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EN

ANNEX 1

of the Commission Decision on the Barbados – European Union National Indicative

Programme for the period 2014-2020

Action Document for EDF 11 – Barbados / EU Renewable Energy and Energy Efficiency

Project

1. Title/basic act/

CRIS number

Barbados Renewable Energy and Energy Efficiency Sector Budget

Support / CRIS number: 2016 / 039-761, financed under the 11th

European Development Fund

2. Zone benefiting

from the

action/location

Caribbean, Barbados

The action shall be carried out at the following location: Barbados

3. Programming

document EDF 11 – NIP for Barbados

4. Sector of

concentration/

thematic area

Renewable Energy (RE) / Energy

Efficiency (EE)

DEV. Aid: YES

5. Amounts

concerned Total estimated cost: EUR 3 000 000

Total amount of EDF contribution EUR 3 000 000 of which

EUR 2 800 000 for budget support, 100 000 for Evaluation, and

100 000 for communication and visibility

6. Aid

modality(ies)

and

implementation

modality(ies)

Budget Support

Direct management - Budget Support: Sector Reform Contract

- Procurement of Services

7 a) DAC code(s) 23110 Energy policy and administrative management

b) Main Delivery

Channel

European Development Fund_42003

8. Markers (from

CRIS DAC form)

General policy objective Not

targeted

Significant

objective

Main

objective

Participation development/good

governance ☐ ☐ ☒

Aid to environment ☐ ☐ ☒

Gender equality (including Women

In Development) ☐ ☒ ☐

Trade Development ☒ ☐ ☐

Reproductive, Maternal, New born

and child health ☒ ☐ ☐

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RIO Convention markers Not

targeted

Significant

objective

Main

objective

Biological diversity ☒ ☐ ☐

Combat desertification ☒ ☐ ☐

Climate change mitigation ☐ ☐ ☒

Climate change adaptation ☐ ☒ ☐

9. Global Public

Goods and

Challenges (GPGC)

thematic flagships

n/a

SUMMARY

The proposed programme “Barbados Renewable Energy and Energy Efficiency Sector

Budget Support” has a duration of 36 months, with a financial allocation of up to

EUR 3 million, and will support the strategies under the respective Caribbean–EU

partnerships. It is directly related to Focal Area 2 of the Caribbean Regional Indicative

Programme (CRIP), which focuses on Climate Change, Disaster Management, Environment,

and Sustainable Energy and priority sector identified under the National Indicative

Programme (NIP) for the period 2014-2020.

The overall objective is to support Barbados in advancing in its attempt towards energy self-

sufficiency from local renewable resources, in line with Barbados’ commitment to the

UNFCCC of reducing its total and per capita GHG emissions.

The Immediate Objective or Outcome is that the private sector gets engaged in power

generation through renewable energies, and consumers make increasingly use of energy

efficiency measures.

The main results to be delivered are: a) The Barbados Government adopts and implements

energy sector reform measures that promote the transition of the country towards renewable

energy and improved energy efficiency on the basis of the National Energy Policy, and b)

Improvement in the relationship between external assistance and the national budget and

policy processes.

In general, the sector budget support answers to the clear needs associated to the

implementation of an energy sector reform agenda on the basis of the National Energy Policy,

and will accelerate policy implementation by supplementing national resources. The design is

based on the disbursement of funds into the National Budget. These funds will be released as

one fixed tranche of 40% in Year 1, one fixed tranche of 30% in Year 3 and a variable tranche

of up to 30% in Year 3, associated to three (3) sector performance indicators (10% each),

which show the progress of the country with respect to the implementation of the reform

agenda. This design will contribute to consolidate the sector and also to activate policy

dialogue among the partners involved.

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1 CONTEXT

1.1 Country / Sector context

Barbados, with a population of 284,000 (2015), is one of the most politically stable countries

in the Caribbean, with good governance standards, strong institutions and comparatively high

average incomes. The impact of the international financial crisis and resulting domestic

economic crisis affected Barbados' social and human development standing to some extent. It

remained however, one of the most developed countries in the Caribbean, with high human

development indicators in the region. It is a high-income Non-OECD country with a per

capita GDP of USD 15 300. Some 80% of GDP is in the non-traded service-based activity -

trade, transport, government, and business and other services are the main contributors to the

economic activity. Tourism is the most important of the trade sectors contributing to almost

12% of GDP in 2014/15, followed by construction accounting for 6% of GDP, and agriculture

and manufacturing, each contributing some 4% of GDP1.

The Energy Division within the Ministry of Finance, Investment, Technology and Energy

(MFIE) is responsible for monitoring and regulating the overall energy sector. It was

established in 1978 as part of the Ministry of Trade. The Energy Division develops

implements and enforces energy policy. It is responsible for the issuing of licenses and leases

for all oil exploration and production, it promotes the use of renewable energy and it advises

on the pricing of petroleum products.

Currently, the Division of Energy is in the process of implementing a programme called the

Public Sector Smart Energy programme (PSSEP). The objective of this programme is to

promote and implement the use of Renewable Energy and Energy Efficiency measures within

the country. Ultimately, the project will help Barbados to reduce Barbados' fossil fuel

dependency, promote sustainable energy and therefore contribute to the country's

competitiveness. The specific objectives of the Programme are to:

i. Install RE systems in government buildings in the Programme and retrofit these

buildings and public lights with EE technologies

ii. Implement the RE pilot project and studies

iii. Assist with capacity building, institutional strengthening and public awareness in the

energy sector

The legislative framework of the energy sector is organized around three regulatory acts: the

Electric Light and Power Act, the Fair Trading Commission Act and the Utilities Regulation

Act (Fair Trade Commission Barbados, 2012). According to this legislation, Barbados Light

& Power Company Limited (BL&P), a vertically integrated utility company, is the sole

producer of electricity for the national grid. It holds the mandate for generation, transmission

and distribution of electricity2.

