1. Energy Infrastructure in Latin America the View of the IDB May 6, 2011 Miami, Florida Sustainable Energy for all

2. Investment in Infrastructure in LAC Total Public Private Source: Calderon y Servén (2010). Note: Investment in infrastructure includes: telecommunications, electricity, transport (roads and railroads), and water and sanitation. This graph includes the average of Argentina, Brazil, Chile, Colombia, México y Peru. 2

3. Latin-America Investments Needs in Infrastructure Latin-America is Investing in Infrastructure Below the Required Demand –The LAC Region invest 1.9% of GDP in Infrastructure (US$43.9 billion), the average investment in the developing world is 5% of the GDP. –Investment Requirements: 1.0% of the GDP to maintain the existing Infrastructure 1.6% of GDP for new investments related to demand (totaling a 2.6% of the GDP or US$81.2 billion). –Example - if LAC were to achieve universal electricity coverage - needs to invest an additional to the above 0.05 % of the GDP per-year. 3

4. Energy Sector is Capital Intensive Sector World Energy Outlook (2010) estimates that LAC needs approximately US$2.8 Trillion between 2010 and 2035 Accumulated Investment on Energy Infrastructure per Region 2010-2035 Source: World Energy Outlook (2010). 4 Electricity Oil Gas Carbon Biofuels US$ trillons, 2009 OECD Pacific Basin Others East Europe / Eurasia Russia Middle East Asia Others India Africa Latin America OECD Europe China OECD North America

5. Latin America Investment Needs in the Energy Sector The projected annual energy demand growth is 4.8%. LAC would have to invest approximately US$28 billion per year (2009 – 2026) in the electricity sector alone: –Generation US$15 billion (100,000-MW) –Transmission from US$4,5 billion –Distribution US$8,5 billion Would also have invest between US$80 to US$90 billion in the Oil & Gas sector –Conventional production US$68 billion –Unconventional production US$9 billion –Refining US$5 billion –Transport US$4 billion 5

6. Latin-America is the cleanest region in the world in Power Generation Emissions of CO2 per Region Hydro power generation per Region LAC has the 20.5% of the world hydro power generation, while generating just the 3.6% of CO2 emissions. Key World Energy Statistics, 2010. Data 2008. The challenge is to keep the clean mix of LAC energy matrix in the context of economic economic and population growth 6 OECD China Middle East Asia Ex Soviet Union Africa Latin America Europe non OECD OECD Middle East Asia Ex-Soviet Union Africa Europe no OECD Bunker China Latin America

7. 7 Rehabilitation of Hydroelectric Power Projects Rehabilitation of Existing Renewable Hydroelectric Plants

8. Energy Efficiency LAC lags in investments in Energy Efficiency: –To reduce consumption –To lower peak demands, avoiding less efficient generation and more GHG Most countries have only implemented CFL bulb replacement It is estimated that a reduction of 10% of consumption in LAC through Energy Efficiency could cost some US$17 billion. To supply that energy with capacity expansion would cost some US$53 billion. Areas where more effort is needed: –Public Sector Energy Efficiency (buildings and roads) –Variable speed motors –Efficient cooling & heating –Commercial and Residential insulation –Load coordination and peak disconnection 8

9. Regional Energy Integration: Central American Isthmus Electric Interconnection Project SIEPAC Estimated expenditures required without SIEPAC (2011-2025): –Investments: US$11.7 Billion –O&M: US$10.1 Billion Savings with a joint planning of the expansion of capacity and joint operation of the grid: –Investments: US$1.2 Billion –O&M: US$0.3 Billion Savings with an interconnection with Colombia and a second SIEPAC circuit (2014): –Investments: US$2.1 billion –O&M: US$1.7 billion 9 Achieving these savings has required: –Participation of Panamá, Costa Rica, Honduras, Guatemala, Nicaragua and El Salvador (1996); Colombia (2005); and Mexico (2009). –Legal Framework:  Treaty among countries (1992). –Governance mechanisms:  Regional Regulator (CRIE);  Grid Operator (EOR);  Owner of the Interconnection line  Transitory Regulatory framework (2002);  Regional Electricity Market regulation (2011). –Investments:  US$494 million (MDBs, IFIs, Commercial Banks, Countries);  Grants from IDB: US$24 million.

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