrels of oil equivalent per day British Thermal Unit Caribbean Association of Industry and Commerce Caribbean Community Association of Caribbean Electric Utilities Caribbean Energy Information Systems Common External Tariff Caribbean Renewable Energy Development Programme CARICOM Regional Organisation for Standards and Quality CARICOM Single Market CARICOM Single Market and Economy Subsidiary of Hess Oil Co. and PDVSA Inter-American Development Bank Independent Power Producers Liquefied Natural Gas Metric Tonnes Million British Thermal Unit Organization of Petroleum Exporting Countries Energy Agreement between Venezuela and Caribbean States Petroleum Company of Trinidad and Tobago Petroleos de Venezuela SA The Shell Group SOL Limited World Trade Organization West Texas Intermediate 4

5 INTRODUCTION MANDATE/TERMS OF REFERENCE 1. At its Fourteenth Inter-Sessional Meeting held in Port of Spain, Trinidad and Tobago, in February 2003, the Heads of Government of the Caribbean Community Agreed to establish a Task Force, comprised of Barbados, Grenada, Guyana, Jamaica, Suriname and Trinidad and Tobago 1, to develop recommendations for a Regional Energy Policy, which would address issues such as- (i) (ii) Security of energy supplies; Energy pricing policy and the impact on relative competitiveness in the CARICOM Single Market and Economy; (iii) Purchasing and transportation arrangements 2 2. When the Task Force began its work, it recognized that in addition to petroleum and petroleum product pricing, it would also need to consider issues pertaining to 3 : a. Natural gas; b. Renewable energy; c. Investment requirements and coordinated investments in the Regional Energy sector; d. Energy efficiency; e. Environmental Impact; f. Rationalization of the Regional Energy Sector. 3. The Heads of Government, at their Twenty-Fourth Conference, held in July 2003 in Montego Bay, Jamaica, agreed to the Task Force s expanded Terms of Reference. 4. In the process of drafting this Policy, the Task Force faced three significant challenges. The first challenge was encountered with the signing of the Energy Cooperation 1 Bahamas participated as an observer 2 Regional Energy Policy For The Caribbean Community Initial Report of the Task Force 3 Ibid. 5

6 Agreement (PETROCARIBE) between certain Member States of CARICOM and the Bolivarian Republic of Venezuela. Under the heading Institutional Platform, the PETROCARIBE Agreement assumes de facto responsibility for coordination of relevant policies, strategies and plans for participating States. The Task Force is of the view that this responsibility ought to be carried out collectively by and within the relevant Councils of the Caribbean Community. This CARICOM Energy policy, however, does not consider any of the bilateral arrangements agreed under the PETROCARIBE Initiative. 5. The second challenge stemmed from the unavailability of timely and relevant data. In 2003, the First Meeting of the Task Force, held in Port of Spain, agreed that it was important to conduct a Study on the Rationalisation of the Regional Energy Sector. Given the diverse nature of the sector in the region, such a study was expected to lead to a better understanding of its operation and to provide valuable information to support the elaboration and implementation of a regional energy policy as well as domestic energy policies. The Conference urged the Governments concerned to use their influence to encourage their petroleum-based companies to make resources available for the conduct of the Study. However, since all required resources were not received, the Study was not carried out. The absence of the Rationalisation Study has constrained the ability of this Task Force to establish related timelines and targets pursuant to the Policy set out hereunder. This study is still required, but the original Terms of Reference will need to be amended in light of the implementation of the PETROCARIBE Agreement. 6. Pricing was an important part of this Task Force s mandate and it represented the third challenge. The issue of pricing with respect to non-discrimination and national treatment under the Revised Treaty of Chaguaramas was referred to the CARICOM Secretariat for an Advisory Legal Opinion. The CARICOM Secretariat drew the Task Force s attention to the specific process outlined in the decision of the Conference on this matter. Specifically, the Conference had decided that the Secretariat s Advisory Legal Opinion should be submitted to the Community Council, in accordance with Article 13.4(f) of the Revised Treaty. In its deliberations the Task Force did not have the benefit of any conclusive opinion on pricing for inclusion in this CARICOM Energy Policy. 6

