Energy and Renewable Energy in Latin America Working Paper 02

Transcription

Working Paper
02|2010
Sabrina Schlosser, Leonardo Peroni
Energy and Renewable Energy
in Latin America
Relevance, Markets and Policies with a Focus on Argentina
www.ibwe.at
Informationsbüro Wirtschaft und Entwicklung,
eine Initiative des BMWFJ und der
ICEP Wirtschaft und Entwicklung GmbH
Sabrina Schlosser studierte Social Development an der University of Sussex, UK und
internationales Tourismusmanagement an der University of Brighton, UK. Sie absolvierte einen
Lehrgang der Welttourismusorganisation der Vereinten Nationen UNTWO für Tourismus und
Entwicklungszusammenarbeit. Ihr Forschungsschwerpunkt liegt in der Integration armer Menschen in
Entwicklungsländern in Wirtschaftskreisläufe, ihre Feldstudien konzentrierten sich auf Brasilien, Indien
und Westafrika.
Leonardo Peroni studierte Environment, Development and Policy an der University of Sussex, UK und
Politikwissenschaft an der L.U.I.S.S. Guido Carli Universität, Italien. Er arbeitete für den Internationalen
Fonds für landwirtschaftliche Entwicklung IFAD und den italienischen Energiekonzern Enel S.p.A. Derzeit
ist er als Umweltanalyst für RelevanSi, ein argentinisches Umweltkommunikationsunternehmen, tätig.
Impressum
Informationsbüro Wirtschaft und Entwicklung | Working Paper 02|2010
Energy and Renewable Energy in Latin America:
Relevance, Markets and Policies with a ;ocus on Argentina
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Working Paper
02|2010
Energy and Renewable Energy
in Latin America
Relevance, Markets and Policies with a Focus on Argentina
www.ibwe.at
1
2
Energy and Renewable Energy in Latin America
Inhalt
Abstract
1. Introduction
4
2. Presentation of Latin America
5
2.1. Population
2.2. Economics
3. The Role of Energy for Development
11
3.1. Household Level
3.2. Business Level
3.3. National Level
4. Energy in Latin America
16
4.1. Consumption
4.2. Production
5. Renewable Energy in Latin America
19
5.1. Reasons for Renewable Energy
5.2. Current Renewable Energy Situation
5.3. Renewable Energy Sources
5.4. Obstacles to Renewable Energy
6. Policies for Energy and Renewable Energy
24
6.1. Renewable Energy Policy
6.2. Latin America: Privatization and Nationalization
7. Case Study: Argentina
27
7.1. The Energy Situation in Argentina
7.2. The Regulative Environment
7.3. Renewable Energy in Argentina
7.4. Barriers to Renewable Energy Implementation
7.5. Clean Development Mechanism – A Chance for Renewable Energy
7.6. Community Development Carbon Fund in Argentina
7.7. Project 0140: Olavarría Landfill Gas Recovery
7.8. Conclusion
Reference List
37
List of Abbreviations
40
Abstract
While most developed countries have access to reliable and affordable energy supply, many developing countries,
about 1.6 billion people, don’t have access to reliable and affordable energy supply and experience a situation, also
referred to as energy poverty, although energy is vital for development on a personal but also on a national level.
On the one hand, the lack of energy inhibits personal development, as people are forced to spend hours looking
for fuelwood instead of pursuing income generating activities; are forced to spend a relative fortune on other
energy supply such as batteries or kerosene and are forced to spend their day breathing in fumes dangerous to
their health. On the other hand, the lack of energy inhibits national development, as companies can’t rely on the
energy supply – if they have access to one – and must invest in generators; as they face power cuts reducing their
productivity and as they suffer in their competitiveness compared to companies, which can concentrate on their
core business as energy supply is fully granted.
For some countries, renewable energy provides one way out of energy poverty, for others it might soon be a necessity as fossil fuels are limited and countries can experience certain strings of import dependency. Often developing countries have enormous renewable energy potential and with the right policies and investment, this will be
their way out of energy poverty.
Während in den meisten Industrieländern eine gesicherte und leistbare Energieversorgung eine Selbstverständlichkeit darstellt, leiden viele Menschen in Entwicklungsländern, rund 1,6 Milliarden weltweit, unter so genannter Energiearmut: Sie haben keinen verlässlichen und leistbaren Zugang zu Energie. Dabei ist Energie eine
wesentliche Voraussetzung für Entwicklung – auf persönlicher wie auf volkswirtschaftlicher Ebene.
Für die betroffenen Menschen ist Energiearmut ein Zeit- und Kostenfaktor und schädigt die Gesundheit: In Ländern ohne geregelte Energieversorgung ist die Bevölkerung häufig gezwungen, viele Stunden für die Suche nach
Brennholz aufzuwenden, anstatt einer gewinnbringenden Beschäftigung nachzugehen. Vielfach müssen sie ihren
Energiebedarf teuer mit Batterien oder Petroleum decken. Hinzu kommen gesundheitliche Schäden, die zum
Beispiel durch das Einatmen von Abgasen entstehen. Gleichzeitig behindert das Fehlen verlässlicher Energiequellen die volkswirtschaftliche Entwicklung. In Ländern ohne gesicherten Energiezugang müssen Unternehmen
etwa in Generatoren investieren, um für Stromausfälle gerüstet zu sein. Dadurch sind Wettbewerbsfähigkeit und
Produktivität eingeschränkt.
Während der Fokus auf erneuerbare Energien für manche Länder einen Lösungsansatz unter vielen darstellt,
um der Energiearmut zu begegnen, wird er für andere Länder – aufgrund begrenzter fossiler Ressourcen und
steigender Importabhängigkeit – bald unumgänglich sein. In vielen Fällen verfügen Entwicklungsländer über
enormes Potential an erneuerbaren Energiequellen: Um die Energiearmut zu überwinden, bedarf es aber richtiger politischer Rahmenbedingungen und entsprechender Investitionen.
3
4
1. Introduction
This paper discusses the role of energy for the development of poor countries. It looks at the importance
of supporting developing countries to increase their
access to energy and discusses the role renewable
energy will play. The regional focus will be on Latin
America where 90 percent of the population has
managed to gain access to electricity – see graph 1
for a global comparison on the electrification rate in
developing countries. According to the International
Energy Agency (IEA 2009) the average electrification
rate worldwide was 78.3 percent and for developing
countries 72 percent in 2008. The average electrification rate for OECD and transition economies is well
above the average with 99.8 percent, whereas the majority with no access to electricity lives in South Asia
(51.8 percent electrification rate) and Sub-Saharan
Africa (29.9 percent electrification rate) – this strongly
correlates with the number of people living below
2 USD per day, the international accepted poverty
line but is not the only determining factor. China,
for instance, has managed to supply 98 percent of its
population with electricity through its rapid electrification program, although 56 percent are still poor.
In Latin America, the period between the 1960s and
the 1980s was characterized by strong economic development and therefore growing demand and service
supply in the energy sector. Hence, most countries in
Latin America developed an interconnected national
grid. State-owned enterprises held a monopoly position in the electric power sector until the 1980s,
when a severe economic crisis brought this model of
organisation to collapse and many countries sought to
reduce the role and intervention of the state.
Today several Latin American countries like Venezuela and Ecuador still face black outs - if not even an
energy crisis. As the demand grows, and fossil fuels
are limited resources, it is necessary for all countries
to restructure and optimise their energy mix. Industrialised countries have an obligation due to the Kyoto
Protocol to reduce their greenhouse gas (GHG) emissions, developing countries have none due to their low
emission per capita. Nevertheless countries in Latin
America make an effort – and should continue to do so
– to restructure their energy mix and to concentrate
on the development of renewable energy (RE) sources.
Renewable energy is a term used to describe natural
sources, such as sun, wind, water, tides, and geothermal heat, which are used to generate energy and are
renewable in a sense, that they are naturally replenished and not limited like fossil fuels.
The second chapter provides an overview on Latin
America in order to set the scene and understand the
energy situation Latin American find itself in. Compared to other developing regions, Latin America has
reached a certain level of development, which allows to
consider the use of RE. Following, the energy situation
in Latin America will be analysed and discussed in
detail, before introducing Argentina in a case study.
Graph 1: Comparison on the access to electricity in developing countries (Source: BMZ 2008)
Middle East
25
2
5 | 16
16 | 78
7
78.1%
8.1%
8.1
Northern Africa
6 | 1 | 95.5%
5%
Latin America
38 | 7 | 90.0%
China and East Asia
182
1
82 | 41
82
4 | 88.5%
5
Sub-Saharan Africa
India and South Asia
438 | 109
09
9 | 25.9%
25
5.9%
5.
9%
%
580 | 126 | 51.8%
1|2|3
1. Rural population without
access to electricity (million)
2. Urban population without
access to electricity (million)
3. Electrifcation rate (percent)
2. Presentation of Latin America
The region Latin America involves a variety of
countries, which have one thing in common: their
Romance language – Spanish, Portuguese or French.
In other aspects the region is as diverse as one can
imagine. On the one hand, Latin America offers a natural variety ranging from the never-ending Amazon
via the heights of the Andes to sandy-white beaches.
On the other hand, the cultural diversity originating
from a range of different indigenous groups, like the
Mayas, Aztecs and Incas, is breathtaking.
Definitions on Latin America don’t seem to be able
to agree on one common factor – while some only
include Spanish and Portuguese speaking countries,
other also include the French speaking. Some studies will include Mexico and exclude the Caribbean;
others might exclude the French speaking countries.
Similar to Europe, it is rather difficult to determine
geographic borders, as cultural borders might look
quite different. This complexity of defining of Latin
America makes it difficult to compare different case
studies. The UN uses the term ‘Latin America and the
Caribbean’ to refer to the regions of Meso-America,
South America and the Caribbean.
¯
Meso-America includes the countries: Costa Rica,
Belize, El Salvador, Guatemala, Honduras, Mexico,
Nicaragua, and Panama.
¯
and the Caribbean (LAC) countries by discussing the
most significant facts for the purpose of this paper.
Hence, some countries, like small island states, might
not be referred to in much more detail due to their
small geographical and economic size and the lack of
researched data.
2.1. Population
The region Latin America covers approximately
21,069,501 km2 and had 541.3 million inhabitants in
2008, which is 43.6 million people more than currently living within the European Union. Furthermore, by 2050 the worldwide medium age is expected
to be 37.8 years and Latin America is expected to
have exactly the same median age by then. 22.3
percent of the population will be 60 years or older in
Latin America by 2050, slightly more than the global
percentage of 22.1 percent. On a national level, Latin
American countries differ in many aspects from each
other. Some countries like Brazil and Argentina cover
almost the majority of the South American continent,
while others, like Haiti and the Dominican Republic,
are fairly small and even share an island together.
Again, about half of the Latin American population
lives in Brazil and Mexico, while others are small in
comparison.
South America includes Argentina, Bolivia, Brazil,
Chile, Colombia, Ecuador, Falkland Island, French
Population characteristics
Guyana (F), Guyana, Paraguay, Peru, Suriname,
Uruguay, and Venezuela.
¯
And finally the Caribbean comprehends Anguilla
(UK), Antigua and Barbuda, Aruba (The Netherlands), Bahamas, Barbados, the British Virgin
Islands (UK), the Cayman Islands (UK), Cuba, Dominica, the Dominican Republic, Grenada, Guadeloupe
(F), Haiti, Jamaica, Martinique (F), Montserrat (UK),
Netherlands Antilles (The Netherlands), Puerto
Rico (US), Saint Kitts and Nevis, Saint Lucia, Saint
Vincent and the Grenadines, Trinidad and Tobago,
Turks and Caicos (UK), and the Virgin Islands (US).
This paper will give an overview on Latin American
The Dominican Republic is estimated to have the
highest population density with 252 people per km2
in 2050, while Bolivia will have a density rate of only
15 people per km2. In comparison, Austria’s population density is expected to fall from 98 in 1999 to 85
people per km2 in 2050, but will still rank above the
worldwide average of 66 people per km2. Another
example to illustrate Latin America’s diversity is
Brazil’s estimated population density rate of 29 people
per km2 by 2050, while having the largest share of
population and Mexico’s estimated density rate of 75
people per km2 by 2050, while being the second most
populated country in Latin America.
