Central America Comes Together on the Way Forward for Renewables

By Cinthya Alfaro Zúñiga

As a native Costa Rican and Worldwatch Institute/INCAE Research Fellow, I was excited to attend the Energy and Environment Partnership’s (EEP) 21st Regional Forum in my home country earlier this month. EEP’s primary objective is providing finance for renewable energy projects, but it also seeks to build capacity by exploring diverse topics such as different energy technologies, policies needed for successful implementation, and regional obstacles and opportunities through stakeholder dialogues.

Worldwatch and INCAE presented Phase 1 of "The Way Forward for Renewable Energy in Central America" in Costa Rica in March.

Under the title “Biogas and Energy Efficiency in Central America,” the most recent Forum convened a group of 200 experts, project developers, governmental representatives, financiers, and the general public. The speakers addressed topics such as the contribution of energy efficiency policies and renewable energy toward carbon emissions reductions. Other important themes included the status of biogas and energy efficiency in Central America, as well as a run-through of EEP energy efficiency and biogas projects in the region.

The three-day event featured speakers from the German Cooperation Agency (GIZ), the Costa Rican Electricity Institute (ICE), the Economic Commission for Latin America and the Caribbean (ECLAC), the Central American Bank for Economic Integration (CABEI), and the Worldwatch Institute, among others.

On behalf of Worldwatch, President Emeritus Christopher Flavin presented on the global status of renewable energy and Climate & Energy Director Alexander Ochs summarized the results from the first phase of the Worldwatch/INCAE project, “The Way Forward for Renewable Energy in Central America,” which applies the Institute’s sustainable energy roadmap methodology to the region. Dr. Ana María Majano, Associate Director of the INCAE Business School’s Latin American Center for Competitiveness and Sustainable Development (CLACDS), joined Ochs as the lead in-country implementation partner.    

This is an important time for the Worldwatch/INCAE Central America project, as its first phase comes to an end. Over the last year, through extensive research, interviews, country visits, and consultation workshops, our team has explored the energy situation in Central America, with an emphasis on the current status and future potential for renewable energy technologies. The project analyzed the socioeconomic opportunities associated with renewable energy, assessed finance and investment barriers and enablers, and developed policy recommendations to accelerate energy solutions that are socially, economically, and environmentally sustainable.

Both Ochs and Majano presented success stories as well as the limitations to future success in Central America’s renewable energy sector. The region currently relies heavily on large hydropower for electricity generation and on traditional biomass for cooking, and it is increasingly dependent on fossil fuels to meet transportation and other energy needs. It is also a world leader in geothermal electricity generation and has significant untapped potential in geothermal as well as wind, solar, biomass, and small hydro resources.

The Worldwatch/INCAE study found that integrated planning is needed in the region’s energy sector, both across countries and across technologies, and that key actors in the sector need to better coordinate their activities and share information. The report also identified the need for country-specific levelized cost of electricity (LCOE) analyses in order to accurately compare the financial, environmental, and social costs of different electricity generation technologies.

Dr. Ana María Majano, Associate Director of the INCAE Business School’s Latin American Center for Competitiveness and Sustainable Development (CLACDS), presented as the lead regional implementation partner.

The report contains a rich analysis of the current state of conventional fuels and renewable energy in Central America, as well as the potentials for each. The broader picture for this first analysis indicates that in a period from 1990 to 2011, electricity generation (which accounts for 12 percent of the region’s final energy consumption) has increased from less than 15,000 gigawatt-hours (GWh) to over 40,000 GWh. The region currently produces 62 percent of electricity from renewable energy, down from 91 percent in 1990. The increase of fossil fuel-based generation has grown dramatically from 9 percent in 1990 to 38 percent in 2011.

The report continues with a detailed analysis of different technologies’ potential. For example, solar photovoltaics (PV) are underutilized. Only two utility-scale PV plants are in operation, in Nicaragua and Costa Rica and are not yet cost-competitive with other generation technologies.

The report explores the socioeconomic opportunities that renewables can offer, having a clear advantage over fossil fuels when considering externalities such as health costs and climate impacts, among others. Given that the region will require 6,300 megawatts (MW) – 7,300 MW additional installed capacity by 2020, these socioeconomic opportunities need to be considered in decision-making processes.

The findings also include important information regarding investments that have taken place in renewable energy, as well as future finance needs of the sector. For example, if the region is to fulfill its Central American Sustainable Energy Strategy 2020 – a strategy agreed upon by the Directors of Energy and Hydrocarbon and Ministers of Energy of the region in 2007 in order guarantee the quality, quantity, and diversity of sources for the region’s energy supply – by the end of that year, an estimated $12-$18 billion must be invested. This will be influenced largely by each country’s overall investment climate. The report also analyzes existing renewable energy support mechanisms, from various sources, such as public and climate financing.

Throughout the report are examples of success stories and best practices, whether for rural solar initiatives in Nicaragua or green microfinance in Honduras. The document wraps up with recommendations aimed at moving renewable energy forward in the region, as well as the main priorities identified for Central America during the project’s initial phase.

The first priority is to expand access to energy in underserved communities through distributed renewable energy and the sustainable use of fuelwood. The second is to reverse growth in fossil fuel-generated electricity and to meet future power demand in grid-connected areas with sustainable energy and energy efficiency.

So what is the way forward? During Phase Two of the project (2013–14), Worldwatch and INCAE will develop more detailed Sustainable Energy Action Roadmaps for the region. These will explore electrification, sustainable fuelwood use, and decreasing growth in fossil fuel consumption through development of small- and large scale renewable energy sources. Phase Three (2014–15) will consist of training and peer-to-peer learning exercises. Although “The Way Forward for Renewables in Central America” is ambitious, and we still have a ways to go, the outcome will hopefully be transformative for the region.

Cinthya Alfaro Zúñiga is a Worldwatch Institute/INCAE Research Fellow for “The Way Forward for Renewables in Central America” project.

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