ACORE: Renewable Energy in Latin America and The Caribbean (2014)

REGIONALBRIEFING:RENEWABLEENERGYINLATINAMERICAANDTHECARIBBEAN
APRIL2014
REGIONAL BRIEFING: RENEWABLE ENERGY

IN LATIN AMERICA AND THE CARIBBEAN
APRIL 2014
AMERICAN COUNCIL ON RENEWABLE ENERGY (ACORE)

ACORE,a501(c)(3)nonprofitmembershiporganization,isdedicatedtobuildingasecureandprosperousAmerica
withclean,renewableenergy.ACOREseekstoadvancerenewableenergythroughfinance,policy,technology,and
marketdevelopmentandisconcentratingitsmemberfocusin2014onNationalDefense&Security,Power
Generation&Infrastructure,andTransportation.Additionalinformationisavailableat:www.acore.org
INTERATIONAL PROGRAMS
Tobuildasecure,prosperousAmericawithclean,renewableenergy,wemustcultivateglobalpartnershipsas
technologicaladvancementsandinnovativeinvestmentstrategiesemanatefromallcornersoftheworld.ACOREs
InternationalProgramsprovideaplatformformemberstobuildthesepartnershipswithgovernment,industry,
andnonprofitentitiesacrosstheglobe.ACOREsInternationalProgramsalsofacilitateopportunitiesforsharing
knowledgeonpolicyandfinancetocreateanenvironmentconducivetoadvancingrenewableenergygrowthboth
intheU.S.andabroad.Withamultitieredstrategyfocusedbothontrackingglobaltrendsandbuilding
partnershipswithspecificcountriesonsixcontinents,ACOREsInternationalProgramsworktoplaceU.S.
leadershipattheforefrontofglobalrenewableenergypolicyandfinance.Additionalinformationisavailableat:
www.acore.org/programs/acoreinternationalprograms
POWER GENERATION AND INFRASTRUCTURE INITIATIVE
ThePowerGenerationandInfrastructureInitiativebringstogetherleadersfromtheutility,business,investment,
regulatory,public,andnonprofitsectorsto:(1)examinethechallenges,opportunities,andappropriatestrategies
relatedtotheexpandeduseandeffectiveintegrationofrenewableenergyinthepowergenerationsector;and(2)
explore21stcenturybusinessmodelsthatwillallowforthisrenewableenergyscaleup.Additionalinformationis
availableat:www.acore.org/programs/memberinitiatives/powergeneration
AmericanCouncilOnRenewableEnergy(ACORE)
APRIL2014
AUTHORS
ACORE
MichaelBrower,Risa
Edelman,JamesHewett,and
LesleyHunter
AkinGumpStraussHauer
&FeldLLP
CleanEnergyLatin
America
DinoBarajas
CamilaRamos
Dentons
JuanCarlosIturreguiand
SydneyMcNiffJohnson
SPONSORS
COPYRIGHT
2014ACORE
AllRightsReservedunderU.S.andforeignlaw,treaties,andconventions.Thisworkcannotbereproduced,
downloaded,disseminated,published,ortransferredinanyformorbyanymeanswithoutthepriorwritten
permissionofthecopyrightownerorpursuanttotheLicensebelow:
Publishedby:
1600KSt.NW,Suite650
Washington,DC20006
202.393.0001
QuestionsorComments:info@acore.org
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TABLE OF CONTENTS
Introduction .................................................................................................................................................... 4
Executive Summary ........................................................................................................................................ 5
The Renewable Energy Sectors New Frontier: Latin America and the Caribbean..................................... 7
Game-Changing Energy Strategies: The Imperatives of Incorporating Significant Renewable Power in
Latin America and the Caribbeans Generation Fuels Mix & Grid Upgrades ......................................... 10
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INTRODUCTION
ACOREispleasedtopresentRenewableEnergyinLatinAmericaandtheCaribbean,awhitepaperon
issuesandopportunitiesintheLatinAmericanandtheCaribbean(LAC)regionrenewableenergy
markets.
ThisregionalbriefingtiesdirectlytotwoofACOREskeyfocusareas:ourInternationalProgramsandour
PowerGeneration&InfrastructureInitiative.Theformercultivatespartnershipswithinternational
businessesandgovernmentstofosterthesharingofinformationonthebestofglobalrenewable
finance,policy,andtechnology,whilethelatterexaminesstrategiesforintegratingrenewableenergy
intoutilitybusinessmodelsandtheevolvingelectricpowergenerationindustry.