5
6
Urbanisation Rate
of 98 percent in 2005, compared to an electrification
rate of 65.6 percent in rural areas.
Five Latin American cities, Mexico City, Bogotá, Lima,
Rio de Janeiro and Santiago de Chile rank amongst
the 30 largest cities worldwide – a strong sign for
Latin America’s high urbanisation rate. While in 1950
only 41 percent lived in urban areas, the proportion
has now reached 75.3 percent. Argentina, Uruguay
and Chile started their urbanisation process during
the 1930s, when they experienced European migration flows – today they have the highest urbanisation
levels in Latin America. For Brazil, Mexico, Colombia,
Peru, and Venezuela the urbanisation process started
after the 1930s, but they urbanised rapidly and now
show advanced levels of urbanisation with over 70
percent. Urbanisation is an important contributing
factor for energy demand and supply. On the one side,
urbanisation leads to a decline of traditional biomass
use, which is the main energy supply for poor rural
households in developing countries, but on the other
hand, leads to an increase of energy consumption
through heating, air-conditioning, refrigeration and
so forth. However, the process of urbanisation makes
it also more feasible to supply a large amount of people with energy. In Latin America, 338 of 449 million
people lived in urban areas with an electrification rate
Graph 2: Gross domestic product PPP in 2008 – country
level (own presentation, Source: World Bank 2009)
Mexico
14,270
Argentina
14,020
Chile
13,270
Venezuela
12,830
Uruguay
12,540
Brazil
10,070
Colombia
8,510
Peru
7,980
Ecuador
7,760
Paraguay
4,820
Bolivia
4,140
LAC
10,309
World
10,357
Europe
12,219
Euro Area
33,228
data in
On a global scale the rate of urbanisation and the rate
of electrification traditionally kept the same pace:
maintaining an urban population without electricity at around 250 million. In other words, the urban
electrification rate increased from 36 percent in 1970
to 91 percent in 2000 (IEA 2002).
2.2. Economics
Gross Domestic Product
Purchasing Power Parity (GDP PPP)
In economic terms, LAC showed a GDP PPP (term used
to compare GDP on an international level) of 10,309
international dollars (ID) in 2008. Thus, the region
of LAC almost levelled with the global average (48 ID
difference), and fell 1,910 ID short of Europe. Graph 2
provides a detailed demonstration of the different GDP
PPP for selected Latin American countries in comparison to the Euro Area, a term used to describe the
countries that have adopted ‘Euros’ as their currency,
and the world.
The Latin American countries show significant differences in their GDP PPP: Mexico had a GDP PPP of over
10,000 USD in 2008; Bolivia had barely half of this
with less than 5,000 USD. The difference is significant within Latin America: on an international scale
Mexico ranks 75th in GDP PPP comparison. The first
25 countries have a GDP PPP at least two, if not four
times bigger than Mexico.
Human Development Index and Gini coefficient
international
dollars
A commonly used indicator to determine a country’s
level of development is the Human Development
Index (HDI), which considers a country’s GDP, life
expectancy and literacy rate. The lower the index is,
the better for the people in that country. Again, differences amongst the countries in Latin America are
predominant and range from a HDI of 44 in Chile to
a HDI of 149 in Haiti. According to the UN (2009) all
Latin American countries are high or at least medium
developed; no Latin American country is very high
or low developed. The majority ranks within the high
human development group (HDI 39 – 83), see table 1.
Norway, Australia and Iceland are the top three countries worldwide with the highest HDI, whereas Niger,
Afghanistan and Sierra Leone are the countries with
the lowest HDI. Austria ranks on place 14.
Table 1 also provides data on the Gini coefficient, commonly used to measure the ratio between inequality
and economy, as the measurement of the GDP only
shows one side of development. The Gini coefficient lies
between 0 and 100 – a value of 0 represents absolute
equality and 100 absolute inequality. Interestingly, the
picture now illustrates that Mexico had the highest
GDP in 2009 (see graph 2) but also a very unequal
distribution of its wealth with a Gini coefficient of 48.1.
Bolivia seems to be a very dramatic case, as it not only
had the lowest GDP but also the third lowest Gini coefficient with 58.2 after Haiti (59.5) and Colombia (58.5).
Venezuela seems to share its wealth the most equal
amongst the selected Latin American countries.
Least Developed Countries (LDC)
According to the UN, Haiti is the only Latin American
country which is a least developed country (LDC) based
on criteria regarding the gross national income per cap-
ita, the Human Assets Index (HAI) based on nutrition,
health, education and adult literacy and the Economic
Vulnerability Index (EVI) based on the instability of agricultural production, the instability of exports of goods
and services and others. All other regions in Latin
America are listed as developing countries, whereas
the UN has no established convention for the designation of ‘developed or developing’. In common practice
Northern America, Europe, Japan, Australia, and New
Zealand are referred to as the developed regions.
Poverty Rate
UN Economic Comission for Latin America and the
Caribbean (ECLAC 2008) estimated a poverty rate for
Latin America at 33.2 percent, or 181.6 million people
in 2008, which is 0.9 percent less than in 2007 (34.1
percent). There has been a trend since 2004 to reduce
poverty and indigence across the region. The poverty
rate was 40.5 percent in 1980, increased by roughly
eight percent within the next ten years and started to
decrease after that. 2002 showed another small upwards jump to 44 percent, but dropped by 4.2 percent
until 2005 and has been falling ever since.
The rate of indigence followed a similar curve,
whereas the rate was 18.6 percent in 1980 and has
then decreased to 12.6 in 2007. Countries with the
lowest poverty rates were Chile, Uruguay and Costa
Rica (below 22 percent) and indigence rates between
3 and 7 percent. Those with the highest poverty and
Table 1: Human Development Index, selected Latin American countries (own presentation, Source: UN 2009)
Country
HDI
GINI
Country
Norway
1
25.8
Australia
2
35.2
Iceland
Chile
HDI
GINI
Country
HDI
GINI
Venezuela
58
43.4
Honduras
112
55.3
Panama
60
54.9
Bolivia
113
58.2
3
…*
Brazil
75
55.0
Guatemala
122
53.7
44
52.0
Colombia
77
58.5
Nicaragua
124
52.3
Argentina
49
50.0
Peru
78
49.6
Haiti
149
59.5
Uruguay
50
46.2
Ecuador
80
54.4
Sierra Leone
180
42.5
Cuba
51
…*
90
50.0
Afghanistan
181
…*
Mexico
53
48.1
Dominican Republic
Paraguay
101
53.2
Niger
182
43.9
Costa Rica
54
47.2
El Salvador
106
49.7
* no data available
7
indigence rates, above 50 percent and 30 percent
respectively, were Honduras, Guatemala, Nicaragua,
Paraguay and Bolivia in 2007.
Unemployment Rate
According to the UN International Labour Organisation (ILO), the average annual employment rate for
Latin America and the European Union is not too far
apart, as one might have expected. The unemployment rate of Latin America was 7 percent in 2008
and 8.2 percent in 2009. The European Union experienced a jump from 6 percent in 2008 to 8.4 percent in
2009. With 4.9 percent Honduras had the lowest rate
in Latin America in 2009 and the European Union
member countries with the lowest rates were the
Netherlands (3.0 – 4.0 percent) and Austria (4.2 – 5.0
percent). In Latin America, the Dominican Republic
(14.9 percent) and Colombia (13.0 percent) had the
highest unemployment rates. In the European Union,
Latvia and Spain had the highest unemployment rates
between 17.2 to 22.9 percent and 18.1 to 18.9 percent
in the months of 2009.
Foreign Direct Investment (FDI)
A survey by the UN Conference on Trade and Development (UNCTAD) discusses the foreign direct investment (FDI) prospect for Latin America. The increasing
demand for natural resources like oil and gas, which
Latin America has a fair share of, should trigger a
new wave of investment flows. Brazil and Mexico
made it into the top ten most attractive countries for
investment between 2007 and 2009. This survey was
published just before the world experienced a global
financial crisis, starting with a real estate market
crisis in 2007 in the United States but impacting on
many countries after that.
this. The largest recipients of FDI are traditionally
developed countries like the United States, France
and the United Kingdom, their share, however, fell
from 69 percent (1,341,800 million USD) in 2007 to
60 percent (1,001,800 million USD) of world FDI flows
in 2008. FDI flows to developing countries remained
fairly stable or even increased slightly, mainly due to
the high remaining commodity prices during most
of 2008 and the attracted investment in the natural resources sector, mainly hydrocarbons and metal mining. Braving the global financial and economic crisis,
graph 3 shows that FDI in LAC reached a record high
with 128,301 billion USD in 2008 that is an increase
by 13 percent from 2007, even as worldwide FDI flows
decreased by 15 percent within the same timeframe.
The increase of FDI was unevenly distributed, whereas South America’s rose 24 percent to 89,862 USD
billion, the FDI received in Mexico and the Caribbean
Basin fell 5 percent to 38,438 USD billion, mainly due
the sharp decrease of FDI flows to Mexico. The economic recession in the United States led to an export
slowdown, set up in Mexico and the Caribbean to supply the United States market, and impacted negatively
on FDI. Mexico experienced a decrease of FDI by 20
percent, with regards to 2007. The countries receiving the majority (80 percent) of FDI flows were Brazil,
Chile and Colombia, with Brazil becoming the largest
Graph 3: Net FDI in billion USD in Latin America and
the Caribbean (Source: ECLAC 2009)
140
(Billions of dollars)
120
100
80
60
40
20
South America
Mexico and the countries of the Caribbean Basin
Total
2007
2008
2006
2004
2005
2002
2003
2001
2000
1998
1999
1997
1996
1994
1995
LAC experienced a steady growth of its FDI flows
within the past two decades. While the FDI accounted
to less than 20 billion USD in the 1990s, it has increased to an amount almost seven times higher than
1992
0
1993
8
recipient in Latin America. The largest amounts of FDI
came from the United States, Spain and the Netherlands between 1999 and 2008.
¯
between Canada, the United States and Mexico.
¯
Latin America also engages in outward investments, which reached 34,561 billion USD in 2008, a
42 percent increase with respect to 2007. Outward
investment goes mainly to markets within the region
or other developing countries, to sectors with a lowincome elasticity (e.g. bread-making), or are longterm maturation projects (e.g. natural resources) by
trans-latin cooperations. The largest investor is Brazil,
which contributes with about 60 percent to the total
outward flows, followed by Chile and Venezuela.
NAFTA (North American Free Trade Agreement):
CAN (Andean Community of Nations): between
Bolivia, Colombia, Ecuador, and Peru.
¯
Mexico is also one of the 30 OECD members (Organisation for Economic Cooperation and Development), while Chile is one of the accession candidate
countries and Brazil an enhanced engagement
country. Other OECD member countries are Australia, New Zealand, 19 European Union member
countries, Island, Norway, Switzerland, Turkey, the
United States, Canada, Korea, and Japan.
¯
Trade Agreements
CAFTA-DR (Central America-Dominican RepublicUnited States Free Trade Agreement): the United
States, Costa Rica, the Dominican Republic, El
Latin American countries are involved in the following trade agreements:
Salvador, Guatemala, Honduras, and Nicaragua.
¯
¯
CARICOM (Caribbean Community): Antigua and
MERCOSUR (Mercado Común del Sur): Argentina,
Barbuda, Bahamas, Barbados, Belize, Dominica,
Brazil, Paraguay, and Uruguay are the founding
Grenada, Guyana, Haiti, Jamaica Montserrat, Saint
members and Venezuela still needs to be ratified by
Kitts and Nevis, Saint Lucia, Saint Vincent and the
the Paraguayan parliament.
Grenadines, Suriname, and Trinidad and Tobago.
Graph 4: Regional trade agreements and their share of intra trade as a % of total merchandise exports in 2007
(Source: WTO 2008)
32%
EU 27
51%
68%
49% NAFTA
8%
Andean Community
25%
92%
75%
ASEAN
14%
86%
Intra-trade
Extra-trade
MERCOSUR
9
10
¯
In 2008 CAN and MERCOSUR leaders signed an
agreement to form UNASUR (Union of South American Nations), which is meant to encompass trade,
security, and political issues, similar to the European Union. The agreement must still be ratified by
each signing nation.