7 OUTLOOK on ENERGY and the ECONOMY GLOBAL PERSPECTIVE 7. Over the last three to five years, as the international economy experienced a surge in benchmark prices for both oil and natural gas, fears have grown over the stability of global energy markets. With respect to petroleum, benchmark WTI oil prices increased from US$26.00 per barrel in 2002 to over US$70.00 per barrel in early 2006, averaging US$60.00 per barrel in With respect to natural gas, in the North American market, benchmark Henry Hub prices escalated from US$2.26 per mmbtu in early 2002 to approximately US$12.00 per mmbtu at the end of 2005, averaging US$7.00 per mmbtu in In the European Market, average Zeebrugge gas prices of US$3.00 per mmbtu in 2002, increased to US$7.00 per mmbtu by late 2005, averaging US$7.00 in Several factors have been responsible for the increase in oil and natural gas prices since 2002 and principal among them are continuing geopolitical tension in the Middle East; political instability in some major exporting countries; minimal spare capacity among OPEC members; supply disruptions in other parts of the world; and rapidly increasing global demand. 9. The 2006 editions of International Energy Outlook and World Energy Outlook project that by the year 2030 total primary energy demand will increase by over 50%. In particular, increased international demand for oil and natural gas is directly attributable to burgeoning consumption in countries like China and India, where the use of oil and gas has increased at an average rate of 8% per annum over the last three years. 10. Generally, it is noted that existing world energy resources may be adequate to satisfy this projected demand, provided that approximately US$17 trillion is invested in the improvement and capacity enhancement of petroleum supply. However, the current and urgent challenge confronting the international community is the identification of plausible ways to maintain reasonable energy prices, mitigate the adverse effects of high petroleum prices and minimize petroleum supply disruptions. 7

8 REGIONAL SETTING 11. The Caribbean Community consists of developing small island States and low lying coastal States, all of which exhibit unique and peculiar characteristics, including, inter alia, varying topographies, limited natural resources, small populations and fragmented markets with different energy product specifications. 12. CARICOM countries consume approximately 240,000 boepd and approximately 95% of this amount is derived from fossil fuels. With the exception of Trinidad and Tobago and to a lesser extent Belize, 4 CARICOM countries are essentially net importers of crude oil and refined products, largely from extra-regional sources. Specifically, CARICOM Member States source petroleum products from Trinidad and Tobago (PETROTRIN), Curacao (PDVSA), and more recently Puerto Rico (Shell), and St. Croix (Hovensa). Table 1 illustrates CARICOM Petroleum Demand and Supply Balances as at TABLE Owing to increasing international demand for petroleum and rising petroleum prices, CARICOM countries are grappling with critical issues relating to security of supplies and pricing and transportation arrangements for petroleum products traded in the region. With a view to ameliorating the deleterious economic effects of high petroleum prices, many CARICOM States have availed themselves of support available from Trinidad and Tobago s Petroleum 4 Belize recently began exporting crude but still imports refined products. 8

9 Stabilization Fund implemented in July 2004, and the Energy Co-operation Agreement (PETROCARIBE) signed in June As adumbrated in the Energy Co-operation Agreement, the primary purpose of the PETROCARIBE arrangement is to contribute to the social and economic development of Caribbean countries, through the principles of integration outlined in ALBA. 14. In June 2005, eleven (11) CARICOM Member States 5 signed the Energy Cooperation Agreement (PETROCARIBE), while so far nine (9) CARICOM Member States 6 have signed bilateral agreements with Venezuela. With respect to the Trinidad and Tobago s Petroleum Stabilization Fund, TT$750 million of grant funds have been disbursed as at the end of December With respect to the refining capacity of the CARICOM region, there are three (3) refineries with a total capacity of 202,000 bpd. The total expenditure for planned refinery upgrade projects for all 3 refineries has been projected to exceed US$1.5 billion. In light of the scarce resources available to the Governments of the region for economic development, opportunities exist for integration or rationalization of regional refining industry and production capacities in the energy sector. 16. Currently, a CET of 10% to 20% is applied on petroleum products imported from extra-regional sources. Products originating from refineries within the CSM and imported crude oil are zero rated. At the Seventeenth Inter-Sessional Meeting of the Conference of Heads of Government of the Caribbean Community, the Heads Welcomed the expression of willingness of Trinidad and Tobago to facilitate PETROCARIBE and to support the application for suspension of the Common External Tariff by Member States when made to the COTED 7 5 Eleven Members of CARICOM signed the Framework Agreement - Antigua and Barbuda, The Bahamas, Belize, Dominica, Grenada, Guyana, Jamaica, Suriname, Saint Lucia, St. Kitts and Nevis and St. Vincent and the Grenadines 6 Nine Members signed bilateral agreements - Antigua and Barbuda, Belize, Dominica, Grenada, Guyana, Jamaica, Suriname, St. Kitts and Nevis and St. Vincent and the Grenadines 7 Summary of Recommendation and Conclusions of the Seventeenth Inter-Sessional Meeting of the Conference of Heads of Government of the Caribbean Community, Port of Spain, Trinidad and Tobago, 9-10-February

10 17. In 2006 CARICOM implemented the CSM, with plans for the CSE to come on stream in With a view to achieving one of the principal CSME objectives of accelerated, co-ordinated and sustained economic development and convergence, it is incumbent upon Member States to secure adequate energy supplies; increase renewable energy sources; ensure environmental protection, particularly of the marine environment; and promote measures for solidarity among Member States in times of energy crises. 10

