Energy intensity in Latin America and the Caribbean is not decreasing as fast as the world average. However, considering the sustainable development goal 7 (SDG7) and the United Nations Sustainable Energy for All (SE4All) initiative goal to double the decrease of the energy intensity rate by 2030 compared to the level between 1990 and 2010, Latin American and the Caribbean is closer to its goal than the world average. In any event, there is a significant untapped potential for energy efficiency in Latin America and the Caribbean, and this represents an opportunity.
Generation projects with renewable energy sources are traditionally more attractive to investors due to the fact that their business model is more mature, clear, and attractive to financiers. However, energy efficiency fits very well in the electricity sector policies of many of the Latin American and Caribbean countries for reasons that differ from country to country.
Countries exposed to the “El Niño” effect, for instance Colombia, view energy efficiency as a way to curb peak demand in an environment with growing economies and growing energy consumption. In countries with large areas not connected to the grid (e.g. Colombia, Brazil and most of the countries in the Amazonian Region) energy efficiency is key to delivering energy at more affordable prices via mini-grids, distributed power generation, etc. In this case, energy efficiency plays a crucial role in reducing demand and simultaneously downsizing generation capacity while maintaining quality of service and potentially increasing coverage.
Countries importing energy in the form of electricity or fossil fuels (e.g. Chile, Argentina, Ecuador, and most of the Caribbean among others) focus on energy efficiency and renewable energy as a means to reduce imports of energy commonly subsidized at the country level. Although this driver has been somewhat reduced by declining oil prices, the gap between international prices and domestic prices is such that the implementation of energy efficiency to reduce the use of fossil fuels is still necessary (e.g. use of flare gas with state of the art gensets in lieu of conventional fossil fuels in the oil sector; use of electrical induction stoves to replace Liquefied Petroleum Gas (LPG) stoves in the residential sector; replacement of diesel based pumps by more efficient electrical equipment in the industrial sector).
Renewable energy and energy efficiency reinforce each other in significant ways and together will maximize development benefits and help mitigate climate change.
Energy efficiency measures vary from country to country and sector to sector and their profitability depends on the electricity tariffs, the cost of technology, and the operating hours of the technology. In the residential sector, common measures include replacing refrigerators, air conditioners, and lighting. There have been numerous programs in Mexico, Peru, Argentina, Brazil, Uruguay, Chile, Nicaragua, and other countries to replace incandescent lamps with more efficient lighting. Most countries in the region have already banned or are banning incandescent bulbs and are in the process of approving and/or expanding EE laws and regulations, especially for lighting.
Another less common initiative but one with outstanding macroeconomic, social, and environmental benefits is the use of more efficient cook stoves in urban areas and rural communities. For example, in Ecuador, there is a program in progress to replace liquefied petroleum gas (LPG) with electricity for cooking and heating water. The Government of Ecuador created the National Cooking Program to replace LPG stoves (40% efficiency) with new electrical induction stoves (80% efficiency). The benefits are associated with the reduction of imported LPG (including the reduction of subsidies associated with the domestic commercialization of LPG) and savings to end users for utilizing more efficient technologies.
In the commercial/institutional buildings sector, again, lighting, AC, and control systems measures are the most common energy efficiency actions. In the industrial sector, lighting, the replacement of motors, the installation of variable speed drives in pumps, and the improvement of air compressor operations are the most used energy efficiency actions. Motors in a wide variety of industries often run 24/7 the entire year, making the implementation of energy efficiency measures profitable. In some sub sectors, such as food and beverages, the replacement or retrofit of cooling equipment (e.g. chillers, cooling towers) could also be a profitable investment. In municipalities, the replacement of public lighting systems with light emission diodes (LEDs) has proven to be profitable in the last few years, now that LED costs have dropped significantly. There are good replicable examples of such actions in Latin American and Caribbean cities, including Buenos Aires, Quito, São Paulo, and Managua.
For electricity companies, one opportunity to improve efficiency is to reduce technical and non-technical electricity losses. One measure to reduce technical losses is to change transformers and cables and installing capacitor banks is a common measure to reduce technical losses. The reduction of non-technical losses is often implemented in conjunction with a social program by the electricity company to provide efficient technologies to clients who are either not paying their bills or are not legally connected, in return for a proper connection or for paying arrears.
The IDB is available to help countries develop programs, dissemination schemes, financing mechanisms, policy and regulatory frameworks, and institutional arrangements to remove the main barriers and promote greater EE in the region.