Clima-y-energías

La transición energética global: el desafío frente a la crisis climática MANUEL GUZMÁN HENNESSEY Otros ejemplos son la iniciativa internacional Carbon DisclousureProject (CPD)37 que funciona como una especie de gremio de la divul-gación de la sostenibilidad (tiene más de 3000 compañías asociadas).También hay consultoras, como Trucost PLC,38 que evalúan el alcancede las externalidades de las corporaciones, lo cual está relacionado conla cada vez mayor aceptación de los consumidores de bienes y serviciosno solo sostenibles, sino que publican sus balances (casos ABC de Man-hattan y Rainforest Aliance). La Accounts Modernization Directive(AMD)39 de la Unión Europea (2005) podría ser un antecedente de loque serán estos relatos. Esta directiva exige un informe mejorado a losdirectores, que debe incluir, además de los indicadores financieros, unanálisis justo del desarrollo y el desempeño de los negocios, el cual con-temple un examen de indicadores comparados y ofrezca informacióncomentada sobre asuntos ambientales. Los cambios simultáneos (micro-macro) que este artículo aproxi-ma deben partir de dos premisas compartidas: El cambio climático esun fenómeno emergente de la cultura humana y, por lo tanto, ni lasempresas ni las sociedades podían haber previsto sus efectos. Las energías fósiles constituyen el factor principal de las emisionesde carbón. En este sentido conviene recordar el análisis de Mac Curdy:“el grado de civilización de cada época o pueblo se mide por su capaci-dad de usar la energía para promover el progreso” (Mac Curdy, 1924). Debido a que la transformación de las empresas energéticas en elescenario post 2015 es un desafío complejo, es necesario diseñar uncamino conjunto entre los nuevos actores del cambio climático: ciu-dadanos, empresas energéticas, gobiernos locales, academia. Si bien no será fácil disminuir significativamente las emisiones decarbono entre 2020 y 2050, sí es posible mejorar la adaptación del eco-sistema empresarial y contribuir con ello a un proceso de mejor adap-37 Ver sitio https://www.cdp.net/38 Ver sitio www.trucost.com39 Ver sitio http://oxfordindex.oup.com/view/10.1093/oi/authority.20110803095346563 53

Clima y energíastación en la sociedad. Las corporaciones deben fortalecer sus alian-zas con sus grupos de interés para contribuir con la transformacióndel ecosistema empresarial público/privado: las instituciones (reglas),los mercados (políticas, precios, competencia), las comunidades (cli-entes, proveedores, consumidores) y especialmente, el subsistema delos riesgos climáticos (adaptación, educación, políticas, seguros, nego-ciaciones internacionales). Como consecuencia de lo anterior se prevéque en el periodo 2020-2050 la adaptación sea una tarea de toda lasociedad.Referencias|17 premios Nobel adelantan dos minutos el Rejoj del Apocalip- sis. El País (2015, ene.). Recuperado de http://elpais.com/el- pais/2015/01/22/ciencia/1421953015_359918.htmlAgencia Internacional de Energía (2012). World Energy Outlook. Recu- perado de https://www.iea.org/publications/freepublications/ publication/Spanish.pdf.AMA/OMA ECOFYS (2011). A fully sustainable and renewable glob- al energy system is possible by 2050. En Energy Report. Recuperado de http://www.ecofys.com/en/info/the-energy-report/Arístegui, J. P. (2012). Evolución del principio “Responsabilidades comunes pero diferenciadas” en el régimen internacional del cambio climático. Re- cuperado de http://www.udp.cl/descargas/facultades_carreras/ derecho/pdf/anuario/2012/28_Aristegui.pdfBenito, G. (2014). Evitar que la temperatura suba 2 grados en 2100 es casi inalcanzable. El País. Recuperado de http://elpais.com/el- pais/2014/11/27/videos/1417090508_722315.htmlBerlin, I. (2000). El sentido de la realidad. Barcelona: Taurus.The Bulletin of the atomic scientists (s. f.). Recuperado de http://thebul- letin.orgCarbon Capture & Storage Association. What is CCS. Recuperado de http://www.ccsassociation.org/what-is-ccs/54

La transición energética global: el desafío frente a la crisis climática MANUEL GUZMÁN HENNESSEYCarrizosa, J. (2001). ¿Qué es Ambientalismo? Cerec, IDEA.Capellá-Pérez, I., Miguel, L. J., Mediavilla, M., Carpintero, O. y De Castro, C. (2014). Agotamiento de los combustibles fósiles y es- cenarios socioeconómicos: un enfoque integrado. Recuperado de http://www.eis.uva.es/energiasostenible/wp-content/up- loads/2014/09/Capellanetall2014_esp.pdfDaly, H. (1990). Toward Some Operational principles of Sustainable Develop- ment, Ecological Economics. Boston: Beacon Press.Di Donato, M. (2009). Impacto del cambio global en el antropoceno: crisis, consecuencias y adaptación. Boletín ECOS, 5. Recuperado de http://www.fuhem.es/media/cdv/file/biblioteca/Sostenibili- dad/Cambio_global_en_Antropoceno.pdfFroggat, A. (2008). The International Climate Agenda: Opportunities for the G8. Londres: Chathman House. Recuperado de www.chathman- house.org.uk/publications/papers/view/-/id/620/Graizbord, B. (2011). Megacities metropolitan areas an local governments. México: Colegio de México.Grupo Intergubernamental de Expertos sobre Cambio Climático (2014). Cambio climático 2014. Impactos, adaptación y vulnerabilidad. Recuperado de https://www.ipcc.ch/pdf/assessment-report/ar5/ wg2/ar5_wgII_spm_es.pdf.Grupo Intergubernamental de Expertos sobre Cambio Climático (2014). Quinto informe de evaluación del IPCC: cambio climático. Recuperado de https://www.ipcc.ch/report/ar5/index_es.shtmlGabás, R. (2001). El “todo-uno” del idealismo alemán en la poesía de Hölderin. Enrahonar, 32 (33), 43-65. Recuperado de http://www. raco.cat/index.php/enrahonar/article/viewFile/31989/31823.George, S. (2005). Otro mundo es posible si. Barcelona: Icaria.Guzmán H., M. (2010). La generación del cambio climático. Bogotá: Uni- versidad del Rosario.Guzmán H., M. (2015). El cambio climático, el reloj y el mapa. Revista Razón Pública. 55

