Last week, Panama hosted the XXII Energy and Environment Partnership (EEP) Central American Regional Forum, an event designed to present examples of EEP-funded projects that show productive uses of energy in the Central America region.

Created in 2002 during the United Nations World Summit on Sustainable Development in Johannesburg, South Africa, the EEP aims to contribute to sustainable development and climate change mitigation in Central America through the promotion of renewable energy. The effort is supported by Finland’s Ministry of Foreign Affairs, in coordination with the Central American Integration System and the Central American Environment and Development Commission, and by the Austrian Development Cooperation.

Presenters at the XXII EEP Central American Regional Forum in Panama (Source: EEP).

Over the last decade, the EEP has supported more than 280 projects in Central America with a total of €13.9 million, 80 percent of which was used exclusively for project funding. At the recent Forum, Dr. Salvador Rivas, regional coordinator of the EEP, summarized the projects implemented to date and noted that the EEP’s strategy model is grounded on four pillars: pilot projects, energy and environmental policy, capacity building, and market development.

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Central America, renewable energy, renewable energy investment, renewable energy policy, small hydropower, solar power, wind power

On August 12th, Mexican President Enrique Peña Nieto presented his long-awaited energy reform proposal, which is now awaiting approval from Congress. There has been quite a bit of speculation and debate, both before and after the proposal was unveiled, about its reach and potential impacts, especially on the national oil company, PEMEX. Even though the proposal was divided into two sections, oil & gas, and electricity, the latter sector has been largely left out of the public discussion. Furthermore, the President’s proposal did not consider reforms for another important part of the energy sector: renewables.

State oil ownership in Mexico is a delicate issue, steeped in history and accompanied even by a national holiday, and with reason: oil is crucial to Mexico’s economy, accounting for one-third of federal income. However, Mexico’s oil production has been decreasing since 2004, as shallow reserves have started running low, and there is a lack of national technical capacity to explore unconventional sources. It is no mystery that allowing private investment in the oil industry could boost Mexico’s hydrocarbon production and with it, its economy, but privatizing national resources is not a political option. President Peña Nieto’s proposal seeks to attract investment without privatizing by reversing the constitution’s ban on private contracts in upstream oil and gas development (i.e. exploration and production) and offering a share in profits. Other oil and hydrocarbon sector reforms include restructuring PEMEX and increasing its transparency and accountability.

President of Mexico, Enrique Peña Nieto

The proposal’s reform of the electricity market, which has largely missed the headlines, includes a simple yet powerful change: enabling private participation in power generation, while maintaining state control over transmission and distribution. Currently, the state-owned Comision Federal de Electricidad (CFE) holds a monopoly over electricity generation, distribution, and transmission. While amendments to the Public Electricity Service Act in 1992 partially opened electricity generation to the private sector, it did so only for self-supply, cogeneration, Independent Power Producers (IPP) exclusively selling to the CFE and planned under CFE’s strategy, small production (less than 30 MW), imports to satisfy self-supply needs, and exports to other countries. In addition, since the CFE controls transmission and distribution, it also chooses from which power generators to purchase electricity. This in turn limits competition in the electricity sector and has contributed to electricity prices that are on average 25 percent more expensive than in the United States. The reform would also establish an independent systems operator to boost competitiveness by determining power producer participation in the electricity market based on lowest generation costs. If properly implemented, Mexico’s electricity reforms will increase competition in power generation and help bring down prices.

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Last month, our friends at Germanwatch published a report that lays out near-term strategies for countries, international climate negotiators, and non-governmental institutions through 2020 that can keep the world on a greenhouse gas (GHG) emissions pathway to limit the average global temperature increase to 2 degrees Celsius. The report, entitled “Short-Term Mitigation Ambition Pre-2020: Opportunities to Close the Emissions Gap,” enumerates a variety of measures – including the phase-out of fossil fuel subsidies, closing emission loopholes in the Kyoto Protocol, meeting national emission reduction targets beyond those pledged in the international climate negotiation processes, and strengthening multinational, multi-sector alliances – and quantifies the emission reduction potential of each action.

The new report is an important supplement to a 2010 study conducted by the United Nations Environment Programme (UNEP), which calculated the gap between the emissions limit required to stay below the global warming threshold of 2 degrees Celsius and the current business-as-usual (BAU) emissions trajectory. UNEP projected that under BAU, annual global GHG emissions will rise to 56 Gt CO2e by 2020, 12 Gt more per year than the 44 Gt limit that would keep the 2 degree warming level achievable. Lending further support to calls for closing this emissions gap, in 2011 the International Energy Agency projected that without new policies to tackle climate change, the world is on track for an average warming of 6 degrees Celsius or more.