The Fair Trading Commission Act 2001 established the Fair Trading Commission (FTC)

which regulates BL&P. The FTC functions as a government regulatory body responsible for,

among other things, regulating electricity rates and stipulating the standards of service. It is a

1 Report to Assess Macroeconomic Eligibility before Disbursement of a Budget Support Payment, EUD Barbados, 2015 2 Castalia. (2010). Sustainable Energy Framework for Barbados (Vol. 1).

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government body and its operating structure and procedures ensure that it operates

independently. 3

Barbados Light and Power (BL&P) is the only utility company generating and feeding

electricity into the national grid (single buyer, single seller model). A number of large

customers, however, produce electricity for self-consumption. BL&P’s total generation

capacity is 239 MW which is 92% of the total generation capacity in the country. Generation

consists primarily of low speed diesel generators (113.5 MW) and gas turbines (86 MW).

Renewable energy generation (PV solar) at the moment accounts for 4% or 10.4 MW of the

total (centralized and roof top). The country’s electrification rate is 100 percent and BL&P

supplies electricity to 119,000 customers. 4

Currently, solar water heaters account for the most significant use of renewable energy in the

country. According to Government estimates, solar water heaters have reached a penetration

of 33.5 % in households. Barbados is one of the best performing countries in the world in this

regard. Additionally, during the annual sugar harvest, the two (2) sugar factories co-generate

4 MW from biomass.

A draft National Sustainable Energy Policy has been prepared in 2013. This document,

together with the country’s Green Economy Scoping Study5, the national Sustainable Energy

Framework (SEF)6 and the draft Nationally Appropriate Mitigation Action (NAMA)

7 for the

energy sector, form the backbone of the Intended Nationally Determined Contribution

(INDC) presented in September 2015 to the UNFCCC.

Barbados intends to achieve an economy-wide reduction in GHG emissions of 44% compared

to its business as usual (BAU) scenario by 2030.

The above emission reduction contributions will be achieved through the mitigation actions in

the energy and waste sectors, which accounted for the vast majority (88%)8 of GHG

emissions in Barbados in 2008.

Energy consumption accounted for 72% of Barbados’ GHG emissions in 2008 and is

therefore the focus of its mitigation activity.

The indicative targets set up in this draft are as follows:

29 % of all electricity consumption to be generated from renewable sources by 2029.

22 % savings by 2029 compared to a ‘business as usual’ scenario.

29 % savings in transportation and other non-electric energy uses by 2029.

increase the sustainability and efficiency of fossil fuel exploration, production,

transportation, storage, and use across all sectors.

3 Renewable Energy & Energy Efficiency Partnership. (2012). Energy Profile Barbados. Retrieved from

http://www.reegle.info/countries/barbados-energy-profile/BB 4 Williams, P. (2010). Fundamentals of the Energy Sector In Barbados, (August). Retrieved from

http://businessbarbados.com/industries/energy-and-utilities/fundamentals-of-the-energy-sector-in-barbados/ 5 http://www.unep.org/pdf/Barbados_GESS_study_web2.pdf 6 http://www.energy.gov.bb/web/national-sustainable-energy-policy 7 NAMA for renewable energy and energy efficiency in Barbados. The NAMA is currently in draft form and is

expected to be published shortly, following INDC information. 8 Barbados 2010 Greenhouse Gas Inventory. This forms part of the Second National Communication Report,

which will be submitted to the UNFCCC shortly. 2008 has been chosen as the base year, so that measures in the

waste sector that were implemented in 2009 can be excluded from the BAU projection.

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increase the awareness and skills of the people of Barbados for sustainable energy

matters, and to ensure that they have the knowledge and ability to implement

economically viable sustainable energy measures.

The Policy is expected to be finalised and approved during the third quarter of the current

year (2016).

It is recognised that a sound regulatory framework is necessary to establish a viable

renewable and energy efficiency sector. To achieve this objective, the Electric Light and

Power Bill was passed by Parliament in December 2013. This legislation provides for, inter

alia, the establishment of a licensing regime for entities wishing to sell electricity to the grid

from renewable energy sources including Independent Power Producers, empowers the

Minister to prescribe levels of electricity generated from renewable energy that the public

utility must allow to be supplied to the public grid. The tariff values will nevertheless be

approved by the independent regulatory authority (The Fair Trading Commission). Even

without the Energy Policy document having been finalised and approved so far, Government

policies are effectively geared towards creating an enabling environment for the private sector

in the area of renewable energy and energy efficiency.

The overall sector (RE and EE) has been progressing but some barriers to the uptake of RE

(renewable energy) and EE (energy efficiency) still persist; these are: i) access to capital; ii)

equipment supply; iii) lack of capacity in administration; iv) conducive enabling environment.

1.1.1 Public Policy Assessment and EU Policy Framework

Public Policy Assessment

The Barbados Growth and Development Strategy (BGDS) 2013-2020 sets out the medium

term strategy for the country development. The BGDS focusses on steering combined efforts

to achieve four main goals: 1) Return the economy to a sustainable growth rate of 3 percent

while maintaining macroeconomic stability; 2) Facilitate broad based adjustments and

reforms in the economy; 3) Enhance social and human development and; 4) Enhance energy

and environmental sustainability in the context of the Green Economy.

From this document emerges a committed focus on important reforms that could effectively

facilitate the implementation of renewable energies and energy efficiency investments and

consequent sector development. Consequently, the most relevant goal is the proposed

transformation into a Green Economy.