Clima y energíasGlen, J. (2010). The state of the future, with millennium project CEO. Recuperado de http://www.kurzweilai.net/the-state-of-the-future- with-millennium-project-ceo-jerome-glennHart, S. L. y Milstein, M. B. (2003). Creating sustainable value. Acad- emy of Management Executive, 17 (2), 53-69.Honty, G. (s. f.). Cambio climático: negociaciones y consecuencias para Amé- rica Latina. Ciudad: Editorial. Recuperado de http://energiasur. com/cambio-climatico-negociaciones-y-consecuencias-para- america-latina/Innerarity G., D. (2012). La democracia del conocimiento. Barcelona: Paid- ós.International Energy Agency (s. f.). World Energy Outlook 2015. Recu- perado de www.worldenergyoutlook.org.International Institute for Applied System Analysis (s. f). Global energy assessment. Ciudad: Editorial. Recuperado de http://www.global- energyassessment.org/MCR y McLean, H. (2013, oct.). Megacities challenges: A stakeholder perspective. Globescan.Judt, T. (2011). Algo va mal. Barcelona: Taurus.Klein, N. (2014). This change everything. USA: Simond and Shuster.Korten, D. (2010). The Great Turning: From Empire to Earth Com- munity.Latour, B. (s. f.). Give Me a Laboratory and I will Raise the world. Recuperado de http://www.brunolatourenespanol.org/03_escri- tos_02_laboratorio.pdfLeidreiter, A. (2013, oct.). Hamburg Citizens Vote to Buy Back Energy Grid. Blog de la comisión sobre el clima y la energía del World Future Council.Mac Curdy, G.G. (1924). Human Origins: A Manual of Prehistory. Lon- dres: D Appleton and Company.Max-Neef, M. (1993). Desarrollo a escala humana. Barcelona: Nordan Comunidad.56

La transición energética global: el desafío frente a la crisis climática MANUEL GUZMÁN HENNESSEYMeadows, D, Meadows, D., Behrens W. y Randers, J. (2004). Limits to Growth. Barcelona: Galaxia Gutenberg.Patterson, W. (2007a). Transforming our energy whitin a generation. USA: Chathman House. Recuperado de www.chathmanhouse.org.uk/ publications/papers/view/-/id/496/Patterson, W. (2007b). Keeping the Lights On: Towards Sustainable Electric- ity. Ciudad: Chatam House/Earthscan.Patterson, W. (2008). Managin enery wrong. USA: Chatman House. Re- cuperado de http://www.chatman house.otg.uk/publications/pa- per/view/-/id/629Randers, J. (s. f.). A Global Forecast for the next 40 years. Recuperado de http://www.2052.info/.Senge, P. (2008). La revolución necesaria. Bogotá: Norma.Sukhdev, P. (2012). Corporation 2020. USA:, Island press, Estados Uni- dos.United Nations (2008). Fighting climate change: Human solidarity in a di- vided world. United Nations Developmentt Programme, Human Development Report 2007/2008. Recuperado de http://hdr.undp. org/enWorld Wide Fund For Nature (WWF) (2012). The Energy Report, 2012. Gland, Switzerland.http://www.csic.es 57



The Social Benefits from Renewable Energyand Future for Latin America and the Caribbean1 Walter Vergara, Ana R. Rios, Claudio AlatorreNota de contexto:En 2011, el gobierno de Dinamarca, apoyado por los gobiernos deChina, Kenya, México, Qatar y la República de Corea, iniciaron unproceso de alcance global: apoyar la transición hacia esquemas de creci-miento verde inclusivo mediante la promoción de alianzas entre los sec-tores público y privado, que faciliten los acuerdos entre países, poten-ciando las acciones y las oportunidades que ofrece una economía verdesustentada sobre la transición energética global. En 2012, se reunió en Copenhague el I Foro Global de CrecimientoVerde (3GF). Como consecuencia, la red latinoamericana sobre cambioclimático KLN instaló en Bogotá, con el apoyo del Instituto de Hi-drología, Meteorología y Estudios Ambientales (Ideam) y el Ministeriode Ambiente y Desarrollo Sostenible, la Plataforma Clima & Energías,que a su vez participa del 3GFLAC a partir de junio de 2013 (BID, Go-bierno de Dinamarca, Gobierno de Colombia). Con ocasión de este foro, un grupo de investigadores2 del BID,encabezados por Walter Vergara, Claudio Alatorre y Leandro Alves,1T1 The opinions expressed in this publication are those of the authors and do not neces- sarily reflect the views of the Inter-American Development Bank, WRI, their Board of Directors, or the countries they represent.2 Participaron además: Wilson Rickerson (Meister Consultants Group), Mauricio So- lano Peralta y Xavier Vallve (Trama TecnoAmbiental), Chris Flavin y Michael Weber 59

Clima y energíaselaboraron, como insumo principal para este foro, el libro blanco delas energías renovables (Rethinking Our Energy Future: A White Paper onRenewable Energy for the 3GFLAC Regional Forum)3 El artículo “Beneficios sociales y futuro de la energía renovableen América Latina y el Caribe” (aquí publicado), que formó parte deesta publicación, fue actualizado a 2014, especialmente para este libroy ha sido complementado con un análisis sobre los beneficios socialesde las energías renovables en América Latina y el Caribe4. En la re-dacción de este nuevo artículo participó, además de los investigadoresVergara y Alatorre, la investigadora Ana R. Ríos. Para una mejor comprensión de lo que esta nota sugiere, y que co-incide con los propósitos de esta publicación y de la Plataforma Clima &Energías de KLN, se recomienda conocer el contexto global que dio inicioal 3GFLAC y consultar los documentos que se reseñan a continuación(algunos de ellos de muy reciente publicación) muchos de los cualesya fueron reseñados en la introducción de este libro o están relaciona-dos con las temáticas abordadas por otros de los autores de este libro:  Energy Report, 2014, contiene las proyecciones de la transición en- ergética de los estados Unidos para 2040, http://www.eia.gov/ forecasts/aeo/  Roadmap 2050. A practical Guide to a Low-CarbonEurope, elaborado por European Climate Foundation, organización que agrupa princi- palmente a empresas. Este estudio detalla en términos técnicos y económicos cómo se podría llegar a una reducción del 80 % en la semisiones de GEI para Europa en 2050. (Worldwatch Institute), Juan Pablo Carvallo y Dan Kammen (Universidad de Califor- nia en Berkeley), Rajendra K. Pachauri (TERI), Jason Eis (Instituto Global de Creci- miento Verde), David McCauley, Tabaré Arroyo y Santiago Lorenzo (WWF), Lisbeth Jespersen (Ministerio de Asuntos Exteriores, Dinamarca), Karen Schutt (Ministerio de Minas y Energía, Colombia), Paul Isbell (Universidad Johns Hopkins), y Hilén Meiro- vich, Juan Roberto Paredes, José Ramón Gómez, Arnaldo Vieira, Verónica Valencia y Emiliano Detta, del BID.3 Ver más: http://publications.iadb.org/handle/11319/5744#sthash.b6HgKn76.dpuf4 Societal benefits from renewable energy in Latin America and the Caribbean / Walter Vergara, Paul Isbell, Ana R. Rios, José Ramon Gómez, Leandro Alves, BID, 201460

