Energy market in Barbados

The Small Island Developing State (SIDS) of Barbados is an English-speaking country with a land area of 430 km squared and a population of approximately 287,000. The economy is driven primarily by tourism, which accounts for more than 25% of GDP each year. Real GDP is expected to increase by 3% in 2025, driven by:

  • expansions in tourism, construction and business services
  • investments in renewable energy and digital infrastructure

Barbados is located in the second most disaster-prone region in the world. It is vulnerable to the extreme effects of climate change, which are increasing in frequency and intensity. There have been major efforts to incorporate sustainability and climate adaptation and mitigation programs into the island’s development to strengthen its resilience. This includes efforts in the renewable energy sector.

Renewable energy is not a new concept for Barbados. The island has used renewable energy throughout its history, starting with bagasse as an energy source in the sugar industry. Solar water heater use began in the 1970s, and wind energy has existed since the 1980s. Barbadians were offered incentives by the government to install solar water heaters. Barbados now has the region's most extensive penetration of solar water heaters. The focus is now on increasing the concentration of solar and wind, although the inclusion of battery storage is key before significant changes can be made at the national level.

Interested parties can read Barbados’ Energy Transition and Investment Plan to learn more about the energy transition in Barbados.

Key opportunities for Canadian Energy companies in Barbados

  • The Caribbean Development Bank and the Inter-American Development Bank are both very active in the renewable energy in Barbados support projects across the renewable's spectrum. These banks facilitate various projects in which companies can participate on a competitive basis.
  • Canadian Commercial Corporation (CCC) is active in Barbados and had identified renewable energy as one of its priorities for the country.
  • Battery storage is a critical element of Barbados’ energy transition and is before more energy can be added to the grid. Upcoming projects are expected to commence within the next few weeks. The government and the sole power utility on the island jointly manage the projects.
  • Canadian engineering companies have thrived in Barbados for many years, having established and maintained a very good reputation over the years. Their services are often well known, respected, and have been actively sought by local stakeholders. Net metering and feed-in tariffs have been introduced in recent years to maximize benefits for companies investing in the sector as independent power producers (IPPs).
  • Resilience in the renewable energy sector is critical to mitigate the risks of the climate crisis and attain energy security. Technologies that reduce climate vulnerability are therefore in high demand, particularly for solar and wind energy.
  • Innovative technologies that are mindful of space constraints are required. This is because limited land space in Barbados makes it impractical to develop large solar and wind farms. Relatively small roads also create challenges with respect to the transport of large blades for wind turbines.
  • Companies based and active in the Maritimes have a good understanding of challenges associated with island environments and are known to present well-suited solutions.

Industry highlights

252.2 MW — Total installed conventional capacity (2022)

73.6 MW — Total installed renewable capacity (2022)

E-mobility

  • Over 600 electric vehicles (October, 2023)
  • Over 100 public and private changing stations
  • 60 public electric buses

National goals:

  • 100% renewable and net zero by 2035
  • Full electrification of the transport sector

Notable challenges for Canadian Energy companies in Barbados

  • China and Europe present strong competition for companies working in the renewable energy space in Barbados.
  • Navigating the regulatory landscape in Barbados presents another challenge for businesses, particularly those interested in generating energy from renewable sources. The laws, regulations and licensing procedure can be complex, and approval processes are protracted.
  • Bureaucratic inefficiencies can delay project approvals and hinder the implementation of renewable energy initiatives.
  • IPPs face issues related to the need for grid modernization and energy storage. Planned activities to significantly increase storage capacity will address some of the problems. However, the timeline for installing the expected 150 MW of storage is uncertain.
  • One of the most significant challenges for all businesses in Barbados is economic volatility, which has been exacerbated by external factors such as global economic trends and regional instability. The Barbadian economy relies heavily on tourism, which accounts for a substantial portion of the country's Gross Domestic Product (GDP). Events such as natural disasters or economic downturns in key markets can drastically affect tourist arrivals. Thisleads to fluctuations in tax revenue for government and revenue for businesses reliant on tourism. In turn, ongoing projects in renewable energy can be negatively impacted.

Barbados business landscape

Barbados is leading the way in climate action, having established a global precedent. The world’s first ever “debt-for-climate resilience” swap freed up US $165 million for vital climate adaptation initiatives. This involves substantial funding for upgrading sewage treatment facilities, highlighting the country’s dedication to sustainable development. This approach acts as a blueprint for other countries facing the difficulties of climate change and in search of creative financing strategies. It can also be extended to include renewable energy and energy efficiency.

Although there are many encouraging developments, Barbados encounters various economic difficulties, including:

  • the elevated cost of living
  • restricted access to funding for small and medium-sized enterprises (SMEs)
  • susceptibility to external shocks. 

Furthermore, the small size of the island's market limits the growth of local businesses, often compelling them to look for opportunities overseas.