As Barbados seeks to restructure its economy and to mitigate the consequences of, and adapt

to, the changing climate while trying to maintain a sustainable environment, the country has

embraced the concept of a “Green Economy”. This concept encapsulates economic, social,

and environmental issues in a way that ensures the sustainable development of the nation,

with the public and private sector all playing a part. For Barbados, the vision of a Green

Economy has been defined as becoming “the most environmentally advanced green country

in Latin America and the Caribbean”. Government’s approach to the growth and acceleration

of the Barbados green economy embraces, among others, the following:9

9 Ministry of Finance and Economic Affairs: Barbados growth and development strategy 2013-2020; Retrieved from

http://www.economicaffairs.gov.bb/

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1. Upholding the national principles of sustainable development;

2. Setting significant national sustainable development goals and targets (energy

efficiency, renewable energy generation, waste reduction, waste recovery, reduction for

unaccounted for water, etc.);

3. Building on existing capacities and systems, both in the public and private sectors;

4. Integrating strategies into existing programmes (economic development, small business

assistance, tax incentives, workforce development, research and development), before

launching new, independent projects;

5. Utilising Barbados’ international presence to develop cooperative platforms with

development agencies and the international community in support of building a Resource-

efficient Green Economy; and

6. Tracking progress in the move towards a green economy.

Nevertheless, and as in many other CARIFORUM countries, Barbados has taken the lead in

setting targets, creating responsible agencies, and developing domestic policy mechanisms to

support an increase in renewable energy and energy efficiency. This is also reflected in the

INDC: despite its negligible contribution to global GHG emissions and its SIDS status,

Barbados is taking significant and ambitious steps to reduce its national emissions. All of the

country’s identified mitigation actions are being targeted by the INDC, which will result in

per capita emissions of 4.8 tonnes CO2e in 2030 (compared to 6.6 tonnes CO2e in 2008),

consistent with the projected global average emissions per capita in 2030 required to meet the

1.5°C above pre-industrial levels target.

Despite these important commitments and steps, sustainable energy development continues to

be constrained by policy and data gaps, administrative ineffectiveness and inefficient and

uncoordinated implementation efforts.

EU Policy Framework

The European Union as a whole has strong historic ties with the Caribbean and some

individual EU Member States still maintain close links with the region, notably through the

French Outermost Regions (ORs) Martinique and Guadeloupe, and the particular relationship

between the UK and the Netherlands with the islands which have maintained the status of

Overseas Countries and Territories (OCTs). Wider Caribbean cooperation between

CARIFORUM countries and ORs and OCTs, as well as between CARIFORUM countries and

neighbouring Latin American countries offers substantial development opportunities.

EU relations with Caribbean ACP countries are based on the legal framework of the

Partnership Agreement with the African, Caribbean and Pacific States (the so called Cotonou

Agreement)10

.

10 The latest Cotonou Agreement was revised in 2010. http://www.eeas.europa.eu/acp/cotonou_en.htm.

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On October 15, 2008 an Economic Partnership Agreement (EPA) was signed between EU and

Caribbean countries which makes specific reference to cooperation on eco-innovation and

renewable energy/energy efficiency. In November 2012, the EU Council endorsed the Joint

Caribbean-EU Partnership Strategy, with the aim of intensifying cooperation, namely:

regional integration, reconstruction of Haiti, climate change and natural disasters, crime and

security, and joint action in multilateral fora.

Established in 2012, The Caribbean Investment Facility (CIF) is one of the EU’s regional

blending facilities, aiming to mobilise funding for development projects by combining grants

from the European Development Fund (EDF) with other public and private resources such as

loans from European and Regional Financial Institutions to leverage additional financing and

achieve investments in infrastructure and support to the private sector.

Similarly to the other EU blending facilities, CIF acts as a catalyst to pool resources and

improve the coordination and coherence of donor actions, thus conforming to the principles of

ownership, partnership and shared responsibilities set out in the Paris Declaration on Aid

Effectiveness and the subsequent Accra Agenda for Action and Busan Partnership

Agreement.

Electrification Financing Initiative (ElectriFI) is an innovative mechanism to unlock,

accelerate and leverage investments increasing or improving access to affordable, reliable,

sustainable and modern energy. The initiative was launched by the European Commissioner

for International Cooperation and Development, Mr. Neven Mimica, at COP21 in December

2015, with an initial EU allocation of EUR 75 million.

The specific objectives of ElectriFI are to:

a. achieve intensive mobilisation of the private sector

b. increase or improve access to modern, affordable and sustainable energy services

c. for populations living principally in rural, underserved areas as well as areas affected

by unreliable power supply

d. encourage more actions in the field of renewable energy in general with emphasis on

decentralised sustainable energy solutions and

e. attract additional financing to ElectriFI clients.

The 11th

EDF National Indicative Programme (2014-2020) for cooperation between European

Union and Barbados, was adopted in September 2014. The total indicative allocation of the

NIP for the period 2014-2020 is EUR 3 500 000 and the focal areas are:

1. Renewable Energy / Energy Efficiency, with an indicative allocation of EUR 3 000

000;

2. Measures to support civil society, with an indicative allocation of EUR 150 000;

3. Support Measures (TCF and NAO), with an indicative allocation of EUR 350 000.

1.1.2 Stakeholder analysis

The institutional framework of the energy sector is quite robust. Energy policy is the

responsibility of the Energy Division within the Prime Minister’s Office. The country's

regulator is the Fair Trading Commission (FTC) which was established in January 2001.

Barbados Light & Power Company Limited (BL&P) is the country’s sole commercial

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electricity provider. The Ministry of Finance will be also an important partner in the dialogues

structure.

The non-state actors (NSA) / civil society organizations (CSO) will also have to be involved

in the dialogue. This is in particular the Barbados Renewable Energy Association (BREA), as

well the private sector in the form of independent power producers and technology service

providers.