The Social Benefits from Renewable Energy and Future for Latin America and the Caribbean WALTER VERGARA, ANA R. RIOS, CLAUDIO ALATORRE Renovables 2050. Un informe sobre el potencial de las energías renova- bles en la España peninsular, de Greenpeace, un análisis técnico de la viabilidad de un sistema de generación eléctrica peninsular con elevada contribución de energías renovables para 2050. Zero Carbon Britain 2030. A new Energy Strategy, elaborado por Centre forAlternativeTechnology, presenta un sistema energético (electricidad y calor) libre de emisiones para Gran Bretaña en 2030. A sustainable energy and climate policy for the environment, competi- tiveness and long-termstability, comunicación del gobierno de Sue- cia en la que se exponen las grandes líneas de actuación de su política de clima y energía. El objetivo: cero emisiones en 2050. EnergyStrategy 2050, fromcoal, oil and gas to green Energy: estrategia energética de Dinamarca, cuyo objetivo es reducir la dependencia de los combustibles fósiles hacia 2050; Dinamarca espera reducir el uso de combustibles fósiles un 33 % en 2020 respecto de 2009. Cambio Global España 2020/50, elaborado por Centro Com- plutense de Estudios e Información Medioambiental. Este docu- mento expone la necesidad de articular una estrategia concertada para España orientada a revisar su modelo económico energé- tico y a reducir la demanda de energía, convirtiendo el consumo eléctrico al 100 % con sistemas renovables y reduciendo sus emi- siones de GEI hasta 50 % en 2030 y entre un 80 % y un 90 % en 2050 en relación con 1990. Energía sustentable en América latina y el Caribe, International Council for Science, 2010. http://www.icsu.org/icsu-latin-america/publi- cations/reports-and-reviews/sustainable-energy/energy_span- ish.pdf Global Energy Assessment 2012, define una nueva agenda política global para la transformación de la sociedad teniendo en cuenta la transición energética. http://www.globalenergyassessment.org 61

Clima y energíasExecutive SummaryDriven by population growth and improvements in quality of life, a 3 %annual growth in the economic output of Latin America, is expected dur-ing the foreseeable future. This will require the region to almost doubleits installed power capacity to about 600 GW by 2030, at a cost of closeto 430 billion dollars (Yepes-García & Johnsson, 2010), posing a chal-lenge but also an opportunity to redefine the energy model for the region. LAC already has a low carbon power sector, anchored through asubstantial hydrological resource. However, the anticipated energy de-mand will require major additions to the existing power matrix. For-tunately, the region could produce over 78 PWh (Hoogwijk & Grauss,2008; Poole, 2009; Meisen, & Krumper, 2009) from solar, wind, ma-rine, geothermal and biomass energy. The corresponding nominal peakcapacity would be about 34 TW (Hoogwijk & Grauss, 2008) (worldinstalled capacity is 5 TW) well above any foreseeable demand. Thecost of use of these Non-Traditional Renewable Energy Technologies(NRETs) is falling and in some cases is already competitive with fossilalternatives. These resources constitute a near zero carbon option. They alsorepresent an indigenous energy resource that carry no expiration datebut bring substantial societal benefits,5 including energy security, re-silience, local environmental benefits, domestic job creation, and im-proved balance of payments, amongst others. It is estimated that thevalue of these societal benefits could amount to about $285 per MWhdelivered, which, if monetized, places many of these options in a verycompetitive position. By and large, the rules of the power sector in LAC and elsewhere,despite being in theory “technology-blind”, were tailor-made to suitconventional power generation technologies, and have therefore intrin-sic biases against renewable energy. NRETs differ from conventionalgeneration in their cost structures, revenue and costs stream, generationprofiles, geographical distribution, and the wider range of societal ben-5 See note 13.62

The Social Benefits from Renewable Energy and Future for Latin America and the Caribbean WALTER VERGARA, ANA R. RIOS, CLAUDIO ALATORREefits they deliver. Therefore, scaling up NRETs will require a recastingof this framework. In order to accommodate these differences, countries can imple-ment mechanisms to compensate for the current biases, or reform theelectricity market regulatory and institutional framework so that theyprovide a truly level playing field, especially by accommodating varia-ble generation and by developing new pricing mechanisms. Public poli-cies have an important role to reduce risks associated with NRETs andincrease the profit potential of these investments. Countries and regionsthat take the lead in developing these new energy sources will have first-mover advantage in one of the world’s fastest growing economic sectors–reaping the economic growth and job creation that will flow from it.IntroductionLatin America and the Caribbean’s (LAC) economic output is projectedto grow by about 3% annually into the foreseeable future, driven by pop-ulation growth and improvements in quality of life. This will require theregion to nearly double its installed power capacity to about 600 GW by2030, at a cost of close to 430 billion dollars (Yepes-García & Johnsson,2010). This represents a challenge to the region’s energy model but alsoan opportunity to redefine and transform it. Current plans in some countries in the region consider that a sub-stantial share of the new demand could be met with fossil fuels, nota-bly gas, with hydropower providing much of the remainder. However,fossil fuels are driving climate change toward dangerous thresholds.6 Asustainable future requires an urgent change of path possible only if amajor departure from the business as usual (BaU) scenario is achieved,capable of preventing global temperature from escalating much furtherthan 2 degrees Celsius (°C) this century. A global climate stabilization goal of this magnitude would re-6 On May 9th, 2013 in Mauna Loa CO2 concentration levels of 400ppm were recorded, which is a substantial increase over the level that existed in the pre-industrial period at 280 ppm. 63

Clima y energíasquire of no more than 20 gigatons (Gt) of CO2 to be emitted by 2050 (asignificant deviation from the current projection of 45 Gt of CO2) andno more than 10 Gt of CO2 by the end of the century. Under currentpopulation growth projections, this implies an average annual per capitaemission of 2 tons by mid-century equivalent to less than 40% of cur-rent emission levels (Vergara, Ríos, Galindo, Gutman, Isbell, Sudding& Samaniego, 2013). For the region, fortunately, an alternative energy path is availablethat is consistent with these goals. Starting from a relatively clean sup-ply base (52% of LAC’s installed power capacity, estimated at about280 GW, is already provided through renewable energy resources, in-cluding hydropower7), non-traditional renewable energy technologies(NRETs) –solar, wind, geothermal, ocean, small-scale hydropower, andadvanced bio-energy– together with improvements in energy efficiency–can play a major role alongside hydropower in meeting LAC coun-tries’ energy needs. The costs of these technologies continue to fall rapidly, and inmany cases are already competitive with fossil fuels, as put in evidenceby the results from recent auctions in the region. Also, LAC’s unusuallyrich renewable resource base may place the region’s renewable energy(RE) generation costs at the lower end of the global cost spectrum, afact particularly significant given that these sources are currently provid-ing electricity that is less expensive than that generated by fossil fuelsin other parts of the world (International Renewable Energy Agency,2013). Furthermore, additional and substantial economic, social andenvironmental benefits (societal) benefits may be realized as a result ofthe deployment of these options at scale. Globally, recent developments in renewable energy suggest that ahistoric energy transformation is underway. NRETs –assembled in largepower plants as well as widely decentralized small systems– are rapidlydiversifying the energy economies of many nations. Some industrial7 30% of the global hydro capacity is in LAC (although a significant portion is in Brazil) while the region only accounts for 7% of the total global electricity generation.64