11 CARICOM ENERGY POLICY POLICY GOAL 18. The goal of the CARICOM Energy Policy is: (a) (b) (c) (d) Provision of sustainable and secure supplies of energy, accessible to all CARICOM citizens; Fundamental transformation of the energy sectors of the Member States of the Community so that they can contribute to the sustainable development of the Community; Optimization of domestic production of energy in an environmentally sound manner; Facilitating the growth of internationally competitive regional industries. OBJECTIVES OF CARICOM ENERGY POLICY GOAL 19. In fulfilment of the goal of the CARICOM Energy Policy and to assure access to adequate, safe and clean energy products necessary for the development and consolidation of the CSME established by the Revised Treaty of Chaguaramas, the Community will develop a programme of regional action in a coherent and comprehensive way in pursuit of the following objectives: (a) sustainable security of supplies of energy in and for the Community; (b) accelerated development and restructuring of sources of supply of energy, (c) sustained growth of intra-community trade in energy; (d) enhanced energy conservation and efficiency, and cleaner production in the Community; (e) increased investment in production, transformation and distribution of viable energy resources; (f) strengthening and enhancement of the human and institutional capacity in the Community in the energy sector; (g) programmed expansion of electricity generation, transmission and trade; 11

12 (h) (i) (j) access to affordable energy by the poor and vulnerable; greater use of renewable energy; and establishment and facilitation of an institutional framework for financing mechanisms for the development of viable energy resources. 12

13 CHAPTER 1.0 SECURITY OF SUPPLY 20. In the context of this CARICOM Energy Policy and the need for research and investment in the production of energy, essential for the sustainable market-driven development of the Community, security of supply means the availability of and timely access by Member States to energy resources of an acceptable quality, and at prices that are both affordable for consumers and reasonable for producers. 21. The Task Force acknowledges that because Member States exert limited influence on developments in the international energy markets, the CARICOM Energy Policy must be inherently flexible, so as to enable Member States to respond to the extra-regional developments that affect the regional energy market. In order to ensure timely access to adequate supplies of energy, Member States will 8 : (a) (b) (c) (d) (e) (f) (g) (h) Determine local and regional capacity to supply oil and gas products; Determine local and regional capacity to supply renewable energy; Diversify the energy supply mix; Determine optimum supply strategy for the Community (Petroleum Supply Optimization Study and Database); Assure access to regional resources to other Member States; Devise and institute a CARICOM Charter to develop and maintain strategic regional reserves of crude oil and energy products to be accessed in time of emergency or crisis; Devise a Community strategy for solidifying internal energy markets of Member States; Collaborate in pooling individual efforts to exert leverage on pricing and marketing arrangements in the region; 8 In this CARICOM Energy Policy actions by Member States refer to actions by these States acting individually or collectively. 13

14 (i) (j) Promote structured cooperation and collaboration among energy firms and agencies through Associations of CARICOM National Hydrocarbon Companies, electric utilities and renewable energy agencies; Develop and implement shipping arrangements for petroleum products in the region that take account of the special need of the region. 14

15 CHAPTER 2.0 DEVELOPMENT and DIVERSIFICATION of ENERGY SOURCES AND MARKETS 2.1 PETROLEUM SECTOR 22. The current dynamics of the international petroleum market, notably continuing robust demand, constraints in refining capacity and escalating prices, require an urgent coordinated effort by concerned States to explore alternatives with the aim of diversifying the product mix and sources of supply in order to secure affordable petroleum-based products. a) Encourage dialogue among national oil companies, with the aim of increasing supplies of and access to supplies of energy resources among CARICOM Member States; b) Encourage private and public entities within the region to seek opportunities to explore and develop potential crude oil and natural gas reserves within the wider Caribbean; and c) Enhance participation by Community enterprises in exploration, production, refining and shipping of petroleum and petroleum products Specifications for Petroleum Products 23. It is accepted that many CARICOM States may already have domestic national specifications for petroleum products traded and consumed within their jurisdictions. Where specifications do not exist, Member States are encouraged to provide for their establishment and implementation. Member States will, in association with CROSQ: a) Identify those specifications that can be standardized; and b) Adopt such standards; 15

16 2.1.2 Transportation of Petroleum and Petroleum Related Products 24. Currently, the transportation of petroleum and related products into and within the CARICOM region is effected through an established distribution network of vessels, trucks and retail outlets which are owned and operated predominantly by private firms, but with some State involvement. 25. This distribution network has kept the region supplied with petroleum products, but at a high cost to Member States. It is imperative that steps are taken, not only to reduce such high transportation and distribution costs, but to implement measures which ensure that a more efficient cost effective transportation network is put in place. (a) Improve and optimize the efficiency of the transportation network for petroleum and related products; (b) Reduce transportation costs for petroleum and related products; (c) Develop centralized storage systems for petroleum and related products; (d) Develop transshipment hubs; (e) Create strategic reserves where feasible; (f) Establish mechanisms for protecting consumers and assuring affordable petroleum products to consumers; and (g) Establish regional control of appropriate shipping services. 2.2 NATURAL GAS SECTOR Optimize Use of Natural Gas 26. Natural gas is a cheaper and cleaner fossil fuel which can be used not only to generate electricity efficiently (by deploying advanced technologies) but also as a feedstock for the manufacture of petrochemical products. Unlike the case of crude oil at the present time, the potential exists for the Community to be able to satisfy its demand for natural gas from the resources of Member States. 16