Asyouwillreadinthefollowingarticles,commoncharacteristicsoftheLACenergymarketmakeita
naturalareaoffocusforACOREsinternationalandpowergenerationefforts.Presentenergyissuesin
theregionincludehighelectricityprices,outdatedorburgeoninginfrastructure,andwaterandenergy
accessconcerns.Renewableenergyhasthepotentialtoaddresstheseproblems.
ACOREinvitesourmembers,whoarefocusedonpowergenerationmodels,globalbusiness
opportunities,andinfrastructuremodernization,toplayanactiveroleincreatingthefinancial,policy,
andmarketsolutionsneededtofacilitaterenewableenergygrowthintheLACregion.Wethankthe
authorsforthearticlestheyhavecontributedonthesecriticallyimportanttopicsandlookforwardto
yourengagementinthisdialogue.
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EXECUTIVE SUMMARY
CamilaRamos
CleanEnergyLatinAmerica(CELA)
ThegrowingeconomiesoftheLatinAmericanand
theCaribbean(LAC)regionareripeforrenewable
energydevelopment.TheLACregionspopulationof
600millionisgrowingat1%peryear,anditsGDP
morethandoubledbetween1990and2013.More
than50millionpeoplehaveworkedtheirwayupthe
socialandincomeladdertojointheregionsmiddle
classinthelastdecade,andthistrendisexpectedto
continue.Nonetheless,percapitaelectricityusagein
theregion,at1,987kWh,isstillathirdbelowthe
worldaverage,and29millionhouseholdsdonot
haveaccesstoresidentialelectricity.
Asaresultofongoingdemographicandsocio
economicstructuralchanges,thedemandfor
electricityintheLACregionwilldoubleby2030and
tripleby2050,accordingtotheEconomic
CommissionforLatinAmericaandtheCaribbean
(ECLAC).Consequently,countriesintheLACregion
willrequiremorethan$350billionofinvestmentin
newpowergenerationassetsbetween2013and
2030tomeetthisdemand.
Thepresentscenarioofstrongelectricitydemand
growth,decreasingcostsforrenewableenergy,
increasingpricesoffossilfuels,thedesireforenergy
security,andconcernsaboutclimatechangeinthe
LACregionpresentsinterestingopportunitiesforthe
expansionofrenewableenergy.Andthereis
significantpotentialforexpandingtheuseof
renewableenergysources,rangingfromextensive
solarandwindresourcesfromMexicotoArgentina,
togeothermalresourcesalongthetectonicallyactive
PacificRim,tobiomassresourcesthroughoutthe
region.Theseenergysourcescanhelpdiversifythe
overallelectricitysupplymixbeyondconventional
optionssuchasfossilfuels.
AccordingtoBloombergNewEnergyFinance(BNEF),
theprivatesectorinvested$92billioninrenewable
energyintheLACregionbetween2008and2013,
including$9.3billionin2013.Intotal,37%ofall
regionalinvestmentsin2013weremadeinBrazil,
followedbyChile(17%),Mexico(16%),andUruguay
(12%).Thebulkofinvestmentwasforwindenergy,
whichaccountedfor60%ofrenewableenergy
investmentintheregionin2013.However,solar
powerisalsobecomingmorecommonintheregion,
responsiblefor$1.3billionofinvestmentin2013.
Thisinvestmentledtotheinstallationof1GWof
newwindenergycapacityin2013and200MWof
newsolarphotovoltaic(PV)capacity,withthefirst
megawattscalesolarprojectsbeingdeployedin
Chile,Peru,andMexico.
Policymakershavebeencompelledtosetnational
carbonreductionand/orcleanenergyinstallation
goalsandtoholdauctionsforrenewablepowerand
biofuelssupplycontractstoattractadditional
investmenttotheregion.Bottlenecksanddifficulties
intermsoflegislation,marketmaturity,andsupply
chainconstraintsarepresent.However,theseissues
arebeingtackledgraduallyastherenewableenergy
industryadvances.Newsourcesoffundingare
increasinglyavailable,includingfromlocaland
multinationaldevelopmentbankssuchastheInter
AmericanDevelopmentBank(IDB),Brazilian
DevelopmentBank(BNDES),andOverseasPrivate
InvestmentCorporation(OPIC),aswellasforeign
andlocalprivateinvestors.Thesepositivesignals
indicatethattheLACregionwillcontinuetobean
importantlocationforrenewableenergyinvestment
anddeploymentintheyearstocome.
