VZCZCXRO5063
PP RUEHGR
DE RUEHWN #1852/01 2930040
ZNR UUUUU ZZH
P 200040Z OCT 06
FM AMEMBASSY BRIDGETOWN
TO RUEHC/SECSTATE WASHDC PRIORITY 3552
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
INFO RUCNCOM/EC CARICOM COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 06 BRIDGETOWN 001852 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
WHA/EPSC FOR FAITH CORNEILLE AND EB/ESC/IEC FOR JEFF IZZO 
 
E.O. 12958: N/A 
TAGS: ENRG EAGR ETRO EAID EPET EINV PGOV PREL BB
XK, XL, XM 
SUBJECT: BIOFUELS IN THE EASTERN CARIBBEAN: UNCLASS/SBU 
VERSION 
 
REF: A. STATE 164558 
     ¶B. BRIDGETOWN 1801 
     ¶C. BRIDGETOWN 785 
     ¶D. BRIDGETOWN 533 
     ¶E. BRIDGETOWN 178 
 
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SUMMARY 
------- 
 
¶1. (U) Discussions with eastern Caribbean Energy Ministries 
in the region revealed a strong interest in alternatives to 
fossil fuels.  Like the countries themselves, the proposed 
alternatives are very diverse, ranging from ethanol and 
geothermal, to solar and wind, and even to waste conversion. 
Most of the countries in the region have already begun 
implementation, or at the very least, are making plans do so. 
 While these alternatives have great potential for domestic 
consumption, the potential for export of biofuels is greatest 
in Barbados and St. Kitts and Nevis, where ethanol production 
is a serious focus.  However, significant challenges to 
public and private investment in this sector remain, such as 
limited resources and challenging geographies.  The recent 
reduction of oil prices in the region and the expected 
benefits of Petrocaribe, have also made the perceived need 
for alternative energy resources less immediate.  End 
Summary. 
 
--------------------------------------------- --------------- 
DIVERSE FACES OF ALTERNATIVE ENERGY IN THE EASTERN CARIBBEAN 
--------------------------------------------- --------------- 
 
¶2. (U) The avenues of alternative energy being explored in 
the eastern Caribbean are as diverse as the islands 
themselves.  In Dominica, plentiful running water produces 
40% of the island,s electricity, which the government hopes 
to export to the neighboring islands of Martinique and 
Guadeloupe.  Hydroelectric power is also producing close to 
20% of St. Vincent's power.  St. Lucia, Dominica, and St. 
Kitts and Nevis are all exploring the feasibility of 
geothermal energy with the support of the French Government 
and the Organization of American States (OAS).  The 
Government of Antigua and Barbuda is looking to fill 40% of 
its energy needs from renewable sources, specifically a 
waste-to-energy plan in the short term, followed by a 
longer-term ocean thermal energy conversion (OTEC) program. 
Grenada is also eyeing the possibility of converting 
agricultural waste to biomass energy and aggressively 
promotes solar water heaters through public awareness 
campaigns and tax rebates.  Barbados and St. Kitts appear to 
be the only countries focused more on ethanol due to their 
histories and experience with sugar production.  Both 
countries developed plans, which they hope to present to 
potential investors and financial institutions. 
 
-------- 
BARBADOS 
-------- 
 
¶I.  State of Sugar Industry 
--------------------------- 
 
¶3. (SBU) According to Barbados government statistics, it cost 
US$1,181 in 2004 to produce one ton of export-ready raw sugar 
in Barbados.  Given the US$683 average export price (all 
exports went to the European Union), Barbados loses US$498 on 
every ton of sugar it exports.  The country exported 34,400 
tons of sugar in 2004 for a total loss of US$17,136,360 or 
nearly US$35,000 for each of the roughly 500 sugar workers. 
The government-owned and managed Barbados Agricultural 
Management Company (BAMC) runs the island's sugar factories 
and handles all exports of the commodity.  Explaining the 
high production cost, the Minister of Agriculture, Erskine 
Griffith, told post that Barbados' yield ratio of 21 tons of 
sugar per acre of sugar cane is, "the lowest of any sugar 
producing nation," whereas "producers in Brazil get up to 80 
tons per acre." 
 