Cooperating Partners to be considered for donor coordination are the Inter-American

Development Bank, the Caribbean Development Bank (CDB), the Global Environmental

Facility (GEF), the United Nations Development Program (UNDP), as well as the

Governments of South Korea, Japan and China. This group of stakeholders may also include

GIZ with their regional REETA+ programme, and possibly the newly created (Caribbean

Centre for Renewable Energy and Energy Efficiency (CCREEE).

1.1.3 Priority areas for support/problem analysis

The Government of Barbados (GoB) has identified three main objectives related to energy: i)

reduce energy costs; ii) achieve greater energy security; and iii) improve environmental

sustainability. Key pillars to assist in achieving these objectives are the promotion of the use

of renewable energy technologies and the efficient use of energy.

Energy costs are a concern for all at the macroeconomic level, and at the individual level of

consumers in Barbados. Nearly all of the electricity generated in the country is produced with

fossil fuels. Oil imports for the period 2007-2012 averaged about 7.3 % of GDP, a level

comparable to Government expenditure on education. Average electricity tariffs reached USD

0.32 per kWh in 2012, but have come down since then, as they are pegged against the diesel

price. Electricity costs have a devastating effect on direct production costs, and hence on the

competitiveness of Barbadian businesses

Barbados currently has a relatively secure electricity supply. However, Barbados’ electricity

generation mix consists primarily of imported fuel oil and diesel. Environmental sustainability

largely concerns the more direct pollution effects on Barbados’ natural environment; a vital

economic resource for the country’s tourism industry.

It has proven difficult for the public and private sector to undertake RE and EE investments in

the Eastern and wider Caribbean in recent years. With a growing awareness of "payback"

times and significantly reduced RE technology costs, GoB has decided to take a leading role

in implementing tangible demonstration projects which are expected to boost awareness and

subsequent private and public sector investments, as well as reducing the GoB energy bill.

The Government has also started to install solar PV on some Government buildings, and has

procured a few electric vehicles into the Government fleet.

The current intervention through sector budget support will intensify dialogue on RE/EE and

consequently raise the profile of this strategic area.

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1.2 Other areas of assessment

1.2.1 Fundamental values

Barbados is an exceptionally stable parliamentary democracy. General elections were held in

February 2013, returning the incumbent ruling party to power. The administration remains

committed to the Medium Term Fiscal and Development Strategies, Public Financial

Management Action Plan, Human Resource Development Strategy, and related Performance

Assessment Framework. The country has a high degree of social stability with the

establishment of governance mechanisms such as the Social Partnership. Barbados strongly

adheres to the fundamental values of democracy, human rights, and the rule of law.

Consequently, the fundamental values pre-condition is met for Good Governance and

Development Contracts.

1.2.2 Macroeconomic policy

Barbados is a high-income Non-OECD country with a per capita GDP of USD 15 300.

Around 80% of the GDP is generated from services in trade, transport, government, and

business, and other services such as banking. Tourism, as the most important sub-sector is

contributing almost 12% of GDP in 2014/15, followed by construction with 6% of GDP,

while agriculture and manufacturing contributing some 4% of GDP each.11

.

The following assessment was extracted from the statement issued by IMF representative for

the Article IV discussions held in Barbados, May 2016.12

1. The economy faces serious challenges. Although growth has resumed, after some

years of stagnation, and short-term prospects are positive, imbalances persist between

available resources and government programs. While favourable external

developments have provided some room for manoeuvre, Barbados remains highly

vulnerable and may not realize its potential without deep-seated reforms to align

revenues and expenditures, and reduce debt. Fiscal reforms have yielded less than

expected. After significant consolidation in FY2014/15, the deficit in FY2015/16

remained broadly unchanged, short of government’s own targets.

2. Growth is projected to increase to 2.1 percent in 2016, reflecting higher private and

public investment, mainly in refurbishing and expanding the tourism stock. While

favourable terms of trade developments support a stronger outlook, government

financing requirements and possible delays in government-backed projects are a

source of risk. Another concern is “de-risking,” i.e., the termination of banking

relationships by global financial institutions with clients perceived to be “high risk”

which could hurt the International Business and Financial Sector operations. Other

sources of risk include weak growth in key source tourism markets. Over the medium

term, growth prospects hinge on fiscal adjustment which should allow reducing debt

and maintaining private sector confidence.

3. To reverse large increases in debt and place it on a downward trajectory, the IMF

mission recommended fiscal adjustments of at least 3.5 percent of GDP over the next

11 CBB Press Release, June 2015 12 IMF Press Release, May 2016 "IMF Staff Completes 2016 Article IV Mission to Barbados"

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three years. This would be on top of the expected improvement in performance this

year, allowing the 2015 revenue measures to start bearing fruit. The strategy would

focus on strengthening Barbados Revenue Authority performance by completing its

reform and improving its operations, and on a comprehensive reform of state owned

enterprises (SOE) to strengthen financial management, consolidate their operations,

and improve the affordability of their programs. This adjustment would put the debt

ratio below 100 percent by FY2019/20 (about the FY2014/15 level), and, if sustained,

would shift the trajectory solidly downward. It would also substantially ease the

financing burden, reduce, and potentially eliminate, the need for Central Bank

funding, support international reserve build up, and possibly improve credit ratings.

4. To support the nascent recovery, the government should also advance measures to

raise the efficiency of public services, which impedes private sector operations, pursue

reforms to increase labour market flexibility without unduly reducing worker

protection, increase training opportunities in a cost effective manner to address the

skill mismatch, and move forward with a viable and affordable agricultural strategy to

strengthen its links with the tourism sector.

1.2.3 Public Financial Management (PFM) 13

.