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ABOUTTHEAUTHOR
CamilaRamosisManagingDirectoratCELAClean
EnergyLatinAmerica,aSoPaulobasedconsulting
andadvisoryfirmsupportingclientstoexplore
opportunitiesintheLatinAmericanrenewable
energymarket,specializinginpolicyanalysis,
fundraising,projectfinance,strategicplanning,and
connectingprojectsandinvestors.Camilaisalsoan
AdvisoryBoardMemberoftheInterAmericanClean
EnergyInstitute,aCaliforniabasedcleanenergy
thinktank.
PriortofoundingCELA,Ms.RamosservedasCountry
ManagerandHeadofLatinAmericaResearchat
BloombergNewEnergyFinance(BNEF).Shewas
alsoMarketingandCommunicationsManagerat
ERBEnergiasRenovveisdoBrasil,aBrazilian
renewableenergycompany.Shehasalsoworkedas
aconsultantatPricewaterhouseCooperswithafocus
onagribusiness.CamilaholdsanMSc.andBSc.from
theLondonSchoolofEconomicsandPoliticalScience
(LSE).
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THE RENEWABLE ENERGY SECTORS NEW

FRONTIER: LATIN AMERICA AND THE CARIBBEAN
DinoBarajas
AkinGumpStraussHauer&Feld,LLP
WhilemostjurisdictionswithinLatinAmericaand
theCaribbeanbasetheircoreelectricgeneration
assetportfolioonfossilfuels,1renewableenergy
technologiesarenowchangingtheregionalenergy
landscape.Now,wind,solar,hydro,tidal,and
geothermalpowerplantdevelopersarefocusing
effortsontransformingLatinAmericaandthe
Caribbeanintomoreecofriendlypowergenerators.
Asaresult,localgovernmentshavebeenmodifying
electricutilityregulatoryframeworksto
accommodatetheintroductionofrenewableenergy
intoregionalelectricgenerationanddistribution
systems.
Therenewableenergydevelopmentactivity
throughouttheregionhasresultedfromarecent
twoyearperfectstormofglobalenergyevents.
Forexample,windpowerprojectdevelopersand
theirtaxinvestorsfacetaxpolicyuncertaintyinthe
UnitedStates.Theresultisachoppyseriesof
boomandbustdevelopmentcycles.Globalsolar
powerplantdevelopers,whohavebeengaining
somecompetitiveadvantagesasaresultofdeclining
solarpanelandsupplypipelinecosts,weredealta
cripplingblowintheU.S.afterChinesesolarcell
manufacturerswereleviedantidumpingtariffson
productsimportedintotheU.S.Equally,solarpower
developershavealsobeenaffectedintheEuropean
Unionbyathreatofhightariffsbeingimposedon
Chinesemanufacturedsolarpanels.Additionally,
Spain,whichhadbeenadarlingofrenewableenergy
developers,retroactivelylowereditsrenewable
energyfeedintariffsandthrewthecertaintyof
Europesrenewableenergyindustryintoatailspin.
CAPITALIZINGONLATINAMERICANAND
CARIBBEANMARKETSANDPOLICIES
Facedwiththedownturnanduncertaintyinthe
EuropeanandU.S.renewableenergymarkets,many
renewableprojectdevelopersareturningtheir
attentionanddevelopmentdollarstowardLatin
AmericaandtheCaribbean.Theregion,whichhas
beenplaguedwithunnaturallyhighenergy
productioncosts,mostlyduetotheneedfor
expensive,imported,fossilbasedbunkerfueland
diesel,offersamarketwhererenewableenergycan
competedirectly,onatrueeconomicbasiswith
existingpowergenerators,evenwithoutextensive
financialsubsidiesorfeedintariffs;however,
regionalgovernmentsmustbeproactiveandenact
favorablerenewableenergyregulatoryand
integrationpolicies.Thepredictabilityofsuch
marketbasedopportunitiesoffersrenewableenergy
developersalongterm,stabledevelopment
environmentwheresuccessislargelycraftedby
economicopportunitybasedontechnology
competitivenessratherthaneverchangingpolitical
andpublicopinion.
Theintegrationofrenewableenergyintoregional
generationportfolioswillhelpachieveindividual
nationalandregionalsecurity,economicsecurity,
andenvironmentalsecuritythroughtheuseoflocal
renewableenergyresources.Asmoreandmore
countriesintheregionassertgreatercontrolover
energyproductioncostsviarenewableresources,
susceptibilitytovariancesinimportedfuelpriceswill
beminimized,andregionalenergyintensive
industrieswillemergeasmorecompetitiveona
1WiththenotableexceptionsofBrazilandCostaRica
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globalbasis.Thesebenefitswillalsoallowtheregion
toattractagreatervarietyofindustriestotheir
marketsandpermithighervalue,moreenergy
intensiveprocessestobedonelocally,thusallowing
agreateramountofthevaluechaintoremainat
home.
numerousprojects.Projectsonthevergeof
achievingfinancinghavecollapseduponthe
discoverythatnegligentorillinformedactionswere
takenduringtheearlystagesofaprojects
development,requiringdeveloperstoredotheir
projectsfundamentals.