The Social Benefits from Renewable Energy and Future for Latin America and the Caribbean WALTER VERGARA, ANA R. RIOS, CLAUDIO ALATORREnations, including Germany and Denmark and others such as Mexico,Uruguay, Costa Rica and China, are well on the way to make renewableenergy and energy efficiency the centerpieces of their energy futures.Some of these developments are behind the fact that for the first time in40 years, energy-related CO2 emissions did not increase in 2014 (Finan-cial Times, 2015). Countries and regions that take the lead in developingthese new energy sources will have first-mover advantage in one of theworld’s fastest growing economic sectors –reaping the potential eco-nomic growth and job creation that will flow from it and placing theseeconomies at an advantageous place in a future world economy wherelow carbon manufacture may have a commercial advantage. This discussion today is more relevant than ever as the region facesmacro trends reshaping power system evolution (Clean Energy Ministerial,2013), including: the need to mitigate greenhouse gas emissions; theimpacts of climate change, calling for a higher resilience of power sys-tems; an increasing impact of fossil fuel price volatility; the advent ofnew information and communication technologies for grid monitoringand control (smart grids); the emergence of new clean energy businessmodels for both large and small-scale generation; and an increased ve-hicle fleet electrification. While there have been some non-traditional renewable energy in-vestments across the region, the use of these resources clearly has notmatched its potential as some barriers to their implementation andmyths remain. First of all, NRETs are perceived as a luxury that the re-gion cannot afford without subsidies or external support. Many also be-lieve that NRET can cover only a minor part of the power demand. Fur-thermore, there is a perception that intermittent resources such as windor solar impose a hefty burden on power systems. Finally, there is animplicit perception that policy recipes to promote renewables necessar-ily come at high economic cost for the countries that implement them.Since successful policies cannot be simply transferred across borders,there is little clarity on how to accelerate the deployment of NRETs. This chapter focuses on the region’s need to define its future en-ergy model and meet the increasing energy demand by addressing three 65

Clima y energíasquestions: What is the magnitude of the available renewable sources?What are the associated societal benefits?8 And, what are the policy op-tions for adopting renewable energy? We present these issues and thestage is set for broader discussions about a new energy future in whichnew, resilient, and renewable energy sources meet most of the electric-ity requirements in the LAC region as a complement to its substantialhydropower base. To reach this goal, NRETs for grid-connected elec-tricity generation are considered. There are equally compelling discus-sions –beyond the scope of the analysis- regarding new paradigms forincreasing energy efficiency, use of renewable energy in transportationand heat applications, and for expanding energy access through off-gridsystems.Resource Endowment for NRETs for PowerGeneration in LACPower demand LAC generated 1.4 PWh9 in 2012, close to 7% of the world’s totalelectricity production (20.2 PWh)10, representing an increase of about50% since 2000 (Figure 1). Meanwhile, the region had 325 GW of in-stalled capacity in 2010, or 6.4% of total global installed electric capac-ity (5.07 TW).11 Moreover, the demand for electricity in the region isprojected to increase to 3.5 PWh by 2050 (Yépez-García, Johnson &Andrés, 2010; Luna, García & Garcés, 2012).8 For the purposes of this document, the term “societal benefits” or “externalities” refers to the positive or negative impacts generated by the provision of goods or services and that have an effect on a third party. Societal costs or benefits occur when the costs or benefits of those that produce or buy the goods or services are different to the total social costs or benefits that their production and consumption involve.9 1 petawatt-hour (PWh) is equal to 1,000 terawatts-hour (TWh), or 1,000,000 giga- watts-hour (GWh).10 Own elaboration based on data from EIA energy database: http://www.eia.gov/coun- tries/11 According to the US Energy Information Agency (EIA): http://1.usa.gov/160W3wH66

The Social Benefits from Renewable Energy and Future for Latin America and the Caribbean WALTER VERGARA, ANA R. RIOS, CLAUDIO ALATORRE ͶǤͲͲͲ ͵ǤͷͲͲ 3.452 ͵ǤͲͲͲ ʹǤͷͲͲ 2.657 ʹǤͲͲͲTWh ͳǤͷͲͲ 2.049 ͳǤͲͲͲ 1.618 ͷͲͲ 1.370 1.004 630 Ͳ ʹͲͲͲ ʹͲͳͲ ʹͲʹͲ ʹͲ͵Ͳ ʹͲͶͲ ʹͲͷͲ ͳͻͻͲFigure 1. Demand for electric power, LAC, 1990-2050 Source: Historical data from British Petroleum Annual Statistical Review of World Energy 2012. Projections to 2050 from IIASA’s GEA Model Database. Data for 2012 is based on a net increase of 890 TWh as reported by the IEA, over the 2010 average of BP (1,373 TWh) and IIASA (1,269.8 TWh). One thousand (1,000) TWh equals 1 petawatt hour (PWh). Using data from the GEA Model of the International Institute forApplied Systems Analysis (IIASA), we estimate that, under a business-as-usual scenario, LAC power demand will more than double to about3.5 PWh (Figure 1) while the carbon emissions of the power sector areexpected to double from current levels by 2050 (from 0.25 GtCO2e/yrto 0.54 GtCO2e/yr) (Vergara et al., 2013). This implies a continuinghigh share for the use of non-fossil based power generation as well assubstantial improvements in energy efficiency but still places the regionunder a projected net increase in emissions. Under current IIASA scenarios the share of fossil fuels in the gen-eration mix is expected to increase from 37% to 40% (peaking at 42%in 2030), mainly because the share of natural gas is expected to rise.Indeed, beyond 2030, expanded natural gas begins to compete withNRETs and large hydropower within the generation mix. This signifi-cant expansion of natural gas within the LAC power mix, expected un-der the BaU trajectory, is what accounts for the projected doubling in 67

Clima y energías ͳͶ ‘ƒŽ ƒ• ‹Ž ›†”‘ ‹‘ƒ•• ͳʹ —…Ž‡ƒ” ‡‘–Š‡”ƒŽ ‘Žƒ” ‹† ͳͲ Ej/year ͺ ͸ Ͷ ʹ Ͳ ʹͲʹͲ ʹͲ͵Ͳ ʹͲͶͲ ʹͲͷͲ ʹͲͳͲFigure 2. Projected Evolution of LAC Power Mix to 2050 Source: IIASA’s GEA Model Database.LAC power sector emissions. Indeed, hydropower’s share of the LACelectricity mix is also projected to fall from 56% in 2010 to 36% in 2050.Meanwhile, the share of NRETs in the LAC power mix is projected torise from less than 1% presently to 22% in 2050 (Figure 2).Power supplyA distinctive feature of the power supply matrix in LAC is its heavyreliance on hydropower (Figure 3), which sets it apart from the situa-tion elsewhere. It also places the region in an advantageous position asit considers how best to further reduce regional emissions in the future.Overall in the region, NRETs and hydropower provide 52% of currentinstalled capacity and generate around 59% of the region’s electricity12. While this large contribution to power generation brings substantialglobal and local benefits, it does on the other hand increase the region’s12 Although this varies by sub-region: Mexico and the Caribbean depend heavily on fossil fuels, Brazil and the countries of the Andean-Amazon sub-region rely heavily on hydropower, whereas the generation parks of Central America and the countries of the South Cone are fairly evenly divided between hydropower and fossil fuel-fired generation.68

