Wind of change sweeps through energy policy in the Caribbean

Aruba in the southern Caribbean has 107,000 people, a lot of wind and sun and, until very recently, one very big problem. Despite the trade winds and sunshine, it was spending more than 16% of its economy on importing 6,500 barrels of diesel fuel a day to generate electricity.

People were furious at the tripling of energy prices in 10 years and the resulting spiralling costs of imported water and food.

That changed at the Rio earth summit in 2012, when the prime minister, Mike Eman, announced that the former oil-producing Dutch island close to Venezuela planned to switch to 100% renewables by 2020.

Working with the independent US energy group the Rocky Mountain Institute and the business NGO Carbon War Room, Aruba ditched its old steam turbines for more efficient engines and changed the way it desalinated seawater.

It cost $300m (£183m), says the energy minister and deputy PM Mike D’Emeza, but Aruba immediately halved its fuel consumption and saved itself $85m a year. It then built a 30MW wind farm and cut its diesel consumption a further 50%. Now it is planning another wind farm and a large solar park. By 2020, Aruba will be free from fossil fuels and possibly storing renewable electricity under water or using ice.

The move to energy independence has had dramatic results, says De Meza. Electricity prices, which were US 33c/ KwH in 2009, have dropped 25% and are stable; inflation has been reversed; the island has nearly paid off the $300m it cost to switch out of diesel; the price of drinking water has fallen by almost a third; and the number of people unable to pay their bills has declined drastically.

“We had been grappling with very high energy costs for 15 years. We realised that our dependency on fossil fuels was leading to political and economic instability. We had to act,” De Meza says.

Aruba is already enjoying health and economic benefits. More tourists are keen to visit a green island, he adds, and children are fitter because it costs families less to pay for sports, and there is less illness. “It has been very popular. Instead of energy prices being the top of the political agenda, the debate now is about which is the best renewable energy source Aruba should go for next.”

Many other Caribbean islands are eager to follow Aruba. Some in the region pay more than 42c/ kwh – three or four times the price paid in most of the US and Europe – and up to 25% of their GDP on diesel for electricity.

Many are also locked into long-term contracts with monopolistic US or Canadian utility companies which have negotiated 17% or even higher guaranteed profit margins.

With many states also having to pay off onerous long-term loans to regional banks, the net effect of high power costs is continual misery, says Nicholas Robson, director of the Cayman Institute thinktank. “People are coming to me saying they cannot afford electricity. It costs 42c in the Caymans. It’s approaching a crisis point. People are struggling because of energy prices.”

“We are very concerned about the high cost of energy and how it affects jobs,” BVI prime minister Orlando Smith adds.

“We pay 38c/ KwH,” says James Fletcher, St Lucia’s energy and science minister. “The result is that industries like tourism, which are very heavy electricity users, are not competitive, our agriculture cannot move out of being just primary commodity producers, and our people have no money.”

St Lucia plans over the next 10 years to switch much of its electricity from diesel to renewables, using geothermal, wind and solar power. The government will make it easier for people to generate their own electricity to reduce diesel demand, and changing street lights to LEDs could reduce costs by $11m a year, he explains.

“Renewables will provide new jobs, everyone will have more money in their pockets, transport will be cheaper and companies will be able to expand more easily,” Fletcher says.

“Islands can get prices down to just 12c/ KwH,” says Ed Bosage, a wealthy American financier who bought the small island of Over Yonder Cay and who has switched it to 96% renewables with wind, solar and a tidal generator. “The wind blows at an average of 16 knots. The tidal is extremely reliable. We learned that wind trumps sun by 2:1. We now produce electricity for 12c, the cheapest in the Caribbean, and will get it cheaper. It’s repeatable everywhere,” he says.

Caribbean islands share similar problems to thousands of others in the Pacific and elsewhere. Mostly, they are not on national grids, which makes them vulnerable to high energy costs, fuel has to be imported at extra cost, and they are often reliant on just one utility company and most are too small to benefit from economies of scale.

While some can attract high-spending tourists and offshore finance companies, small island states are often heavily indebted, with weak economies, pockets of intense poverty and often rundown hospitals and schools.