Somecountriesintheregion,suchasMexico,are
activelycourtingrenewableenergydevelopersby
creatingattractiveregulatorysystemsthatrecognize
theuniquefeaturesofrenewableenergy
production.Forexample,ComisinFederalde
Electricidad(CFE),Mexicosnationalelectricutility,is
addressingissuesofwheelingpower,whichhas
oftenhinderedpastdevelopmentofregional
renewablepowerprojects.CFEspreviouswheeling
structurefailedtoaccountforwindandsolar
powersuniquecharacteristics.CFEwaspenalizing
suchrenewableenergypowerprojectsfornot
producingbaseloadelectricitysupplywithout
considerationoftheactualvalueofrenewablesover
fossilfuelpowerprojects.Today,CFEswheeling
arrangementsbalancetheuniquecharacteristicsof
renewables.CFEhascreatedasystemwherea
renewableenergyprojectcanbankexcessenergy
productionduringperiodswhenanofftakerdoes
notrequireenergyfromtheproject,andallowsthe
usertoaccessthebankedenergyduringperiods
whenthepowerprojectproducesinsufficientenergy
tomeettheusersneeds.Additionally,postage
stampwheelingcharges,earmarkedsolelyfor
renewableenergy,havebenefittedrenewable
energyproduction.Asaresult,buyersofrenewable
powerseeenergysaleratesthatcompeteeffectively
anddirectlywithfossilfuelgeneratedenergy.
Mindfulofthesechallenges,successfulrenewable
energydevelopersintheregionhaveleveragedthe
lessonslearnedfrompreviouslydevelopedprojects
inspecificcountries.Thecomplexproject
contractingandequityinfusionstructuresdeveloped
overthelast20yearsareservingtodaysrenewable
energypioneerswellbyhelpingthemcreatethe
mostefficienttaxstructurespossiblefortheir
projectsand,inturn,preservingtheirprojectsrates
ofreturn.GiventhattheLatinAmericanand
CaribbeanmarketsdonotresembletheU.S.or
Europeanmarkets,knowledgeofthetermsand
structuresofexistingpowerprojectdealsspecificto
theregionisessentialtoachievingearlysuccess.
LESSONSLEARNEDANDBESTPRACTICES
RenewableenergycompaniesenteringtheLatin
AmericanandCaribbeanmarketsarequickly
learningthatthepotentialrewardsavailableinthe
regionarenotwithouttheirchallenges.Successfully
navigatingjurisdictional,legal,cultural,andbusiness
environmentsisthedeterminingfactorasto
whetheranewmarketentrantcanbesuccessful.
Seeminglysimpletasks,suchassecuringsitecontrol
andpermitting,havebeentheAchillesheelon
Additionally,manydevelopershaveformedjoint
ventureswithlocalcompaniestogainmarketlegal
andculturalknowledgewherepossible.Othershave
reassembledtheexternallegalandtechnical
advisoryteamsresponsibleforstructuringearlier
powerprojecttransactionsinordertogainvaluable
marketaccessandknowledge.
CONCLUSIONSANDRECOMMENDATIONS
GivenexistinghighfossilbasedLatinAmericanand
Caribbeanenergyprices,renewableenergy
developersenteringtheregionarefindingsomeof
themostlucrativeprojectsanywhereintheworld.
Theultimateresultoftheexpansionofthe
renewableenergyindustrythroughoutLatinAmerica
andtheCaribbeanwillbeawinwinfordevelopers
andinvestorsaswellaslocalconsumers.For
developers,anexpandedrenewableenergymarket
andincreasedequipmentdemandwillcontinueto
driveinnovationinthemarketandlowerequipment
pricing.Forconsumers,theinclusionofnew
renewableenergypowerprojectsintotheirnational
powergenerationportfolioswillloweroverall
electricitypricesandpromoteincreased
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industrializationthroughouttheregionasaresultof
pricingpredictability.
environmentinordertospurthedevelopmentof
renewableenergypowerprojects.
Thetruelitmustestofthefeasibilityofthese
renewableenergypowerprojectsiswhetherornot
thirdparty,nonrecoursefinancingisavailable.In
thecaseofLatinAmericaandtheCaribbean,
commerciallendinginstitutionsareactivelylooking
forlendingopportunitiestowellstructured
infrastructureprojectsthroughouttheregion.