The Social Benefits from Renewable Energy and Future for Latin America and the Caribbean WALTER VERGARA, ANA R. RIOS, CLAUDIO ALATORRE Ͳǡ͵Ψ ͵ǡ͵Ψ ͷǡͶΨͲǡ͹Ψ ͳͲǡͷΨ ‘ƒŽ ʹ͵ǡ͵Ψ ‹Ž’”‘†—…–• ƒ–—”ƒŽ‰ƒ•ͷͶǡͶΨ —…Ž‡ƒ” ›†”‘ ‡‘–Š‡”ƒŽ ‘Žƒ”Ȁ™‹†Ȁ‘–Š‡” ‹‘ˆ—‡Ž•ƒ†™ƒ•–‡ ʹǡͳΨFigure 3. Electricity generation in Latin America in 2010 Source: IEA (2010).exposure to changes in the stability of hydrological cycles projected un-der current climate change scenarios. A sample of this vulnerability isexemplified by the impact of the current drought on firm generationcapacity in Southern Brazil during the period 2013-2014 (Hydroworld,2014). In this context, and in order to maintain a diversified power sup-ply while limiting its carbon emissions, the region would need to accessother renewable energy resources. Fortunately,13 non-hydro renewable energy resources of LAC arealso substantial. These are indeed world-class and could easily providethe required complement to hydropower to meet regional demand to2030 and beyond, even assuming aggressive demand growth rates, andconsidering a range of technical constraints. Recent assessments14 showthat the region could produce over 78 PWh from solar, wind, marine,geothermal and biomass energy (Figure 4). The corresponding nomi-13 At present, 92% of all on-grid renewable electricity generation is from hydropower, but the penetration of non-hydro technologies has been growing steadily, often with public support. Biomass and waste comprise the largest share, with almost 6%, and the remaining 2% are shared among geothermal (1.3%), wind (0.6%), and solar (0.004%).14 See references in note 4. 69

Clima y energías ‡‘–Š‡”ƒŽȋ‡Ž‡…–”‹…Ȍ ͷ ͳͲ ͳͷ ʹͲ ʹͷ ͵Ͳ ͵ͷ ͶͲ …‡ƒȋǡ™ƒ˜‡ǡ–‹†ƒŽǡ‡–…Ȍ ‹†Ǧ‘ˆˆ•Š‘”‡ ‹†Ǧ‘•Š‘”‡ ‘Žƒ” ‘Žƒ” ‹‘ƒ••Ǧ‡•‹†—‡• ͲFigure 4. Renewable energy resource technical potential for electricity generation in LAC (PWh) Source: REN21 (Hoogwiijk & Grauss, 2008).15 Solar is in practice a limitless resource. However, in this study, the potential solar resource was bounded based on limited by space availability (assuming 269 million hectares for Mexico and Central America and 1,761 for South America) with an average land use factor of 0.6, average solar irradiation of 152.4 to 175.9 W/m², 25% conversion of efficiency, and a performance factor of 90%.nal peak capacity would be about 33 TW16 (500 GW for geothermal;3,400 GW for marine –ocean- power; 450 GW for offshore wind;4,200 GW for onshore wind; 17,000 GW for PV; 7,500 GW for solarCSP, and 255 GW for biomass residues), well above foreseeable de-15 This report includes as well a potential of 2.8 PWh for hydropower (800 GW), and 2.8 PWh for energy crops (580GW). Energy residues capacities reported in this study were in thermal capacity. Therefore this capacity was multiplied by a 30% thermal to electric conversion factor. One reason to exclude energy crops is the anticipated con- tinuous demand for food, feed and fiber from the region to balance global demand. Energy crops would exert an additional pressure on land resources possibly leading to a net loss of regional carbon sinks.16 Capacity factor values taken from assumptions made by Hoogwijk et al (2008) and NREL. (2010). Energy Technology Cost and Performance Data. Available at: http:// www.nrel.gov/analysis/capfactor.html70

The Social Benefits from Renewable Energy and Future for Latin America and the Caribbean WALTER VERGARA, ANA R. RIOS, CLAUDIO ALATORREmand and enough to power the entire region, indeed the entire globaldemand, several times over. Considering that current consumption is 1.4 PWh, exploiting 1.6%of the available technical potential the current power demand could bemet. Likewise, the projected 2050 demand growth of 3.5 PWh wouldonly amount to 4% of total available technical potential. In a globalcontext, the renewable energy potential of the region could theoreti-cally meet a major share of global power demand. The availability ofthis resource in the face of the sustainability challenge in the provisionof power and the potential benefits that its deployment could bring tothe region, calls for further review and exploration of possible ways tomaximize its use. Some of the renewable energy resources are broadly distributed,and others are concentrated in specific sites. Figure 5 shows specificregional renewable energy resources that have been drawn from differ-ent country studies. Developing just these illustrative resources wouldmeet more than 100% of current electricity demand and do not neces-sarily represent the full resource of a given area. In the case of AtacamaDesert, for example, the land area that would be required to generate26 TWh would be just 100 km2, or 0.01% of the desert’s area. Globally, the amount of new investment in NRETs is growingrapidly. However, new investments fell to $214 billion worldwide in2014 (Global Trends in Renewable Energy Investment, 2014), some14% lower than in 2012 and 23% below the 2011 record. The declinereflected a sharp fall in solar system prices, and the effect of policy un-certainty in many countries. The latter issue also depressed investmentin fossil fuel generation in 2013. Current figures however still reflect anincrease of over 600% from 2004 and, projections for 2012-2035 estimatea cumulative total of $6 trillion out of a total power system invest-ment of $16.9 trillion (International Energy Agency, 2012). However,LAC’s share of global investment in NRETs and hydropower is mod-est (5.4% of the total) (Frankfurt School-UNEP Collaborating Centrefor Climate & Sustainable Energy Finance, & Bloomberg New EnergyFinance, 2012). 71

Clima y energíasFigure 5. Examples of specific RE-rich sites for electricity generation Estimated Site Specific Technical Potential: Mexico (Solar) (WWF, 2012); Wind On-shore (Brazil) (Leite, 2001); Venezuela (ICA, 2010); Argentina17; Mexico (Wind On-Shore)18; Brazil (Solid Wastes) (Basto & Pinguelli, 2003); Brazil (Sugar Cane Co-generation) (WADE, 2014); Chile (Solar PV); Peru; Central America (Corporación para la Competitividad e Innovación en la Región de Ataca- ma, s. f.); Mexico (Biomass); Caribbean (Johnson, Alatorre, Romo & Liu, 2010); Colombia (Corpo- ema & UPME, 2010); Chile (Marine) (Hassan, 2009) , and Brazil (Solar) Calvalcati & Petti, 2007). 17 Available at: http://bit.ly/Armereom 18 Available at: http://bit.ly/Morelosmx72