Graph 4 provides an idea, how some of these trade
agreements work regarding their share of intra trade
as a percentage of total merchandise exports. Europe’s
very integrated market has an internal trade level (68
percent) that is significantly higher than its external
trade level (32 percent), with two-thirds of its trade
transactions taking place within the European Union
region. Trade flows of MERCOSUR and the Andean
Community work the opposite way. MERCOSUR carried out 14 percent and the Andean 8 percent with
their trade agreement partners; also the Asian component ASEAN had more external trade than internal in
2007. MERCOSUR exports about another 14 percent
within Latin America and the Andean Community
around 23.4 percent, the remaining share goes to other
countries beyond trade agreements and Latin American borders. MERCOSUR has very strong trade links
with the European Union, the United States and China,
exporting mainly primary products, mineral resources
and low priced manufactures. In 2007 MERCOSUR
merchandise export valued 223,852 billion USD, leading by far before the Andean Community (76,222 billion USD) and NAFTA (18,534 billion USD), according
to the WTO (2008).
Graph 5 gives an idea of the role Brazil plays as an anchor economy for other Latin American countries. Brazil
is not only one of the biggest investors in Latin America;
it also exports its second largest share of merchandise
(38 billion USD) within Latin America, after exporting
merchandise to Europe for 43 billion USD. With its export value of 161 billion USD and an import at 127 billion
USD, Brazil had a positive trade balance of 34 billions
USD in 2007, but experienced a sharp drop in 2008 to
24.7 billion USD, however estimates prognose a further
upward trend for this emerging economy.
Graph 5: Brazil – Merchandise exports by region in 2007 (Source: WTO 2008)
CIS
4 bn USD
Europe
43 bn USD
North America
32 bn USD
Middle East
6 bn USD
Africa
9 bn USD
Brazil
S/C America
38 bn USD
merchandise exports
Asia
26 bn USD
3. The Role of Energy for Development
Within the last three decades, access to electricity and
modern fuels has been extended to over one billion
people worldwide. Nevertheless, almost two billion
people still face daily challenges of not having access
to electricity. Four out of five people without access to
electricity live in rural areas in developing countries
mainly in South Asia and Sub-Saharan Africa. Estimates show that, if present trends continue, about 200
million people will gain access to electricity, while
1.4 billion will remain without it by 2030, mainly in
Sub-Saharan Africa (650 million) and South Asia (680
million). See graph 6 for a detailed overview, where
people are likely to gain access to electricity.
In other words, working with electricity connection
rates of the past decades, it will take more than 40
years to electrify South Asia and almost twice as long
for Sub-Saharan Africa. The reliance on traditional
biomass, e.g. wood, agricultural residues and dung,
will even increase to 2.6 billion people worldwide,
which accounts for more than 80 percent of their
residential energy need – this is a characteristic of
extreme poverty and the lack of access to other fuel
types. Especially Guatemala, Honduras, Nicaragua,
and Haiti rely heavily on wood for cooking and heating. While table 2 gives an overview on the traditional
biomass reliance on a global scale, graph 7 shows the
correlation between poverty and biomass use. More
than half of the population in developing countries
relies on traditional biomass, whereas Sub-Saharan
Africa’s population is with 89 alarming percent
dependent compared to 0.5 percent in North Africa
and the Middle East. In regards to graph 7, some Latin
American countries, such as Guatemala, El Salvador
and Paraguay show a high percentage of poor and a
high share of biomass consumption. The smaller the
dependence of biomass, the smaller the percentage of
people living on less than 2 USD per day. This proves
Energy Reality Check
It is six o’clock in the morning, when my alarm clock rings loudly and repeatedly. After struggling out of my warm
bed, I switch on the light, as it is still slightly dark outside. ‘It was definitely too warm last night’ – and with that
thought I reach to turn down the radiator. About an hour later I had a shower and blow-dried my hair, had some
strong coffee and some fresh toast – I am almost ready to take the underground to work.
For any person living in a developed country – this could be just like any other day in life. For 1.6 billion people, who
lack access to electricity, and 2.4 billion, who rely on traditional biomass fuels for cooking and heating, the reality
looks very different. The daily tasks of heating, cooking, cleaning and so forth become time consuming and strenuous. In other words, many people mostly in developing countries are in great need for reliable and affordable energy
to sustain a minimum standard of living:
Feeling the night’s chill and the last few rain drops leaking through the tin roof, her younger sister pulls away the
only blanket the family shares amongst the five of them. It must be early as the morning sun only just started to
rise, when Anne, being the oldest, gets up to get on with her chores. She picks up the nearly empty water container,
which she only filled a day ago after a three hours walk, and checks on the stove outside to make some tea. Charcoal
costs about seven dollars a bag and lasts for about a month – today there is none left, which means Anne will have
to go and collect firewood before being able to cook and boil water. If she is lucky, she might be back on time before
her dad leaves for work, if not, he will leave hungry. If there was only a little milk left from last night to feed the little
ones for now, but there is no way to keep it fresh – with that thought Anne starts her search for fuelwood while I settle down behind my desk at work and start reading through my emails.
11
12
to be case with Costa Rica. The percentage of Mexico
and Brazil regarding their biomass consumption
varies only slightly, but Mexico shows a much higher
percentage of poor population, indicating that Brazil
is managing to supply its population better with other
energy sources than Mexico.
Biomass, any organic material, such as wood by-products and agricultural waste, plays an important role
in the energy mix of developing countries and will
continue to do so. Thus, the development of more efficient biomass technology is vital to alleviate poverty
and the market is significant, considering how many
millions of people depend on traditional biomass
today. Those figures are worrisome and should be
a wake-up call, considering how much developed
countries depend on electricity for their daily living
and how much developing countries are still lacking
behind. The consumption of energy through electricity is probably the most common use; however, other
forms of energy are just as important for heating,
cooling and other purposes. Therefore it is important
to extend the access to sustainable energy sources
in developing countries as quick as possible and as
sustainable as possible.
Developed countries experienced an initial push in
their social and economic development during the
industrial revolution (18th – 19th century), a period
of time, which made growth and process possible,
mainly through the increased use of coal. Graph 8
illustrates how the consumption of different energy
sources increased between 1960 and 2010 worldwide.
However, it doesn’t show the increase of coal consumption during the industrial revolution. Another
big leap is evident after World War II, when the per
capita consumption as well as the world population
increased notably. The consumption of oil, gas and
coal increased enormously. Only from 1940 onwards,
gas started to appear as an energy supply option,
while the consumption of oil experienced a rapid
increase. Just before the 1960s, the consumption of
hydro and nuclear energy started to increase visibly,
but their share of worldwide energy consumption has
not changed massively ever since.
Clearly, sufficient energy supply was – and still is – a
key ingredient for social and economic development.
In order to reduce poverty, access to energy and efficiency in its use has to increase. Energy impacts on
many different aspects of life such as income, health,
education, gender and environment, therefore it will
Graph 6: Annual average number of people gaining
Table 2: Number of people relying on traditional bio-
access to electricity (Source: IEA 2002)
mass for cooking and heating in developing countries,
140
2000 (Source: IEA 2002)
million
120
million people % of total population
100
China
706
56
Indonesia
155
74
Rest of East Asia
137
37
60
India
585
58
40
Rest of South Asia
128
41
96
23
8
0.05
575
89
2,390
52
80
Latin America
20
North Africa/Middle
East
0
1970-80 1980-90 1990-2000 2000-10 2010-20 2020-30
Sub-Saharan Africa
Africa
Latin America
Developing countries
South Asia
East Asia/China
Middle East
Graph 7: The link between poverty and share of traditional biomass in residential energy consumption (Source:
IEA and World Bank 2002)
100
Zambia
Mozambique
Zimbabwe
Nigeria
Nepal
90
Sri Lanka
Guatemala
India
Bangladesh
80
Tanzania
Kenya
Senegal
Paraguay
El Salvador
Pakistan
Indonesia
Share of biomass in residential consumption (%)
70
Panama
Peru
China
South Africa
60
Chile
Thailand
Ecuador
Bolivia
Tunisia
Colombia
50
Turkey
40
Mexico
Uruguay
Brazil
30
Romania
Morocco
20
Costa Rica
Poland
10
Russia
Algeria
0
100
90
80
70
60
50
40
30
20
10
0
percentage of population below 2 USD a day
Graph 8: Development of worldwide energy con-
Graph 9: Marketed energy use by region 1980 – 2030
sumption (Source: Andersen 2008)
(Source: EIA 2009)
500
quadrillion Btu
400
4,000
mtoe/year
3,500
300
Oil
3,000
2,500
2,000
200
Coal
Gas
1,500
100
1,000
Hydro
500
0
Nuclear
1980
1990
2000
2006
2010
2020
2030
0
1960
1970
1980
1990
2000
2010
Non-OECD Asia
Middle East
Africa
Central/South America
Non-OECD Europe and Eurasia
13
14
also impact on a country’s poverty reduction. Graph
9 provides a picture of how the energy use trend will
develop in the different regions until 2030. Clearly
visible is the strong increase for the non-OECD Asian
countries and to some extent also the Middle East,
while Central and South America, the non-OECD European and Eurasian countries also increased their use
slightly between 1980 and 2030. The global growth of
energy use is significant – it rose from 283 quadrillion British thermal units (Btu) in 1980 to two and
a half times that in 2030, with 722 quadrillion Btu,
according the US Energy Information Administration
(EIA 2006).
are an expensive luxury in a poor person’s life – not
only because their income is smaller compared to
wealthy a household, but also because those energy
sources available are less efficient. On an average,
people without grid access spend between 5 – 15
USD per kilowatt/hour (kW/h) on energy compared
to the average grid consumer, who spends 0,15 UDS
per kW/h.
¯
The open fire cooking method is extremely inefficient. On a daily basis, nearly 3 million tons of wood
are being burnt for cooking purposes worldwide.
Moreover cooking on open fires produces 5 percent
of the worldwide CH4 emissions and 14 percent
of the worldwide CO2 emissions – hence it also
3.1. Household Level
impacts on climate change. Moreover, the biomass
used for open fires impacts on agricultural produc-
The Deutsche Gesellschaft für technische Zusammenarbeit (GTZ 2009) uses the example of cooking to
illustrate, how the lack of electricity, one use of reliant
energy supply, impacts on people’s daily routine and
life: nearly every second person worldwide prepares
meals and drinking water on an open fire. In order
to do so, a pot is placed on stones around an open
fire, fed by wood. Wood, which is mostly collected by
women, sometimes in long and exhausting marches.
This simple example allows coming to some conclusion on the importance of electricity for individual
households:
tivity, as the agricultural residue and dung are being
burnt and cannot be used as fertilizers, which would
be worth millions of USD.
¯
Open fires are not only extremely inefficient, but
also dangerous, as they cause a series of health
problems due to the strong smoke. Related illnesses range from chronic coughs and burning
eyes to asthma and even cancer. The World Health
Organisation (WHO) estimated in 2009 that around
1.5 million deaths per year were caused by indoor
air pollution, a figure bigger than the malaria death
toll.
¯
The lack of electricity forces women and children
to collect firewood on a daily basis – time which
could be used more productively. Women could
3.2. Business Level
undertake activities to increase their income and
children could attend school. In extreme cases,
Indian women and children spend up to seven hours
to gather fuelwood. A survey in Nicaragua shows a
strong relationship between education and household electricity. According to this, 72 percent of children living in a household with electricity attended
school compared to 50 percent of those living in
households without electricity. In other words, traditional fuels, such as wood, come at very expensive
cost in labour. Additionally, other available sources
of energy such as candles, batteries or kerosene
This brief insight of the challenges for individual
households to deal with ‘energy poverty’, a term used
to describe the lack of access to modern energy services and the related impact on life quality, provides
the first understanding of how important energy is for
personal development. Energy poverty deeply affects
people on an individual level, but also businesses
face constraints without a reliable access to energy.
Due to unreliable energy supply businesses are often
not created or placed to a different location, which
has reliable energy supply – hence opportunities for
employment and generation of GDP are being wasted.