Overall, Barbados is considered to have a strong PFM system. In 2013, during the first year of

operations of the 10th

EDF Sugar Programme, Barbados carried out a repeated PEFA

assessment. Compared with the first 2010 PEFA assessment, the 2013 exercise concluded that

PFM was improving in some areas, despite an apparent deterioration in many ratings. It

should be noted that the 2010 PEFA used a different methodology and included autonomous

agencies, whereas the 2013 PEFA assessed central government PFM systems only.

The 2013 PEFA assessment gave Barbados a total of 6 A scores and 4 B scores, with

particularly high ratings in the areas of credibility of the budget, comprehensiveness of

information in the budget documentation, orderliness of the budget process, transparency of

taxpayer obligations, effectiveness of measures for taxpayer registration and assessment and

cash management.

However, the PFM system in Barbados points to a few fundamental weaknesses that should

become the priority in the management of its public funds. These were captured in the PEFA

report 2013, and in the 2014 PFM Reform Action Plan that was developed by CARTAC,

following the PEFA exercise.

After having been discussed within Government for several months, the PFM Reform Action

Plan was formally approved by Cabinet on 7 May 2015, and provisions for its implementation

adopted. At the same time a PFM Steering Committee was also established with the mandate

to monitor progress on the PFM action plan implementation and to advise on ongoing PFM

reforms.

The Government also continued to undertake and implement its PFM objectives, both in

terms of performance on key PFM indicators (as per PEFA results) and in terms of major

PFM reforms, most notably in the domains of tax policy and administration, and state owned

enterprise reporting and performance.

13 PFM Annual Monitoring Report, EUD Barbados, 2015

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1.2.4 Transparency and oversight of the budget

All government ministries, departments, and agencies take part in an annual consultative

process with the Ministry of Finance that culminates with the publication of the approved

Estimates Revenue and Expenditures document. This public document itemised the approved

budgetary allocations for each ministry, department, and agency for the current financial year.

The approved Estimates Revenue and Expenditures document for any given year may also

show, for comparative purposes, the actual expenditures for the same period of the previous

two years.

With respect to budget transparency, the budget documentation, the annual appropriation bill

includes information on almost every aspect where reporting can be provided

(macroeconomic assumptions justifying the forecasts, fiscal deficits, deficit financing, public

debt balances, etc.).

The budget address for the 2014/2015 and 2015/2016 financial years are published on the

official website of parliament (www.barbadosparliament.com). The draft estimates for the

2014/2015 and 2014/2015 financial years are also published on the parliament website.

2 RISKS AND ASSUMPTIONS

Risks Risk

level

(H/M/L)

Mitigating measures

Vulnerability to external shocks.

Macroeconomic data, public

finance management analysis and

debt sustainability must be taken

into account during sector dialogue.

M Dissemination of best practices to be

included in the analysis of strategic

investement at sector level.

Information coordination on

renewable energy and energy

efficiency is still weak, the issue is

complex and would require joint

efforts at national and regional

levels.

M Improve the country’s energy information

network by strengthening and expanding

existing information systems. Seek

complementarity with other supporting

initiatives and strategic support to

identified stakeholders.

The development of favourable

sector policies has only started, but

this is a prerequisite when deciding

about a support to an operation that

intends to trigger a systematic

impact.

L The EU Delegation is to take an active

role in the sector policy dialogue which

supports the country in developing

consistent sector policies.

Lack of a conducive financing

environment to implement

renewable energy and energy

efficent projects

L Support dialogue to promote investments

and promote champion targets in the

sector.

Low capacity to address the

renewable energy and energy

efficiency sector

L Support technical capacity among players

in the renewable energy sector.

Growing vulnerability to natural

hazards such as hurricanes, floods

and droughts and their implication

M Support policy dialogue that focuses on

climate resilient solutions, and contribute

to climate change adaptation and

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on investment levels. mitigation.

Assumptions

A stable political and financial climate at regional level in general, and at country level in

particular, is promoting sustainable energy and secure investments.

Barbados concentrates its efforts and allocates relevant resources to accelerate the adoption

of sustainable energy policies, and steers their implementation.

3 LESSONS LEARNT, COMPLEMENTARITY AND CROSS-CUTTING ISSUES

3.1 Lessons learnt

3.1.1 In general14

Given the reliance of Barbados on diesel generation of electricity and transport fuels, the

volatility of the oil price is detrimental to economic planning and security. Renewable energy

and energy efficiency provides an option to reduce dependency on commodity markets.

Countries can use the opportunity of current low oil prices to diversify their energy sectors, to

build resilience against future price shocks. When suitably designed, projects can positively

contribute to such areas as environmental protection, as well as water and food security.

The catalytic role of the energy sector has become evident for wider social and economic

development, enabling education, health and sustainable agriculture, and creating jobs: This

recognizes that energy is not an end in itself, but rather that energy for productive uses is

particularly important to enable local business innovation and to create more vibrant

economies for communities and countries, while simultaneously providing social benefits.

Furthermore, the importance of energy data and information exchange, and the potential to

improve coordination with countries and stakeholders to minimize duplication and enable the

monitoring / evaluation of energy projects to maximize the impacts of efforts towards fully

integrated, low carbon and climate-resilient energy transition plans has to be recognised.

The limited potential to harness economies of scale, combined with the lack of experience

with RE and EE and the general macroeconomic circumstances in the respective countries,

can typically weaken the business case of many potentially beneficial projects. Global

experience has shown that a committed public engagement is critical for the stimulation of

private investments within the sustainable energy sector.

