Latin America: Pass on Renewables, Fail on Efficiency

By Humberto Márquez
CARACAS, Nov 13 2024 – The Latin American and Caribbean region is a student with good grades in renewable energy, but not in energy efficiency, and has a long way to go in contributing to global climate action and overcoming the vulnerability of its population and economies.

The recent energy crises in Ecuador and Cuba, with power outages ranging from 14 hours a day to days at a time, and the threats posed by droughts – which this year hit Bogotá and the Brazilian Amazon, for example – to the hydroelectric systems that power the region, are proof of this.

Among the 660 million Latin Americans and Caribbeans enduring the various impacts of climate change, there are at least 17 million people, some four million households, who still lack access to electricity.“Countries in the region are very much affected by barriers in their investment ecosystems, access to financing, whether due to institutional problems, policies or legal security”: Alfonso Blanco.

That scenario comes under new scrutiny at the 29th Conference of the Parties (COP29) to the United Nations Framework Convention on Climate Change (UNFCCC), which began its two-week run on Monday 11 in Baku, capital of oil-rich Azerbaijan.

The annual conference of 196 states parties has climate action financing as its main theme and will also review the global commitment made a year ago to triple renewable energy capacity and double energy efficiency.

The COP28 in Dubai proposed a global installed capacity of 11,000 gigawatts (Gw, equivalent to 1,000 megawatts, Mw) of energy from renewable sources by 2030, 7,000 Gw more than today. This is unlikely, judging by the Nationally Determined Contributions (NDCs).

The NDCs serve as commitments by states to adopt measures to reduce greenhouse gas emissions so that global warming does not exceed 1.5 degrees Celsius above pre-industrial averages, as stated in the 2015 Paris Agreement, which concluded the COP21.

Large solar power plant in the Sertao region, in the arid northeast of Brazil, installed by the Spanish company Naturgy. Credit: Naturgy

In the case of Latin America and the Caribbean, “the installed capacity for electricity generation is already 58% renewable energy, and in 11 countries it exceeds 80%,” Uruguayan expert Alfonso Blanco, director of energy transition and climate at the Washington-based think tank Inter-American Dialogue, told IPS.

According to the Latin American Energy Organisation (Olade), the region’s installed electricity generation capacity was 480,605 megawatts (MW) in 2022, with about 300,000 MW produced from renewable sources – 200,000 MW from dams – and the rest from non-renewable sources, mainly fossil fuels.

The International Renewable Energy Agency (Irena) put the region’s installed electricity generation capacity at 342,000 MW last year, with advances in solar energy installations, with a capacity of 64,513 MW, and wind power, which reached 49,337 MW, as the hydroelectric source remains stable at 202,000 MW.

The Latin American and Caribbean region “can increase its capacity to generate electricity from sources such as solar or wind, but it can’t triple its hydroelectric capacity,” said Blanco, who was executive secretary of Olade in the period 2017-2023.

Diana Barba, coordinator of energy diplomacy at the Colombian think tank Transforma, also believes that “tripling renewable energy capacity by 2030 does not apply to Latin America and the Caribbean”.

“The next step is to maintain the proportion… until 2040, and in general to reduce the trend towards the use of fossil fuels,” Barba told IPS.

An auto parts factory in the Mexican state of Coahuila. Credit: México Industry

Elusive efficiency

Green energy capacity figures are improving every year in the region, but energy efficiency figures are not keeping pace. Experts from the Economic Commission for Latin America and the Caribbean (ECLAC) have shown that only the Caribbean sub-region has made significant progress compared to the first decade of this century.

Measured in kilograms of oil equivalent (kgoe) per 1,000 dollars of gross domestic product (GDP), the Caribbean consumed 110 kgoe during the 2001-2010 decade and decreased that expenditure to 67 units in 2022, while the region as a whole fell from 95 to 87 kgoe.

In that period, the Andean sub-region was able to fall from 108 kgoe to 90, Central America and Mexico from 85 to 70, and the Southern Cone remained at 90, although the figure is 80 kgoe if Brazil is excluded.

