Latin America: will there be enough energy for all?

Social advances and the amazing economic growth in the past decade have brought Latin America closer to the standards of the more advanced economies, but they have also brought new challenges, such as how to ensure that all Latin Americans have access to stable energy services.    

Experts agree that as the middle class and urbanization grows, so does demand for energy, especially electricity, natural gas, and production of oil by-products. This reality goes hand in hand with the fact that currently there are close to 30 million Latin Americans who do not have access to electricity and 34 millions who do not have access to potable water. 

As if this were not enough, global warming forces us to come up with a new energy paradigm based on alternative sources that are less dependent on fossil fuels. 

Facing this scenario, Latin America must face a triple challenge: 

• Achieve security of supply 
• Equity in the access to energy services  
• Environmental sustainability 

To be successful, investments in modern and efficient infrastructure are essential to support the increasing demand, and enable the region to compete with guarantees at a global level.  

According to the report Energía: una visión sobre los retos y oportunidades en América Latina y el Caribe (Energy: A vision of the challenges and opportunities in Latin America and the Caribbean), energy production and consumption in the region must be coordinated with sustainable policies, and involve sectors such as automotive, petrochemical, agriculture-food industry, mining, or services. This would help improve competitiveness and regional integration, and would promote investments both in the public and private sectors. 

The response to these challenges seems to be in the intelligent management of the available energy resources. In other words, optimize productive processes and the use of energy to achieve energy efficiency. Despite successful experiences in diverse sectors, energy efficiency has not been fully incorporated in the public policy agendas of most countries in the region.  

These are some recommendations to achieve energy efficiency in Latin America:    

• Promote public and private investments in energy efficiency. 
• Coordinate the policies for the efficient use of energy in the energy chain stages and consumption sectors. 
• Create short, medium, and long-term results monitoring. 
• Create legal frameworks that go hand in hand with dynamic regulatory frameworks that are able to adapt to the technological evolution and market conditions. 
• Seek regional agreements for the development of infrastructure that provides regional services (for example, laboratories). 
• Coordinate sectors such as transportation, industrial, housing, health, and education. 
• Maintain an economic-financial stability. 
• Address energy losses from an entrepreneurial and social perspective. 
• Work in a comprehensive manner in the area of public policies, involving all actors, from the State, enterprises, and different civil associations or organizations of society. 

The cleanest energy matrix in the world  

Latin America has the cleanest energy matrix in the world, with a 25% participation of renewable sources. This is mainly due to the high participation of hydroelectricity and biofuels in several countries of South America.  

In addition, the region has a significant potential of renewable resources (hydroelectricity, solar energy, aeolic energy, and biomass, among others), which may help make this matrix even cleaner in coming years.   

In any case, oil and its by-products dominate, with 41% of the regional energy distribution, followed by natural gas (29%), biomass (14%), hydro-energy (8%), natural coal and coke (4%), other renewable sources (3%), and nuclear energy (1%). 

At a global level, renewable energies represent 13% of total consumption and 20% of the generation of electric energy. In Latin America, these figures are almost three times higher, as they represent 66% of generation and 30% of the total energy consumption, according to the International Energy Agency. For example, in Brazil, Chile, Colombia, Ecuador, and Peru, low cost hydroelectric programs can already compete with thermoelectric alternatives. 

Key sectors for Latin America 

• Hydroelectricity:   Latin America is one of the regions with the highest hydroelectric potential in the world, but has only developed 23% of its capacity. Among the main factors that prevent the development of this potential are those related with the delay in numerous hydroelectric energy projects, the difficulties to obtain environmental permits, or conflicts with the communities directly affected by the projects.  
   
• Aeolic energy: Aeolic energy is the most competitive among energy sources, in second place behind hydroelectric plants. In South America, the installed capacity went from 435 MW in 2008 to 4,137,6 MW in 2013;  In Central America the expansion has been similar, going from 226 MW to 2,355 during the same period of time. In summary, the expansion of the Latin American aeolic generating park has responded to the economic competitiveness of this technology; technological advances have enabled the increase of the obtained load factors; the fast incursion of aeolic energy in Latin America has responded to the introduction of promotion policies for renewable energies. 

More about CAF's work in this area in the energy sector.