Barbados will sharply reduce its dependence on imported fossil fuels by creating a “Smart Fund’’ that will finance renewable energies technologies and energy efficiency measures with a US$10 million loan approved by the Inter-American Development Bank (IDB).
The project aims to reduce Barbados’ fossil fuel dependency and promote sustainable energy while reducing CO2 emissions. By 2014, the Smart Fund intends to finance the installation of at least 1000 kilowatts of renewable energy generation capacity and produce savings equivalent to at least 500 megawatt hours per year through efficiency measures.
“The savings that will be generated by the Smart Fund, as part of Barbados´ Sustainable Energy Framework, are expected to total at least $283 million over the next 10 to 15 years,” said Christiaan Gischler, the IDB team leader for the project. “This will be one of the largest reductions in fossil fuel consumption ever achieved by a country in Latin America and the Caribbean, and it will show that fiscal responsibility can go hand-in-hand with the promotion of renewable energy, energy efficiency and environmental sustainability.”
The government of Barbados is launching the Smart Fund to help consumers and businesses, including the tourism industry, to finance the up-front costs of renewable energy technologies such as solar panels and more efficient air-conditioners and light bulbs. The Smart Fund will seek to develop a package of financial instruments and provide technical assistance to remove the main barriers to investment in these technologies.
As part of the program, $9 million will be destined to support renewable energy and energy efficiency projects, including rebate mechanisms to upgrade air conditioning systems and the distribution of compact fluorescents lamps (CLFs). Another $1 million will help provide institutional support for the execution of the Smart Fund and will finance public awareness campaigns and data collection activities.
“Barbados is the first Caribbean country to create this type of fund, which could easily be replicated in other countries that are highly dependent on fossil fuels,” added Gischler. “Since tourism is such a vital industry in this region, we have the opportunity to combine sustainable energy and “green” tourism by reducing monthly energy bills as well as the carbon foot print of hotels and end users. Barbados has already succeeded in getting 40% of the country’s homes and businesses to install solar water heaters, for example.”
Barbados is highly dependent on fossil fuels. In 2007, the country spent US$208 million in oil imports, which represents about 7 percent of GDP. The Prime Minister of Barbados has expressed concern not only about the high cost of oil leading to a drain of foreign exchange, but also about the necessity of preserving the island’s fragile environment.
The US$10 million loan comes from the Bank’s ordinary capital and has an amortization period of 25 years with a grace period of 5 years. The interest rate is based on the LIBOR. The execution agency is the Prime Minister’s Office, acting through the Energy and Telecommunications Division, with Enterprise Growth Fund Limited as a sub executing agency.