17 In order to realize this potential, a) Develop and implement programmes and projects which aim to incorporate, expand and optimize the use of natural gas in the energy mix; b) Establish natural gas as a key energy source for the region; and c) Encourage research into natural gas utilization and transportation through the Natural Gas Institute of the Americas. 17

18 CHAPTER 3.0 RENEWABLE ENERGY 3.1 RENEWABLE ENERGY SOURCES 27. There are numerous commercially viable renewable energy sources available within the CARICOM region, including, solar, wind, biomass, bio-gas, landfill gas, bio-ethanol, hydro, and geo-thermal. At present, other renewable energy applications such as bio-diesel are becoming more commercially and financially viable and are worthy of further development. Member States are urged to keep abreast of developments in renewable energy resources such as ocean waves, tides and currents, as well as hydrogen. In order to reduce the dependence on fossil fuels, a) Develop comprehensive national energy policies that seek to increase the use of commercially viable renewable energy sources to 10% of primary energy by the year 2010; b) Draft and implement legislation and regulations to promote the use and development of renewable energy sources; c) Draft and implement regulatory and legislative enactments to require utilities to use or increase the utilization of renewable energy sources in the electricity sector; d) Ensure that the synergies between agricultural production and the renewable energy sector are optimized (e.g. for bio-energy sources such as bio-ethanol, biodiesel and biomass); e) Identify available renewable energy sources and technologies that are practical, commercially viable and suited to particular Member States; f) Encourage the substitution of renewable energy technologies that may be damaging to human health (e.g. charcoal and wood stoves) with more benign commercially viable renewable energy technologies; g) Encourage short and long term programmes for active research, development and training in renewable energy technologies and designs; 18

19 h) Establish South-South cooperation programmes as a means to harness existing expertise from outside the region; i) Encourage the use of carbon trading opportunities as a means of enhancing the financial returns of renewable energy projects; j) Strengthen the Energy Desk of the CARICOM Secretariat, inter alia, to: (i) Research, advise on, recommend, co-ordinate and conduct educational programmes on renewable energy; (ii) Promote commercially viable renewable technologies; (iii) Develop model laws and fiscal policies to support renewable energy; (iv) Update CARICOM renewable energy targets, identify sources of grant financing and establish links between regional renewable initiatives (e.g.: the Caribbean Renewable Energy Programme, the Wigton Wind Farm Centre of Excellence, Barbados Renewable Energy Centre and other national agencies of excellence. 3.2 DEVELOPMENT OF HYDRO POWER 28. In contrast to energy produced from hydrocarbons, energy produced by hydropower cannot be stored. Transportation of hydro originated energy can only be achieved through fixed infrastructure (i.e. power lines). Notwithstanding, the development and utilization of hydropower potential can be achieved by establishing energy intensive industries near to a hydropower source. 29. Within the CARICOM region, some Member States have engaged in hydroelectric power generation, particularly Guyana, Suriname, Dominica and Jamaica. Potential exists for significant expansion in this sector in the future. 19

20 Member states will: a) Explore and utilize viable technologies for commercial long distance transportation of hydro- electric energy; and b) Encourage private and public entities within and outside the region to seek opportunities to establish energy intensive operations near to hydropower sources within the region. 20

21 CHAPTER 4.0 ELECTRICITY SECTOR 4.1 Power Generation 30. Electricity rates in Member States are among the highest in the world and the reasons for this include: lack of economies of scale; isolation of utilities due to the lack of an interconnecting transmission system; over capacity as a result of the isolation; lack of collective buying arrangements for fuel and power plants; and the historical use of cost of service and rate of return regulations which encourages over investment. To achieve a sustainable reduction in such rates, Member States will need to intervene in the electric sector in a manner that goes beyond the narrow traditional role of regulating the generation, transmission, distribution and pricing of electricity. a) Identify, develop and promote alternative or renewable energy sources, technologies and systems for electricity generation; b) Promote advanced high-efficiency power generation technologies such as combined cycle, cogeneration, and hydro-power; c) Promote competition in power generation to encourage non-utility or independent power producers (IPPs); d) Cooperate in the observance of best practice industry standards and employment of mechanisms, which reduce system losses in the electricity sector; e) Encourage utilities to participate in collective purchasing programmes with other utilities through regional networks such as CARILEC; f) Encourage institutional collaboration aimed at the production of electricity from municipal solid waste. 4.2 Transmission and Distribution of Electricity 31. The Community can only benefit economically if the demand for electricity in the single economic space can be satisfied by the supply of electricity from the single economic space, and if any shortage in one area can be satisfied from a surplus in another. 21