Greenhouse gas emission and global warming scenarios (source: Intergovernmental Panel on Climate Change)

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Many energy investors are interested in Latin America due to its great renewable energy potential and its relatively untapped markets. Good governance in the energy sector – a government’s ability to ease the flow of investment, and its capacity to handle resources and finances of projects transparently – is a key factor in determining a country’s readiness for renewables. It is not only a matter of getting the money from international and national funds, but also of using funds wisely and directly for the benefit of the population. Many populations suffer from a lack of electricity, and these projects are a way to improve energy services, leading to jobs and better futures. Governance has been an obstacle for renewable investment in many LAC countries, which are well-known for corruption.

The question is, are these governance issues natural and somehow a part of Latin American culture that cannot change? This theory is somehow accepted by many Latin Americans due to their own everyday experiences, plus some well-known scandals involving former presidents and high level authorities of the region for being prosecuted for money laundering and illicit enrichment. The UNDP has found some factors that explain why governance issues, such as corruption, happen in the region: the lack of transparency in a country’s performance, the perceived weakness of a government to implement policies and enforce the law, high insecurity and criminal rates, and unequal distribution of wealth.

The majority of LAC countries score below the regional (40.08) and global average (43.26), showing that LAC countries have a higher level of perceived corruption compared to the rest of the world.

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One of the most underreported stories in the U.S. energy industry today is Connecticut’s ambitious electricity pilot project—one that could have a widespread ripple effect across the country. On July 24, state government officials announced plans for nine microgrid projects as part of a Microgrid Pilot Program aimed at ensuring electricity grid resilience and reliability during severe weather events.

“Microgrids” are essentially small-scale electricity generation and distribution systems that integrate various distributed energy resources and can be managed locally and, if necessary, independently from the main grid. Diesel-powered microgrids are common in the rural areas of many developing countries such as Haiti, Indonesia, and the Philippines, and some military bases, telecommunications bases, and Internet server farms have done the same, in order to ensure a steady flow of power even if a natural disaster or terrorist attack should take down the main grid.

A local microgrid in Sendai, Japan. Source: NTT Facilities, Tokyo.

More recently, and in response to security concerns and prolonged power outages, the concept of creating a microgrid within an existing electricity grid has gained traction. The goal is to increase the security of local power supplies in the face of natural disasters and cyber threats, while at the same time creating a robust market for solar energy and other small-scale generators. Several microgrids are already complete or under development in the United States. Among the first adopters are educational institutions like the University of California-San Diego, New York University, Utica College, and Cornell University. The U.S. Department of Defense is also blazing trails, having installed microgrid infrastructure at multiple army bases already. Now, Connecticut is the first state to develop an explicit policy on microgrids.

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In the coming years, Latin American countries will have to make major investments in electricity generation and grid infrastructure in order to meet growing energy demand and provide universal energy access. According to the U.S. Energy Information Administration, power generation in Latin America and the Caribbean will have to double by 2030, requiring an investment larger than $700 billion. Over 31 million people in the region lack access to electricity and many countries still depend on fossil fuels for power generation, causing economic vulnerability due to volatile prices. Hydroelectric power is the other main source of electricity for many Latin American countries, but recent changes in precipitation patterns signal an uncertain future for this traditionally reliable baseload energy source in the face of climate change.

Creating integrated regional power systems by connecting national electricity grids can alleviate some of these challenges facing Latin America, especially for those countries seeking to provide affordable and reliable electricity to their citizens while constrained by limited natural resources, poor infrastructure, and low investment levels. By pursuing regional integration, countries benefit from economies of scale, complementary energy resources, lower costs of energy infrastructure development, and stronger regional cooperation. A regionally integrated power system can provide energy security at lower costs by increasing power generator and utility access to markets and diversifying the mix of energy sources. Furthermore, it facilitates the penetration of renewable energy by creating a market for financing large-scale projects and by providing increased grid stability necessary for high levels of intermittent energy sources like solar and wind.

Latin America could benefit greatly from regional power systems integration (source: commons.wikimedia.org)

In April 2012, at the Sixth Summit of the Americas in Cartagena, Colombia, the Connect 2022 initiative was introduced. Its aim is to ensure universal access to electricity to people in the Americas by 2022. This past June, in support of the Connect 2022 initiative, the Inter-American Development Bank (IDB) and the U.S. Department of State hosted a dialogue in which commitments for energy integration in Latin America were strengthened.

