Caribbean Development Bank and Canada assist with financing
Dominica is set to open its first geothermal power station, with others ready to follow
December 11, 2025 Ben Payton
The Caribbean island of Dominica is preparing for a revolution in its power supply. A 10MW geothermal facility, built by US-headquartered Ormat Technologies, is set to be commissioned by early 2026. Almost overnight, the country will have a new renewable resource supplying baseload power that can meet more than 60 per cent of its electricity needs.
This will allow Dominica to address one of its key economic pain points: the huge and volatile cost of importing diesel to run its existing heavy-fuel oil power station.
Dominica will be only the second island in the Caribbean after Guadeloupe to exploit its geothermal resources. Several others are now exploring geothermal possibilities. Next in line appears to be St Kitts and Nevis, which is currently evaluating bids from five international companies for a contract for production drilling on Nevis.
A geothermal well taps into water superheated by magma deep below the surface of the Earth. As steam rises from the well, it turns turbines to generate electricity.
The development of geothermal power is “a game-changer for Caribbean islands”, says David Gumbs, director of the islands energy programme at energy-focused non-profit organisation RMI. He points out that the region faces unique challenges in its energy transition. Wind power is difficult due to the economies of scale required, while space constraints limit the use of solar energy on some islands.
Financing hurdles
Dominica’s progress with geothermal has been made possible by concessionary finance. The Caribbean Development Bank acted as the lead arranger for a $34.8mn facility that reached financial close earlier this year, with contributions from the UN-backed Green Climate Fund and Canada, along with separate loan financing through the Caricom Development Fund.
CDB president Daniel Best tells fDi that developing geothermal power is vital for the region. “It affords us the opportunity to reduce the vulnerability of our countries from exogenous shocks, while building economic and social resilience into the fabric of these countries,” he says.
Best notes that concessionary capital will reduce the cost of construction for Dominica’s geothermal power station, which will in turn ultimately reduce power costs for consumers.
The CDB is also helping to finance geothermal exploration on Nevis through what Best calls an “innovative financing model” in the form of a contingent recoverable grant. The majority of the funding will be repaid to the CDB if geothermal resources are developed. If the drilling is unsuccessful, however, the funding will remain as a grant. In this way, Best says, the CDB is helping develop the island’s geothermal potential “without adding to the debt overhang of the country”.
The Green Climate Fund is the biggest investor in the Dominica plant, with a $25.4mn commitment, and is also helping to finance exploration activities on several other Caribbean islands. The fund’s regional director Kristin Lang points out that drilling for geothermal power — much like drilling for oil and gas — entails a significant degree of risk. “Why is it necessary to have GCF involvement?” she asks. “It’s because, precisely, the private sector wasn’t willing to take that risk.”
She notes that the Dominica plant is expected to reduce CO₂ emissions by 9.4mn tonnes during its lifetime. And Lang highlights how geothermal will enable a “real paradigm shift”, in allowing Dominica to develop energy-intensive activities. One option, she suggests, is to use geothermal energy to power desalination facilities, thereby contributing to water security.
Exporting power
The nature of the geothermal resources in Dominica and other Caribbean islands is both an opportunity and a challenge. Dominica is thought to be capable of producing up to 1,000MW of geothermal power, vastly more than it could consume with a population of just 75,000 people, even if more energy is used for activities such as desalination.
Geothermal requires scale if it is to be economical. The long-term development of geothermal resources in the region will depend on finding ways to use the excess power.
One possibility is to construct a web of subsea transmission lines to allow electricity to be exported between Caribbean islands. A fully interconnected Caribbean “really is a dream at this point in time”, Gumbs cautions. There would, however, be economic logic in connecting islands that are closest together, he says. Dominica, for example, could potentially export power to Martinique, less than 40km away.
An alternative to exporting electrons is to export molecules. Gumbs highlights how geothermal power could power electrolysers that produce green hydrogen, which could then be exported within and beyond the region. Again, however, converting this potential into real developments will face an array of technical and financial challenges.
While the path towards resolving these issues remains uncertain, there is little doubt that it is positive for the region that islands like Dominica are taking their first steps on a geothermal journey. As steam begins to rise from the new facility in the near future, a new energy era will begin.
Source: fDi Intelligence
See also The Caribbean Prepares for a Geothermal Revolution | Caribbean Development Bank