Vice President of Energy Hamilton Moss London, 2015 CAF and the energy sector in LA: How can we help in the energy storage issue?

Contents Some few words about CAF – Latin America Development Bank CAF’s action in the energy sector in LA – an overview highlighting interface with storage issues Conclusions

Few words about CAF

CAF – development bank of Latin America CAF is a development bank established in Its current shareholders are 19 countries of Latin America, the Caribbean and Europe, as well as 14 private banks from the Andean region

Membership Evolution Bolivia Colombia Ecuador Perú Venezuela Argentina Bolivia Brasil Colombia Ecuador Panamá Paraguay Perú Trinidad y Tobago Uruguay Venezuela Costa Rica Chile Jamaica México Rep. Dominicana Barbados España Portugal 5 countries 16 countries19 countries Argentina Brasil Panamá Paraguay Uruguay Costa Rica Chile Jamaica México Rep. Dominicana Trinidad y Toba go Bolivia Colombia Ecuador Perú Venezuela

Financial Indicators

CAF’s Portfolio ( growth )

CAF and other multilaterals ( regional approvals )

Rating evolution

Comparative ratings in the region

CAF’s action in the energy sector

Support for Energy Projects CAF’s Direct Portfolio TOTAL CAF USD 19,634 MM (Feb 2015)

CAF in numbers USD 5.49 Billion TOTAL CAF USD 19,634 MM (Feb 2015)

CAF Energy Investment - Projects Energy Portfolio (Feb 2015) : USD 5.49 Billion

CAF’s Energy Studies Technical Assistance Portfolio: USD 6.1 MM

Strategic Lines Support to energy security 6 7 Promote a regional energy network Encourage to regional integration projects Sponsor energy efficiency Promote clean and renewable energy Expand rural electricity services Technological innovation

8 agencies working together to increase the synergies in LA’s energy sector Coordinating instututional efforts

Study: New Opportunities for Electricity Interconnection in Latin America CAF & CIER studied new projects looking to promote strategic exchanges to enhance energy security in the region and increase added value

Study: Hydropower Assessment (Brazil, Bolivia & Peru) Hydropower Map of Sao Paulo

Technological Development What is the purpose of this initiative? To establish a regional platform for the generation of patentable technological concepts through international applications for patents from Latin America and the Caribbean. This first call for proposals will focus on renewable energies and energy efficiency; however, future editions will take into consideration other priority sectors of the region. Initiative's contribution Educate the population about the process of obtaining patents internationally Increase international applications for patent from the region (through USTPO).USTPO Implement pilot projects for the selected technologies Promote the creation of patent incubators in the region. Generate regional knowledge and training networks related to technological patents Principles Aimed at Latin America and the Caribbean countries The technological sectors chosen for technological patent development will be those prioritized by the initiative

Investment has increased in LA over the past years Investment by year and sector as a percentage of GDP, 11 countries (current dollars)

Private investment has kept growing in the region

What to expect… Modest growth rates We do not expect an economic collapse LA has developed buffer mechanisms to navigate through the deterioration of the external economic conditions It is necessary to invest in infrastructure in order to prepare for the next growth cycle

LA’s Energy Context

Latin American energy resource base 693 GW of Hydropower Potential 20% of World’s Oil Reserves 4% of World’s Gas Reserves 1,5% of World’s Coal Reserves Source: OLADE (2012) Source: CAF (2013) Proven Reserves Oil Natural Gas Coal Uranium Hydropower Potential Energy Resources Wind Photovoltaic Solar Geothermal Biomass Biodiesel Ethanol

Latin America is an urban region 8 out of 10 Latin Americans live in cities Souce: World Bank (2012) 35% lives in cities with over 1 Million inhabitants

Energy resources are unevenly distributed Mexico Wind (W/m2)22 Geothermal (MW)3.650 Hydro (MW) Solar (W/m2)506 Natural Gas(Gm3)358 Oil (Mbbl) Venezuela Wind (W/m2)39 Geothermal (MW) Hydro (MW) Solar (W/m2)484 Natural Gas(Gm3)5.561 Oil (Mbbl) Brasil Wind (W/m2)33 Geothermal (MW) Hydro (MW) Solar (W/m2)471 Natural Gas(Gm3)459 Oil (Mbbl) Argentina Wind (W/m2)68 Geothermal (MW)120,6 Hydro (MW) Solar (W/m2)412 Natural Gas(Gm3)867 Oil (Mbbl)2353 Peru Wind (W/m2)62 Geothermal (MW) Hydro (MW) Solar (W/m2)508 Natural Gas(Gm3)436 Oil (Mbbl)632 Colombia Wind (W/m2)55 Geothermal (MW) Hydro (MW) Solar (W/m2)417,8 Natural Gas(Gm3)161 Oil (Mbbl)2.377 Bolivia Wind (W/m2)57 Geothermal (MW)120 Hydro (MW) Solar (W/m2)503 Natural Gas(Gm3)231 Oil (Mbbl)169 Source: OLADE, SIEE (2012)