Multilaterallendinginstitutions,suchasthe
InternationalFinanceCorporation(IFC),theInter
AmericanDevelopmentBank(IADB),theCentral
AmericanBankofEconomicIntegration(CABEI),and
theDevelopmentBankofLatinAmerica(CAF),have
becomeincreasinglydeterminedtoensurethat
renewableenergyprojectsfindfundingby
introducingcreativefinancingstructuresthatalso
attractinterestfromtheprivatelendingcommunity.
Inadditiontoglobalandregionalfinancing
institutionsandcommerciallenders,development
banks,suchasFMO(Netherlands),DEG(Germany),
Proparco(France),OeEB(Austria),andtheOverseas
PrivateInvestmentCorporation(U.S.),have
supportedthefinancingofnumerousinfrastructure
projectsthatpromotecertaineconomic,
environmental,orsocialobjectives.Someofthese
internationaldevelopmentbankshaveevengoneas
farasprioritizingtheregionasalending
Thesecrettonavigatingtheserichenvironmentswill
beassemblingtherightteamarmedwithmarket
knowledge,languageskills,andbusinessacumen.
ABOUTTHEAUTHOR
ThisarticlewaspreparedbyDinoT.Barajas,partner
intheGlobalEnergyTransactionsGroup(specializing
inprojectfinanceandLatinAmericantransactions)
ofAkinGumpStraussHauer&FeldLLP
(www.akingump.com).Youmaycontacttheauthor
bytelephoneat(310)5526613orbyemailat
dbarajas@akingump.com.Theauthorwelcomes
questionsandcommentsregardingthisarticle.
Mr.Barajashasextensiveexperiencerepresenting
lenders,investors,anddevelopersinawiderangeof
domesticandinternationalprojectfinancinginthe
energy,power,infrastructure,andcommercial
sectors,aswellastraditionalbanking,structured
finance,mergersandacquisitions,corporatefinance,
assetfinance,jointventures,andventurecapital.His
clientsincludecommerciallenders,institutional
investors,investmentfunds,projectsponsors,and
publicandprivatecompanies.HereceivedhisJ.D.
fromHarvardLawSchoolandisbilingual.
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GAME-CHANGING ENERGY STRATEGIES

T HE I MPERATIVES OF I NCORPORATING S IGNIFICANT R ENEWABLE P OWER
IN L ATIN A MERICA AND THE C ARIBBEAN S G ENERATION F UELS M IX &
G RID U PGRADES
JuanCarlosIturreguiandSydneyMcNiffJohnson
Dentons
Provenrenewablepowertechnologiesavailable
todayprovideauniqueopportunityformany
countriesandregionsinLatinAmericaandthe
Caribbean(LAC)tosecuretheirenergyfutureina
sensible,costeffective,andsustainablemanner.
Stakeholdersshouldempowertheirratepayersand
citizensbyactingonshortterm,feasiblegoalsto
reachanaverageof1520%renewableenergyby
2017.Thesegoalscanbeadvancedinseveral
regionalnationsinamerethreetofouryears,ifnot
sooner,andcanyieldsignificantandquantifiable
nationalsecurity,economic,health,and
environmentalbenefits.Particularly,forward
thinkingnationsmightevenadoptgamechanging,
midterm,feasiblegoalstoupgradetheirgridsto
generate3040%fromrenewableenergysourcesby
2020.
Ingeneral,onemightsaythatcountriesfallintoone
ofthefollowingcategories:thestatusquogroup,
thedevelopers,andtheindecisive.Actionstaken
todaybygovernmentsandpolicymakersinthe
energysecurityrealmhavealmostimmediate
impactsonthewellbeingofanationalpopulation.
Evenwithoutacomprehensivenationalenergy
policyandpossessingaquitefragmented
marketplaceintermsofgridoperatorsand
regulators,theUnitedStateshasbecomeevenmore
competitiveineconomictermsbecauseithas
adoptedanaggressivestrategytodeployallkindsof
renewablepower.Infact,themajorityofallnew
generationinstalledlastyearinCanadaandtheU.S.
camefromrenewablesources,withwindandsolar
10
powerplayingkeyroles.TheU.S.manufacturing
sectorisexperiencingaresurgence,whileconsumer
inflationhasremainedvirtuallyflat,inpartbecause
oftheavailabilityofaffordableandreliableenergy
supplies.Ofcoursethereareseveralreasonsforthis
resurgence,butonecannotunderplaythepositive
effectrenewableenergyishavingtodayinthe
marketplaceandsociety.
