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Energía para el Futuro

Energy regulation. A woman and a man check a panel photovoltaic

What should be the next steps for energy regulation in this innovation era?

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IDB participated in the XXIII Meeting of the Ibero-American Regulatory Association (ARIAE) in which a Regional Cooperation in Support of LAC regions regulators was launched.

Energy regulation has been a key element for credibility and predictability to the energy sector; it is the backbone for balancing key objectives of attracting new investment and protecting consumers. Nowadays, innovation and energy transition encompass a new stage of challenges for regulators, demanding to fine tune the regulatory process allowing simultaneous adaptation and predictability, and, at the same time providing predictability to investors and consumers. This new scenario needs to further strengthen regulators’ capabilities.

In this context, the Inter-American Development Bank (IDB) collaborates with the Ibero-American Regulatory Association (ARIAE) in building regulatory frameworks that allow countries to unlock the opportunities opened by innovation while helping them to cope with challenges that are still important in the region. These challenges include: ensuring supply adequacy in an environmentally sustained manner; achieving universal access, affordable prices and sound performance of public and private utilities; and, benefiting consumers.

New technologies, improving system efficiency, increasing competition, and taking advantage of decentralization and digitalization will allow LAC to: i) foster new business models by diversifying options to consumers; ii) tackle old challenges; and, iii) access to new opportunities with a fresh perspective.

How to use technology to deal with challenges in energy regulation?

In most of LAC countries, the high potential technological evolution for the sector transformation is the implementation of distributed energy potential (especially Solar Photovoltaic).

It brings opportunities to deal with historical challenges in LAC, such as losses, the need for more affordable services and clean energy supply in a region where demand will continue to grow. However, the potential benefits of such technology may not occur if inadequate mechanisms are in place. Moreover, technological disruptions may not appear if retail tariffs continue to poorly reflect costs, especially in segments in which such technology has already become a technical and economic solution; thus, distributed energy is an opportunity, but also a requirement to rethink about the subsidies in the energy sector.

Such topics were discussed at the XXIII Meeting of the Ibero-American Regulatory Association (ARIAE), which resulted in the Regional Public Good Program to support regional regulators. During the meeting, the regional regulators entities reached the key conclusions on the state and the future of the energy regulation in Latin America.

Some of these conclusions include:

  1. the benefit of sound separation between policy making and regulatory functions to ensure their proper functioning;
  2. the regulation in times of innovation should be efficiently dynamic and balanced;
  3. the subsidies continue to be a challenge in the region, hence, the importance to exchange best practices;
  4. the necessity to count on a dynamic regulatory framework that allows the usage of the full potential of distributed energy resources, which should make competition and commercialization of energy more active for consumers;
  5. there is an increasing need to strengthen the governance of energy regulatory entities, ensuring their independence in many fields, such as technique, decision making, and finance.

Finally, the IDB will continue to collaborate with regional regulators entities since regulation is the key element to ensure a sustained development of the region energy sector in times of transformation.

Official photo of the XXIII Meeting of the Ibero-American Regulatory Association (ARIAE)

Michelle Hallack

Michelle Hallack is a senior economist responsible for the Energy Division’s knowledge agenda at the Inter-American Development Bank and she is also an Energy Policy Advisor at the Florence School of Regulation. At the IADB she works on program and policy issues across Latin America and the Caribbean. She leads the research team and coordinates the research initiatives for the Energy Sector, such as the Green Hydrogen Initiative. She is leading and co-leading new initiatives and products such as the Energy HUB, the Electrorating, and the Regional Regulatory Data Base Initiative. At FSR she is involved in teaching/training activities, she has been especially interested in developing interactive learning tools and methodologies for academic courses and professional training. Before joining the IADB, Michelle has worked for both public and private sectors around the world (including Latin American, European, and Asian countries). She has more than 15 years of experience in research and consulting on regulatory and energy economics. Some of the main results of her work has been published in scientific, professional journals, books, and blogs. In particular, she has focused on network industries' institutional design and development of new services taking into account the intersection between innovation, public policies, and regulation (tools and design). Michelle holds a Ph.D. from the University of Paris Sud XI of Economics, a M.Res from Federal University of Rio de Janeiro, a European Master (EMIN), and a Diploma in Economics Sciences of the State University of Campinas.

Marcelino Madrigal Martínez

Dr. Marcelino Madrigal is currently the Chief of the Energy Division of the Inter-American Development Bank (IDB). In his more than twenty years of experience in the energy sector worldwide, he has served as a former commissioner of the Regulatory Commission in Mexico, as senior energy specialist at the World Bank, as a research professor at the Technological Institute of Morelia and as a member of the national system of researchers in Mexico. Additionally, he was the Chairman of the International Committee of the World Forum of Regulators in 2018 and vice president of the Ibero-American Association of Regulators (ARIAE). Dr. Madrigal has a bachelor's, master's, and a doctorate degree in electrical engineering from the Morelia Institute of Technology, the Autonomous University of Nuevo León, and the University of Waterloo in Canada. He specializes in the operation, planning, market design, regulation, and projects related to the transition and decarbonization of the electric energy sector. He has published more than 10 peer-reviewed technical articles and was the recipient of the Outstanding Young Engineer Award from the Institute of Electrical and Electronics Engineers (IEEE).

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