22 a) Explore the opportunities for import, export and cross-border trade in electricity ; b) Encourage the deployment of new technologies that promote higher energy efficiencies in electric power generation, reduce transmission and distribution losses, and reduce commercial losses. 4.3 Electricity Regulation 32. The creation of a transparent and independent enabling regulatory system is critical to the development of the electric sector. However, this is constrained by a shortage of qualified personnel in the smaller Member States. a. Establish appropriate regulatory agencies; b. Promote regulation of the electricity sector and introduction of relevant regulatory and legislative enactments. 22

23 CHAPTER 5.0 ENERGY CONSERVATION AND EFFICIENCY 33. To optimize the use of energy for development, it is important to implement measures to minimize energy consumption and increase energy efficiency. Often, these measures are low or no cost and therefore should be implemented immediately. a) Promote energy conservation, energy efficiency, reductions in energy intensity and establish appropriate measurement and monitoring standards and guidelines; b) Promote energy saving measures through introduction of fiscal incentives and other incentives; c) Implement intensive energy saving and energy efficiency programmes, which include energy audits of residential and commercial properties; d) Promote the use and installation of renewable technology in the construction, refurbishment and upgrade of public, commercial and residential buildings; e) Establish regional energy efficiency institutional networks and energy efficiency testing facilities; f) Establish electric utility and other Demand Side Management programmes; g) Develop regional public sector energy efficiency programmes; h) Establish training capacity in national and regional agencies; i) Develop a CARICOM Charter on Energy Efficiency. 23

24 CHAPTER 6.0 ENERGY INVESTMENT 34. Energy related projects are capital intensive, and as a consequence require considerable capital investment from both public and private sectors of CARICOM Member States. 35. In order to create appropriate conditions to attract much needed capital from domestic, regional and international sources, a) Provide the requisite policy, legislative and regulatory frameworks, including fiscal and economic incentives, to encourage and increase private and public sector investment in the development and commercialization of relevant energy related projects in, inter alia: (i) Petroleum resources; (ii) Natural gas resources; (iii) Renewable energy resources; (iv) Energy efficiency b) Establish energy investment promotion units to: (i) record and monitor public and private investments in energy and renewable energy related projects; (ii) identify local, regional or international agencies which provide funds for energy or renewable energy projects and assist prospective investors in satisfying the application criteria. c) Encourage membership in relevant regional and international organizations in order to maximize access to resources, assistance and support. 24

25 CHAPTER 7.0 INTRA-COMMUNITY TRADE IN PETROLEUM 7.1 Crude Oil and Petroleum Products 36. All Member States except Trinidad and Tobago are net importers of petroleum. CARICOM Member States expend approximately US$2.54 billion per annum on petroleum imports. Twenty-one percent (21%) of this sum represents imports into the region, while seventeen percent (17%) represents export receipts in the Community. 37. The supply of petroleum products is constrained by several factors, including the availability of appropriate shipping services and issues relating to parcel size and product specifications. 38. In pursuit of the primary objective of regional security of supply, it is important that the application of CET to imports of refined petroleum products, except imports under PETROCARIBE, be maintained. 7.2 Natural Gas 39. Given the increasing demand for natural gas among some CARCIOM Member States, the establishment of a more efficient transportation, distribution and marketing network for natural gas is required. 40. Natural gas supply options and the costs thereof vary, depending on whether it is transported, distributed or traded in the following forms: CNG; LNG; Piped natural gas; or Electricity transmission lines. a) Identify and implement alternative methods and measures aimed at: (i) creating more efficient means to transport natural gas; and 25

26 (ii) expanding the transportation and trade network for natural gas within the CARICOM region; b) Co-ordinate shipping arrangements to minimize transportation costs. 7.3 Pricing 41. The prices of petroleum products in the region are volatile and subject to the vagaries of the international market-place. Recent developments in global energy markets have led to surging oil and, to a lesser extent, natural gas prices. With CARICOM demand for and supply of petroleum estimated at less than 1% of world demand and world supply respectively, CARICOM Member States have little or no capability to influence prices of crude oil and petroleum products which are traded internationally in the global market. 42. Determination of basic petroleum prices will remain a function of demand and supply in the global market-place and by extension within the Community. Pricing of regional energy sources should conform to the Revised Treaty of Chaguaramas, where applicable. Member States need to focus on and positively affect both demand and supply and Member states will: (a) (b) (c) (d) (e) (f) (g) Increase energy efficiency, enhance energy conservation and reduce the demand for petroleum per unit of output; Increase energy supplies from all viable sources of energy; Establish regional control over access to appropriate shipping on a long-term basis; Create strategic stockpiles of petroleum and petroleum products; Encourage and increase collaboration and coordination among national petroleum companies, so as to maximize their leverage in the market; Identify mechanisms which mitigate the adverse effects of escalating prices for crude, petroleum products and natural gas; and Utilize developments in technology which allow for the commercial distribution of energy among Member States in an efficient manner. 26