Efficiency, in which the region shows more modest results, is fundamental for the triple purpose of saving resources, reducing costs and, a primary objective at climate COPs, reducing the carbon emissions that pollute the environment and heat the atmosphere, precipitating climate change.

In this regard, the World Economic Forum, which each year gathers political and economic leaders, advocates electrifying transport, and above all stresses that NDCs should focus on demand and supply to improve industrial energy efficiency, only mentioned in 30% of the world’s NDCs.

In transport, an Olade study highlights that the fleet of electrified light-duty vehicles multiplied more than 14 times in the region in 2020-2024, with a total of 249,079 units in circulation by the first half of 2024.

This market – which entails greater energy efficiency and drastic reductions in carbon emissions – is led by Brazil with 152,493 vehicles, followed by Mexico, Costa Rica, Colombia and Chile, but Costa Rica has the best per capita figure, with 34 electrified cars per 10,000 inhabitants, followed by Uruguay with 17.

However, as far as manufacturing industry is concerned, with an annual GDP of 874 billion dollars (14% of regional GDP), ECLAC records that it consumes more renewable energy each year and less fossil fuels such as residual fuel oil.

But its energy intensity – an indicator that measures the ratio of energy consumed to GDP – went from 232 tonnes of oil equivalent per million dollars of value added in the 1990s to 238 TOE in 2022, suggesting that the region’s industrial sector has not improved its energy efficiency.

Rows of solar panels on the roofs of Metrobús stations in Buenos Aires, Argentina. Credit: Caba

Four South Americans

To assess the necessary and possible efforts of each country to contribute to global renewable energy capacity targets, Transforma studied four cases, those of Argentina, Brazil, Chile and Colombia.

Barba explained that Argentina and Brazil were considered for their membership of the G20 (Group of 20 industrialised and emerging economies), Colombia for its capacity for action and Chile for its decision to accelerate the end of the operation of thermal power plants, while insufficient information was received from Mexico.

Argentina could take advantage of its onshore wind energy potential and large-scale solar energy, but Barba argues that “it would be super-difficult” to triple its energy matrix in a few years, which is only 37% covered by renewables, and that its current president, Javier Milei, “is betting on fossil fuels”.

Brazil can take advantage of its large-scale renewable energy potential, but Barba notes “contradictory signals” regarding its NDCs, by favouring hydrocarbon exploration and exploitation in the Amazon “instead of sending a very clear signal to close these projects in strategic ecosystems”.

Chile could reach 96% renewable generation in its electricity matrix by 2030, taking advantage of sources such as solar, wind, thermal and geothermal, and Colombia could reach 80% renewables in installed electricity capacity if it continues to multiply its solar and wind energy installations.

Of the countries analysed, Chile is the only one with a specific target of 10% reduction in its energy intensity, established in its national energy efficiency plan 2022-2026, and Transforma suggests that the other countries adopt similar targets in their plans for 2030.

On the other hand, there are calls for savings, considering that energy efficiency is “the first fuel”, the most cost-effective source or, in other words, that the cleanest energy is the one that is not used.

Oil exploitation in the Brazilian Amazon at the Urucu base in the Coari area along the Amazon River. Credit: Petrobras

A question of finance

Giovanni Pabón, Director of Energy at Transforma, has stated that “the issue of financing covers everything. If we don’t have secure financing, we can talk about a lot of things, but in the end it is very difficult to achieve the goals we require” in the Paris Agreement.

Blanco highlights that, in order to tackle their transition to green energy, countries in the region “are very much affected by the existing barriers in their investment ecosystems, access to financing, whether due to institutional problems, policies or legal security”.

“Overcoming that barrier is not impossible, but it requires work and political will, which is often lacking,” he added.

He recalled that countries with strong extractive industries, which are more oriented towards fossil fuels and allocate subsidies to them, stand out in that scenario.

Finally, Blanco considered that COP29, the second consecutive one in an oil-producing country, is “a transitional summit”, preparatory to COP30, which will be held in 2025 in the Amazonian city of Belém do Pará, with Brazil as host and leader, and could produce clearer and firmer results and commitments in terms of renewable energies and energy efficiency.