As businesses need stable energy supply to work efficiently, power cuts lead to a loss in their productivity.
Moreover, if some (urban) regions are better supplied
with energy than others (rural), businesses in regions
without reliable supply suffer in their competiveness
on a national level, even more so on an international
level, which will not help a country’s economy to
prosper. As an example, affordable and reliant energy
sources will increase the efficiency of agricultural
production, while the actual demand for labour will
decrease. As a consequence, the dependence on certain geographical locations decreases and people can
move into areas with better income prospects. This
increase in agricultural productivity leaves people
the option to make a living in other sectors, which
will eventually impact on a country’s GDP. The same
stands for manufacturing, shops, trading, transportation, and construction, that are also engines for
economic growth, which require energy to function
efficiently. This absence of reliable and affordable
energy hinders people to improve their life quality
through ‘increased productivity, mobility and higher
value-added economic activity that energy can enable’
(US AID 2009).
3.3. National Level
Developed countries are one step further, while their
GDP growth increased with the need for energy, they
have now reached a stage, where it takes one-third less
energy to produce a unit of GDP. This is mainly a result
of different energy savings that have taken place in the
various branches of manufacturing, in different end-uses
in households and commercial buildings, and for differ-
ent modes of passenger and freight transportation. For
developing countries, this shows again that reliant energy supply is vital for a GDP growth, but it also means
that energy efficiency can help a developing country to
increase its GDP without necessarily increasing the need
for energy.
Primarily, stable energy supply is vital for the economy
of a country. A healthy economy consists of a combination of different sectors – a country with unstable energy
supply however, is not very likely to foster business
growth in sectors that are known to be energy consuming, such as chemicals (29 percent of worldwide
industrial energy consumption in 2005), iron and steel
(20 percent), non-metallic minerals (10 percent), pulp
and paper (6 percent), and nonferrous metals (3 percent).
In other words, an economy in a country with unreliable
energy supply limits its economic diversity, and hence its
productivity and international competitiveness.
Countries, just like individuals, can experience energy
poverty. Just like individuals are not able to participate
fully and fairly in the local market without reliant and
affordable energy supply, countries are not able to
participate in the global economy. It is a difficult task
to solve the problem of energy poverty, as a variety of
objectives have to be balanced. Energy poverty involves
different sectors, different social groups and even different energy agendas. While developing countries struggle
to sustain their current energy needs through traditional
sources, developed countries can afford the luxury to
think about sustainable and renewable energy sources.
Nevertheless, there seems to be a common understanding that the role of energy for development is vital and
significant in order to reduce poverty on an individual
and national level.
15
16
4. Energy in Latin America
This chapter will discuss, what the features of Latin
America’s energy situation are: What sources are
being used, which relied upon? Which energy sources
provided opportunities for development?
Graph 10 illustrates LAC’s primary energy sources in
2007, with a rough three-fourth of fossil fuels (natural
gas, oil and coal) and one-fourth of RE (hydro, geothermal, etc.) supply. A reliance on fossils is still predominant globally. As an illustrative example, the US
White House is said to have allowed offshore drilling
in March 2010, in an effort to decrease the dependency on foreign oil. Oil firms can explore oil reserves
off the US coast for the first time since the 1980s.
In global comparison, Latin America’s RE share is
quite impressive:
According to the European Commission and EIA,
the European Union has a current RE share of
roughly 10 percent and wants to increase its RE
share to 20 percent by 2020
¯ and the United States’ RE share accounted to only
11 percent in 2009.
¯
4.1. Consumption
In 2006 the worldwide energy consumption was 472.3
quadrillion Btu, which is an increased by roughly 5
percent (96.9 quadrillion Btu) compared to ten years
ago. Europe’s share of energy consumption amounted
to 86.4 quadrillion Btu, 3.5 times more than Latin
America’s with 24.2 quadrillion Btu in 2006. In 2007,
the total primary energy consumption in LAC was 5.3
billion barrels of oil equivalent (BOE). In 2008, global
primary energy consumption experienced its slowest
growth by 1.4 percent since 2001. Furthermore, also
non-OECD primary energy consumption exceeded
OECD’s for the first time, whereas the Asia-Pacific region accounted for 87 percent world’s energy consumption growth (BP 2009). IEA (2008) also projected a fall
for 2009 in global energy use as a consequence to the
financial and economic crisis, but on a long-term it is
expected to resume its upward trend.
Moreover, graph 11 shows that global energy consumption relies heavily on fossil fuels. Although
Latin America has a much stronger RE supply than
the United States or Europe, it also still depends with
a majority on oil and natural gas. Latin America’s
energy consumption is expected to increase with the
worldwide highest annual growth rate of 2.3 percent
– the global average growth rate is 2.0 percent – and
will reach 45.7 quadrillion Btu by 2030. To compare,
Europe is expected to have the lowest growth rate
with less than 1 percent and its energy consumption
by 2030 will be 94.5 quadrillion Btu – still more than
double of Latin America’s. A recent study by US AID
(2009) has identified that developed countries have
managed to implement certain energy saving mechanisms that increase energy efficiency and impact
positively on energy consumption.
Graph 10: Sources of primary energy in Latin Ameri-
Graph 11: Global energy consumption 2006 (Source:
can and the Caribbean in 2007 (Souce: ECLAC 2009)
ECLAC 2009)
Coal & Coke
Natural Gas
Hydroenergy & Electricity
Nuclear 3 %
Biomass
Nuclear
Geothermal
Biofuels
Fossil fuels
79 %
Oil & Derivatives
total 5,331,760 kboe
Biofuels 0.2 %
Electricity gen. 1 %
Water heating 1.3 %
Hydroenergy 3 %
Others
18 %
Biomass 13 %
4.2. Production
¯
In 2008, with 44.06 billion cubic meters generated
Argentina the largest amounts of natural gas in
Worldwide energy production has increased from
373.4 quadrillion Btu in 1996 to 469.4 quadrillion
Btu in 2006. While Europe’s production fell from 51.9
quadrillion Btu in 1996 to 47.7 quadrillion Btu in
2006 due to a drop in crude oil and coal production,
Latin America’s increased from 22.5 quadrillion Btu
in 1996 to 29 quadrillion Btu in 2006. In 2007 the total energy production amounted to 7,372,902,000 BOE.
What becomes obvious now, is the fact that Europe
consumes almost twice as much energy as it produces, while Latin America produces slightly more than it
consumes, opening the door to international trade.
Latin America and exports to Chile. Also Venezuela,
Bolivia and Brazil produced between 12.6 and 24
billion cubic meters of natural gas, whereas Brazil
still needed to import almost the same amount of
gas (11 billion cubic meters).
¯
Coal is largely produced and also exported by Colombia, which in 2006 had the second-largest coal
reserves (7,670 million short tons)2 in South America,
slightly behind Brazil. Colombia is the fifth biggest
world coal exporter after Australia, Indonesia, Russia, and South Africa and exported in 2007 around
70 million short tons to Europe, North and Latin
On a global scale, Latin America contributes with 9 percent of oil, 4.9 percent of gas, 1.4 percent of charcoal1,
0.8 percent of nuclear and 20.7 percent of hydroelectric
power to the worldwide energy production, according to
the IEA and World Energy Statistics (2007).
America mainly. Although Colombia’s coal production
increased from 15 to almost 80 million short tons
within the last two decades, its consumption still remains around 5 million short tons, according to EIA.
Latin America’s 0.8 percent nuclear energy contri-
¯
Several Latin American countries have an active
bution is restricted to the countries Brazil, Argenti-
oil production. However, only Mexico, Venezuela,
na and Mexico, whereas Brazil generates 3 percent,
Colombia, Ecuador, and Brazil have enough oil re-
Argentina one-tenth and Mexico 5 percent of their
sources to sustain their needs. Venezuela with 2,643
overall production with nuclear energy.
million barrels per day and Brazil with 2,422 million
barrels per day rank on place 10 and 13 amongst
2 A short ton is a unit of weight equal to 2,000 pounds or 907 kg.
the largest producers worldwide. In comparison:
the countries Saudi Arabia (10,780,000 billion barrels/day), Russia (9,810,000 bbl/day) and the United
Table 3: Countries with the greatest water resources
States (8,514,000 bbl/day) produce the highest
worldwide (in ECLAC 2009)
quantities of oil worldwide (2008 est. in CIA 2010).
As mentioned above Latin America’s energy supply
depends mainly on oil and the majority has to be
imported. Brazil balances its oil exports against its
imports, while Argentina, Colombia and Ecuador
export significantly more than they import. The LAC
region imports energy with 738,798,000 BOE, the
majority was in oil products in 2007.
1 A solid residue derived from carbonization, distillation and
torrefaction of woods and wood by-products, using continuous
or batch systems in different types of kilns: pit, brick and metal
(ECLAC and GTZ 2003)
km3 / year
m3 / year / habitants
Brazil
8.2
48.3
Russia
4.5
30.9
Canada
2.9
94.3
Indonesia
2.8
13.3
China
2.8
2.2
USA
2.0
7.4
Peru
1.9
74.5
India
1.9
1.8
Congo
1.3
25.1
Venezuela
1.2
51.0
Top ten
29.7
34.9
World
43.7
7.2
17
18
¯
The 20.7 percent of hydro energy contribution of
has the most installed capacity of hydropower
Latin America to the global energy production
generation. Hence, Brazil is with 345 billion kWh a
are significant. According to ECLAC (2009), Latin
year the leading producer of hydroelectric power,
America has three countries out of ten with the
followed by Paraguay (53 billion kWh), which exports
greatest water resources of the world: Brazil, Peru
the majority of its generated kWhs and Venezuela
and Venezuela (see table 3).
(81 billion kWh). In other words, Brazil ranges
amongst the worldwide five largest producers of hy-
The water resources per capita for Peru and Ven-
droelectric power (China, Canada, the United States
ezuela are the highest in Latin America, but Brazil
and Russia in 2006, EIA 2010).
5. Renewable Energy in Latin America
5.1. Reasons for Renewable Energy
¯
Today, the worldwide energy supply is dominated by
fossil fuels, so what are the reasons, why a country
should or has to focus on a RE? Is there a real necessity for RE implementation or is it something only
developed countries can afford? Is there a demand for
RE or will political incentives be the only driver for its
development?
¯
Attracted investment for domestic infrastructure
projects
Developed countries have the knowledge and the
technology to initiate and implement RE facilities
especially in developing countries that experience
energy poverty. There is no need to relive the process of industrial revolution alongside with its pollution. Scientific evidence clearly indicates that this
period of time has lead to a massive expansion in
GHG emissions, a primary cause for climate change,
according to Davy (2007). At this stage ‘poor people
are both the agents and the victims of environmental
damage’ (Saghir 2005:8) as they lack realistic energy
supply options. They need to use the sources available: fuelwood and biomass, for instance. These are
energy sources, which are very inefficient and lead
to environmental degradation and pollution. In other
words, they impact on climate change, which is a global issue also effecting developed countries. Graph
12 shows that power is causing the biggest share of
worldwide GHG emission and this is one of the main
reasons, why RE should be focused on. Existing
energy sources are limited and clearly polluting the
environment, which has global implications that can
be reduced with RE.
High tech job creation
Many are aware of these benefits and make the
increase of the production and consumption of RE one
of the top priorities on their agenda. The German Federal Ministry for Economic Cooperation and Development (BMZ 2005) expresses its concern and insists on
implementing RE as fast as possible. The World Bank
puts forward that our future energy mix path requires
a drastic reorientation away from fossil fuels and to
renewable energy. ‘A right policy framework’, ‘financial incentives’ and ‘a price on carbon’ are necessary
to deploy RE on a large scale and to increase competiveness (World Bank 2010:190).
