Coping With Disaster Vs. Energy Security

Last year at COP27, participating countries agreed to create a historic loss and damage fund for small island developing states (SIDS) and other vulnerable places to cope with climate change impacts. But this funding will still be a small part of addressing those states’ climate challenges.

When it comes to island states, conversations almost always focus on how they will be able to withstand climate impacts, while assuming any decarbonization will occur entirely with renewables.

But in some ways, this assumption gets it backwards because it is focused on lessening emissions. Given that small island developing states account for less than 1% of global emissions, decarbonizing—however it is done—won’t make a difference for mitigating global warming.

Naturally then, one could ask what the point of decarbonizing at all would be. But island states will still be pushed to do so—whether by outsiders through a global push for decreasing every emissions source, no matter how small, or by their own desires to transition to carbon-free energy sources. In turn, energy prices may eventually take a turn for the worse as incentives keep making clean energy technologies cheaper than fossil fuels and their related technologies become more expensive as a result of decreased production, some of which has already started such as phasing out internal combustion engine vehicles.

Rather than emissions reduction, the real opportunity presented by transitioning away from fossil fuels is achieving energy security and affordability. Most small island developing nations are almost entirely dependent on imported fossil fuels, which creates significant financial pressure and vulnerability given that they are completely dependent on other nations to keep their own lights on. Energy security is a goal that has long eluded these states due to vast geographical and financial barriers. A better understanding of energy security and reliability challenges must be the fundamental basis for energy transition solutions for island nations.

Why small island developing states are so difficult to decarbonize

Small island states share a distinct combination of geographical and economic characteristics that make decarbonization even more difficult than for other countries.

For one, they are small and isolated. Existing domestic energy resources are often low or non-existent, so they are heavily import-dependent for the oil and gas needed for their energy consumption. Furthermore, limited land availability makes it harder to build new power generation capacity. This is why many island states have some of the highest energy costs in the world; their isolation often contributes to elevated costs for fossil fuel imports given the logistics of marine oil and gas shipping.

Dependence on trade also exposes these countries’ economies to volatility in fossil fuel markets, such as the oil price shocks due to Russia’s war on Ukraine. Limited financial and economic resources, meanwhile, further restricts efforts toward energy security or decarbonization, especially given that governments are often simultaneously trying to alleviate high degrees of poverty.

Given the problems of imported fossil fuels and the global push for decarbonization, many observers have argued that renewables are the perfect solution. Many small island states are in the tropics, with sunny weather all year round. But entirely relying on variable renewable generation for energy, specifically solar and wind energy, would not be so simple as one might assume.

First, there is the economics. Many small island developing economies depend on relatively erratic income streams, such as tourism and remittances (for many, tourism accounts for over 25% of their GDP). And that restricts their financial capabilities, at times causing devastating blows as a result of extreme fluctuations. The COVID-19 pandemic, for example, led to a 9% drop in GDP for small island developing states compared to a 3.3% drop for other developing nations. Given how much variability already exists for these economies, the added investments needed to reliably operate large amounts of variable energy and batteries could exacerbate economic challenges.

Second, there’s the problem of variability: ensuring energy security in the event of low sunlight or wind, such as during extreme weather events which are quite common for many island nations. Compounding the problem, geographical isolation means that these countries are on their own in the event of insufficient generation, as they don’t have the benefit of long-distance grid connections with other regions. A 100%-renewable power grid would require a high amount of storage through high-performing batteries, plus added wind and solar capacity to charge this storage capacity while meeting regular societal needs.

And that leads to the third problem: scarce land. On many of these islands, there is not much space to achieve what would be required for a 100%-renewable grid. Furthermore, the reliability of solar-wind energy systems decreases for countries with small land areas. This is because the smaller the land area, the more volatile wind and solar energy will be. In layman’s terms, if it isn't windy on one side of a small island, it likely isn't windy on the other, either. This is not a problem for large countries like the United States, where weather is almost always different in one corner than the other.

Given the arguments against large-scale reliance on renewables for these countries, it is not surprising that experiments with a 100%-renewable fantasy have already failed. El Hierro, a small island located off the coast of Morocco and governed by Spain, was widely celebrated some years ago as the first ever 100%-renewables island. It was actually consuming oil quite often to maintain generation during periods of low renewable output. As of today, El Hierro remains dependent on oil to meet demand when renewable generation is insufficient, making up as much as 90% of the generation depending on the time of day.

No matter how much sun and wind island nations have, renewables will not be perfect candidates for ensuring energy security. This is not to argue that island nations must make an “either/or” decision between wind and solar versus other clean energy technologies, in favor of the latter. It just means the governments of these countries must expand their focus to include firm, clean energy sources to make up for variable generation from renewables.