27 CHAPTER 8.0 ENERGY and the ENVIRONMENT 43. The production, transportation and use of energy have considerable impact on the environment. It is important to ensure that economic growth, sustainable and secure energy supplies and a clean environment are compatible objectives. The challenge for the Community is therefore to ensure that the solutions for ensuring sustainable and secure energy supplies do not exacerbate problems in the environment. 44. The integration of environmental considerations within the Community energy policy needs to take place in a balanced way taking into account the goals and objectives of the policy. A key objective of this policy is to ensure that good environmental practices are observed in accordance with national, regional and international environmental standards and legislation. To achieve these objectives, action at all levels is required. a) evaluate and disseminate information on the environmental impacts of various energy options; b) develop and implement information and education programmes for end users; c) ensure the exchange of information, the dissemination of best practices and shared analyses to facilitate cooperation among Member States; d) adhere to existing national, regional and international environmental legislation and Standards; e) introduce economic and fiscal incentives and measures, which promote good environmental practices in the energy sector; f) introduce programmes for self-regulation of energy producers and suppliers; g) develop appropriate plans for liability and compensation regimes for cases of environmental acts and omissions negatively affecting the environment 27

28 CHAPTER 9.0 ENHANCEMENT OF HUMAN and INSTITUTIONAL CAPACITY 9.1 Human Resource Development 45. It is important that CARICOM Member States train and develop skilled personnel to satisfy the human resources demands of the energy industries. a) Identify and promote mechanisms to develop a regional pool of human resources to provide the requisite professional expertise and skills needed in the energy sector; b) Establish regional mechanisms to provide for training and technical assistance in the energy field; c) Encourage public and private schools, technical colleges and universities, to conduct programmes and courses and offer overseas student or job trainee/internship exchange energy programmes in subjects including, inter alia: petroleum value chain; renewable energy; energy efficiency; energy policy, programming and research and development; d) Offer scholarships and funding for the training of skilled personnel in energy and energy related fields. 9.2 Institutional Strengthening 46. CARICOM Member States should ensure that the appropriate legal, fiscal and regulatory frameworks are established in order to aid the development and implementation of the Community Energy Policy. a) Explore, create, develop and promote institutional capabilities in the energy and electricity sectors, including: (i) Energy Policy formulation (ii) Management, assessment and audit of energy systems; (iii) Resource monitoring; 28

29 (iv) Design of legislative and regulatory frameworks pertaining to the energy and electricity sectors; b) Strengthen the capacity of CEIS to provide harmonized data on the energy sector and establish a central Regional Energy Database, which serves as depository for regional energy or energy related information for use by Member States; c) Provide, on a timely basis, the requisite information that the central depository requires to fulfil its function; d) Develop a mechanism for facilitating intra-community technical cooperation; e) Encourage all electricity generating utilities and other associated public and private sector entities in CARICOM to participate in CARILEC; f) Convene regular meetings of the Ministers with responsibility for energy matters to oversee the implementation of the CARICOM Energy Policy; g) Encourage dialogue among national oil companies with the aim of enhancing access to energy resources within the Community and to establish a CARICOM Energy Committee to coordinate inter-governmental energy dialogue and planning; h) Support the establishment of CARICOM energy desk. 29

30 9.3 Research and Development 47. Market-led research, technological development, adaptation and commercialization of technology in the energy sector should be directed to enhancing the competitiveness of regional industries and improving the quality of life of the people of the Community. a) Encourage research and development primarily in natural gas, solar fuels and other renewable resources by public and private sector agencies, research establishments and tertiary institutions and assist in identifying sources of funding for such activities; b) Establish guidelines for the adaptation, diffusion and transfer of appropriate technologies in the fields of priority interest for research and development; c) Promote research and development of appropriate energy related technology programmes; d) Promote cooperation in research and technological development among Member States; and e) Facilitate cooperation: (i) in training; (ii) in the exchange of scientific and technical information among competent institutions; and (iii) among private sector enterprises to integrate the results of research and development 9.4 Public Education and Outreach 30

31 48. Taking into account significant changes occurring in the global energy sector, it is imperative that the public be sensitized and encouraged to play an active role in the implementation of the programmes and projects emanating from the CARICOM Energy Policy. 49. Member States will undertake to create and implement programmes and course curriculum which ensure the availability and public dissemination of adequate information on the benefits of energy conservation and efficiency. CHAPTER 10.0 ENERGY and POVERTY ALLEVIATION 50. In most CARICOM Member States, the majority of the population is connected to an electricity grid, while in some territories, a significant minority of households have no access to the national grid or affordable energy supplies. a) increase access to electricity in remote areas and where applicable, deploy alternative technologies (photovoltaic technology, micro-hydro and biogas) in rural farming communities; b) establish and expand programmes to provide affordable energy to the poor and vulnerable in the Community. 31