3.1.2 Budget support

Previous experience in the implementation of budget support programmes highlighted the

need to (a) increase the predictability of disbursements; (b) have a coherent and results

oriented performance assessment framework before launching the programme; (c) hold a

budget support review that assesses the eligibility ahead of disbursement requests; (d) expand

programme ownership to line ministries; (e) create strong coordination and monitoring

mechanisms to ensure timely and adequate reporting and link to other donor activities; (f)

14 Caribbean Sustainable Energy Roadmap (C-SERMS), Phase 1 (2013); CARICOM – Worldwatch Institute – IDB and

Caribbean Renewable Energy Development Programme (CREDP), Final Evaluation (2011);CREDP/UNDP-GEF

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have a credible public financial management reform plan; (g) have a well-developed technical

assistance plan supporting performance indicators identified in the programme and (h) hold a

regular policy dialogue with relevant ministries on all eligibility criteria

3.2 Complementarity, synergy and donor coordination

In the field of renewable energies and energy efficiency, the Government of Barbados is

currently receiving support from the Inter-American Development Bank, the Caribbean

Development Bank (CDB), the European Union (EU), the Global Environmental Facility

(GEF), the United Nations Development Program (UNDP), as well as the Governments of

South Korea, Japan and China. Interventions in the energy sector are coordinated by the

Energy Division. The Government also works with Gesellschaft für Internationale

Zusammenarbeit (GIZ - formerly GTZ) and SIDS Dock(Small Island Development States) in

the context of the regional programmes of these institutions. These cooperating partners will

have to be included in a donor coordination circle.

The Government will also explore the extent to which the components of RE and EE

interventions may benefit from the Clean Development Mechanism (CDM) in order to

generate an additional income stream from carbon revenues and trading of CDM certified

emission reductions (CERs). This should also provide a useful experience for the access to

CDM by other RE projects in Barbados. Being part of the CDM framework should also

support the establishment of capacity to access funds linked to NAMAs and proposed new

climate / carbon mechanisms and funds. Energy issues are discussed in the context of the

Social Partnership Dialogue – given the cross-cutting impact of energy on Barbadian society.

Energy was, in particular in the context of transport and tourism, extensively discussed in a

participatory manner in the context of the Barbados Green Economy Scoping Study (GESS).

A standing Green Economy Technical Steering Committee (GETSC) guides the

implementation of the GESS.

The establishment of the Caribbean Centre for Renewable Energy and Energy Efficiency

(CCREEE) in Barbados with the support of several donors (SIDS-DOCK, UNIDO, Austria

government, GIZ) will create a reference point to foster the development of the four main

lines of action (Information, Finance, Policy and Capacity) that emerge from the Caribbean

Sustainable Energy Road Map and Strategy (C-SERMS).

3.3 Cross-cutting issues

Activities to be financed under 11th EDF will be executed in full compliance with the

environmental policies, laws and regulations of the country. For the purpose of this sector

reform contract, there will be no need for a separate Environmental Impact Assessment.

EU support will take into account the equal and non-discriminatory access to energy services

as integral to the enjoyment of socio-economic rights. Gender equality, participation of the

most marginalized in equitable service delivery will be thus paid special attention to.

A gender analysis will be conducted and gender sensitive indicators, if relevant, will be

established during the project formulation phase. These indicators will be monitored over the

lifespan of the project.

[14]

3.3.1 Environment and climate change

The EU - Barbados programme will contribute to achieving the EU proposal to make 20% of the

EU overall budget for 2014-2020 “climate relevant”. The focus of the project on promotion of a

conducive policy and institutional environment for the promotion of renewable energies and

energy efficiency is expected to have a positive impact on GHG emission reduction, in line

with the targets proposed in their Intended National Determined Contributions (INDCs)

report.

Barbados is experiencing more extreme weather events, as well as more subtle changes to

temperature and precipitation patterns. Observations confirm that temperatures are rising, the

frequency of extreme weather events are increasing, sea levels are rising and coral bleaching

events are more frequent. These observations are consistent with climate change projections

for the Caribbean region.

The promotion of diversified sources of energy and improvement of their efficiency will

permit to improve Barbados’ resilience to climatic shocks and raising temperatures that will

require an increasing request of energy.

On the other hand, renewable energies are vulnerable to climate hazards, so awareness on the

need to promote climate proofing of renewable installations will be part of the support

provided by the EU Delegation. The support will also cover the environmentally sustainability

of the actions, promoting best practices in the reuse and recycling of the materials used for of

renewable installations.

Additionally, it is envisaged that through a broad based sector approach/involvement, the

implementation of the initiatives outlined above will trigger a buy-in by all stakeholders. This

will ensure sustainability of the project.

4 DESCRIPTION OF THE ACTION

4.1 Objectives/results

The overall objective is to support Barbados in advancing in its attempt towards energy self-

sufficiency from local renewable resources

The Immediate Objective or Outcome is that the private sector gets engaged in power

generation through renewable energies, and consumers make increasingly use of energy

efficiency measures.

This will be achieved through the major Output induced by the EU budget support

contribution: The Barbados Government adopts and implements energy sector reform

measures that promote the transition of the country towards renewable energy and improved

energy efficiency on the basis of the National Energy Policy and commitments to the

UNFCCC.

[15]

Q4 / 2017 Q4 / 2018 Q4 / 2019

Indicators for

variable tranches Year 1 Year 2 Year 3

FIXED

TRANCHE FIXED TRANCHE FIXED TRANCHE

% 40% 30%

Amount (EUR) 1 120 000 840 000

Policy Dialogue with all key

stakeholder and reports provided on

the fulfilment of the general

conditions described in point

5.3.2(a) of this document.

1) Institutional

Strengthening

Policy Dialogue with

all key stakeholder and

reports provided on the

fulfilment of the

general conditions

described in point

5.3.2(a) of this

document.

Policy Dialogue with

all key stakeholder and

reports provided on the

fulfilment of the

general conditions

described in point

5.3.2(a) of this

document.

Renewable Energy Roadmap

established and implemented

according to milestones defined.