But, says Peter Lilienthal, director of Colorado-based Homer Energy and former US national energy laboratory chief, islands stand to benefit from the renewable revolution more than anyone. “Diesel is now hurting small islands. They are burning money. But the price of solar has plummeted in the last few years. It’s now cost-efficient everywhere. Islands now can be the leaders.”

Jamaica is investing heavily in wind, Barbados in solar power and eight island states – Aruba, British Virgin Islands, Dominica, St Kitts and Nevis, Grenada, St Lucia, Turks and Caicos,and the Colombian islands of Providencia and San Andreas have joined the Carbon War Room’s “10 island challenge”. This gives them access to technological and funding help from the Rocky Mountain Institute and others.

“Renewables have come slowly to the Caribbean and other developing countries but the technology is now cheap enough and diverse enough to make it much easier to install,” says Amory Lovins, chief scientist at the Rocky Mountain Institute. “Small islands can move fast if they have coherent policies. They can be the future.” More

 

Excluding complacency in Small Island Developing States

MasterCard CEO Ajay Banga’s six lessons on leadership

Ajay Banga

What I want to focus on is leadership. How do you take the leadership potential all of you have and cultivate it. Here are some perspectives around leadership that I can offer.

1. A sense of urgency: Today’s world of rapidly-advancing technology and ever-shortening innovation cycles have no space for procrastination. It’s that urgency that makes me say to colleagues in my company that “if you have good news for me, take the stairs. If you have bad news, take the elevator.” I need that information fast, so I can do something about it.

2. A sense of balance: A lot of people think that urgency and patience are contradictory. And they could not be more wrong. You need to be patient enough to listen to everybody, but yet, you must have a sense of urgency to take a decision and to execute.

3. Courage to take thoughtful risks: Rarely are you going to have perfect information. The willingness to take a decision at that time will depend on your ability to take a thoughtful risk. The thoughtful part depends also on your humility and realising that you don’t have all the answers—that you can learn something from everybody. You get a good dose of humility as soon as you arrive here. You come from a school where you were the top gun. You get here and everybody’s a top gun. Humility is practically a rite of passage.

4. Be competitively paranoid: I don’t mean be fearful. What I mean is constantly ask yourself if you’re missing something. Is there more to the problem? If you don’t question everything, if you’re not competitively paranoid, you will not have the sense of self-introspection that you need to be a real leader.

5. Develop a global view: Leadership attributes are tremendously facilitated if you surround yourself with people who don’t look like you, don’t walk like you, don’t talk like you, and don’t have the same experiences as you. Admittedly, when I’m in the US, I’m suddenly diverse. In India, I’m obviously not. But it’s not where you come from or what you look like that matters. What matters is what you do and how you do it. That’s the true essence of diversity.

What makes diversity so important? Diversity is essential because a group of similar people tends to think in similar ways, reach similar conclusions, and have similar blind spots. To guard against that, you need to harness the collective uniqueness of those around you to widen your field of vision—to see things differently, to fail harder, to innovate, and to question everything. Widening that field of vision means widening your worldview

Increase your connectivity to the world around you. For example, once you get acclimated to your new jobs, consider getting involved in organisations outside of your work but that connect back to it as well. Explore avenues like the World Economic Forum. The key is to go beyond looking at the world through the lens of your company or your organisation or even your country.

6. Do well and do good: It’s the highest form of leadership. It’s the idea that you can pursue what is in your best interest as well as what is in the interest of others. It’s the recognition that your success is tied to the success of others. You know the saying, it’s lonely at the top? It’s only lonely at the top when you don’t bring other people along with you.

This principle of doing well and doing good holds true for any one person or organisation, but it’s an especially powerful principle for business and the private sector today. In a business sense, it’s the idea that the private sector can be a force for growth and a force for good. That business can make money and make a difference.

Both the private and the public sector have a role to play in the following: Bring more people into the financial mainstream—at a time when half the world’s adults don’t have a bank account, guard against a future where we have the Internet of Everything, but not the Inclusion of Everyone, give women same opportunities as men.

Of course, this very school was founded, not just on the idea of public-private partnerships but literally by public-private partnerships. It was the government of Gujarat, the government of India, local businessmen, Harvard Business School, and the Ford Foundation—all coming together, not only to help build industry in India but to help build India herself.