¶4. (SBU) There is no longer any economic reason for Barbados 
to continue producing sugar, but an historic emotional 
attachment to the crop causes the government to keep the 
industry alive at considerable taxpayer expense.  Instead of 
cutting their losses, Barbados continues cutting cane.  But 
now there is an additional objective:  In January of 2006, 
the Barbadian Government announced a US$150 million 
government financed plan to construct a multipurpose facility 
which would produce 30 megawatts of electricity, 14 million 
 
BRIDGETOWN 00001852  002 OF 006 
 
 
litres of ethanol, and 15,000 tons of specialty sugar for the 
local and export markets.  BAMC head Carl Simpson spoke 
positively of the plan in several public fora, citing a 
feasibility study showing ethanol production to be a viable 
option for Barbados.  However, concrete information on the 
economics of this new plan has been difficult to obtain. 
 
II.  Fuel Distribution 
---------------------- 
 
¶5. (U) The latest statistics show that Barbados produced 
about 1,000 bbl of oil per day and 29.17 million cubic meters 
of natural gas.  Consumption is estimated at 110,000 tons of 
unleaded gas; 87,000 tons of diesel; 182,000 tons of fuel oil 
for electricity generation; 11.8 million cubic meters of 
natural gas; and 1,800 tons of jet fuel.  The most recent 
data on transportation show that there are approximately 
54,000 automobiles in the country.  Barbados has some of the 
lowest electricity rates in the Caribbean.  Electricity 
consumption by sector was 127 million kWh for hotels; 194 
million kWh for commercial; 121 million kWh for government; 
275 million kWh for domestic; 54 million kWh for industrial; 
and 58 million kWh for other, unspecified consumption. 
Barbados Light and Power is state-owned and the only 
electrical utility company on the island.  There are three 
power stations run by steam, gas turbines, and diesel.  The 
current renewable energy portfolio for Barbados consists of a 
10 MW wind farm at Lamberts, St. Lucy, and 38,000 residential 
and commercial solar hot water heaters. 
 
III.  Investment Climate 
------------------------ 
 
¶6. (SBU) In general, the investment climate is very good in 
Barbados for the ethanol biofuel market.  Although there is 
no current ethanol production, consumption or exports, the 
Minister of Energy of Barbados has made it clear that the 
government fully supports the production of alternative 
energy and will do what is necessary to turn talk into 
action, as indicated by the allocation of over US$150 million 
for a new sugar processing facility.  The government has 
already begun testing vehicles to run on gasoline with a 10 
per cent ethanol mix and hopes to have 50 government vehicles 
on the road next year that run on this ethanol mix.  Barbados 
has adequate port facilities and land routes for export and 
has plans to build storage tanks for ethanol.  The road 
networks, although congested during the school year and 
tourist season, are well-developed and construction is 
underway for further road network improvements. 
 
¶7. (SBU) According to Energy Ministry officials, there would 
be no difficulty transporting and blending ethanol with 
gasoline.  However, the current stumbling block may be 
financing due to the current shortage of ethanol, increased 
demand, and high price.  In addition, several costly 
adjustments would need to be made along the retail supply 
chain. 
 
¶8. (SBU) There may also be difficulties associated with 
production volume for export to larger countries as well as 
the logistics of getting feedstock to other islands, which is 
very expensive.  The volume of cane is not large enough in 
many island countries to benefit from the economies of scale. 
 A month ago, Acting Minister of Agriculture, Senator Tyrone 
Barker, stated publicly that the Government of Barbados needs 
at least 31,000 acres of land accessible for the cultivation 
of sugar cane to guarantee raw material availability for a 
25-30 year period.  The will to invest in technology is being 
manifested in the move to restructure the Barbados 
Agricultural Management Company (BAMC) to manage industrial 
production of raw sugar, ethanol, bagasse, molasses and 
special and refined sugars.  Still, bankers may not yet be 
willing to take the risk of investing in alternative energy 
development, citing underdeveloped capital markets and 
problems of liquidity as major obstacles.  In order to reduce 
these risks, a regulatory environment is needed that is 
conducive to alternative investment and financial 
instruments, based on regional harmonization. 
 