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Central America, Connect 2022, developing countries, electricity, energy policy, grid integration, IDB, Latin America, Proyecto Mesoamerica, regional electricity integration, renewable energy, SIEPAC, SINEA

Once celebrated as the best policy instrument for curbing harmful greenhouse gas emissions, emissions trading seems to be attracting new critics every week. Europe’s cap-and-trade scheme, the EU Emissions Trading System (EU ETS), has come under particular scrutiny. With carbon prices falling from around EUR 30 in 2008 to lows of under EUR 3 in April 2013, voices from within and outside of Europe are challenging not only the region’s choice of instrument, but also its willingness to take ambitious climate action.

Is all the criticism of Europe’s flagship policy justified? And are cap-and-trade schemes still the go-to climate policy that we should be promoting globally?

Critics are wrong to pronounce the demise of the EU ETS, but policymakers should go beyond small adjustment measures, such as the decision to temporarily hold back the sale of allowances, to fix its carbon price. Internationally, the importance of emissions trading is growing as new schemes emerge. Discussions of the benefits of emissions trading should make way for efforts to ensure the optimal design of new systems that can ultimately be interlinked.

Source: Environmental Defense Fund

Critics should remember that the most important job of cap-and-trade schemes is to ensure the reduction of greenhouse gas emissions. The EU emissions target is enforced through a mandatory emissions cap, a tightly controlled monitoring system, and heavy fines for non-compliance. The cap is declining by 1.74 percent year by year for the sectors covered under the scheme. Other policy initiatives—such as feed-in tariffs, renewable quota obligation, and energy efficiency laws—also contribute to emission reductions, but only the EU ETS can guarantee that the actual environmental target is met. The scheme serves as the backbone policy instrument to ensure that the EU remains on a predefined path of decarbonization.When setting interim targets, emission reductions from additional measures should be factored into the cap.

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California, China, Climate Policy, EU 20/20/20 policy, EU-ETS, European Union, GHG emissions, transatlantic power series

Solar and wind continue to dominate investment in new renewable capacity. Global use of solar and wind energy grew significantly in 2012. Solar power consumption increased by 58 percent, to 93 terrawatt-hours (TWh), while wind power increased by 18.1 percent, to 521.3 TWh.

Global investment in solar energy in 2012 was $140.4 billion, an 11 percent decline from 2011, and wind investment was down 10.1 percent, to $80.3 billion. Due to lower costs for both technologies, however, total installed capacities still grew sharply.

Solar and wind energy investments were down slightly in 2012, though installed capacities still grew sharply (Source: BNEF).

Solar photovoltaic (PV) installed capacity grew by 41 percent in 2012, reaching 100 gigawatts (GW). Installed PV capacity has grown by 900 percent since 2007. The countries with the most installed PV capacity today are Germany (32.4 GW), Italy (16.4 GW), the United States (7.2 GW), and China (7.0 GW). Concentrating solar thermal power (CSP) capacity reached 2.55 GW, with 970 megawatts (MW) alone added in 2012.

Europe remains dominant in solar, accounting for 76 percent of global solar power use in 2012. Germany alone accounted for 30 percent of the world’s solar power consumption, and Italy added the third most capacity of any country in 2012 (3.4 GW). Spain added the most CSP capacity (950 MW) in 2012 as well. However, Italy reached the subsidy cap for its feed-in tariff (FIT) program in June 2013, while Spain recently made a retroactive change in its FIT policies, meaning that growth in solar energy will likely slow in these countries in the near future.

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China, feed-in tariff, Germany, Italy, japan, renewable energy, renewable energy investment, renewable energy policy, solar power, Spain, United States, wind power

This week members of Worldwatch’s Climate and Energy team traveled to Barbados to participate in the Mobilization Forum in support of the Caribbean Community (CARICOM) Secretariat’s Caribbean Sustainable Energy Roadmap and Strategy Initiative (C-SERMS). It was an opportunity for various projects to share their respective final results related to the larger C-SERMS platform. It was also a chance for international donors and project developers to take initial steps in exploring potential follow-up work. In the words of Ambassador Joan Underwood of Antigua and Barbuda, “This is kind of like speed dating. We’re not looking for a full on proposal, just trying to see if a pair might be interested in a second date.” While no “second date” officially materialized, those in attendance were very clear that the steps CARICOM member states are taking show real promise in creating a more secure and sustainable energy sector in the region and that strong interdependence will be necessary for that progress to continue.