It is necessary to supply billions of people facing the
daily challenges of energy poverty with reliable energy to stimulate development. Chapter 2 discussed how
important energy is for development on an individual
and national level. Thus, in order to address the global
challenge, set in the Millennium Development Goals,
to ‘eradicate extreme poverty and hunger’, it is vital
to ensure access to energy. However, it is not only
necessary to supply people with energy but to supply
them with energy that is sustainable. As pointed out
before, the current global energy mix relies heavily on
fossils, which are not only limited with their supplies
but enforce environmental challenges. In other words,
Graph 12: Worldwide greenhouse gas emissions by
sector (Source: World Bank 2010)
Waste and wastewater
The Organisation of American States (2004) summarizes the benefits of RE as following:
¯
Long-term competitive price stability
¯
Reduced vulnerability to fuel supply disruptions
¯
Flexibility to delivery distributed and household
3%
Land use change and
Power
forestry 17 %
26 %
Agriculture
14 %
energy to peri-urban and rural populations
¯
¯
Minimal emissions of GHG -
Transportation
climate change
13 %
Minimal local pollutants - including air and
Residential and commercial
water emissions
Industry
buildings 8 %
19 %
19
20
this dependence on fossils is not sustainable and
alternative energy supplying options, which are sustainable and even renewable, have to be considered.
Some countries have an obligation to meet certain
standards of reduced emissions due to the Kyoto Protocol; however, all countries should consider RE as a
viable and suitable option to supply their people with
sustainable energy. In this sense, one mechanism to
meet one’s Kyoto obligation is the Clean Development
Mechanism (CDM), which allows a country with an
emission-reduction commitment to implement an
emission-reduction project in developing countries.
Remarkably, both scenarios consider biomass, followed by hydro energy, to be the main source to meet
the primary energy demand, whereas WEO estimates
a slight decrease for both energy sources and E[R]
calculates an increase to 30 percent of biomass share,
while hydro energy remains about the same.
GTZ (2004) publishes a survey on the RE energy situation in Latin America, some of the results found are:
¯
Between 1999 – 2000, Central America (Guatemala,
El Salvador, Honduras, Nicaragua, Costa Rica, and
Panama) experienced serious deforestation (1.6 – 2
percent per year), whereas the majority of wood
5.2. Current Renewable
Energy Situation
production is being used for the production of energy. It is estimated that on average Central American countries use 92 percent of wood production as
The Latin American countries, like many developing countries, have abundant RE potential, which
is by far under-exploited. RE implementation varies
from country to country. Graph 13 gives a general
overview on Latin America’s RE sources in primary
energy demand. The first column confirms previous
data and identifies the share of RE sources in Latin
America with 27 percent in 2005. In comparison, the
global average is 13 percent; the EU (with 12 percent
in 2010) and the US (with 11 percent in 2009) are
slightly below that, as mentioned before. The second
and third columns demonstrate future scenarios:
one by the World Energy Outlook (WEO) and one by
Energy [R] evolution. WEO bases its projections on
current trends, while E[R] bases its projections on a
radical energy policy change and hence, foresees a
significant increase in RE demand, to 53 percent. This
radical policy change anticipated by E[R] considers
the implementation of the following principles:
¯
To implement renewable energy solutions,
fuelwood and 8 percent goes to industrial uses.
¯
In the expanded MERCOSUR region (Brazil, Argen-
tina, Paraguay, Uruguay, and Chile) Brazil stands
out with its RE sources. Worldwide it has the second
largest hydro potential after Canada and is a world
leader in large industrial applications of biomass
energy as the country produces large quantities of
Graph 13: Primary energy demand – renewable energy – Latin America (Source: ECLAC 2009)
60
percent
50
40
30
20
especially through decentralized energy systems.
¯
To respect the natural limits of the environment.
¯
To replace polluting and unsustainable energy
sources.
10
0
y2005
2030 WEO
¯
To create greater equity in resource use.
¯
To decouple energy growth in consumption of
Solar
Geothermal
fossil fuels.
Biomass
Hydroenergy
2030 E[R]
Windpower
waste. For example, it has biomass energy potential
5.3. Renewable Energy Sources
of around 1,800 MW from pulp and paper and has
currently an installed capacity of just over 600 MW.
5.3.1. Hydro Energy
Thus, certain biomass sources remain unexplored
and provide room for diversification.
¯
The Andean region (Venezuela, Colombia, Ecuador,
Peru, and Bolivia) has high levels of sunlight exposure and enormous potential for wind, geothermal
and hydroelectric power – a region abundant with
‘In order to generate electricity from the kinetic energy
in moving water, the water has to be moving with sufficient speed and volume to turn a generator. Roughly
speaking, one gallon of water per second falling one
hundred feet can generate one kilowatt of electrical
power’ (Union of Concerned Scientists 2010).
unexploited and unexplored RE sources. Saying
that, the demand for reliant energy supply has been
identified, especially amongst the poor people living
in rural areas in the Andean region. The rural electrification rate for the region averages 46 percent.
The following graph provides an overview of the RE
share in some Latin American countries. Remarkable
is Paraguay, which has a RE share of 74 percent as its
energy supply is with 71.9 percent fed by hydropower.
Also El Salvador, Guatemala and Nicaragua stand well
above the average and their energy supply is mostly
provided through wood, whereas El Salvador also has
a substantial RE share from geothermal power (16.7
percent). At the bottom of the table ranks Mexico relying with 54.5 percent on oil (GTZ 2004).
Graph 14: Renewable energy share in selected Latin
American countries in 2007 (own presentation,
Source: ECLAC 2009)
80
percent
70
60
50
40
30
20
Peru
Uruguay
Paraguay
Mexico
Nicaragua
Guatemala
Ecuador
El Salvador
Colombia
Costa Rica
Chile
Brazil
Bolivia
Argentina
0
Venezuela
10
As pointed out before, hydro energy is the leading RE
in Latin America and has further potential in several countries. Bolivia, for instance, has an unused
hydropower potential of 99.1 percent, while Venezuela
and Peru, within the same region, are amongst the
top ten countries with the largest water resources
worldwide, making the Andean region the main
hydrocarbon producer in Latin America. All countries
in the Andean region have between 15 and 30 percent
hydrocarbon potential and Venezuela stands out with
over 30 percent.
The issue to be considered with hydro energy is the
dimension of the energy generating plant. The size
of the hydro plant often determines the environmental and social impact, including habitat destruction,
prevention of fish passage and displacement of local
communities. In other words, hydro energy might be
renewable but its use not sustainable. Small hydro
plants of 10 MW and micro hydro plants of 100 kW
are often used to supply communities or small enterprises and are considered to be more sustainable than
larger ones, as the need for dams falls away. In most
surveys and data calculation no difference is being
made between small and large scale plants, which
both qualify as renewable sources, but are not equally
sustainable.
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5.3.2. Others
Biomass
The importance of biomass for energy supply has
become obvious several times throughout this discussion. Moreover, it has become apparent that biomass
will continue to be an important part of any energy
mix. Brazil’s biomass potential has been pointed out,
also Colombia’s cane industry ranks amongst the
worldwide highest productivity level with 114 tons
of sugar cane per hectare. Importantly the climate
in the Cali region allows year-round production for
sugar cane – a significant chance for biomass energy
in Colombia. Also Ecuador has significant chances
to sustain its energy needs through biomass – it has
evaluated agricultural waste with the result to possibly generate 50 percent of the current electricity
demand.
Wind energy
In Central America, Cost Rica has developed to be the
leading country in wind energy, with the first wind
plants in operation in 1999, reaching an installed
capacity of 62.3 MW in 2002. However, the country
has been estimated to have a total wind power potential of 600 MW, which identifies a ten times increase
potential.
In general, the Andean region lacks higher capacity
technology, such as wind generations with potential of
100 kW or more and needs to import most technology.
installed solar energy capacity remains very small in
comparison to other RE, like biomass for the whole of
Latin America.
5.4. Obstacles to Renewable Energy
Having discussed the different relevant RE sources
and its further potential in Latin America, table 4
illustrates some of the reasons, why the RE potential
might still be unexploited.
Putting table 4 into context with the Latin American
RE situation, it becomes obvious, why wind and solar
energy contribution, despite high potential, has remained so low: the need for further research in terms
of the RE technology and high cost have moderated
the RE development. Hydro energy, on the other hand,
requires certain amounts of water and is site-specific
– both attributes, which Latin America has to offer
in several countries, as pointed out before. Biomass
plants, also in extensive use in several countries, can
have noxious emissions but no other disadvantages to
hinder the implementation of RE as such.
In other words, the biggest obstacle to RE development
and implementation is the high cost. In developed
countries, the technical expertise and the technology are available, but RE cannot compete against the
lucrative price of fossil fuels yet. Developing countries
often experience even higher costs, as they also lack
the know-how and have to import RE technology.
Geothermal
Because of the large amount of volcanism, Latin
America has good a potential for geothermal energy.
Central America, for instance, has an installed capacity of 416 MW, whereas 2,112 MW remained to be
developed in 2004. Two countries with leading geothermal contribution were Costa Rica and El Salvador,
with 17.8 and 16.7 percent in 2002.
In developing countries, the lack of information and
research regarding RE technology poses a financial
risk, as RE technology is not competitive enough yet
to survive on the market without financial incentives,
on the one hand, and on the other hand, fossil fuel
subsidies enforce the gap of a fair chance to compete
in the market.
Solar
Traditionally subsidies are given to the poor as a
financial support from the government – however
this mechanism is highly criticised. Subsidies might
not only undermine the mechanism of a market by
The existing solar facilities in Central America represent such a small percentage that it has an unused
solar energy potential of 100 percent and the share of
favouring one over another, but might also encourage
inefficient levels of consumption by demeaning the
real cost. Hence, subsidies for fossil fuels are one of
the biggest barriers for RE, as they are making it extremely difficult to compete. In other words, subsidies
play a significant role in promoting productivity and
the use of one energy supply over the other. While a
first reaction might demand removing these subsidies,
it is not all that straightforward and reforming and redirecting of energy subsidies might be more realistic
for developing countries. Ideally, subsidies for fossil
fuels will be reduced and subsidies for RE increased,
as they are necessary to support RE technology, to
promote RE use and to facilitate access to RE services
for population with low financial resources.
IEA estimates that non-OECD countries paid
310 billion USD in fossil fuel subsidies with about
half of that going to oil products in 2008. Not only
could the money be spent on RE technology or energy
efficiency, but the International Monetary Fund also
estimates that richer households receive about 42 percent of the subsidies, as they are the heaviest users.
Several OECD and non-OECD countries have already
started to subsidize the production of fuel derived
from agricultural products, in an effort to promote RE.
Table 4: Advantages and disadvantages of RE (Source: IEA 2002)
Technology
Applications
Pros
Cons
Small biomass plants
Water pumps
Allows for income-generating
Noxious emissions
Mills
activities
Refrigeration
Base load operation, continuous
Lighting and communication
operation possible
Mills
Long life, high reliability
Site-specific
Lighting
Allows for income-generating
Intermittent water availability
Communication and other
activities
Lighting and communication
No fuel cost
Mini-hydro
Wind
Mills
Expensive batteries
Intermittent energy services
Pumps
PV/Solar
Basic lighting and electronic
equipment
No fuel cost
High capital costs
High cost of battery replacement
Needs further R&D
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6. Policies for Energy and Renewable Energy
Energy politics in Latin America are as diverse as
the Latin American countries. In other words, the
different countries have different energy politics due
to their different energy sources, their political players with different characteristics and their different
political engagement with energy.
Even though Latin American countries are so diverse
in their energy politics, they have one common goal:
to supply the whole population with access to electricity and modern fuels. The role of energy has been
discussed extensively before and it is therefore vital
for a country to supply the population with electricity
in order to generate social and economic development.
Especially rural areas still suffer from the lack of electricity, due to the high costs of extending the energy
supply – a strong focus is needed. In order to achieve
this goal, Latin American countries need strong insti-
tutional and regulatory frameworks, an energy master
plan, to motivate the delivery of modern energy services in a reliable, efficient and sustainable way to all
areas in a country.
Firstly, an energy master plan will need to identify
the energy situation of a country: what sources are
being used – are they being used efficiently? Which
energy sources offer more potential to be exploited
and to which cost?
