Just days after Hurricane Maria devastated Dominica, the country’s prime minister, Roosevelt Skerrit, stood in front of the U.N. Generally Assembly in New York to plead for help.
“I come to you straight from the front lines of climate change,” he said.
The leaders of island nations have been at the forefront of international climate agreements, pushing for more stringent climate commitments in forums where lurching progress is the norm. “While the big countries talk,” Skerrit said, “the small island nations suffer.”
For small island nations like Dominica, installing clean energy doesn’t come down to politics, but to price.
Despite calls for a shift in the energy mix, 3,600 islands around the world continue to rely on imported oil -- historically the most economic way of getting dense energy to remote communities.
But according to a timely report out this week from GTM Research, those economics are changing. By 2025, the report finds, a range ofsolar storage and hybrid alternatives will have a lower levelized cost of energy (LCOE) than oil.
“Small island communities are very vocal, because by their very nature they’re going to be impacted. We think there’s an opportunity for these markets to be a bit of a lead in transitioning to a low-carbon supply,” said Tom Heggarty, senior analyst in global solar markets at GTM Research.
“There are many more options for alternatives to oil products than there were even four or five years ago, and at competitive prices," he said.
The most feasible alternative is liquefied natural gas (LNG), which is already able to compete with oil on price. Though islands still have to import gas and build infrastructure to use it, newer export infrastructure coming in the U.S. and Australia will provide ample supply and opportunities for long-term contracts with more favorable prices compared to oil.
Switching to less-carbon-intensive LNG from oil could give islands more time to wait out the fall in prices for solar and lithium-ion batteries.
The report assessed the economics of several lifetime scenarios, including existing standalone LNG, solar and diesel; a solar and LNG hybrid; solar with 4 hours of lithium-ion storage and diesel; solar with 4 hours of lithium-ion storage and LNG; and finally, solar with a 4-hour lithium-ion battery. The projections included construction costs for infrastructure.
Currently, the scenario with the lowest LCOE range is solar and LNG, with a range starting at $80.7 per megawatt-hour. Solar paired with battery storage has the highest current LCOE, starting at $216.40 per megawatt-hour and stretching up to a possible $397.70 per megawatt-hour.
But by 2025, the scenarios change, spurred by the falling costs of solar and batteries and rising costs of crude. GTM Research projects that the LCOE for PV and lithium-ion storage will fall by 45 percent between 2017 and 2025.
By that date, diesel alone will be the most expensive, with an LCOE of $200 per megawatt-hour. And solar-plus-storage will come down enough to rival hybrid solar-diesel systems.
The report studied four key island regions, including the hurricane-ravaged Caribbean. The Caribbean has only 120 inhabited islands, but uses 281,000 barrels of oil a day.
Across all island regions examined in the report, renewable and gas alternatives could displace 135 terawatt-hours of oil-based electricity.
As prices fall, novel solar-plus-storage projects like those led by Tesla and SolarCity on islands such as American Samoa, the Cook Islands, and Hawaii will become more widely feasible. But a fully renewable grid remains costly, especially as many Caribbean islands are picking up the pieces after devastating hurricanes.
"The high cost of these [fully renewable] systems could result in power prices close to those already observed in island markets burning oil for power generation. It would, however, provide power supply with very little exposure to global oil markets and close to zero power-sector carbon emissions. As Li-ion battery and solar costs fall, these systems will become increasingly viable, although they will likely remain a relatively expensive option," writes Heggarty.
GTM Research's report Future Power Supply Options for Island Markets is available here.