SeveralLACregionalcountriesapproachthe
deploymentofrenewablepowerasaneconomic
developmentimperativepartofthecritical
infrastructurestrategynecessarytofoster
competitivenessandgrowth.Theimmediate
nationalreturnsarequiteclear:continued
developmentprogress,diversification,predictability,
sustainability,andaffordabilityofenergy,allwhile
preservingtheenvironmentbyusinglessfossilfuels
andreducingcarbonemissions.
Somenationsintheregionareblessedwith
abundantnaturalresources,enablingafewto
efficientlyoptimizetheuseofhydropower.Asa
primeexample,Colombiasinstalledhydropower
capacityrepresentsover50%ofallelectricity
generation.Yetotherenergyrichcountriesare
simplywastingtheirpotential,astheirpoliciesand
trackrecordshavecreatedobstaclesthatpushaway
privatesectorinvestments.Venezuelaissadlyavivid
exampleofthisreality.Thecountrypossessesoneof
thelargestoilandgasdepositsontheplanet,along
withartificiallylowandsubsidizedelectricrates.
However,perplexingly,theirpeoplesufferpower
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outages,draconianinflationrates,andsevere,
unsettlingeconomiccontraction.
Poorenergyaccessalsoresultsfromtheinefficient,
insufficient,oroutdatedpowergenerationmodels
oroperationsthatexistinmanyoftheregional
nations.TheInterAmericanDevelopmentBank
predictsthatseveralhundredbilliondollarswillneed
tobeinvestedintheregionsenergysectoroverthe
nextdecadetosatisfydemand,improveormaintain
growth,mitigateclimatechange,andsupply
affordableelectricitytothemajorityofthe
population.Theseneedsrepresentaunique
opportunitytoupgradeelectricityresources.From
generationtotransmissiontodistributionand
operations,theincorporationofrenewablepower
canbeawinwinforallstakeholders.Capitalis
available,andfinancingtoolscanleverage
investmentsandfacilitatewellconceivedprojectsin
placeswithreliableregulatoryandlegalframeworks.
SURMOUNTINGPETROLEUMDEPENDENCY
Insomeregions,suchasCentralAmericaandthe
Caribbean,thedependencyonfossilbasedliquid
fuelstogenerateelectricityhasfosteredeconomic
stagnation,orinsomecases,aregression.Burning
oiltoproduceenergyisamongthemostinefficient
energyproductionpracticesknown.Notonlymaking
zeroeconomicsense,theadverseenvironmental
effectsaretragic.Severalregionalnationshavean
excessiveaddictiontoafossilbasedliquidfuelhabit
thatsiphonstremendouswealthfromtheir
economiesandratepayerswhiledestroyingtheir
environmentalhealth.Contrastsuchpracticeswith
thoseoftheU.S.,wherelessthanonepercentofthe
country'senergygenerationcomesfromburningoil.
Petrocaribe,theinitiativebeguntenyearsagoby
Venezuela'snationalstateoilmonopoly(PdVESA)to
createanoilalliancewithmanyCaribbeanstates,
mayhaveappearedtoassistsomeofitsaffiliated
countries(clients)intheshortterm;butatitscore,
itisapoliticaltooltoensuresubsidizeddeliveriesof
expensivefuels,anevenlessreliablemechanism
todaygiventhedecliningproductionofPdVESAand
thepoliticalturmoilinVenezuela.
11
Ironically,twooftheleastefficientenergygrids
happentobeinsideU.S.borders:PuertoRicoand
theU.S.VirginIslands.Theseisolatedislandsystems
dependonburningoilforover70%oftheir
generation.Itisnosurprisethenthatboth
economiesremaineconomicallyburdenedwhile
manyoftheirneighborshaveexperiencedemergent
orsustainedgrowth.Withratesrangingfrom29
centsperkWhinthecaseofthePuertoRicoElectric
&PowerAuthority(PREPA)and45centsperkWh
chargedbytheVirginIslandsWater&Power
Authority(WAPA),itisnearlyimpossibletofoster
economicgrowth.