Secondly, an energy master plan must consider the
sustainability of the country’s energy sources. For
instance, if countries rely strongly on fossil fuels, they
can be considered to be at long-term risk due to the
limited fossil supply; often a dependency on imports
and price volatility are important issues. Furthermore, it has to be considered, whether energy sources
Renewable Energy - Best Practice
Costa Rica is the country with the broadest most coherent regulatory and legal framework in regards to RE in Latin
America. In its third National Energy Plan and also in the National Development Plan 2002 – 2006 it has declared to
encourage alternative and renewable sources for electrical energy generation, such as wind, biomass and solar to
reduce or eliminate the impact on resources. By putting RE in policy context with development, the role of energy
for development is being emphasised. Efficient policy making will include RE policies within the context of national
development considering the energy system is strongly linked with a country’s economy, society and environment.
Costa Rica supplies about half of its energy by RE and is aiming to be the first carbon neutral country by 2021. With
its ‘Organic Environmental Law’ the country establishes that ‘energy resources are essential factors for the country’s sustainable development, indicating that the state will retain control of them, being able to dictate general and
specific measures, regarding research, exploration, operation and the development of these resources’ (as cited in
GTZ 2004).
Specific laws concerning RE can be found in the electricity sector. On the one side, rural electrification cooperatives,
consortia formed by the same and municipal public utility companies generate electrical energy by using RE and
non-RE sources, always in line with the National Energy Plan. On the other side, the Costa Rican Electricity Institute
(Instituto Costarricense de Electricidad, ICE) is authorized by national law to hire private bodies, cooperatives and
municipalities to produce up to 30 percent of electricity, given that it is based on RE. The state company is the only
buyer through a regulated price scheme and a subsidiary of ICE, Compañía Nacional de Fuerza y Luz, handles the
distribution. The former president Oscar Arias and the current president Laura Chinchilla are supporting the liberalisation of the state-controlled electricity sector.
are sustainable in regards to climate change. Within
this context energy master plans will consider the role
of RE: what is the potential, to which cost?
Thirdly, it is necessary to discuss who will be the
provider of energy: the state or the private sector, a
combination of both? To achieve the goal of supplying the whole population with access to electricity
and modern fuels, it is of minor relevance, who will
provide the energy, as long as the people can manage
to escape their situation of energy poverty.
6.1. Renewable Energy Policy
Thus, the development and implementation of policies
regarding RE and also certain incentives to encourage
RE development are even more important, especially
since fossil fuels are still the predominant energy
supply and the need to make RE reliable and cost effective is not urgent enough.
It seems that countries with both, privatized and nationalized, energy sectors face challenges of meeting
their energy demand. An reinforced focus on RE could
be the answer to that challenge.
Most Latin American countries have a notion of the
importance of RE, especially as an alternative to supply isolated communities with energy. However, it is
often left to complement general energy policy. So far,
national law, legislation and regulatory framework in
Latin American countries focus mainly on conserving, protecting and sustainably using countries natural resources (GTZ 2004). The individual countries,
however, are at different stages in their policy making
process. Colombia and Peru, for instance, have a
defined legal framework, while others, like Bolivia,
experience a limit on the coordination, execution and
reach of their policies.
6.2. Latin America:
Privatization and Nationalization
In Latin America, the state has played a vital role
for the generation, transmission and distribution of
electricity until the 1980s, when the ‘power sector became a major drain of public finances and a
constraint for economic development’ (Dusan 1996)
for many countries due to political interference in the
management, weak regulatory framework, regulation,
and ownership roles of the state. Consequently, many
countries, like Chile, Argentina, Peru or Colombia,
reformed their power sector through the separation of
the generation and distribution, the establishment of
a competitive market and the privatization of formerly
state-owned enterprises. This trend ended in many
countries in Latin America between 1999 and 2006 - a
re-nationalization of certain energy sectors took place:
Evo Morales increased the role of the Bolivian state in
partnership with foreign-owned oil and nationalized
its gas sector in 2006 and Brazil’s state oil company is
still being traded at the Latin American stock market
and Wall Street.
In other words, Venezuela, one the one side, has an
extended public ownership over oil and Colombia, on
the other side, has foreign oil companies largely in
control. Somewhere in between those two extremes
are Bolivia and Ecuador, which share the profits from
crude oil exploitation between state and foreign oil
companies. The refining and trading, however, is
mostly foreign owned. Peru and Mexico previously
owned their own oil companies, but have now passed
them on to foreign companies. Only through the effort
of the electrical workers union, the Mexican government refrained from privatizing this sector.
Nationalized or Privatized – The Same Problems
Today governments with mostly nationalized energy
sectors, like Venezuela and Bolivia and governments
with mostly privatized energy sectors, like Colombia
and Mexico, are fairly balanced with a few in the
middle, like Brazil and Argentina. In terms of RE
policy, it doesn’t seem to make a difference whether
the energy sector is privatized or nationalized, as
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it faces challenges to develop and implement RE in
both scenarios.
Many of the privatized systems are unbundled
(separated generation, transmission and distribution
entities) competitive market, generating and distributing energy in Latin American countries. Currently
fossil fuels are the most lucrative way to supply
energy for the private sector, as the technology and
know-how are readily available and there is no guarantee that the private sector will chose to supply the
cleanest, most sustainable energy to meet the energy
demand. The cost of RE is a definite obstacle for the
private sector, as the costs for fossil fuels are lower in
comparison.
Venezuela, a country that nationalized most of its
energy sector after 2006, also faces challenges with
its RE supply. Although having large reserves in oil, it
depends heavily on hydropower for electricity generation. Early 2010 Venezuela’s president, Hugo Chavez,
spoke of an electricity emergency, whereas poor management and the lack of investment are referred to as
reasons amongst others for this situation.
Despite all challenges and obstacles it is possible to
implement and encourage RE. In an common effort and with some creativity people were given the
chance to escape their situation of energy poverty and
to improve their life quality. The next chapter will
provide an example, of how a Latin American country,
Argentina, has managed to develop RE in rural areas
using its potential – despite all political and economic
challenges. The World Bank has financed a project,
which could generate profits through Certified Emission Reductions (CERs) trading and is now investing
in RE applications in a rural village.
Austrian investment in RE abroad
2009: During the 14th Regional Forum on biofuels and other renewable energies hosted by the National Energy Commission and representatives of Austrian companies interested in installing power plants in Dominican territory, it
was announced that the Austrian Development Bank has made available 100 million EUR for the Dominican Government or businesses, who are interested in investing in RE.
The Dominican Republic offers RE potential in several fields: biomass, wind and solar. Currently, it has a relatively
small amount of photovoltaic projects and wind plants generating up to 300 MW. However, wind potential is estimated to have a potential of 100,000 MW. Moreover, the country’s surface is to 28.9 percent covered with forest, which
offers possibilities for biomass energy. Already in 1999, the Dominican Republic received more than 600 million USD
in foreign capital, channelling it into non-traditional sectors like electricity generation and distribution. According to
IEA estimates, the Dominican Republic had an electrification rate of 92.5 percent in 2005.
However, the traditional energy supply mix of the Dominican Republic relies with the big majority on oil, which is
rather interesting and worrying as the country has no own oil production and needs to import. In other words, the
need for RE development and investment is given and provides considerable business opportunities as the country
has substantial RE potential and experiences a dependency on imported fossils.
7. Case Study: Argentina
7.1. The Energy Situation in Argentina
The energy context of Argentina is currently marked
by an insufficient availability of energy resources and
a failure to provide energy services in remote areas.
The particular deficits in the electric and gas fields explain the amounts of energy imports, mainly natural
gas from Bolivia, electricity from Brazil and oil from
Venezuela. Argentina also reduces its energy exports
to Chile strongly. Up to date, the Argentinean primary
energy mix is mainly composed by the national supply of fossil fuels. Specific details on the Argentinean
primary energy consumption can be seen in table 5.
Argentinean present and future energy scenarios
seem to be characterized by an inadequate energy
supply, mostly because its national reserves are being quickly depleted. Analysts (Lapeña et al. 2009,
Instituto de Energías Limpias y Desarrollo 2009)
have estimated that if the existing energy policies
do not change soon, the country will face an energy
crisis that will drastically increase its dependence on
imported energy resources.
In particular, Argentinean energy experts have
recently addressed a letter to the national govern-
Table 5: Domestic supply of primary energy (Source:
Ministerio de Planificación Federal 2007)
Primary Energy Font
Domestic Supply
Percentage of
of primary energy
primary energy
measured in
domestic supply
thousand tons of
petroleum
Natural Gas
40,870
50.8%
Oil
30,187
37.5%
Hydro Power
3,283
4.1%
Nuclearl
2,115
2.6%
Wood
1,180
1.5%
Coal
1,138
1.4%
Bagasse
1,071
1.3%
595
0.7%
80,439
100.0%
Other Primary Fonts
Total
ment in which they state that the energy ‘system is
managed with short-term vision, not farsighted, with
investments that are delayed, and, therefore, presents
technical deficient performance with prospects that
will tend to worsen’ (Lapeña et al. 2009).
New energy requirements are pushing the Argentinean administration to search for long-term energy
solutions that require large amounts of investments
and quite long periods of implementation (Cameron
2004). In this context, sustainable energy is left aside
as a marginal option to supply rural areas, while
nuclear power and large hydro projects are judged to
be the most efficient solutions.
Yet, not taking advantage of RE in Argentina could
appear to be a missed opportunity for the country to
turn its development plans into more environmentally
friendly development strategies. A country like Argentina, which has a considerable potential of RE, should
take advantage, in order to promote sustainable
development, particularly in those areas, where energy national grids are not able to reach poor remote
communities. Above all, solar energy, wind farms
and biomass solutions are interesting alternatives
with respect to nuclear and large hydro power plants
supported by the government. RE can represent sustainable substitutes to traditional energy generation.
Additionally RE infrastructure requires less time to
be implemented compared to the major power projects
planned by the government, and it can be deployed
in different areas of the country. In this context, RE
represents the perfect solution to provide remote communities with energy. In other words, in Argentina RE
represents a more sustainable solution to the energy
problems that the country is currently facing.
7.2 The Regulative Environment
In response to the energy crisis that struck Argentina
in the early 1990s, the government decided to enact
an important reform for its energy industry. The idea
was to encourage investments and efficient management criteria through the reorganization and privati-
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zation of the national energy business. The new legal
framework was established in 1992 due to the promotion of different laws such as Law 24.065 that regulates the electricity market, Law 24.076 that regulates
the gas market and Law 24.145 that establishes the
privatization of the Argentinean state oil company. As
a result of these policies Argentina has set the basis to
allow public and private companies to compete in the
energy market.
7.3. Renewable Energy in Argentina
Despite the increasing international interest in RE,
Argentina has only recently adopted a legal structure that could allow the achievement of sustainable
targets. In 1998, the promotion of RE in Argentina
has started, when the Argentinean Congress passed
the Law 25.019, the National Wind and Solar Energy
Rules. In particular, the law stated that wind and solar
energy were matters of national interest. In addition,
the law introduced a tax mechanism that benefits and
provides incentives for the widespread of wind and
solar energy technologies.
RE in Argentina is still under exploited. In relation
to the wind and solar situations, Arrascaeta (2010)
states that ‘the total operating wind power capacity
[…] barely reaches 30 MW’ […], which ‘is only about
0.05 percent of the theoretical potential of wind
energy in Argentina. It also represents 0.15 percent of
the total installed capacity in Argentina. The situation with solar energy is quite similar: it constitutes
less than 0.12 percent of the country’s entire energy
production.’
However, the law has never achieved its goals. The
reason being a delayed enactment of the law until
2001, when Argentina faced a severe economic downturn. Since then, the conditions for new investment in
power generation are adverse (Secretaría de Energía
de la Nación 2004).
In recent years the Argentinean public administration
has undertaken further steps towards the promotion
of RE. With the enactment of the biofuel Law 26.093
and the RE Law 26.190 the government has committed
to achieve few but significant, sustainable targets. In
particular, the biofuel law makes it compulsory that
by 2010, energy suppliers include a minimum share
of 5 percent of biofuels in both petrol and diesel fuels
marketed within national borders. In relation to the
law on RE, the government requires the whole national electricity system to provide at least 8 percent
of RE by the end 2016. Under many aspects both laws
intend to create mechanisms to promote investments
and reduce fiscal impositions.
There are many considerations related to the significant potential, political willingness and current context of RE in Argentina, as the country is considered
to have a large potential for RE generation. Its diverse
climate, natural resources and agri-business activities
can provide the opportunities to overcome the country’s current fragile energy independence.