32 CHAPTER 11.0 CONCLUSION 51. The Member States of the CARICOM Community have for some considerable time evinced an interest in the formulation of a CARICOM Energy Policy and the implementation of measures which could insulate Member States from the vagaries of the international oil market. It is noteworthy, however, that interest in the formulation of the policy has tended to increase when international prices of petroleum were high and to wane when prices fell to more acceptable levels. 52. Today, however, industry experts generally agree that a fundamental shift in the oil market has occurred, which will prevent prices from returning to the more acceptable levels experienced in the past. If regional Governments accept this assessment for the future direction of the petroleum market, it is crucial that previous inaction is not repeated and immediate steps are taken to implement this policy, with the ultimate goal of assuring the vitality of regional integration movement and avoiding serious economic difficulties among the more vulnerable Member States of the Community. 53. This CARICOM Energy Policy has been so formulated as to lend itself to targeted and programmatic implementation of its constituent elements, whether for example, such elements relate to the creation of strategic reserves of petroleum products and the modalities associated with that exercise; the need for establishment of some measure of control over shipping of petroleum products to disparate island markets and low lying coastal States in the Community; or desirability for diversification of the energy mix and increase in the proportion of renewables in the production of energy. 54. Taking due cognizance of the significance of energy in the everyday life of the citizens of the Caribbean Community and its importance in the sustainable economic development of Member States, it is of critical importance that regional Governments seek to adopt, incorporate and implement the objectives and programmes outlined in this CARICOM Energy Policy. 32

33 55. In pursuit of the sustainable economic development of the Community and the enhancement of the quality of life of the people of the region, acting individually and in concert, Member States are required now, beginning with the adoption of this Policy, to cooperate and collaborate on measures designed to ensure provision of affordable, ample, clean and high quality energy to the consumers of the region and to engage in purposeful and concrete actions that minimize, reduce and mitigate any economic distress caused by high petroleum prices. The ability of regional governments to exert positive influences on petroleum pricing in the Community will be a function of the collective willingness of Member States to confront those peculiarities and weaknesses in the petroleum market in the Community that conduce to the maintenance of high prices in the region for petroleum products. 56. To assist the Conference and Member States in charting the way forward in the implementation of this Policy, the Task Force submits for the attention of Conference an Annex which groups a range of measures and action items culled from the Policy. The Task Force is confident that action on the Annex can impact positively on the achievement of the overall goal and objectives of Policy outlined above. The Task Force commends for the timely consideration of the Conference the elements of the CARICOM Energy Policy set out above. 33

34 ANNEX WAY FOWARD The following action items are recommended for consideration by the Conference: will: SECURITY OF SUPPLY In order to ensure timely access to adequate supplies of energy, Member States a) Determine local and regional capacity to supply oil and gas products; b) Determine local and regional capacity to supply renewable energy; c) Diversify the energy supply mix; d) Determine optimum supply strategy for the Community (Petroleum Supply Optimization Study and Database); e) Assure access to regional resources to other Member States; f) Devise and institute a CARICOM Charter to develop and maintain strategic regional reserves of crude oil and energy products to be accessed in time of emergency or crisis; g) Devise a Community strategy for solidifying internal energy markets of Member States; h) Collaborate in pooling individual efforts to exert leverage on pricing and marketing arrangements in the region; i) Promote structured cooperation and collaboration among energy firms and agencies through Associations of CARICOM National Hydrocarbon Companies, electric utilities and renewable energy agencies; j) Develop and implement shipping arrangements for petroleum products in the region that take account of the special need of the region. 34

35 PETROLEUM a) Encourage dialogue among national oil companies, with the aim of increasing supplies of and access supplies of energy resources among CARICOM Member States; b) Encourage private and public entities within the region to seek opportunities to explore and develop potential crude oil and natural gas reserves within the wider Caribbean; and c) Enhance participation by Community enterprises in exploration, production, refining and shipping of petroleum and petroleum products. Specifications for Petroleum Products Member States will, in association with CROSQ: a) Identify those specifications that can be standardized; and b) Adopt such standards; Transportation of Petroleum and Petroleum Related Products a) Improve and optimize the efficiency of the transportation network for petroleum and related products; b) Reduce transportation costs for petroleum and related products; c) Develop centralized storage systems for petroleum and related products; d) Develop transshipment hubs; e) Create strategic reserves where feasible; f) Establish mechanisms for protecting consumers and assuring affordable petroleum products to consumers; and g) Establish regional control of appropriate shipping services. will: Optimize Use of Natural Gas In order to realize the potential for natural gas usage in the Community, Member States 35

