This study analyses the feasibility of introducing natural gas in 14 countries in the Caribbean. The current dependence on fuel oil in the countries in the Caribbean has led to high generation costs and electricity prices. Introducing natural gas would decrease both the cost and price of electricity, mainly due to the lower price of natural gas. Additionally, natural gas plants emit less carbon dioxide (CO2) per ton than fuel oil plants. Therefore, the net benefits of natural gas would be seen in lower financial and economic (environmental) costs. It is important to note that upon introducing natural gas, not all renewable energy (RE) and energy efficiency (EE) technologies that are viable in the current scenario—a scenario in which most electricity is generated with fuel oil—will still be viable. Furthermore, though natural gas proves viable under the current situation—where the price of natural gas is lower than that of fuel oil—there is no guarantee that this will always be the case. Lastly, some factors need to be considered closely to fully assess if they will affect the viability of introducing natural gas in the Caribbean. For example, the introduction of natural gas may be hard to organize due to market structure disparities for each country. Additionally, it may not be feasible to completely phase out fuel oil. This report explains the above-mentioned topics in detail. Section A assesses the potential of natural gas as a generation source and presents the costs of supplying natural gas to the Caribbean. Section B analyses the implications of introducing natural gas on generation costs, electricity prices, and the viability of renewable energy and energy efficiency technologies. Section B includes a cost-benefit analysis that compares the savings in net benefits of three alternatives scenarios to the costs of the current scenario.
Inter-American Development Bank (IDB)
1 December 2013