In terms of hydropower, it is worth commenting that
the ways in which water resources can be used impacts differently on local ecosystems and its populations. In Argentina, estimations have set out that the
country has a large hydro energy potential. In this
regard, a study undertaken by Devoto, a Senior engineer for the Argentinean Ente Nacional Regulador de
la electricidad (2000), reports that the gross theoretical hydro potential of the country is about 169,000
Gigawatt hour (GWh) per year, while the practical potential consists of about 130,000 GWh per year. Other
data coming from the same study states that by 2004
the total installed hydro capacity was close to 10,000
MW, which represents an annual generation of 32,000
GWh per year. Considering that 10,000 MW correspond to 25 percent of the country’s technical feasible
potential, hydropower production can reach up to
40,000 MW. Data on mini-hydro power generation
appears to be incomplete as information about small
rivers tends to be neglected.
In Argentina, geothermal uses for energy activities
consist in the electric generation of 670 kW. The implementation of sustainable geothermal energy development generation experiences major difficulties due
to the high costs of exploration and the remoteness
of geothermal interest areas from major populated
locations. However, by December 2005, Argentinean
geothermal uses have been estimated to be around
26 Megawatt thermal (MWth). The vast majority of the
104 installations consisted in spas and beach therapy
activities (52.7 percent of the installed capacity).
Other geothermal applications are related to residential uses, aquaculture, industrial uses and snow
melting. However, it is important to note that the use
of geothermal technologies allows Argentina to save
an amount of 77,000 oil barrels per year, according to
Bravo et al. (2005).
In 2005, another study undertaken by Bravo et al.
(2005) refers to the production of biomass energy:
‘When considering only the available renewable
resources from biomass, and transforming them into
a ton of oil equivalent (TOE), we note an annual availability of 6.6 million TOE. We need to bear in mind
that Argentina currently produces approximately
2.9 million TOE between firewood, bagasse and agro
industrial waste, from which we conclude that the
production of renewable energy from biomass could at
least be more than doubled’.
Argentina has almost 30 years of experience in
biofuels activity. The first biofuel programme, the
Alconafta plan was put into practice by the government in 1981. The main idea was to use ethyl alcohol
from sugar cane as fuel. However, due to legislative
and economic circumstances the plan was put aside
after a few years.
A real step towards the use of biofuels was realized
with the recent biofuel act, with which Argentina
made it compulsory to use a certain percentage of
ethanol or biodiesel within the country. As previously mentioned the law requires that by 2010 energy
suppliers include a minimum share of 5 percent of biofuels in both petrol and diesel fuels, which is mainly
produced from soybeans. However, the incentive
mechanism risks fostering environmental degradation. For instance, Fernandes (2009) states that in
1997 Argentina had a soybean production of
11 million tons over an agricultural surface of
6 million hectares. Ten years later, after the biofuel
act, the soybean production amounted to 47 million
tons and was cultivated over 16.6 million of hectares.
It is important to highlight that this surface represents 60 percent of the total agricultural production.
Nowadays, Argentina is the second largest world soybean producer, after the United States. Yet, soybean
production has required a very strong reduction in
the production of other agricultural goods and the
agro-industry is also replacing the Argentinean
forest. In this context, biofuels are one of the main
factors enhancing environmental degradation through
deforestation.
Although this working paper has not discussed other
fonts of biofuels, because of its current scarce impact
in the Argentinean context, biofuels may be generated
from multiple sources. For instance, biofuels may be
produced from animal and human manure, landfill
solid waste, agricultural produce etc. In this regard,
the conversion of livestock manure into biogas represents one of the biomass renewable resources with the
highest potential to meet the energy needs of the poor.
Finally, the current role of RE in Argentina is by far
under exploited. As Argentina is a very large country,
with poor rural populations that live far from energy
grids, RE options may represent an important alternative to promote sustainable development. Thus, the
design and implementation of an appropriate sustainable energy framework are essential elements to
achieve UN goals such as mitigating climate change,
preventing environmental degradation and poverty
reduction. Hence, to contribute to the international
efforts in promoting sustainable development, Argentina is required to address its efforts to more efficient
environmental and social policies.
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7.4. Barriers to
Renewable Energy Implementation
In Argentina the RE sector is still struggling to become
a mature industry. Even though the government has
promoted the enactment of laws to foster RE, there are
still many unsolved issues. Most of them seem to be attached to the lack of an adequate energy strategy. Energy
related issues are still not a key priority on the national
agenda and lack political attention and engagement.
Surprisingly, the new laws supporting RE and
sustainable development have not made substantial
changes in the Argentinean energy scenario. Part of
this must be attributed to the erroneous idea that RE
has a limited ratio of convenience compared to its cost
of implementation (Bravo et al. 2009). Other reasons
have to be endorsed to government plans, which still
seem to focus on large scale projects such as nuclear
power generation and large hydroelectric projects thus, leaving little room for the development of RE.
The lack of financial investments is another critical issue in the development of an Argentinean RE
industry. According to many studies, the shortage of
financial sources is due to a lack of assurance by the
national government towards energy investors. In
particular, following the 2001 country economic collapse, energy prices have been strongly influenced by
government interventions (Kennedy 2009). The result
of such policies has been a reduction in investments
in the national energy sector and therefore also in RE.
7.4.1. The Role of Subsidies
The role of subsidies in Argentina is a very complex
issue that since the 2001 crisis produces a wide range
of distortions discouraging investments in energy
activities. While in 2001, subsidies were considered a
good solution to face energy prices, nowadays subsidies represent one of the biggest issues that discourage investments in energy activities. Thus, leaving
the energy system in a condition that does not meet
the growing needs of the country.
Further criticisms to the current subsidies model can
be summarized in the following main areas:
¯ Unequal energy consumption has increased as high
consumption sectors benefit from subsidies;
¯ Gap between energy fees and energy production
costs are paid by the whole population (not only by
those that consume it);
¯ Energy over-consumption has been promoted;
¯ Consumers in the metropolitan area of Buenos
Aires pay less for electricity than consumers from
inland;
¯ Lack of a real long-term energy investment plan is
obvious.
As the current Argentinean energy system promotes a
non-financially sustainable mechanism, it is clear that
the subsidy situation urges a change towards a new
framework that makes energy investments beneficial
for both private sector and consumers.
7.5. Clean Development Mechanism –
A Chance for Renewable Energy
In recent years energy sources have become one of the
main concerns related to global warming. However,
the need for energy to support development and alleviate poverty is a key issue that affects all countries
with no distinction.
To date, developed and developing countries experience different energy contexts and policy strategies
that fuel their development, while trying to mitigate
the effects of their emissions on the environment.
Whilst developed countries are able to supply almost
all their population’s energy needs, with the exception of a few remote areas, and have adopted targets
to mitigate their energy GHG emissons, developing
countries struggle to provide the basic energy needs
to large parts of their population, in particular poor
rural and isolated communities.
Under the guise of fighting global warming, RE
production combined with the CDM represents an
interesting opportunity to promote development and
mitigate the effects of GHG emissions. In particular, it
has been argued that ‘energy is a determinant for poverty and development, supporting basic needs such as
cooking, lighting, water supply, health care and communications, and it facilitates agricultural production,
commerce and transportation. In rural areas of the
developing world, introducing even small amounts of
energy can have a positive multiplier effect in terms
of increased’ and diversified ‘income, education opportunities, health and food security’ (IISD 2004).
However, financing the implementation of RE programmes identifies a major challenge for developing
countries. The CDM, the offset mechanisms promoted
by the Kyoto Protocol represents a potential financial
solution to supply countries with economies in transition with sustainable technologies required to meet
their energy needs.
7.6. Community Development Carbon
Fund in Argentina
Despite RE options being numerous, this paper focuses on how a biogas project enhances development
in Argentina, the difficulties faced and what can be
done to increase the project output. The importance of
biogas is that it is a natural form of energy that can be
stocked to support rural and urban lifestyles. While in
urban areas projects emphasise on producing biogas
from biodegradable waste, in rural areas biogas can
be produced from animal and human manure, and
other organic waste.
The strength of this source of energy lies in its possible uses, low costs and potential to mitigate the effects
of methane gas and promote development. For instance, a poor rural family can use biogas to cook, for
light and so on. Thus, allowing rural poor to save time
and money, produce natural fertilizers (IFAD 2006)
and transform biogas into an extra source of revenue:
these potentials make biogas plants very attractive as
a mean to improve development in poor rural areas.
However, the impact on development can be even
greater, if biogas projects benefit from selling CER
units to the carbon market. In order to be able to
capitalize the benefits of biogas projects, private and
public company entities need to be able to access the
carbon market with competitive offers. Thus, it is arguable that further reforms in the CDM may promote
additional incentives to develop biogas small scale
projects. Hence, leading to valid changes in promoting sustainable development among rural vulnerable
populations (Lloyd 2009).
7.7. Project 0140:
Olavarría Landfill Gas Recovery
The use of landfill gas recovery technology is dependent upon a specific context and policies of nationstates, in which they are implemented. Although,
these technologies are being used in many countries
around the globe as means to manage solid waste
materials, reduce GHG emissions, produce energy and
in many cases to promote sustainable development,
the landfill gas (LFG) recovery project in Olavarría,
funded by the Community Development Carbon Fund
(CDCF) through the World Bank, represents the first
step for Argentina towards an innovative way to fight
global warming and to promote sustainable development (CDM Executive Board 2004).
The project has two main aims, which are located in
two different areas: the town of Olavarría, with 100,000
inhabitants located at the center of Buenos Aires Province, 350 km from Argentina’s capital; and the rural
community of Espigas, 80 km from Olavarría, with a
population of 550 villagers. The first aim contributes
to reach the Kyoto Protocol goal by reducing the emissions of anthropogenic GHG into the atmosphere. The
second intends to promote sustainable development in
Argentina ‘by demonstrating the potential for better
municipal solid waste management practices supported through the CDM’ (CDM 2004).
Olavarría’s LFG recovery project is constituted in
a way that Espigas benefits in terms of its energy
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supply: ‘The objective of the plan was to improve the
infrastructure in a rural community [Espigas] within
the jurisdiction of the municipality focusing on the
installation of a water distribution network and solar
water heating systems’ (Sen 2009). Espigas is able to
experience progress in its energy – RE – sector due to
funding through CERs generated by the LFG project
in Olavarría. The project in Olavarría, however, does
not generate energy directly as it burns part of the
collected methane gas to prevent climate change effects, which is probably its biggest limitation.
Despite that, CDM generate valuable environmental results and development improvements in both
Olavarría and the rural community of Espigas. By
examining both matters, one recognises that the
project provides a precious example of how avoiding
GHG, and the associated trade of CERs, can play a key
role in improving the living conditions of poor rural
communities. The case of Espigas highlights, how
development goals can be achieved through the implementation of RE funded by CERs. Olavarría’s model
seems to indicate that potential far-sighted policies
and approaches may turn waste management into a
valuable source of energy, work and development. The
project has been planned to receive revenues from
carbon credits over a period of 21 years.
7.7.1. Olavarría Landfill Gas Recovery
The proposed project will capture and destroy methane that is currently generated at Olavarría’s municipal landfill. As pointed out before, in order to reduce
GHG emissions the programme burns LFGs without
generating any service or form of energy. Such lack
might be seen as a waste of energy resources that
could be used to further reduce GHG emissions.
However, the project at the landfill implements an active system for gas collection, monitoring and control
activities. Graph 15 illustrates the primary activities
of the LFG recovery project and how they are related
to each other.
Due to the project implementation a positive transfer
of technology towards Argentina has also taken place.
Graph 15: MSW operations, project activity and project boundary for Olavarría landfill gas recovery
project (Source: CDM 2004)
Waste
production
Waste
collection and
transportation
Waste
disposal at
landfill site
Landfill gas
generation
Non-captured
LFG
LFG
collection
system
Project boundary
Flarinf of
captured
LFG
CO 2 from
methane
combustion
CO 2 originally
contained in
LFG
Noncombusted
methane
In this respect, a report from the CDM executive
board (2004) highlights that the technology used for
the project’s conduct - which is the most effective for
LFG collection worldwide - is being implemented for
the first time in Argentina.