Withoilpriceshoveringatabout$100perbarrel
nowandinthefuture,theeconomicsare
detrimentaltoanynationtosurrenderitsenergy
presentandfuturetooil,aswellasimprudentfora
regionalnationsenvironmentalwellbeing.The
problembecomesmorevividwithasidebyside
comparisonofenergypricesindeveloped
economies,inpartbecauseinordertomeasurethe
realandcompleteadverseeffects,onemust
considerthe"purchasingpowerparity"(PPP)ofa
nationsratepayersrelativetonationalpercapita
GDP.Inrealandabsoluteterms,mostratepayersin
theCaribbeanbasinarepaying47timesmorefor
electricitythanratepayersintheU.S.Tobeginwith,
thefamilyorbusinessthatissubjecttothe35cents
perkWhcostforelectricityinadevelopingisland
nationwouldbepayingabout10centsperkWhin
TexasorMaryland.Butinaddition,theislanders
haveaPPPthatislessthan50%oftheir
counterpartsintheU.S.Ineffect,theislandersare
payingtheequivalentofabout400500%morefor
thesameamountofenergyconsumedbypeoplein
theU.S.Thisisthesituationtoday,whetheryouare
aclientofWAPA,PREPA,theCDEEEinthe
DominicanRepublic,orelsewhere.
SEIZINGMARKETOPPORTUNITIES
Withsuchamarkedcontrasthavingrealandvery
detrimentaleffectsonpeopleandbusinesses,the
onlywayoutofthissocioeconomicenigmaisto
pushforwardwithgamechangingrenewableenergy
strategies.
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Allcountrieshaveatleastpartialenergywealth
throughtheabilitytoexploitrenewablepower,beit
hydro,solar,wind,geothermal,biomass,orallofthe
above.Thepeopleandtheirelectedofficialsare
responsibleforoptimizingsuchnaturalresources.
Whilesomeassertthatitisverydifficultto
incorporatesignificantrenewablepowerinisland
jurisdictions,thefactsdemonstrateotherwise.Afew
yearsago,theHawaiianarchipelagoadoptedan
ambitiousyetfeasiblegoalofdiversifyingits
generationmatrixonafasttrackbasis.Thusfar,
Hawaiisplanisaheadofscheduleandreaching
tangibleeconomicandenvironmentalbenefits.
TakethecaseofChile;itseconomyhasgrownby
leapsandboundsoverthelasttwodecades.Official
estimatesindicatethatthecountryneedsto
increaseitspresentenergyoutputby100%during
thenexteighttotenyearstokeepupwithdemand,
meaningChile'senergymatrixneedstobevery
quicklyduplicated.Toachievethisreality,authorities
have,ofnecessity,fasttrackedenergydevelopment
madetheinclusionofunconventional,renewable
energysources(i.e.,virtuallyallrenewablesexcept
traditionalbighydro)atopnationalpriority.Hence,
Chilesemergingbutrobustgreenpowersectoris
expectedtoexperienceover60%growthin2014.
Gridconnectedprojectsinthepipelinewilladd
approximately650750MWofnewrenewable
power,foratotalinstalledcapacityofabout1,800
MW.Inaddition,considerabledeploymentofoff
gridrenewableenergyistakingplacevia
freestandingprojectsthatsupportcriticaleconomic
activities,includingtheuseofsolarphotovoltaics
(PV)atminingsitesandbiomassandsmallhydroin
forestryandagriculturaloperations.
Changeisheretostay.IntheCaribbean,theCDEEE
isimplementingaplantoincorporateover2,000
MWinnewgenerationwhilerestructuringitsfuels
matrix,significantlyaddingrenewableenergy,but
alsoincludingimportednaturalgasandcoal.The
endresultwillbetogrowandstabilizeboththe
nationalgridandprices.Otherregionalnationsare
takingthejumpintothefutureaswell.Uruguayhad
virtuallyzerounconventional,renewablepower
12
installationsin2011.Bytheendofthisyear,itwill
haveover700MWofnewwindandsolarPV
capacityinstalled.Noteworthyisthefactthat
Uruguaysstrategyisbeingimplemented100%via
privateinvestments.
Gamechangingstrategiesarerealistic.Renewable
energydeploymentinEurope,theU.S.,andCanada
haveproventobesmartpoliciesandgoodeconomic
choices.China,SouthAfrica,Chile,andotherfast
pacedeconomiesareadoptingaggressivemetricsto
installseveralthousandgigawattsofrenewable
energyoverthenextfewyears.Nowisthetimefor
LatinAmericaandtheCaribbeantoleapforwardand
advancethissustainabletrend.Thepublicand
privatesectorsoughttoworktogetherinthiscritical
endeavortocomplementandsupporteachother.
Governmentscanleverageprivatecapitalandfoster
directinvestmentsingenerationandtechnology
transfer.Usingprivatesectorfundsfornewsmart
andrenewablegeneration,thepublicsectorcan
liberateresourcestoinvestintransmissionand
distribution,andotherareasincludingsocial
prioritiessuchaslowandmediumincome
renewablefinancetools.