The hard road to firm energy

In large and wealthy nations, decarbonizing may be expensive, but it's definitely feasible. Developed countries can afford to subsidize clean energy to a relatively high degree; their markets can bear taxes that make fossil fuels more expensive. Larger developed nations can likewise sustain additional funding for research and development for alternative clean energy technologies while increasing the efficiency of existing clean technologies. And if the going gets tough, the tough can borrow. To decarbonize, governments need a lot of funding, much of which is financed.

None of this will work for small island developing nations, which can’t readily subsidize, already face extremely expensive energy costs, and cannot borrow capital as easily. These states often carry huge debt loads, reducing lender confidence in long-term payback. Loss and damage funds may well be eaten up entirely if small island developing nations continue paying back debt at a rate of more than 15 times what they received in climate finance.

Zooming out to the bigger picture, an energy transition presents an opportunity to fix small island developing states’ broken energy landscape, which would in turn improve their long-term financial well-being. Transitioning to a range of reliable domestic energy sources is a vital point for resilience and economic development going forward, and the fact that these technologies are also emissions-free is even better.

To do so will mean rethinking traditional funding mechanisms to allow for more flexibility and less debt. Additionally, a need for robust, affordable insurance in island nations will continue to increase as climate impacts are expected to worsen over time. However, many of these countries currently struggle to access any insurance at all.

New funding mechanisms are being proposed in the hopes of building resilience in small island developing states while enabling their escape from the debt hamster wheel. Barbados has proposed a new financial lending structure for the IMF known as the Bridgetown Agenda, which calls for faster access to financing, a suspension of interest surcharges on debt, and a more formalized system for giving out funding for climate resilience.

Climate policy scholars have likewise introduced proposals for developed countries to cancel small developing island nations’ debt altogether in exchange for the climate funding they have promised to small island nations, killing two birds with one stone. Barbados recently achieved a similar swap by refinancing $150 million of its debt for a much lower rate, with plans to put the $50 million savings towards its environmental priorities.

But all of these mechanisms, traditional and new, depend on how much the international community prioritizes small island developing nations for climate financing. And so far, its track record is not great. Some nations are trying to lead the change themselves through organizations like SIDS DOCK, which focuses on energy solutions suitable for small island nations through public-private partnerships and investments. Either way, island states will need a lot more fiscal flexibility to decarbonize without sinking further in inescapable debt.

Realistic decarbonization strategies matter most

In the end, these nations need firm energy sources and new, resilient infrastructure if they are to enjoy a prosperous life beyond simply surviving climate impacts.

Suitable support for variable renewables and batteries could include geothermal and nuclear energy. Geothermal potential is still vastly unexplored despite its potential, at least for Caribbean nations. Nuclear power can easily meet the energy demand of many island states, more suitably using smaller reactors. Jamaica has been successfully managing a research reactor since 1984, and it’s time to consider expanding that expertise for broader energy use.

Decarbonization pathways must be practical and support small island developing states’ economic growth, and work in tandem with continued development. Many environmental groups run laps trying to avoid accepting that developing countries will increase emissions in order to develop, even if such impacts are minuscule compared to those of the developed world. Estimates show that even if the world’s lowest-income countries were to rapidly develop at a generous growth rate of 8% annually until 2035 while larger countries decarbonized, they would account for a negligible portion of less than (2%) of global emissions.

But accomplishing this growth while decarbonizing will take capital to invest in infrastructure and clean energy technologies. And it will take international technological support and institutional capacity building. Technological support would include industry expertise for training a domestic workforce, accessing clean energy technologies, and constructing new power plants and transmission lines. Institutional support would pinpoint where each country may need help on an organizational level to accomplish its goals. Expertise in planning and implementation should be shared by more experienced countries and organizations that have successfully deployed and managed the new clean energy technologies that small island nations need. The International Atomic Energy Agency (IAEA) is a good example, offering a multitude of resources and consultation for planning and establishing civilian nuclear power programs.

Overall, the real point of an energy transition for small island developing nations is to acquire secure energy sources that can build prosperity. The sooner governments and financial institutions realize this, the sooner these countries can finally achieve energy security and affordability. Decarbonizing small island nations is inherently more difficult given economic, physical, and geographic constraints. Such factors increase the need for energy system flexibility, which can be addressed by pairing renewables with firm, clean technologies. A reliable, affordable, and flexible energy system is an important step towards economic development, which will itself be key to building resilience through infrastructure that will provide better protection, decrease poverty and raise living standards. All of which is also necessary preparation for extremities, including future climate impacts.

Climate conversations around small island nations must extend to this bigger picture in order for island states to be better off after weaning off fossil fuels. If island nations are going to transition with the rest of the world to a clean-energy future, developed nations will need to help these countries address the same persistent energy security issues that island states have been confronting for decades.