Project monitoring activities have been planned to
measure emission reductions on a daily basis. In
particular, the analysis has been designed to quantify
Table 6: Annual estimates of emission reductions
(Source: CDM 2004)
Year
Annual estimations of emission reductions in tons of CO2 e
First 7-year crediting period
2006
9,424
2007
10,647
2008
11,789
2009
12,883
2010
13,910
2011
14,884
2012
15,813
Second 7-year crediting period
2013
16,701
2014
17,552
2015
18,372
2016
19,164
2017
19,932
2018
20,679
2019
21,408
the amount of LFG that is flared and the quantity of
non-captured LFG that is still being released into the
atmosphere. In this regard, a project design document
form introduces an interesting calculation methodology (the ACM0001) that determines the emission
reductions achieved by the project activity during a
year. The result is ‘the difference between the amount
of methane actually destroyed during the year and the
amount of methane that would have been destroyed
during the year in the absence of the project activity,
times the approved Global Warming Potential value
for methane’ (CDM 2004).
Emission estimates forecast that over the 21 year
period flared LFGs will amount to 18,688 tons CO2 per
year (more details are shown in table 6) while the noncaptured emissions are 21,450 tons CO2 per year. In
other words, the Olavarría landfill gas recovery project
almost halves LFGs emissions of the municipal landfill
estimated at 40,138 tons CO2 per year. Table 6 gives an
estimation of the amount of emission reductions over
the chosen crediting period and shows that the total
estimated reductions of LFGs are 392,452 CO2 tons.
According to the World Bank (2010c), about 131,000
tons CO2 of the total avoided landfill gas emissions are
sold as CERs to the Community Development Carbon
Fund. The income generated through CERs is used to
cover the implementation of Olavarría’s project and
the related social development component in Espigas,
which will be discussed at a later stage.
Third 7-year crediting period
2020
22,122
2021
22,823
2022
23,514
2023
24,196
2024
24,873
2025
25,544
2026
26,213
Total estimated reductions (tons
392,452
of CO2 e)
Total number of crediting years
21
Annual average over the credit-
18,688
ing period of estimated reductions (tons of CO2 e)
It is important to stress that without the project no
methane gas coming from the landfill would have
been destroyed. There are three main reasons: The
first is related to the existing gap in the Argentinean
legislative framework, which does not require municipal landfills to capture and destroy their GHG emissions. Secondly, the project, as it is designed, does not
imply any economic benefit, such as selling electricity
generated from LFG combustion or tax credits. That
means that without CER benefits Olavarría’s emission
reductions are economically unsustainable. Finally,
there is a lack of qualified staff that can commission
and maintain the project implementation.
33
34
Further barriers that have prevented the dissemination of such programmes are associated with the lack
of awareness by the Argentinean public administrations on: the effects of climate change, the international efforts in contrasting it, the existence of carbon
markets, the lack of knowledge about LFG technologies and how to implement them, and the lack of economic resources in order to carry out such activities.
7.7.2. The Community of Espigas
The Olavarría gas recovery project has been introduced as a successful sustainable development
programme, not only because of its environmental
achievements, but also because of its community
development component. In this regard, implementing
RE to supply safe water to the whole community, and
hot water to the village hospital and schools has been
extremely important for the development of Espigas.
The case study shows, how fostering environmentally
friendly practices can be critical to improve the living
conditions of those that are in need – in this case
Espigas’ villagers.
After some analysis by one of the engineers in charge
of monitoring Olavarría’s landfill gas recovery project,
it became clear that the rural community of Espigas
had been chosen to indirectly benefit from the CDM
project mainly because 80 percent of its villagers
were used to use manual pumps to extract water,
which often came from contaminated wells, and also
because Espigas is one of the few rural communities
in Argentina, whose population is not decreasing due
to urban migration. Considering the large number of
Latin American’s poor living in rural areas, implementing energy access to such areas is an important
incentive to reduce urban migration and improve the
life quality of poor rural communities.
Under such conditions, the Espigas community development component has been designed to build ‘two 60
meter deep wells, submersible electric water pumps,
a 50 cubic meter storage tank, 4,000 meters of pipe
network to distribute the water by gravity through the
village, water monitoring equipment and a treatment
plant. Also, two solar water heating systems will be
installed to supply hot water to the elementary school
and the high school in Espigas’ (World Bank 2010c).
Further benefits for Espigas consists in the installation of a solar panel used to provide the local hospital
with hot water, which represents a huge improvement
for the people living in rural areas.
Recent assessments have stated that the community
benefit plan has been successfully executed by connecting 160 households to water sources, which would
have been impossible without the funds coming from
Olivarría’s project. It is important to highlight that
the project has also undertaken serious measures to
ensure good water quality by conducting monthly examinations. As a consequence, health diseases caused
by drinking unhealthy water are being controlled.
Furthermore, gaining home access to safe water supplies has allowed beneficiaries to avoid going to other
towns to buy water. Hence, Espigas villagers have
been able to reduce their expenses and to save time
that they can dedicate to other activities.
To conclude, it is of critical importance to stress that,
even though the main component of Olivarría’s project
does not directly generate any form of energy, the
rural community of Espigas has been able to improve
its life quality by getting access to several fonts of RE.
As energy is an important input in the set of development activities, its availability in Espigas has played
a central role in the process of diseases reduction
and human development. As a result of such achievements the large majority of project beneficiaries and
professionals have expressed great satisfaction with
the results obtained by the community development
component.
7.7.3. Other Outcomes
7.8. Conclusion
In addition to the efforts to reduce GHG emissions and
the related benefits for community development, it can
be projected that the implementation of Olavarría’s
landfill gas recovery project increases awareness on
the possible effects of sustainable solid waste management at a regional level. Experience shows that this
consideration has solid foundations. Since the project
was presented, several local governments have demonstrated particular interest in the possible benefits of
active LFG recovery and the possibilities to fund it.
Olavarría’s gas recovery project is a very good example of how LFGs emission reductions programmes
can impact positively on sustainable development.
Incentive instruments, such as the CDM, play a critical role in the implementation of sustainable development activities, as this mechanism makes it possible
to finance projects, which do generate incomes as
such. In this regard, it is important to stress that the
analysed project has been implemented under the
CDM. Otherwise its lack of revenue generation would
have turned Olavarría’s emission reductions activities
into a non-economically sustainable business. Without
involving the CDM it is certain that Olavarría’s project
and its indirect effects towards Espigas’ community
today would not exist.
7.7.4. Way forward
Even though Olavarría’s project represents an effective
way to reduce GHG emissions, it is clear that further environmental and social benefits can be achieved, if the
project of LFG emission reductions is linked to a service
energy component, such as electricity generation or
household heating. Considering the current Argentinean energy scenario, it is arguable that energy should
be of critical interest to Argentinean public administrations. LFG flaring not only reduces GHG emissions, but
can also be used as a source of RE that, if implemented
in large scale, could drastically reduce the stress on
Argentinean current and future energy needs.
On the other hand, there are many studies assessing that landfill gas to energy (LFGTE) projects are
less effective in fighting global warming than just
flaring LFGs or combusting waste to generate energy
(Centre for a Competitive Waste Industry 2008, Ewall
1999, Kaplan et al. 2008). However, LFGTE is still
‘recognized internationally as being a viable and
cost-effective method of controlling emissions from
landfills’ (Eam-o-pas et al. 2003). Moreover, LFGTE
projects emit less GHG than fossil fuel-fired electricity power plants and their costs of implementation are
lower. Thus, it is arguable that in the absence of other
efficient plans, community heating systems, and electricity availability, LFGTE represent a valid solution
to efficiently promote development by satisfying the
energy needs of poor and non-poor communities.
Although the project has achieved remarkable green
and social results, it is arguable whether Olavarría’s
project has attained its maximum of efficiency. Combining LFGs flaring with an energy generation or energy supply component would have further improved
both project environmental and social outcomes. For
instance, a LFG electricity generation module aiming
at supplying electricity to poor households has the potential to promote development, while reducing electricity generation from fossil fuels. The mechanism
should replace conventional electricity with electricity
produced from biogas. Moreover, electricity prices
would be more accessible to the local community, because the fuel used to produce it, does not depend on
international market prices as for oil, coal or natural
gas, but on LFGs local availability generated through
environmentally friendly waste management activities. Further development benefits would also involve
an increased employment in environmentally friendly
activities and improvements in community health, as
less harmful sources are used to produce energy.
Furthermore, using LFGs to supply poor households’
gas needs would further contribute to reduce human
impacts on the environment and contribute to community development components. For instance, instead of
collecting wood for heating, poor communities could
35
36
benefit from LFGs to meet part of their needs. In this
regard, Olavarría’s recovered LFGs could achieve
further development purposes than ‘just’ reducing
GHG emissions.
To conclude, Olavarría’s project and its Espigas component are successful in both: reducing GHG emissions
and promoting social development through the management and use of RE. On the other hand, the project
could go much further, if implemented with other
components such as energy generation or gas supply
services for heating. Nevertheless, the programme is
the first of its kind in Argentina. For this reason, it
should be seen as a test base for further experience.
Finally, policymakers should seriously pay attention
to the experience made in Olavarría, drawing important lessons, in order to enact laws pertaining to
sustainable landfill management activities and energy
generation, with a particular eye towards development
issues.
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World Business Council for Sustainable Development (2009)Development – Energy – Climate. Sustain. Issue 31, p. 1 – 36
World Business Council for Sustainable Development (2010) After 5 years of trading, experts say European carbon prices are too low to spur renewables
[online] www.wbcsd.org/plugins/DocSearch/details.asp?type=DocDet&ObjectId=Mzc2NzY Accessed 17 March 2010
World Business Council for Sustainable Development (2010) A Low-carbon Pathway to Development
[online] www.wbcsd.org/Plugins/DocSearch/details.asp?DocTypeId=251&ObjectId=Mzc0NTE Accessed 31 March 2010
39
40
World Nuclear Association (2010) Power in Argentina, Brazil and Mexico
[online] www.world-nuclear.org/info/inf96.html Accessed 17 March 2010
World Trade Organization (2008) International Trade Statistics 2008
[online] www.wto.org/english/res_e/statis_e/its2008_e/its08_toc_e.htm Accessed 23 March 2010
World Trade Organization (2008) World Trade Developments – The Highlights. p. 1- 35
World Trade Organization (2009) International Trade Statistics. p. 1 – 246
List of Abbreviations
Btu
British thermal unit, a unit of energy equal to 1.054 to
IEA
International Energy Agency
1.060 kilojoules
kboe
kilo barrel of oil equivalent
BOE
barrels of oil equivalent
kWh
kilowatt-hour
CER
Certified Emission Reductions
LAC
Latin America and the Caribbean
CDM
Clean Development Mechanism
LDC
Least Developed Country
ECLAC United Nations Economic Commission for Latin America
LFG
Landfill gas
and the Caribbean
LFGTE
Landfill gas to energy
EIA
Energy Information Administration
MSW
Municipal solid waste
FDI
Foreign Direct Investment
Mtoe
Million tons of oil equivalent
GHG
Greenhouse gas
MWth
Megawatt thermal
GWh
Gigawatt hour, Unit of electrical energy equal to one billion
RE
Renewable Energy
watt hours
TOE
Ton of oil equivalent
HDI
Human Development Index
www.ibwe.at
Das Informationsbüro Wirtschaft und Entwicklung IBWE ist eine Initiative des Bundesministeriums für
Wirtschaft, Familie und Jugend BMWFJ und der ICEP Wirtschaft und Entwicklung GmbH mit dem Ziel, die
strategische Kooperation zwischen Entwicklungszusammenarbeit und Privatwirtschaft zu fördern und die
Rahmenbedingungen für das Engagement österreichischer Unternehmen in diesem Bereich zu verbessern.
Das Informationsbüro Wirtschaft und Entwicklung möchte zu einem wirtschaftlicheren Verständnis von
Entwicklungszusammenarbeit beitragen und die Komplementarität von Wirtschaft und Entwicklung
stärker im öffentlichen Bewusstsein verankern.

Energy and Renewable Energy in Latin America Working Paper 02

Transcription

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