% 10%

Amount (EUR) 280 000

2) Policy Reform

Policy Dialogue with

all key stakeholder and

reports provided on the

fulfilment of the

general conditions

described in point

5.3.2(a) of this

document.

Policy Dialogue with

all key stakeholder and

reports provided on the

fulfilment of the

general conditions

described in point

5.3.2(a) of this

document.

Favourable electricity licence

regime for small IPPs and IPPs with

Renewable Energy generation

systems larger than 1 MW

introduced

% 10%

Amount (EUR) 280 000

3) Renewable

Energy and

Energy Efficiency

systems

Policy Dialogue with

all key stakeholder and

reports provided on the

fulfilment of the

general conditions

described in point

5.3.2(a) of this

document.

Policy Dialogue with

all key stakeholder and

reports provided on the

fulfilment of the

general conditions

described in point

5.3.2(a) of this

document.

30 MW of Renewable Energy

installed by public and private

agencies by 2019.

% 10%

Amount (EUR) 280 000

TOTAL Max. 40% 60%

2 800 000 EUR 1 120 000 1 680 000

4.2 Main activities

4.2.1 Budget support

Transfer of funds if conditions are met;

Permanent dialogue on the sector, including relevant civil society organization and

other non-state actors;

Permanent dialogue on PFM, budget transparency and control;

Cross-sectorial dialogue

Analysis and monitoring of reforms on the above mentioned areas

[16]

4.2.2 Complementary support

No specific EU complementary support is envisaged.

4.3 Intervention logic

N/A

5 IMPLEMENTATION

5.1 Financing agreement

In order to implement this action, it is foreseen to conclude a financing agreement with the

partner country, referred to in referred to in Article 17 of Annex IV to the ACP-EU

Partnership Agreement.

5.2 Indicative implementation period

The indicative operational implementation period of this action, during which the activities

described in section 4.1 will be carried out and the corresponding contracts and agreements

implemented, is 36 months from the date of entry into force of the financing agreement.

Extensions of the implementation period may be agreed by the Commission’s authorising

officer responsible by amending this decision and the relevant contracts and agreements; such

amendments to this decision constitute non-substantial amendment in the sense of Article 9(4)

of Regulation (EU) No 322/2015.

5.3 Implementation of the budget support component

5.3.1 Rationale for the amounts allocated to budget support

The amount allocated for budget support component is EUR 2.8 million.

5.3.2 Criteria for disbursement of budget support

a) The general conditions for disbursement of all tranches are as follows:

- Satisfactory progress in the implementation of the energy sector reform agenda and

continued credibility and relevance thereof, as outlined in the annual progress report

for the Sector Reform Contract;

- Implementation of a credible stability-oriented macroeconomic policy;

- Satisfactory progress in the implementation of the PFM reform programme;

- Satisfactory progress with regard to the public availability of timely, comprehensive

and sound budgetary information.

In order to justify having met these conditions, the Government of Barbados will present a

comprehensive progress report on the implementation of the sector reform agenda well before

the annual policy dialogue meeting for the confirmation of the earmarked payments for the

tranches under the Sector Reform Contract. In this report, the milestones achieved during the

current reporting period in line with the New Energy Policy for Barbados should be reported

[17]

on, and concrete milestones which are to be achieved during the forthcoming reporting period

should be proposed.

b) The specific conditions for disbursement that may be used for variable tranches are the

following:

The first tranche will be provided as a fixed tranche of 40% of the total amount after

year 1, on the basis of an invoice and submission of the annual progress report

showing fulfilment of the general conditions. The second tranche will be provided as a

fixed tranche of 30% of the total amount after year 3, on the basis of an invoice and

submission of the annual progress report showing fulfilment of the general conditions.

The variable tranche due at the end of year 3 is composed of the three Performance

Assessment Indicators:

1) Renewable Energy Roadmap established and implemented according to

milestones defined;

2) Favourable electricity licence regime for small IPPs and IPPs with Renewable

Energy generation systems larger than 1 MW introduced;

3) 30 MW of Renewable Energy installed by public and private agencies by 2019;

The chosen performance targets and indicators to be used for disbursements will apply for the

duration of the programme. However, in duly justified circumstances, the NAO Office in

Barbados may submit a request to the Commission for the targets and indicators to be

changed. The changes agreed to the targets and indicators may be authorised by exchange of

letters between the two parties.

In case of a significant deterioration of fundamental values, budget support disbursements

may be formally suspended, temporarily suspended, reduced or cancelled, in accordance with

the relevant provisions of the financing agreement.

5.3.3 Budget support details

A fixed tranche of 40% of the total amount will be provided after the first year. A fixed

tranche of 30% will provided after year 3. A variable tranche of up to 30% which is

associated to 3 sector performance indicators (10% each) will be provided after year 3 once

all indicator targets are met.

Budget support is provided as direct untargeted budget support to the national Treasury. The

crediting of the euro transfers disbursed into Barbados Dollars will be undertaken at the

appropriate exchange rates in line with the relevant provisions of the financing agreement.

[18]

5.4 Implementation modalities for an action under project modality

5.4.1.1 Procurement (direct management)

Subject in generic terms, if possible Type (works,

supplies,

services)

Indicative

number of

contracts

Indicative

trimester of

launch of the

procedure

Communication and Visibility

Services One (1) 2

nd quarter

2017

Evaluation Services One (1) 1

st quarter of

2020

5.5 Scope of geographical eligibility for procurement and grants

The geographical eligibility in terms of place of establishment for participating in

procurement and grant award procedures and in terms of origin of supplies purchased as

established in the basic act and set out in the relevant contractual documents shall apply.

The Commission’s authorising officer responsible may extend the geographical eligibility in

accordance with Article 22(1)(b) of Annex IV to the ACP-EU Partnership Agreement on the

basis of urgency or of unavailability of products and services in the markets of the countries

concerned, or in other duly substantiated cases where the eligibility rules would make the

realisation of this action impossible or exceedingly difficult.

