“Renewable energy has not competed on equal footing with conventional energy ”

As part of the event “Renewable Energy: Sharing the Experience of Mesoamerica and the Caribbean” held in Santa Marta, Adriana M. Valencia, a specialist in the Energy Division of the Inter-American Development Bank (IDB), spoke with APC-Colombia about the progress and challenges in Latin America and the Caribbean seen in the development of unconventional sources of renewable energy. To read the full interview in Spanish, click here.

What is the potential of Latin America and the Caribbean in the development of renewable energy and how it has begun to be exploited?

Adriana Valencia: The potential of renewable energy in Latin America and the Caribbean far exceeds demand. The largest renewable power source has been hydropower, which generates over 64% of energy in the region according to the International Energy Agency. Still, studies estimate that more than 70% of technical hydro potential is still untapped in the region.

However, the large hydroelectric dams present challenges involving climate variability (drought periods), their impact on ecosystems and land use and community involvement.

Small hydropower plants with a capacity below 20 megawatts (MW) without storage have advantages over large-scale generation, both from hydroelectric and fossil fuels. This technology tends to be appropriate in rural areas where costs can be reduced to avoid the cost of fuel and transport of these and ideally can be maintained by the local community at a low cost.

The potential of these technologies and renewable resources has already begun to be exploited in Latin America and the Caribbean. According to a new report by the Multilateral Investment Fund (MIF) and other partners, at the end of 2014, 11% (39 GW) of 352 GW installed in Latin America and the Caribbean were represented by biomass, wind power (almost 10 GW ), solar power generation projects (0.5 GW) and geothermal, and mini-hydro.

What are those lessons we can learn from Mesoamerica and the Caribbean about the development of unconventional renewable energy?

Adriana Valencia: Renewable energy has not competed on equal footing with conventional energy. Its implementation has encountered many obstacles, such as fossil fuel subsidies, coal prices that do not reflect the social and environmental costs, fuel surcharges on electricity prices that transfer the risk of prices from suppliers to consumers, and infrastructure and regulations designed for conventional energy.

Thus, one of the first lessons is about the impact of fossil fuel subsidies. Attention should be paid to evaluating the opportunity cost represented by subsidies since they do not encourage energy saving and do not allow renewable energy to compete on an equitable basis.

What is the new market for sustainable energy?

Adriana Valencia: This is a program and platform called the Sustainable Energy Marketplace to support the development of renewable energy projects in Latin America and the Caribbean. The program is available to those involved in developing, financing, and maintaining sustainable energy projects in Latin America and the Caribbean.

This platform was developed by the International Renewable Energy Agency (IRENA) with support from the IDB. The platform is free to project owners, governments, financiers, and service and technology providers, and it aims to help develop and promote new investments in renewable energy projects. The platform will provide public information to evaluate project opportunities related to financing development projects and provision of services and technology.

The Inter-American Development Bank is the first financial institution to provide a grant opportunity using the Sustainable Energy Marketplace. To qualify for funding, projects must meet minimum eligibility criteria and be registered on the market before March 1, 2016. Projects will be evaluated and selected by a technical team from the IDB. Those selected will be eligible for services worth up to $50,000 from a specialized consulting firm. This company will provide support to help the winners develop reports related to social, environmental, financial, technical, economic feasibility, due diligence, legal structuring, or other related topics. More information can be found on this page.