The Social Benefits from Renewable Energy and Future for Latin America and the Caribbean WALTER VERGARA, ANA R. RIOS, CLAUDIO ALATORRE Despite this small share of total investment, major new develop-ments underway in NRETs in the region include:  Photovoltaic (PV). There has been a sharp increase in PV project development activity in the region, driven by dramatic cost reduc- tions during the past few years. Multiple large-scale PV systems have been completed, or have started development, and some in- dustry forecasts predict that over 2 GW could be installed across the region by 2016 (Masson, Latour, & Biancardi, 2012).  Concentrated solar power (CSP). The first CSP power plant in the region is under construction in Mexico, a hybrid solar/gas plant with a solar generating capacity of 14 MW (NREL, 2013). In Chile, the government has awarded a tender for CSP power, anticipated to be in the range of 50 to 100 MW, offering a public subsidy and access to concessional finance and grants.19  Wind. Wind power generation costs have also fallen rapidly, and the entry of more efficient designs, and larger tower capacities have contributed to this cost reduction.20Wind is the fastest grow- ing NRET in the region. In 2013, Latin America accounted for over 2 GW or 43.3 percent of the 4.7 GW installed last year in the Americas, driven primarily by Brazil and Mexico. Cumulative in- stalled capacity in Latin America reached 5.5 GW in 2013, more than doubling the 2.3 GW21 installed in 2011. Brazil’s power con- tract auctions are continuing to drive the country’s wind market. In 2013, Brazil brought 948 MW of new wind plants online, just down from the 1,077 MW installed in 2012. Cumulative capacity reached 3,869 MW by the end of the year, a growth rate of 32.419 See Concurso Planta de Concentración Solar de Potencia (CSP) http://bit.ly/CSPChile. Concessional finance is offered by the IDB (with resources from the Clean Technology Fund) and the German Development Bank KfW. A grant from the European Union’s Latin-American Investment Facility (LAIF) is also available.20 Overcapacity in manufacturing due to market decline in some countries and Chinese competitions are also important factors that have driven wind power prices down.21 In the case of solar nominal power capacities normally noted as W are also described as Wp. 73

Clima y energías percent from the 2,921 MW total capacity online at the end of 2012 (Latin America wind energy market overview, 2014).  Geothermal. Mexico is the world’s 5th largest producer of geo- thermal electricity with almost 1 GW of installed capacity. This country is now seeking to complement the utility’s activity with private sector projects, and has requested resources from the Clean Technology Fund.22 Central America has almost 500 MW of installed capacity in Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. More recently Caribbean countries (St. Kitts and Nevis, Grenada, Dominica, Montserrat, and St. Lucia) have developed plans to exploit their geothermal resourc- es. There have been no geothermal projects to date in South America, although Argentina is planning a 100 MW plant in Neuquén,23 and Colombia, Ecuador and Panama are actively ex- ploring their resource.24  Biomass-based generation. Biomass, including energy from waste sources, is the primary source of electricity from NRETs in LAC. Most of it comes from sugarcane or wood from Bra- zil (7,800 MW), followed by Mexico (496 MW), Guatemala (300 MW), Argentina (300 MW) and Chile (526 MW).25 There continues to be interest in developing biomass and waste resourc- es across the region.  Marine energy. There is no wave, tidal, or ocean thermal energy project operating in LAC, but interest is emerging as a result of significant resource potential. Chile is assessing the possibility of22 Revised CTF Investment Plan for Mexico. http://bit.ly/ctfMXrev23 Ministry of Environment of Argentina: http://bit.ly/EnvArg24 Chile passed a Geothermal Law in 2000 to foster exploration and expects first deploy- ments in 2015. Valenzuela (2011).25 EIA energy database: http://www.eia.gov/countries/ Other countries such as Colombia and Nicaragua have some power plants installed. Note that the biomass capacity figures may not reflect actual renewable energy capacity, as many power plants are co-fired by biomass and fossil fuels.74

The Social Benefits from Renewable Energy and Future for Latin America and the Caribbean WALTER VERGARA, ANA R. RIOS, CLAUDIO ALATORRE publishing a tender for prototype wave and tidal projects in the South, to take advantage of the substantial endowment along its coast line. Nonetheless, marine energy sources -if deployed at scale- can be a significant contributor to future energy supply.  Small hydro:26 There is an installed capacity of approximately 1.6 GW27 in the region.CostsCosts of NRETs are continuing to fall, following a market entry andmaturation curve.28 The case of photovoltaic power is particularly re-markable as it is closer now to the fully commercial phase. The LCOEof PV had historically been higher than those of other generationtechnologies. During the past several years, however, PV prices havedropped dramatically as module prices have declined to $0.74/wattin 2013. This has translated into dramatically lower PV LCOEs andsteep decreases in the incentives required. Above all, most NRET auc-tions carried out in LAC are showing declining prices (seeRenewableenergy auctions, despite some difficulties in implementation in thepast, have become a popular policy tool in recent years. The numberof countries that adopted renewable energy auctions increased from 9in 2009 to at least 44 by early 2013, out of which 30 were developingcountries. Many of these actions have taken place in Latin America.Some of these are presented in Table 1 below. The Special Report on Renewable Energy Sources and ClimateChange Mitigation published by the International Panel on ClimateChange provides levelized costs of energy (LCOE) for different tech-nologies (Figure 6) around the globe. In addition, the International Re-26 The definition of small hydro varies from country to country. It is commonly defined as projects with installed capacity of up to 20 MW but for Brazil it includes projects of up to 30MW.27 Estimated as the 2.7% of the global installed capacity. Global installed capacity is re- ported by IRENA 2012 (see reference in note 11).28 Renewable Energy Medium-Term Market Report 2014: Market Analysis and Forecasts to 2020. 75

Clima y energías PV Module Price Per WattTable 1. Particularly for larger markets and the lower rungs of the LCOEs Source: Adapted from Solar Central. Com (2015) Figure 6. Cost of PV modules per WattFigure 6. Levelized Cost of electricity generation, IPCC Adapted from Figure SPM5, SRREN.29 Medium values are shown for the following subcategories, sorted in the order as they appear in the respective ranges (from left to right): Biomass: 1. Cofir- ing; 2. Small scale combined heat and power, CHP (Gasification internal combustion engine); 3. Direct dedicated stoker & CHP; 4. Small scale CHP (steam turbine); 5. Small scale CHP (organic Rankine cycle). Solar Electricity: 1. Concentrating solar power; 2. Utility-scale PV (1-axis and fixed tilt); 3. Commercial rooftop PV; 4. Residential rooftop PV. Geothermal Electricity: 1. Con- densing flash plant; 2. Binary cycle plant. Hydropower: 1. All types. Ocean Electricity: 1. Tidal barrage. Wind Electricity: 1. Onshore; 2. Offshore.29 See http://bit.ly/SRRENfr.76

