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:
- the benefit of sound separation between policy making and regulatory functions to ensure their proper functioning;
- the regulation in times of innovation should be efficiently dynamic and balanced;
- the subsidies continue to be a challenge in the region, hence, the importance to exchange best practices;
- 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;
- 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.