Growing tendency for electricity consumption Source: OLADE, SIEE (2013) Average annual 4.2% growth during last 10 years

Latin America’s Energy Mix Source: Data BP Statistical Review (2014)

LAC’s vulnerability to climate change Source: Wikipedia 40 N 35 S “Solar Belt”

Latin America’s Electricity Generating Installed Capacity Source: OLADE, SIEE (2013) Total: MW

Electricity: high growth in a volatile prices environment Elevated coverage: 92.7% (98.7% urban, 70.6% rural). Relatively high, although some countries lag behind Sustained growth of energy demand and power capacity: 36% and 25%, between Volatile prices shape regulatory frameworks to secure generation Generation: installed capacity accounts 56% hydro and 40% thermal; reserve margins are shallow Transmission is expensive due to low density of consumption sector Tendency to incorporate renewable sources to reduce carbon emissions Important participation of the private sector, particularly in the generation segment

More people, more income… bigger energy consumption Source: BP Energy Outlook billion people x2 World GDP > 36% Primary energy consumption* *93% belongs to No-OECD

Energy trends in LAC In 20 years, LAC will daily demand: 12.35, million bpd of oil 4.5 billion m ³pd of gas 1200 TWh of electricity

According to CAF estimations, based on national plans and private sector announcements, LA will demand at least USD 71 Billion per year over the next decade in the energy sector Resources needed

Renewable Energy in Latin America

Renewable Generation Hydropower accounts for 47,7% of electricity generation in the region, which has been displaced by generation from fossil fuels NCREs share in generation: 3.3% in 2005 to 6.0% in 2013 NCREs have grown within the Latin American electricity mix On average, 7.4 TWh per year have been added during this period Generation based on NCREs: 34.2 TWh to 91.8 TWh within a decade 12.8% annual growth rate on average since 2007 Fossil Source: CAF (2014) NCRE Hydro NCREs

Wind Power in Latin America Aggregated growth of approximately 900% during this period LAC: wind power: installed capacity (MW) Normalized generation costs in LAC (USD/MWh) Source: CAF (2014)

Wind energy has reached critical a mass in several markets in LAC LAC is currently developing an important wind power industry to complement its vast hydropower resources and biomass In the short term, increasing the competitiveness of this technology will enhance its attractiveness In the long term, growing pressures to consolidate regional energy security and diversification of its energy supply will continue to foster wind power growth in LAC According to the latest projections of the International Energy Agency (IEA), the region will generate around 59.8 TWh of wind power by 2018, a significant increase compared to 10.9 TWh generated in 2013 Drivers of wind energy in LAC Wind Power in Latin America LAC: Wind Power Generation Forecast ( , TWh) Source: CAF (2014)

LAC: generation based on solar energy is still incipient It has shown clear signs of increasing dynamism: installed capacity went from 37.2 GWh in 2013 to 373 GWh in 2013 Within those three years it registered 90% of the growth accumulated in the last twelve years Solar Energy in Latin America The significant expansion is mainly explained by the growth experienced by Peruvian solar market Peru, Mexico and Argentina concentrate almost three quarters of the solar energy generated in the region Rapid expansion of solar farms in LAC: 68.5 MW in 2012, 131 MW in 2013 and 433 MW till September 2014 it is estimated that the additions in 2014 reached 805 MW Source: CAF (2014)

The normalized average cost of photovoltaic generation in LAC has been declining. Currently solar generation costs averages US $ 200 per MWh, with a maximum of $ US 312 and a low of $ US 115. Solar Generation in Latin America Normalized costs of generation in LAC ($US/MWh- media, min and max) LAC: Generation based on solar energy (GWh) Source: CAF (2014)

Additions to solar PV installed capacity in LAC during 2014 are expected to have reached 805 MW Projects pipeline: 2,300 MW of photovoltaic capacity will be incorporated in 2015 During the last quarter of 2014, nearly 2.9 GW were incorporated into the generation projects pipeline 224 GW in Power Purchase Agreements (PPAs) have been signed Solar Generation in Latin America Source: CAF (2014)

Overcoming the challenges So far, LA has performed well in satisfying its population’s energy needs. Nonetheless, investments must be intensified, especially in electricity generated by new renewables. Energy demand has grown and thus the requirements to reduce the impact of resource use. The constant search for new sources and an increase in energy efficiency are key elements for the sustainable development of LA’s energy sector. The storage issue is very important for the effective use of new renewable sources, and can bring new opportunities both for urban and rural applications. Cost is a key factor to improve its use. Cooperation amongst different actors and institutions is fundamental to overcome the new challenges that lie ahead.

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