The Social Benefits from Renewable Energy and Future for Latin America and the Caribbean WALTER VERGARA, ANA R. RIOS, CLAUDIO ALATORRE ‘Žƒ” ̈́ͳͲͲ ̈́ʹͲͲ ̈́͵ͲͲ ̈́ͶͲͲ ƒ”ƒ„‘Ž‹…”‘—‰Š ̈́ȀŠ ‘™‡” ‡‘–Š‡”ƒŽ ›†”‘ζʹͲ ›†”‘εʹͲ ‹†ȋ…Žƒ••͸Ƭ͹Ȍ ‹‘ƒ••Ƭƒ†ˆ‹ŽŽ„‹‘‰ƒ• ƒ–—”ƒŽ‰ƒ•‘„‹‡†›…Ž‡ ƒ–—”ƒŽƒ•–—”„‹‡•‹’Ž‡…›…Ž‡‹‡•‡Ž–‡”ƒŽ‘„—•–‹‘‰‹‡  –‡”ƒŽ‘„—•–‹‘‰‹‡  Š‡”ƒŽ’‘™‡”•–ƒ–‹‘ ‘ƒŽ ̈́ͲFigure 7. Levelized cost of electricity generation in LAC, IRENA NRET LCOE data from a database by IRENA30 based on actual LAC project data, excluding Gov- ernment incentives and subsidies. Green bars show the median values, and error bars show minimum and maximum values. Data for the two CSP technologies, as well as for fossil fuel technologies, are based on a study by IMCO (Instituto Mexicano para la Competitividad A.C. IMCO, 2013), using fuel price data from Mexico’s public utility CFE. Hydro ≤ 20 refers to hydro- power under 20 MW.newable Energy Agency (IRENA) has recently compiled a dataset ofLCOEs for different technologies in LAC (see Figure 7) (IEA, 2014).Although LCOE calculations exclude overall system costs, NRETscan be a cost effective option in many cases (nonetheless, furtheranalysis is needed to make comparisons for each individual electricitysystem). It is anticipated that the LCOE will be further reduced formost of NRETs as they move along the maturity curve (see Figure 8).30 In some cases, the study in Mexico did not consider some of the technologies for which data is available in the rest of the region. In other cases, the Mexico study presented LCOEs for which comparable data was not available in the IRENA data- base. 77

Clima y energíasFigure 8. Degree of maturity of the different renewable energy technologies Source: Foxon et al. (2005). Renewable energy auctions, despite some difficulties in implemen-tation in the past, have become a popular policy tool in recent years.The number of countries that adopted renewable energy auctions in-creased from 9 in 2009 to at least 44 by early 2013, out of which 30 weredeveloping countries (Irena, 2013). Many of these actions have takenplace in Latin America. Some of these are presented in Table 1 below.Societal Benefits from NRE for Power Generation in LACNRETs deliver more than energy.31 While these resources constitute anear zero carbon option, they also constitute, as a group, an indigenousenergy resource without an expiration date and with several societalbenefits.32 To guide the decision process on the use of these resources, asynthesis of key societal benefits follows:  NRETs contribute to de-carbonization of regional economies. Although by global standards greenhouse gas emissions from the31 “More than Energy” was the motto of the International Grid-connected Renewable Energy Policy Forum held in Mexico in 2006. See http://bit.ly/gridre.32 See note 13.78

The Social Benefits from Renewable Energy and Future for Latin America and the Caribbean WALTER VERGARA, ANA R. RIOS, CLAUDIO ALATORRETable 1. Results for publicly available NRET auctions and contracts in LAC countries Average Tariffs in $/MWh (Size in MW)Country Wind Biomass Small Solar Year Type Argentina hydro Brazil Brazil 127 (754) 0 0 572 (30) 2009 Auction Brazil Brazil 42 (289) 0 42 (294) 0 2012 Auction Chile Honduras 150 (1,000) 70 (N/A) 96 (N/A) 0 2006 Public Honduras Mexico 77 (1,800) 80 (2,400) 0 0 2009 Auction Panama Peru 75 (2,050) 82 (713) 81 (N/A) 0 2010 Auction Peru Uruguay 102 (78) 0 0 0 2009 Private 120 (102) 0 0 0 2009 Public 148 (94) 0 0 0 2010 Public 66 (304) 0 0 0 2009 Auction 91 (121) 0 0 0 2011 Auction 00 0 120 (43) 2012 Auction 80 (140) 63 (27) 60 (160) 220 (90) 2010 Auction 85 (150) 0 0 0 2010 AuctionSource: Carvallo (2013).“Public”stands for direct procurement,“Auction”means an international auction re-gardless of who called it, and“Private”refers to a private project not deployed through auctions nor procure-ment. Irena (2014). power sector are low in LAC, current projections predict that these will increase as more fossil-fuel based, mostly natural gas plants are built to meet regional demand (Yépez-García, Johnson & An- drés, 2010). Scaling up NRETs is one of the most effective strate- gies to reduce the emissions of greenhouse gases in the region as it would also facilitate the de-carbonization of the transport and industrial sectors. The adoption of bold renewable energy deploy- ment targets will also strengthen the position of countries that take proactive action in the international climate change arena.  NRETs can contribute to long-term energy security. Energy se- curity can be defined as a country’s control over its energy sources 79

Clima y energías (i.e. sovereignty) and the ability of the energy system to respond to fuel supply disruptions (i.e. resiliency).33 • Given the inexhaustible nature of renewable energy supplies, the security of supply spans generations. The recent Global Energy Assessment from IIASA concludes that LAC in particular could capture energy security benefits from a shift toward renewable energy (Riahi et al., 2011). • Volatile fuel prices can complicate and disrupt energy planning and broader economic initiatives, directly affecting inflation and therefore affecting macroeconomic stability (Irena, 2013). As a diverse stock portfolio can decrease the impact of volatile in- dividual commodities, an energy portfolio diversified through NRETs helps insulate LAC economies from oil and natural gas price fluctuations.  Diversification of power supply can help reduce vulnerability of hydro-based power systems to unstable hydrological cycles. In the case of a hydro-dependent power matrix, other renewables can help address the impact of extreme events in hydrological cy- cles, or changes over time in firm capacity, while maintaining a low carbon footprint in the sector (Ebinger & Vergara, 2011). Glacial retreat, for example, is already affecting hydropower output in the Andean nations (The Andean Community, 2008). Non-hydro re- newable electricity can serve as an insurance policy against the risk of an unstable hydropower outputs (Vergara, Deeb, Toba, Cram- ton & Leino, 2010).  Low operation and maintenance (O&M) costs typically associ- ated to renewables can help redirect budgetary resources to oth- er development priorities. A 10% increased share of renewable electricity would decrease regional oil consumption by 20 million33 A standard methodology for quantifying energy security benefit has not yet emerged. One recent analysis in Asia used the cost of stockpiling fossil fuels to hedge against supply disruptions as a proxy for energy security benefits. Another recent analysis from a US utility attempted to use the national security benefits of reduced oil reduc- tion as an argument for justifying energy efficiency programs.80

