Energy Challenges in LAC Sustainable Energy For All

2 Challenge I: LAC Energy Investment requirements According to ECLAC* between 2007 and 2030 LAC will require an investment of US$1.27 trillion or US$55 billion per year for the energy sector (other sources: IEA says US$1.8 trillion in the same period, excluding Mexico). Projected investments through 2030:  Electricity Sector: generation US$324 billion, transmission US$124 billion, distribution US$271 billion.  Oil Sector: upstream investments US$270 billion, refining US$42 billion, processing heavy crude US$66 billion.  Natural gas: exploration and production US$148 billion, transport US$54 billion, liquefied natural gas US$22 billion. *Economic Commission for Latin America and the Caribbean

3 Challenge II: LAC Electricity Demand vs. Supply Source: IEA, World Energy Outlook various years (excludes Mexico)

4 Challenge III: LAC Oil Demand vs. Supply Source: IEA, World Energy Outlook, 2008 (excludes Mexico)

5 Challenge IV: ENERGY & CLIMATE CHANGE IN LAC LAC generates 12% of Global GHG emissions 28% of LAC’s GHG emissions are energy related: electricity & heat; manufacturing; transportation; other fuel use Electricity Generation in LAC lowest CO 2 emission per kW/h (200gCO 2 /kWh vs. 450g OECD and 750 Asia) due to dominant hydropower High vulnerability to Climate Change due to the impact in hydro-generation and land productivity (biofuels and co- generation)

6 Electric Power Generation Sources in LAC Although LAC’s share of renewable energy as a source for electricity generation is relatively high due to hydroelectric power, non conventional renewable energy (wind, solar, geothermal) contribution is minimal. Source: CIER, OLADE, CEPAL, EIA, various national energy entities

7 Renewable Energy (RE) Sources for Electricity Generation, including Large Hydros Source: CIER, OLADE, CEPAL, EIA, various national energy entities

8 Non Conventional RE Sources for Electricity Generation, excluding Large Hydros Source: CIER, OLADE, CEPAL, EIA, various national energy entities

9 Issues Related to the Energy Sector Planning –Pre-feasibility –Regulatory Framework Capital and Operational Costs –Volatility of inputs Introduction of Different Energy Matrix –Reduction of Barriers to Entry

10 Short-term ( ) Objective Support the sustainable development of the energy sector, focusing on the most effective investments and policies to close the gap between demand and supply. Activities –Rehabilitation of existing renewable hydroelectric plants. –Energy efficiency in the electricity and oil and gas sectors. –Sustainable energy programmatic programs.

11 Short-term ( ) Cost of New Electricity Generating Technologies SourceUS$/kW* Diesel**400 Gas (CCGT)717 Coal1534 Nuclear2475 Wind1434 Hydro1551 Solar PV5649 Source: Energy information Administration, *Overnight Cost: capital cost as if the project was completed overnight and without interest. ** IDB calculations vs. SourceUS$/kWe Energy Efficiency Hydro rehabilitation IDB calculations

12 Short-term ( ) Rehabilitation of Existing Hydroelectric Plants –In LAC hydroelectric project construction took place mostly in the 1960s and 1970s. –It is expected that electro-mechanical equipment in LAC will start reaching end of useful life. –IDB is executing hydroelectric rehabilitation projects in Nicaragua, Haiti and Costa Rica.

13 Short-term ( ) Energy Efficiency in the Electricity and Oil sub-sectors –The IDB has been widely involved in energy efficiency in the supply side by modernizing the transmission and distribution sub-sectors to reduce technical losses. CountryProject Name ARAdditional Financing Norte Grande BRMinas Gerais Electrification Program CHCCLIP: Energy for isolated regions ECSupport to Petroecuador investments HOSupport to Energy Sector II, Energy Efficiency in Transmission NISupport to Electricity Sector III, Energy Efficiency in Transmission MEEnergy Efficiency Program II NISupport to the Electricity Sector IV PNElectrical Interconnection Colombia- Panama VETocoma Hydroelectric Power Plant (Supplementary Financing)

14 Short-term ( ) Sustainable Energy Programmatic Programs –Support policy reform towards the configuration of sustainable energy matrices. –Contribute to relieve sector constraints through regulatory reforms.

15 Short-term ( ) Examples of Sustainable Energy Programmatic Programs CountryProject Name PEDevelopment of a New Sustainable Energy Matrix Program I PNEnergy Sector Consolidation Support Program I CountryTC Name PESupport for the Energy Strategy of Peru PEStrategic Plan of Sustainable Energy and Biofuels to Peru (PEESB)

16 IDB Projected Pipeline 2009

17 Medium-term ( ) Objectives Implement projects and programs consistent with sustainable energy matrix that includes energy policy reformulation and increasing percentage of renewable energy in the matrix.

18 Medium-term ( ) Facilitate the Transition to Increasingly Sustainable Energy Matrices Three modalities of support: –Project that promote national policy shift and implementation of large scale sustainable energy and energy efficiency projects. –Support technical assistance programs on sustainable energy and energy efficiency, which may eventually lead to concrete projects. –Provide knowledge transfer by sector notes and in house analysis to assess the energy resource.

19 Medium-term ( ) Ongoing Activities Towards Increasingly Sustainable Energy Matrices Loans NISustainable Rural Electrification, Renewable Energy and Energy Efficiency Programs PEDevelopment of a New Sustainable Energy Matrix Program I PNEnergy Sector Consolidation Support Program I TCs BASustainable Energy Framework BREnergy Efficiency programs (São Paulo, Minas Gerais, Pará – CELPA) ECSustainable Energy National Action Plan ES, GU, HO, NI Energy Efficiency Programs MENational Program for the Sustainable Use of Energy (PRONASE*) MESupport to energy efficiency programs in Central America and Dominican Rep. PNSupport to Bioenergy, Energy Efficiency and Renewable Energy Programs Technical sector notes: El Salvador, Dominican Republic, Belize * Programa Nacional para el Aprovechamiento Sustentable de la Energía

20 Long-term, (beyond 2015) Support regional energy integration –Support the successful completion of ongoing projects, i.e. Mesoamerica Project (SIEPAC) and the Guatemala- Mexico interconnection; –Promote new energy integration projects and support regional integration initiatives like IIRSA; and –Support the development of potential new bi-national hydroelectric projects, i.e. Garabi (AR-BR) and Corpus (AR-PR).

Sustainable Energy For All