Missing From Latin America’s Green Energy Policies: Cooperation

U.S. Vice President Joe Biden speaks to Dominica’s Foreign Minister Francine Baron as they pose for a group photo at the Caribbean Energy Security Summit at the State Department in Washington, Jan. 26, 2015 (AP photo by Jacquelyn Martin).

Leaders from across the Caribbean are meeting in Washington this week for the first-ever Caribbean Energy Summit, hosted by U.S. Vice President Joe Biden. In an email interview, Johanna Mendelson Forman, senior adviser at the Stimson Center, scholar-in-residence at American University and founder of the Latin American and Caribbean Council on Renewable Energy, discussed renewable energy in Latin America.

WPR: How extensive is renewable energy infrastructure in Latin America, and what countries have been most active in pursuing renewable energy?

Johanna Mendelson Forman: With the greenest energy matrix in the world, mainly due to the extensive use of hydropower, South America, Central America and the Caribbean have all been expanding their capacity to generate electricity from wind and solar. Wind power generation in Mexico and Brazil, in particular, experienced its highest growth yet in 2014. Investment and interest in geothermal energy is also growing, especially in Mexico.

While Latin America has one of the highest average electrification rates at 95 percent, many isolated regions in rural areas account for the 34 million people that still do not have access to energy. Governments are working on distributive energy projects to address these gaps, especially in places like Haiti and rural Colombia. Caribbean and Central American states are rapidly gearing up to expand their renewal energy capacity, in the wake of the political crisis in Venezuela, which has made fossil fuel dependence highly unreliable. However, barriers to hydroelectric production are evident in the confrontations between governments and environmentalists in Brazil and Chile, where plans to build bigger dams have been delayed or halted.

WPR: Who have been the main international partners involved in developing renewable energy infrastructure in Latin America?

Mendelson Forman: A new commitment is visible in Chile, Mexico and Uruguay, where each country committed more than $1 billion for renewable energy investment in the past year. Brazil, however, did not commit as much, a reflection of its overall economic downturn in 2014. Since the 2013 Abu Dhabi declaration, Middle Eastern countries and the Latin American Energy Organization have pledged greater cooperation and investment in renewable energy technologies.

It is too early to see how deep these pockets go in terms of project financing. Chinese investment in this sector has been less significant than it has been for other commodities, such as fossil fuel production. Development institutions such as the Brazilian Development Bank, the Inter-American Development Bank, the Overseas Private Investment Bank and the U.S. Trade and Development Agencies have become the catalysts for investment capital in this sector, as they partner with many private firms to advance renewable energy technologies.

WPR: What incentives have Latin American governments implemented to encourage renewable energy development, and what obstacles still exist?

Mendelson Forman: As of early 2014, at least 14 countries in the region had renewable energy targets, such as Chile’s 20/20 project, which aims to have renewables fuel 20 percent of its electricity needs by 2020. And 19 countries had renewable energy policies, an important trend that underscores the importance of the sector.

This trend is likely to continue, but two problems still create disincentives toward investment in the renewable energy sector in the Caribbean and Central America. First, in Central America there is no integrated electricity planning, in spite of the creation of a regional electricity market. Regulatory frameworks for implementing the new markets are still not in place. Moreover, regional capacity for governance of any regulatory scheme is also weak or non-existent. Second, until recently the availability of cheap fossil fuels through Venezuela’s Petrocaribe program delayed planning for alternative energy sources and investment programs. This may change quickly, but will still require a more formal mechanism to create financing mechanisms to hedge against volatile energy prices. The long-term solution to the energy problems of Central America and the Caribbean is to transition toward a regional energy strategy. This, however, is not yet in place.

In South America, rapid urbanization—80 percent of the population now lives in urban areas—has created more incentives for governments to shift toward using biofuels for public transportation, with Brazil leading the way, followed by Peru, Argentina and Colombia. Even in South America, however, regional energy integration is still a barrier to broader mechanisms to support investment at this time.

 

Reposted from: http://www.worldpoliticsreview.com/trend-lines/14936/missing-from-latin-…

 

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