5.6 Indicative budget

Budget

EU

Contribution

(Amount in

EUR)

Third party

contribution

Budget support Sector Reform Contract 2 800 000 N.A.

Communication and visibility 100 000

Evaluation 100 000

Total 3 000 000 N.A.

[19]

5.7 Performance monitoring

The day-to-day technical and financial monitoring of the implementation of this action will be

a continuous process and part of the implementing partner’s responsibilities. To this aim, the

implementing partner shall establish a permanent internal, technical and financial monitoring

system for the action and elaborate regular progress reports (not less than annual) and final

reports. Every report shall provide an accurate account of implementation of the action,

difficulties encountered, changes introduced, as well as the degree of achievement of its

results (outputs and direct outcomes) as measured by corresponding indicators, using as

reference the logframe matrix (for project modality). The report shall be laid out in such a

way as to allow monitoring of the means envisaged and employed and of the budget details

for the action. The final report, narrative and financial, will cover the entire period of the

action implementation.

The Commission may undertake additional project monitoring visits both through its own

staff and through independent consultants recruited directly by the Commission for

independent monitoring reviews (or recruited by the responsible agent contracted by the

Commission for implementing such reviews).

The assessment of performance indicators will be subsequently conducted by the European

Commission staff on the basis of disbursement requests and proof of verification submitted by

the Government.

This operation may be subject to review in light of the implications of the Commission's

revised policy on budget support.

5.8 Evaluation

Having regard to the nature of the action, a final evaluation will be carried out for this action

or its components via independent consultants contracted by the commission.

It will be carried out for accountability and learning purposes at various levels (including for

policy revision), taking into account in particular the fact that a system for monitoring and

evaluation would for the first time be developed in the sector.

The evaluation reports shall be shared with the partner country and other key stakeholders.

The implementing partner and the Commission shall analyse the conclusions and

recommendations of the evaluations and, where appropriate, in agreement with the partner

country, jointly decide on the follow-up actions to be taken and any adjustments necessary,

including, if indicated, the reorientation of the project.

Indicatively, one contract for evaluation services shall be concluded under a framework

contract in mid-2020.

5.9 Audit

Without prejudice to the obligations applicable to contracts concluded for the implementation

of this action, the Commission may, on the basis of a risk assessment, contract independent

audits or expenditure verification assignments for one or several contracts or agreements.

[20]

5.10 Communication and visibility

Communication and visibility of the EU is a legal obligation for all external actions funded by

the EU.

This action shall contain communication and visibility measures which shall be based on a

specific Communication and Visibility Plan of the Action, to be elaborated at the start of

implementation and supported with the budget indicated in section 5.5 above.

In terms of legal obligations on communication and visibility, the measures shall be

implemented by the Commission, the partner country, contractors, grant beneficiaries and/or

entrusted entities. Appropriate contractual obligations shall be included in, respectively, the

financing agreement, procurement and grant contracts, and delegation agreements.

The Communication and Visibility Manual for European Union External Action shall be used

to establish the Communication and Visibility Plan of the Action and the appropriate

contractual obligations.

[21]

APPENDIX - INDICATIVE LIST OF RESULT INDICATORS (FOR BUDGET SUPPORT)

The inputs, the expected direct and induced outputs and all the indicators, targets and baselines included in the list of result indicators are

indicative and may be updated during the implementation of the action without an amendment to the financing decision. The table with the

indicative list of result indicators will evolve during the lifetime of the action: new columns will be added for intermediary targets (milestones),

when it is relevant and for reporting purpose on the achievement of results as measured by indicators. Note also that indicators should be

disaggregated by sex whenever relevant.

Results chain Indicators Baselines

(incl. reference

year)

Targets

(incl. reference

year)

Sources and

means of

verification

Over

all

obje

ctiv

e:

Impac

t

OO 1Barbados advances

towards energy self-sufficiency

from local renewable resources.

1. % of electricity generated from

renewable energy sources

TBD by 2017 TBD by 2017 Division of

Energy

(National

Energy Policy)

Spec

ific

obje

ctiv

e(s)

:

Outc

om

e(s)

SO1 The private sector gets

engaged in power generation

through renewable energies,

SO2 consumers make

increasingly use of energy

efficiency measures.

1.1.% of installed power generation

capacity from independent power

producers (also under PPP)

1.2.Number of MW of Renewable

Energy installed by public and

private agencies by 2019

2.1. should add an indicator to

measure energy efficiency

1.1. None

(2016)

1.2. 10 MW

(2016)

2.1. No act

passed (2016)

1.1. 2 (2019)

1.2. 30 MW

(2019)

2.1 Act Passed

(2019)

Division of

Energy

Division of

Energy

Division of

Energy

[22]

Induce

d o

utp

uts

1. The Barbados Government

adopts and implements energy

sector reform measures that

promote the transition of the

country towards renewable

energy and improved energy

efficiency on the basis of the

National Energy Policy.

1.1 Extent to which the core targets

specified in the National Energy

Policy regarding private power

producer involvement in electricity

generation have been implemented.

1.2. Status of electricity licence

regime for small IPPs and IPPs with

generation systems larger than 1

MW.

1.1. No

programme

established

1.2. No Road

Map (2016)

1.1.

Programme

established

(2018)

1.2. Road Map

established and

implemented

(2019)

Idem as above

for the

corresponding

indicator.

Dir

ect

outp

uts

Improvement in the relationship

between external assistance and

the national budget and policy

processes.

Amount of money made available to

the national budget

Idem as above

for the

corresponding

indicator.

Idem as above

for the

corresponding

indicator.

Idem as above

for the

corresponding

indicator.