IV.  Regulatory Structure 
------------------------- 
 
¶9. (U) Barbados allows non-utility power generation and 
permits independent power producers to sell power to the 
national grid.  In addition, utilities are required to 
purchase from independent power producers, facilitate grid 
inter-connections and participate in independent review 
 
BRIDGETOWN 00001852  003 OF 006 
 
 
panels to evaluate renewable energy projects.  There are no 
laws or regulations concerning local power production and 
sales.  However, Barbados Light and Power is a monopolistic 
state-owned enterprise which prevents outside companies from 
importing fuel unless there is a specific agreement between 
the government and the importing company.  Environmental 
regulations for biofuel refineries consist of a requirement 
for environmental impact assessments, much like those in the 
United States, which can take six months to a year to 
complete. 
 
¶10. (SBU) There is relative ease of access and ownership of 
land by foreign companies and individuals.  A proposal was 
made earlier this year by the Acting Agriculture Minister for 
a legislative mandate to identify a minimum number of land 
acres, under which land would be solely designated for 
agricultural activities.  Other than the Agriculture 
Ministry,s proposal, there are no current obstacles to 
acquire title to land and the process is the same as land 
acquisition by Barbadian citizens.  (Note:  Recent op-ed 
pieces in the local press, however, demonstrate public unease 
with this policy or lack thereof.  Continued resistance and 
pressure by the general public seem to be surfacing (having 
more to do with the expansion of the tourism industry) and 
may influence change in land ownership laws as many feel the 
island is running out of land for local people and their 
future generations. End Note.) 
 
--------------- 
ST. KITTS/NEVIS 
--------------- 
 
¶I.  State of Sugar Industry 
--------------------------- 
 
¶11. (SBU) St. Kitts and Nevis ceased centuries of sugar 
production at the end of the 2005 harvest.  The state sugar 
company, St. Kitts and Nevis Sugar Manufacturing Corporation 
(SSMC), has lost money every year since at least 1985.  In 
2004, the cost of debt service alone was more than the total 
revenue of the company.  The SSMC now has a debt of over 
US$112 million, around US$2500 for every person in St. Kitts 
and Nevis, and the sugar industry has contributed to the 
public debt at a rate of approximately 4% of GDP per year. 
If the SSMC were a private company, it would have gone 
bankrupt years ago.  The impending loss of European Union 
trade preferences virtually eliminated any hope of the sugar 
industry's comeback. 
 
II.  Fuel Distribution 
---------------------- 
 
¶12. (U) Rising oil prices and supply problems are the biggest 
energy challenges for St. Kitts and Nevis.  The country is 
totally dependent on imported petroleum for electricity 
generation.  The high maintenance requirements and poor 
reliability of small diesel generation results in electricity 
outages and produces negative environmental impacts. 
According to the latest figures acquired by post, St. Kitts 
consumes approximately 800 bbl of oil per day.  Approximately 
130 million kWh hours are produced, of which 120 million kWh 
is consumed.  Some 7.8 to 8.5 million gallons per annum of 
diesel are used in electricity production.  At present, the 
Nevis Electricity Company, Ltd. (NEVLEC) is the only 
electrical utility in the country. 
 
¶13. (U) There is not yet any ethanol/biofuels production in 
St. Kitts and Nevis.  Embassy Bridgetown recently sponsored 
two Science Fellows to conduct research on ethanol potential 
in St. Kitts and Nevis.  They suggest that the present volume 
of sugar cane lands could produce about 7 million gallons per 
annum of ethanol at most.  However, production of about 4 
million gallons per year is more likely, using historical 
yields from St. Kitts Sugar Manufacturing Corporation (SSMC). 
 Imported feedstock, such as molasses, high-test molasses 
(sugar syrup), or grains could be imported to supplement the 
locally grown sugar cane feedstock and produce 10 million 
gallons per year through a full fermentation plant.  This 
production could be supplemented by an ethanol dehydration 
plant that would process Brazilian hydrous (95%) alcohol into 
motor fuel grade ethanol (99.5% ) which has the potential to 
produce 20-30 million gallons a year, but too much dependency 
on feedstock would mean higher commodity risk.  Other energy 
efficiency alternatives currently being explored consist of 
improvements to the electric utility system; commercial and 
household energy conservation; use of energy efficient 
appliances and lighting; implementation of environmental 
 
BRIDGETOWN 00001852  004 OF 006 
 
 
standards and regulations; and solar water heating. 
 
