Over the past several years, the countries of Latin America and the Caribbean have taken action and defined policies to increase energy efficiency in all sectors of the economy. As part of that process, it has been necessary to adjust institutional, legal, and regulatory frameworks, i.e., to create or modify government structures to accommodate this new pillar of energy policy. That transition has not been easy, and in many countries, these policies are still under development.
Enacting energy efficiency laws is a key step. It allows the establishment of long-term commitments and sets macro objectives and goals that guide a country’s energy policy. In many cases these laws have allowed countries to define how energy efficiency initiatives will be funded in the long-term. This is vital. Commitments are useless if there is no money to fund them.
Experience has shown that state funding is essential to create and maintain energy efficiency programs. However, there is no single response to the level of investment required by country, but it is interesting to have figures in mind: in Mexico, for example, the 2015 CONUEE budget was close to US $6.5 million. In the case of Brazil, the 2013 PROCEL budget was close to US $10 million, while the Chilean government earmarked some US$ 9.8 million for programs to be executed by the Chilean Energy Efficiency Agency (AChEE).
Financing through the state budget can certainly be supplemented by other instruments, and there are interesting models in practice that provide important lessons.
For example in Brazil, initially the ANEEL law passed in 2000, which was later modified, required power distribution companies to invest 1% of their income in the development and implementation of end-use energy efficiency and R & D programs. This has meant annual investment figures of US $150 million on average between 2008 and 2015. In the case of Uruguay, via the 2009 Law 18,597 the Uruguayan Trust for Energy Saving and Efficiency (FUDAEE) was created. Companies providing energy services must contribute annually to FUDAEE for funding, just like power generators that develop new investments.
In the case of the US, 30 federal states have some kind of Public Benefit Fund that allows fund energy efficiency or renewable energy at the state level, usually through an additional charge to consumer electricity bills (public benefit charge). These charges vary between 4.8 mils and 0.03 mills per kilowatt-hour and can fund a wide range of energy efficiency programs.
Regardless of the source of funding, countries or federal states should consider not only the cost of the programs themselves, but also the cost of administering them. Human and financial resources should be allocated for the design, implementation, monitoring, and evaluation of programs to ensure their continuous improvement. In some cases, these activities are concentrated in a specific organization that has the mission of managing energy efficiency programs.
There is no single type of program manager for energy efficiency. In some countries, these administrators have high private participation, while in others it is a purely state agency. Whatever the case, there is no doubt of the relevance of the agencies responsible for promoting energy efficiency. These agencies – such as the case of the Chilean Energy Efficiency Agency or the National Commission for the Efficient Use of Energy in Mexico – have played a key role in promoting and educating people about final consumer energy use and the implementation of strategic actions at the country level.
Strengthen institutions to introduce energy efficiency as another pillar of energy policy is essential, since the transformation of our society towards a more efficient society is a long and complex process. Fortunately, many countries in our region have already begun this transformation.
To learn more about this topic, we invite you to read our latest publication. Guide D: Institutional arrangements for energy efficiency programs (Spanish only).