However, the current challenges also present opportunities for innovation and resilience. The rise of e-commerce and digital platforms has allowed local enterprises to access international markets. Furthermore, government efforts to aid small and medium-sized enterprises through funding and training initiatives encourage entrepreneurial ventures. The emphasis on sustainable development aligns with global trends, positioning Barbados as a leader in environmental stewardship and green business practices.

The government of Barbados is working diligently to simplify business processes and update laws, creating a more attractive environment for local and foreign companies. These initiatives aim to simplify government systems, improving both efficiency and compliance for businesses. There is also often special consideration for foreign companies pursuing business/investment opportunities on the island. 

Upcoming projects and events

The solar water heater and solar PV industries have developed significantly in Barbados and currently dominate the renewable energy market. However, the interest in wind, waste-to-energy, biomass, and marine energy is increasingly providing opportunities for investment into the development of these technologies. These interventions aim to:

  • reduce the country's dependency on fossil fuels
  • enhance energy security
  • stabilise the energy supply
  • improve the economy's competitiveness
  • achieve environmental sustainability

Demand side potential and projects 

In the Barbados Action Plan for the Integrated Resource and Resilience Plan (IRRP), the government committed to promoting renewable energy sources on the supply side. On the demand side, the government encourages the use of energy efficient equipment and appliances to increase energy conservation. The National Energy Efficiency Policy and Strategy Action Plan for Barbados is being prepared. It will cover residential, commercial, and industrial sectors to reduce demand and cost to consumers. With this national plan in place, there will be opportunities for investment in and the supply of energy-efficient equipment including lighting, cooling and appliances. 

Waste-to-energy opportunities 

A waste-to-energy (WTE) project is proposed for Vaucluse, St. Thomas. The proposed WTE plant is estimated to be up to 25 MW, with design and investment bidding to commence in the future. Williams Caribbean Capital, a subsidiary company of Williams Industries, leads this potential opportunity. Additionally, a WTE plant is being proposed to replace the incinerator at Barbados Port Inc. This aligns with the Port’s goal to become “the most innovative green maritime hub in the world by 2030”.

Storage 

The IRRP for Barbados emphasized that storage should be modular and distributed considering resiliency of the transmission network. Li-ion battery storage is highlighted as the preferred option, as it would cover the whole range of required storage applications. This is the form of battery storage chosen by the Government of Barbados and Barbados Light and Power Company Ltd. 

The Ministry of Energy and Business Development is currently developing a request for proposals to secure 60MW of battery storage. This is the first phase of an initiative that involves procuring 150MW of battery storage in total. Subsequent phases are expected to begin as soon as phase one has been completed and assessed.

Grid modernisation

The current grid needs to be modernised to meet the projected additions of intermittent supply to the electricity grid, particularly given the ambitious goal for Barbados to be 100% renewable by 2023. This potential opportunity can allow for equipment supply to make the necessary changes for a more sustainable and resilient grid. 

Large-scale energy projects

There is potential for large-scale projects to meet the renewable energy and carbon neutrality goals set by the local government. This would involve a competitive procurement process. The 2023 power purchase agreement makes large-scale energy projects more attractive for investors. However, battery storage must be installed first, except in cases of grid defection. 

At COP28 in December 2023, the government retained IFC as a transaction advisor to help structure a public-private partnership (PPP) for the 30 to 50 MW Lamberts Wind Farm. The PPP is currently under development.

Electric vehicles

The excise tax and value-added tax holiday on electric vehicles, which was introduced in 2022, has been extended to March 31, 2026. This has contributed to a high demand for electric vehicles in Barbados. This incentive encourages Barbadians to switch from diesel and gas-powered vehicles in alignment with the country’s move to become fossil fuel-free by 2035. The high demand has resulted in suppliers having waiting lists. This opens the opportunity for:

  • the supply of electric vehicles
  • electric vehicle servicing and maintenance and the supply
  • maintenance of the supporting infrastructure for the electric vehicle market

Summary

Overall, the Barbados renewable energy sector is dynamic, and the Government of Barbados is committed to making the necessary adjustments as it evolves. This is evident with new legislation drafted to meet the current market and trends adding.

The Barbados renewable energy sector is open for investment. Storage is a critical element of the energy transition for the country -in fact is essential to reach of carbon neutrality. Incentives to potential investors cover not only the equipment, but business practices as well, making Barbados an attractive location for investment. There are opportunities for the diversification of the renewable energy mix on the island with:

  • the expansion of solar energy
  • the development of wind energy both onshore and offshore
  • energy storage

For more information on the renewable energy sector in the Barbados market please contact Tammy Brathwaite (tammy.brathwaite@international.gc.ca), Senior Trade Officer, or bdgtn-td@international.gc.ca. 

Additional Information

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