III.  Investment Climate 
------------------------ 
 
¶14. (U) Diversification of the sugar to produce biofuels or 
other sugar cane-based industrial products is possible due to 
existing infrastructure and equipment, but the planning will 
require the crafting of a long-term strategic plan that will 
make efficient use of the little available cane acreage as 
well as near-obsolete technology.  The government of St. 
Kitts and Nevis is currently looking at proposals for ethanol 
production from American and Norwegian companies.  Prime 
Minister Denzil Douglas told the press that Global Green, a 
Norwegian company, Transmediair Incorporated from the United 
States, and Caribbean Energy Resources of Florida have each 
submitted proposals to the Sugar Transition Office.  Another 
company, Alboomberg International, has representatives 
currently visiting St. Kitts and Nevis, and has submitted a 
proposal for financing.  Douglas told reporters his 
government gave a specific time period for proposal 
submissions and that the Sugar Transition Management Team, 
the Department of Legal Affairs, and the Ministry of Finance 
would work together to make a final determination as to which 
company would most effectively use the assets the industry 
already has in place. 
 
¶15. (U) The most significant barrier to ethanol use is 
acreage volume of cane.  Last month in Trinidad, St. Kitts 
Energy Minister Earl Martin told U.S. Department of Energy 
A/S Harbert that the country must seriously evaluate how 
practical ethanol production can be considering the 
availability of land, which only totals 68 square miles, of 
which there are only 8,000 usable acres for production. 
There are no apparent barriers with regard to adequacy of 
port facilities or land routes for export.  The port 
facilities are adequate to import ethanol and feedstocks for 
ethanol, using the SSMC tanks and sugar warehouse.  The same 
tanker trucks moving petroleum would handle ethanol without 
any major problems.  The marine fleet could use biodiesel and 
gasoline engines with 10 per cent ethanol blends, though 
there have been some problems with old boat engines using 
ethanol as it can dissolve some old seals and tank liners. 
However, potential problems associated with the transition to 
ethanol-blended gasoline could be easily overcome by private 
oil companies, which have the necessary experience with 
maintenance, monitoring and parts replacement.  Flex-fuel 
cars are available from most U.S. and Brazilian automobile 
manufacturers, and the St. Kitts and Nevis Sustainable Energy 
Plan, drafted in collaboration with the Global Sustainable 
Energy Island Initiative (GSEII), aims to import hybrid, E85, 
and other alternative energy vehicles in the near future. 
 
IV.  Regulatory Structure 
------------------------- 
 
¶16. (U) At present, state-run utilities control generation, 
transmission and distribution of electricity as well as 
prices, and there is limited or no opportunity for private 
power generation.  There is no legislation to mandate any 
ethanol blends or flex-fuel automobiles.  There are also no 
environmental regulations on bio-refineries.  The Global 
Sustainable Energy Island Initiative (GSEII) and the United 
Nations Industrial Development Organization (UNIDO) are 
conducting a financial and economic analysis of sugar cane on 
the island for ethanol use and biomass for power and heat 
generation, which will include the administrative and legal 
requirements and/or barriers to developing alternative 
biofuels. 
 
------------------- 
ANTIGUA AND BARBUDA 
------------------- 
 
¶I.  State of Sugar Industry 
--------------------------- 
 
¶17. (U) There has been no competitive sugar industry in 
Antigua and Barbuda for over 46 years.  During the 1960s, the 
economy of Antigua moved away from agriculture to primarily 
tourism, which continues to be the dominant activity, 
accounting for more than half of GDP.  Agricultural activity 
is now largely for subsistence farming and for sales in the 
domestic market, but production is constrained by a limited 
water supply and a labor shortage stemming from the lure of 
higher wages in tourism and construction work. 
 