36 a) Develop and implement programmes and projects which aim to incorporate, expand and optimize the use of natural gas in the energy mix; d) Establish natural gas as a key energy source for the region; and e) Encourage research into natural gas utilization and transportation through the Natural Gas Institute of the Americas. Renewable Energy Sources In order to reduce the dependence on fossil fuels, a) Develop comprehensive national energy policies that seek to increase the use of commercially viable renewable energy sources to 10% of primary energy by the year 2010; b) Draft and implement legislation and regulations to promote the use and development of renewable energy sources; c) Draft and implement regulatory and legislative enactments to require utilities to use or increase the utilization of renewable energy sources in the electricity sector; d) Ensure that the synergies between agricultural production and the renewable energy sector are optimized (e.g. for bio- energy sources such as bio-ethanol, biodiesel and biomass); e) Identify available renewable energy sources and technologies that are practical, commercially viable and suited to particular Member States; f) Encourage the substitution of renewable energy technologies that may be damaging to human health (e.g. charcoal and wood stoves) with more benign commercially viable renewable energy technologies; g) Encourage short and long term programmes for active research, development and training in renewable energy technologies and designs; h) Establish South-South cooperation programmes as a means to harness existing expertise from outside the region; i) Encourage the use of carbon trading opportunities as a means of enhancing the financial returns of renewable energy projects; j) Strengthen the Energy Desk of the CARICOM Secretariat, inter alia, to: 36

37 (i) (ii) (iii) (iv) Research, advise on, recommend, co-ordinate and conduct educational programmes on renewable energy; Promote commercially viable renewable technologies; Develop model laws and fiscal policies to support renewable energy; Update CARICOM renewable energy targets, identify sources of grant financing and establish links between regional renewable initiatives (e.g.: the Caribbean Renewable Energy Programme, the Wigton Wind Farm Centre of Excellence, Barbados Renewable Energy Centre and other national agencies of excellence. Development of Hydro Power Member states will: a) Explore and utilize viable technologies for commercial long distance transportation of hydro electric energy; and b) Encourage private and/or public entities within and outside the region, to seek opportunities to establish energy intensive operations near to hydropower sources within the region. Power Generation a) Identify, develop and promote alternative or renewable energy sources, technologies and systems for electricity generation; b) Promote advanced high-efficiency power generation technologies such as combined cycle, cogeneration, and hydro-power; c) Promote competition in power generation to encourage non-utility or independent power producers (IPPs); d) Cooperate in the observance of best practice industry standards and employment of mechanisms, which reduce system losses in the electricity sector; e) Encourage utilities to participate in collective purchasing programmes with other utilities through regional networks such as CARILEC; f) Encourage institutional collaboration aimed at the production of electricity from municipal solid waste. 37

38 Transmission and Distribution of Electricity a) Explore the opportunities for import, export and cross-border trade in electricity ; b) Encourage the deployment of new technologies that promote higher energy efficiencies in electric power generation, reduce transmission and distribution losses, and reduce commercial losses. Electricity Regulation a) Establish appropriate regulatory agencies; b) Promote regulation of the electricity sector and introduction of relevant regulatory and legislative enactments. Energy Conservation and Efficiency a) Promote energy conservation, energy efficiency, reductions in energy intensity and establish appropriate measurement and monitoring standards and guidelines; b) Promote energy saving measures through introduction of fiscal incentives and other incentives; c) Implement intensive energy saving and energy efficiency programmes, which include energy audits of residential and commercial properties; d) Promote the use and installation of renewable technology in the construction, refurbishment and upgrade of public, commercial and residential buildings; e) Establish regional energy efficiency institutional networks and energy efficiency testing facilities; f) Establish electric utility and other Demand Side Management programmes; g) Develop regional public sector energy efficiency programmes; h) Establish training capacity in national and regional agencies; i) Develop a CARICOM Charter on Energy Efficiency. 38

39 Energy Investment a) Provide the requisite policy, legislative and regulatory frameworks, including fiscal and economic incentives, to encourage and increase private and public sector investment in the development and commercialization of relevant energy related projects in, inter alia: (i) Petroleum resources; (ii) Natural gas resources; (iii) Renewable energy resources; (iv) Energy efficiency b) Establish energy investment promotion units to: (i) record and monitor public and private investments in energy and renewable energy related projects; (ii) identify local, regional or international agencies which provide funds for energy or renewable energy projects and assist prospective investors in satisfying the application criteria. c) Encourage membership in relevant regional and international organizations, in order to maximize access to resources, assistance and support. Natural Gas a) Identify and implement alternative methods and measures aimed at: (i) creating more efficient means to transport natural gas; and (ii) expanding the transportation and trade network for natural gas within the CARICOM region; b) Co-ordinate shipping arrangements to minimize transportation costs. Pricing Member states will: 39