the development of the renewable energy market in latin america and the caribbean

The Development of the Renewable Energy Market

in Latin America and the Caribbean

Alexander Ochs Brown-Bag Lunch, IDB Headquarters Washington DC, 24 September 2014

Worldwatch in the Region

• Dominican Republic Wind and Solar Roadmap EEP, 2012

• C-SERMS Phase I Baseline Report CARICOM & IDB, 2013 (first draft)

• Sustainable Energy Roadmaps in the Dominican Republic, Haiti and Jamaica ICI of the German Government, 2013 & 2014

• 10 Islands Profiles & Regional Matrix Carbon War Room, 2014

• The Way Forward for Renewable Energy in Central America (with INCAE Business School) EEP, CDKN, 2013

• Study on the Development of the Renewable Energy Market in LAC IDB, 2014

• Study of Water and Energy Regulatory Systems in Four Caribbean Islands and Lessons Learned for the Pacific ADB, 2014

Overview Purpose:

To identify the strengths and challenges related to

renewable energy development in LAC and to develop

recommendations to guide future IDB activity

Contents:

1. Renewable Energy for Power Generation: Global

Trends

2. Renewable Energy in LAC

3. Barriers to the Advancement of Renewable Energy in

LAC and Opportunities to Overcome Them

4. Vulnerability to Climate Change and Adaptation

Strategies in the Power Sector in LAC

5. How the IDB Can Support Renewable Energy

Development in LAC

1. Renewable Energy for Power Generation: Global Trends

Global Growth in Energy by Source 2007–2012

-2.1% 0.6% 2.4% 3.5% 3.7%

17.6%

25.0%

69.0%

-3%

7%

17%

27%

37%

47%

57%

67%

77%

Gro

wth

Rat

e (

%)

Nuclear Oil Natural Gas Hydro Coal Biofuels Wind Solar

Source: BP


40 65

100

146 171 168

227

279 250

214

0

50

100

150

200

250

300

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Bill

ion

USD

Source: BNEF


Global Investment in Renewable Energy 2004–2013

Global Levelized Cost of Energy for Renewable Power Generation, 2013

0

0.1

0.2

0.3

0.4

0.5

0.6

LCO

E (U

SD/k

Wh

)

Source: REN21


Electricity Generation by Source in LAC, 1970, 1990, and 2013

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1970 1990 2013

Others

Hydro

Nuclear

Coal

Natural Gas

Oil & Diesel

Source: Tissot, OLADE


Population Without Access to Electricity in LAC, 2013

0123456789

10

CentralAmerica

Mexico Caribbean AndeanZone

Brazil SouthernCone

Mill

ion

Peo

ple

Source: ClimateScope 2013


Net Renewable Capacity Additions by Source in LAC, 2007–2012


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2007 2008 2009 2010 2011 2012

GW

solar

geothermal

small hydro

wind

biomass & waste

Source: MIF and BNEF

Renewable Energy Investment by Technology in LAC ($B,%)

36.5, 56% 16.8, 26%

8.3, 13%

1.9, 3% 1.5, 2%

0.03, 0.05%

Wind

Small Hydro

Biomass & Waste

Solar

Geothermal

Small Scale Dist

Source: MIF and BNEF


Renewable Energy Policy Trends


• Renewable energy targets

• Renewable energy tenders or auctions

• FITs

• Quota obligations

• Net metering

• Fiscal incentives

• Public funds for renewable energy projects

3. Barriers to the Advancement of Renewable Energy in LAC and

Opportunities to Overcome Them

Technological Barriers

3. Barriers to the Advancement of Renewable

Energy in LAC and Opportunities to Overcome Them

• Lack of available data and information

• Transmission and distribution challenges

Need for integrated resource planning

Market Barriers



• Restricted grid and power market access

• Lack of economies of scale

• High transaction costs

• Counterparty risk

• Fossil fuel subsidies

Need to create open, fair, and competitive electricity markets

Finance Barriers



• Currency risks

• Inadequacy of financial products

• Underdeveloped financial sectors

Need for financial sector development

Social Barriers



• Lack of public acceptance

• Vested interest in business as usual

• Not in my backyard

Need for up-to-date, fully inclusive data gathering and communication

4. Vulnerability to Climate Change and Adaptation Strategies in the

Power Sector in LAC

Climate Change Impacts in the Region



• Changes in precipitation

• Temperature increase

• Ocean warming

• Sea-level rise

• Increase in frequency of extreme weather events

Power Sector Vulnerability



• Climate change affects the whole energy supply chain

• For example: – Water scarcity affects hydropower, biomass, fossil

fuels and nuclear power generation

– Higher temperatures decrease thermal efficiency for fossil fuels and nuclear power generation

– Extreme weather events and sea level rise put infrastructure at risk

– Rising temperatures lead to higher energy demand

The Need for Adaptation Measures



• LAC depends on hydropower for 50% of its electricity, so water availability is a major concern

• It has already experienced decreases in hydropower due to extreme droughts

• Need in-depth assessments of impacts of climate change on non-hydro energy sources, vulnerability studies at a national level, and the development of adaptation strategies


Development in LAC

How the IDB Can Support Renewable Energy Development in LAC?

• Building Enabling Infrastructure for the Grid of the Future

• Securing Private Sector Investment

• Engaging in Energy Policy Design and Development

• Helping to Establish Supply Chains for Current and Emerging Technologies

Building Enabling Infrastructure for the Grid of the Future


Development in LAC

• Help governments address important infrastructure and technical barriers to building a smart, low-carbon, and low-cost energy system.

• Assist governments in carrying out critical infrastructural investments, as well as aid in capacity building of system operators throughout the region.

• Support countries in coordinating infrastructure expansion with the establishment of smart grids, weather forecasting, and energy efficiency technologies.

• Assist governments in carrying out feasibility and environmental impact studies of potential large-scale renewable energy generation sites and in planning for their integration to the grid.

• Provide technical and policy assessments for the most cost-effective regional integration strategies and aid countries in harmonizing national-level energy plans and regulations.

Securing Private Sector Investment


Development in LAC

• Assist governments in lowering market and financial barriers that prevent the private sector from investing in small-, mid-, and large-scale renewable energy, energy efficiency, and smart grid projects.

• Help leverage private sector investment through risk mitigation of renewable energy projects.

• Aid small-scale projects in meeting equity requirements and help build the capacity of local financial institutions, increasing their familiarity with renewable energy projects and lowering perceived risks.

• In markets with limited private sector involvement, the IDB can stimulate engagement by providing support for public-private partnership (PPP) projects.

Engaging in Energy Policy Design and Development


Development in LAC

• Continue to play an important role in assisting governments through capacity building, institutional development, and policy design.

• The IDB, with its extensive knowledge of the region, is ideally positioned to support national governments in developing sustainable energy plans that are suitable to their needs and goals.

Helping to Establish Supply Chains for Current and Emerging Technologies


Development in LAC

• The IDB can support the growth of local supply chains for clean energy technologies through capacity building and technical cooperation, as well as through financing of pilot projects, local businesses, and emerging clean energy technologies.

Thank you!

Alexander Ochs Director

Climate and Energy Program [email protected]

the development of the renewable energy market in latin america and the caribbean

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