 
BRIDGETOWN 00001852  005 OF 006 
 
 
II.  Fuel Distribution 
---------------------- 
 
¶18. (SBU) Electricity demand is mostly supplied with fossil 
fuel-fired power stations.  Reciprocating diesel engines 
account for 70% of the installed capacity in Antigua.  A 
dual-purpose electricity and water production steam plant 
accounts for the remaining 30% of installed electricity 
generation capacity.  Close to 20% of households use coal for 
cooking.  The quality and delivery of electricity supplied by 
the Antigua Public Utilities Authority (APUA) has 
deteriorated considerably in recent years.  The APUA 
Electricity Division is subject to frequent power outages 
because of breakdowns of its power generation plants. 
APUA,s financial situation is very weak, making upgrades 
almost impossible, which may be due to inefficient internal 
management and alleged corruption. 
 
III:  Non-Ethanol Alternatives 
------------------------------ 
 
¶19. (U) Up until early 1970, renewable energy played a 
significant role in Antigua and Barbuda.  Antigua,s 
topography and year-round sunshine were very conducive to 
wind power and solar energy.   Efforts to exploit wind energy 
in the 1980s failed, however, due to mechanical and control 
problems.   Since then, solar water heaters have been the 
most successful renewable energy program in Antigua and 
Barbuda, due to credit facilities initially offered by the 
main suppliers of solar water heaters and tax concessions by 
the government.  It is estimated that there are 14,000 solar 
water heaters in Antigua.  More recently, in November of last 
year, the United Nations Development Program (UNDP) and the 
Environment Division of Antigua and Barbuda proposed a 
one-year plan to fill 40% of Antigua and Barbuda energy needs 
from renewable sources.  The plan is to convert 250 tons of 
daily waste into energy, in the short term, and harness power 
from the surrounding sea by ocean thermal energy conversion 
(OTEC).  To date, post is unaware whether Antigua and Barbuda 
has begun implementing this plan. 
 
IV:  Obstacles to Alternative Energy 
------------------------------------ 
 
¶20. (SBU) The main obstacles to renewable energy exploration 
appear to be awareness and finance.  Low-cost financing is 
necessary but not always available for successful development 
of further renewable projects.  Renewable power has to be 
commercially competitive with the traditional petroleum-based 
electricity supply, which is currently a challenge due to a 
lack of infrastructure and poor internal management, as well 
as the perceived immediate and tangible benefits of 
Petrocaribe.  In addition, there is an ongoing problem with 
land registration, land use, and land ownership and leasing 
despite government efforts to offer tax incentives.  This 
problem has discouraged foreign investors from coming to 
Antigua and, in some cases, caused them to leave. 
 
------- 
COMMENT 
------- 
 
¶21. (SBU) From wind and solar to geothermal and ethanol, the 
eastern Caribbean countries are serious candidates for 
sustainable alternative energy investment.  In terms of 
alternative energy export potential, Barbados and St. Kitts 
are most likely the best candidates, particularly with 
ethanol production.  Both countries have histories, 
experiences, and remaining infrastructure related to sugar 
cane production.  However, the small volume of cane acreage 
in each country is one of the biggest challenges.  Another 
challenge is trade-related.  Both countries want reassurance 
that 1) duty-free market access will continue for many years 
in the future, and 2) the U.S. will not erode Caribbean Basin 
Initiative (CBI) preferences by cutting tariffs on Brazilian 
ethanol.  With the CBI possibly expiring in 2007, however, 
Barbados and St. Kitts are reluctant to stake their future 
now on U.S. market access. 
 
¶22. (SBU) The overwhelming dependency on diesel fuel in the 
region, some of which carries the Petrocaribe label, 
threatens the economic well-being of the region,s citizens, 
as well as their choices.  At the very least, domestic supply 
and consumption of alternative energy may provide these 
countries with the breathing space needed to pay down their 
national debts and open new opportunities for cooperation 
with the United States. 
 
BRIDGETOWN 00001852  006 OF 006 
 
 
 
KRAMER