 

 

 

The Great Global Lie By Richard W. Rahn

Offshore financial centers owe their prosperity to tax transparency, not tax evasion

Grand Cayman, Cayman Islands — January 13, 2015 – Cayman is prosperous, in part, because of a great global lie, which causes many big rich nations to pursue bad economic policies. The global lie is that the developed countries have too little government, rather than too much

 

That lie causes countries to tax themselves far above the level that would maximize the general welfare and job creation. That lie causes governments to spend money on many nonproductive activities and to spend money far less efficiently than the private sector for the same activity. Finally, that lie causes governments to regulate excessively and often in a destructive manner. The simple and obvious empirical fact that most developing and developed countries with smaller government sectors have grown faster in recent decades than those countries with big government sectors is ignored both by the politicians and many in the media

The Economist magazine is just out with its annual lists of economic forecasts for the major developed countries. It makes for depressing reading. The euro area (including Germany, France, Italy and Spain) and Japan had less than 1 percent growth in 2014, and are forecast to average only about 1 percent growth in 2015, which is little more than stagnation. Britain and the United States are doing the best — having growth of about 2.9 percent for Britain and 2.3 percent for the United States in 2014 — with a forecast of approximately 3 percent growth for both in 2015. These numbers are all well below the averages for the great prosperity that lasted for the 25-year period from 1983 to 2007. The unemployment rate for the eurozone at the end of this past year was 11.5 percent (depression levels)

The political classes in these countries, rather than taking responsibility for their own misguided policies, look for scapegoats. Their favorite scapegoats are high-growth countries with low tax rates on savings and investment. They blame offshore financial centers like Cayman, Hong Kong, Bermuda, and even mid-sized countries like Switzerland for engaging in “unfair tax competition.

Critics of Cayman and other offshore financial centers call them “tax havens,” ignoring the fact that they all have many taxes, particularly on consumption — which is good tax policy — rather than on productive labor and capital — which is bad tax policy. The statist political actors in the high-tax jurisdictions will not admit that people do not work, save and invest if they are going to be overly taxed and otherwise abused by their own governments. Those who are able will pick up some of their marbles and move them to places where they will be better treated.

Cayman and other offshore financial centers originally arose because of a need to have places that facilitate the movement of marbles (aka savings). Cayman is too small (only 100 square miles and 50,000 people) to be the ultimate destination of wealth trying to escape oppression — but it has the rule of law, an honest court system and protects private property — which allows it to become a protected way station for productive investment throughout the world, including the United States.

Cayman now has almost total tax transparency with the United Kingdom, the European Union and the United States as a result of tax information exchange agreements; yet its financial sector continues to grow — more company licenses, more of the world's hedge funds (with total assets of almost $2 trillion), and more insurance companies. This growth is not driven by tax evasion, but mainly by regulatory and civil court efficiency and integrity

The chairman of the Cayman Islands Stock Exchange, Anthony Travers, recently wrote in the IFC Review: “Paradoxically, what now becomes clear as a result of this increased tax transparency is that the historical arguments of the NGOs [non-governmental organizations] in relation to the extent of tax evasion in the offshore jurisdictions are proven to be the purest nonsense. Not only have the Tax Information Exchange Agreements failed to generate any discernible revenue but what will now be shown is that the tax revenues generated for the benefit of the USA and the U.K. Treasuries from FATCA [Foreign Account Tax Compliance Act] will be marginal.”

The fact is the world would be poorer with even less growth if the offshore financial centers did not exist — because the amount of productive investment and its efficient allocation would be less. The offshore centers are merely a response to bad tax, regulatory and spending policies in most of the major, rich countries. The major countries could conquer the offshore centers, but as the smart people know, that would make the rich countries poorer, and without a convenient scapegoat. Or, the rich countries could reduce the size of their own governments, cut tax rates on capital, and make their regulatory systems cost-efficient. Such actions would reignite growth and job creation — but reduce the power of the political and international bureaucratic classes — so they continue the big lie.Richard W. Rahn

Richard W. Rahn is a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth.

 

http://www.washingtontimes.com/news/2015/jan/12/richard-rahn-cayman-islands-owe-prosperty-to-trans/