Globally,technologiesareeverimprovingand
achievinggridparityinmanylocations.AkWh
generatedbypetroleummaycostover30cents;
however,akWhproducedbyrenewableresources
averagesroughly50%less.Moreover,advancesin
storagetechnologies,betterefficiencyratiosin
equipment,andsmartmetering,amongseveral
othertechnologies,reinforcetheeconomicsecurity
ofincorporatingrenewablepowerintoLACnational
grids.
CONCLUSION
AmidstallthechangesintheLACenergylandscape,
onethingisfairlycertain:renewablepowersources
arepredictable,sustainable,affordable,andreadyto
bedeployed.Smarttechnologiesarenowareality,
financingoptionsareattractive,andadistributed
generationandmicrogridrevolutionlookstobethe
nextbigmarketdriver.Suchindicators,conditions,
anddevelopmentsareagreatharbingerforLatin
APRIL2014
AmericaandCaribbean.Formostregionalnations,
renewableenergyportfoliosofbetween3040%by
2020aredoable.Meanwhile,shortterm,feasible
goalssuchas1520%oftotaldeployedrenewable
powerby2017mustbeapriority,and
achievementofthatgoalwouldbequiteagame
changer.
ABOUTTHEAUTHORS
Dentonsisaglobalfirmdriventoprovidea
competitiveedgeinanincreasinglycomplexand
interconnectedworld.ItwasformedinMarch2013
bythecombinationofinternationallawfirmSalans
LLP,CanadianlawfirmFraserMilnerCasgrainLLP
(FMC),andinternationallawfirmSNRDenton.
Dentons'clientsbenefitfromapproximately2,600
lawyersandprofessionalsinmorethan75locations
spanning50pluscountriesacrossAfrica,AsiaPacific,
Canada,CentralAsia,Europe,theMiddleEast,
RussiaandtheCIS,theUK,andtheU.S.whoare
committedtochallengethestatusquoandoffer
creative,dynamicbusinessandlegalsolutions.
JuanCarlosIturreguiisaSeniorAdvisoratDentons,
basedinWashington,D.C.Heisanaccomplished
attorney,entrepreneur,andpublicpolicy
professionalwithtwodecadesofWashingtonand
internationalexperience.Hehaspracticalexperience
andyearsofworkingwithdiverseclients,colleagues,
andinterestsinbothpublicandprivatesectors.Juan
Carloshasakeenunderstandingoftheinteractions
andinterconnectionsamonggovernments,
multilateralentities,stakeholders,andspecial
interestsintheformulationandexecutionofpublic
policyandprojects,withparticularfocusonthe
13
globaltrade,commerce,energy,renewables,and
infrastructuresectors.Hetravelsextensively
throughoutLatinAmericaandtheCaribbeanandhas
beenacommittedadvocateforcloserintegration
andnorthsouthcommercialtiesformanyyears.He
obtainedhisBAinPoliticalSciencefromthe
UniversityofMassachusettsinAmherst,andhisJD
fromtheCatholicUniversityofAmericain
Washington.JuanCarlosspeaksSpanishandEnglish.
SydneyMcNiffJohnsonisaPrincipalatDentons,
basedinWashington,D.C.Sydneyhasoverthirty
yearsofenergypolicyexperience,startingonCapitol
HillwithCongressmanPeteMcCloskey(RCA)in
1978asEnergyandEnvironmentalLegislative
Assistant.SydneyworksintheDentonsEnergy
Practiceonprojectmanagementforalternative
energyandtraditionalenergyclients,aswellas
strategiccommunicationsstrategiestoincrease
clientvisibilityanddirectpublicopinionwithin
governmentandcommercialsectors.Shealso
advisesclientsoncurrentenergypolicyissues.
SydneyconsultswithCEOsandseniormanagement
teamstomakelongtermbusinessdecisionstohelp
bringproductstoalargermarketplace.Sheisskilled
inevaluatingthegovernmentrelationsstrategyand
publicrelationseffortsofacompanytoultimately
increaseshareholdervalue.Sydneyservesonthe
LeadershipCouncilofACORE,theBoardofDirectors
oftheWomen'sCouncilonEnergyandEnvironment
(WCEE),andisamemberoftheChairman'sCouncil
ofConservationInternational.Sydneyobtainedher
BAinPoliticalEconomicsfromtheColoradoCollege
andspeaksEnglishandFrench.

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REGIONALBRIEFING:RENEWABLEENERGYINLATINAMERICAANDTHECARIBBEAN

REGIONAL BRIEFING: RENEWABLE ENERGY

AMERICAN COUNCIL ON RENEWABLE ENERGY (ACORE)

THE RENEWABLE ENERGY SECTORS NEW

GAME-CHANGING ENERGY STRATEGIES

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