The Social Benefits from Renewable Energy and Future for Latin America and the Caribbean WALTER VERGARA, ANA R. RIOS, CLAUDIO ALATORRE barrels per year, or about to 2% of region’s 2009 gross domestic product (GDP) (Yépez-García & Dana, 2012). This would lead to additional resources readily available to be invested in social needs. This is particularly relevant for Haiti where 3% of the GDP could be saved by a shift towards renewables.  NRETs have a positive impact on job creation. Generally, it is estimated that NRETs create more jobs per dollar invested than conventional electricity generation technologies. According to a study in the United States, jobs created by employment of renew- able energy are three times those generated by the same level of spending on fossil fuels (National Renewable Energy Lab, 1997).34 Additional reports have also shown that the deployment of NRETs contributes positively to employment as compared to other tech- nologies both regarding the number of jobs generated in the renewable energy sector as well as economy-wide (IEA-RETD, 2012).35  NRETs reduce the local health and environmental impacts of fossil fuel technologies. The generation of electricity from fossil fuels, and in particular from fuel oil, diesel oil and coal produces negative impacts on the environment and on human health due to air pollution from nitrogen oxides, sulfur oxides, and particulate matter (Casillas &Kammen, 2010). Extraction processes of fossil fuels can have high on-site environmental impacts. Moreover, the trend towards using fracking technologies to extract natural gas will likely increase environmental risks of extraction. The use of renewable energy helps mitigate these impacts.36  Non-hydro renewable electricity production can reduce power plant siting concerns. There has been sharp criticism related to34 See also: Kammen, Kapadia & Fripp (2004).35 See also: E. Pollack (2012); Renner, Sweeney & Kubit (2008).36 Several methodologies are available to quantify local environmental benefits. See for example: Extern E. (2013), Instituto Mexicano para la Competitividad A.C. - IMCO (2013) And OSINERGMIN (2011). Valorización de las externalidades y recom- posición del parque óptimo de generación. Documento de Trabajo N° 28. Oficina de Estudios Económicos. Available at: http://bit.ly/IMCompet 81

Clima y energías the impacts of large hydropower plants in the LAC region (Ledec & Quintero, 2003) exemplified –for instance– by resistance to pro- jects in Brazil (Belo Monte) (Fearnside, 2009) and in Chile (Hydro- Aysen) (NRDC, 2012). High profile efforts to halt oil and gas ex- ploration have been reported in regions such as Yasuní in Ecuador (Yasuni ITT Initiative, 2013) and the Camisea gas project in Peru’s Kugapakori-Nahua-Nanti Reserve (Hill, 2013). Certain types of NRETs can be sited more easily and flexibly than conventional generation and therefore reduce many of these social and environ- mental concerns.  The renewable electricity industry represents a significant op- portunity to attract new investment. LAC currently accounts for just 4% of the global investment on NRETs, but has the potential to capture a much larger share of global investment on NRETs, estimated at $6 trillion during 2012-2035. Societal costs and benefits are difficult to generalize because theyare location-sensitive: they depend on the geographical context, the util-ity, the technology, and ultimately the project itself. Some of these ben-efits may be quantified into a dollar figure using established methodolo-gies (Mosey & Vimmerstedt, 2009). Others may be quantified but onlypartially. In particular, the hedge value of NRETs against fossil fuelprice volatility, which is one of their most relevant benefits, is hard tofully quantify, simply because there are no 25-year hedges for fossil fuelsavailable in the market against which NRET costs could be comparedon a like-for-like basis (Bolinger, 2013). Finally, some benefits may onlybe considered in a qualitative way as their impact is hard to measure,such as siting concerns and investment attraction. For purposes of illustration, Table 2 summarizes societal benefitsof NRETs –specifically wind and solar-in terms of avoided costs andeconomic benefits. Results show that the aggregated value of societalbenefits (US$0.285/kWh) is higher than the LCOE differential betweenmost renewables and the main fossil sources in LAC (Vergara et al., 2014).Higher LCOEs of NRETs in comparison with those of fossil fuels arehence compensated by the societal benefits provided by these options.82

The Social Benefits from Renewable Energy and Future for Latin America and the Caribbean WALTER VERGARA, ANA R. RIOS, CLAUDIO ALATORRETable 2. Societal benefits of NRETs in Latin America US$ cents/kWh • Avoided Climate Change Impacts Avoided Costs of Emissions 13.7 Avoided Costs of Climate Change Adaptation 21.5 or more* Avoided Pollution • Avoided Costs of Air Pollution Control Measures 12.0 Energy Security • Avoided Costs of Oil Price Volatility (value of fuel price hedge) 0.0041-0.0095 Economic • Balance of Payments Gains 1.22 Net Job Creation 1.16 28.5 Total with Avoided Climate Impacts 14.7 Total without Avoided Climate ImpactsSource: Vergara et al. (2014). The societal benefit from NRETs (US$0.285/kWh) is higher thanthe cost disadvantage of solar versus gas in both BAU and GEA Mixscenarios (US$0.09/kWh and US$0.14/kWh respectively) – even ifavoided climate impacts are excluded from the total (see Figure 1). Thesame conclusion is valid for wind power: the wind-gas LCOE differ-ential (US$0.132/kWh under BAU and US$0.067/kWh under GEAMix I) is lower than our conservative estimation of societal benefits(US$0.285/kWh), even excluding climate change impacts (US$0.147/kWh). Even when only partially and conservatively estimated, the soci-etal benefits of NRETs in LAC are sufficiently large enough to justifythe eventual wholesale entry of these technologies. This is true even ifavoided costs of climate change are excluded from the total estimate.Hence, the magnitude of the benefits accrued to society from NRETdeployment fully support public policy and regulatory actions to facili-tate the adoption of these technologies. Understanding the magnitude 83

Clima y energías 0.35 0.25 0.15 Societal benefits Societal benefits 0.05 including avoided excluding avoided -0.05 -0.15 costs of carbon costs of carbon emissions emissions LCOE differential LCOE differential (solar-gas) (wind-gas) -0.25 Avoided costs Economic benefits -0.35Figure 1. Estimate of LCOE Differentials Compared with Societal Benefitsof these benefits is also useful when planning for removal of subsidiesfor fossil fuels in LAC. The results also reveal significant positive synergies in LAC fromthe simultaneous pursuit of NRET deployment and the mass electrifica-tion of the transport sector. The inclusion of synergy gains from elec-trification could potentially double all of this study’s estimated avoidedcosts and economic benefits from NRET deployment.37 This is becausethe displacement of fossil fuels from transportation would in turn beassociated with additional societal benefits to be accrued through thetype of avoided costs and economic benefits described above and pos-sibly others such as avoidance of domestic refining costs and associatedhealth related expenses.37 The results, as presented, only account for impacts directly stemming from deplo- yment of NRETs in the electricity sector. However, the GEA Mix scenario pathway also incorporates a significant electrification of the transportation sector. The resul- ting impact of significant electrification accompanying NRET deployment typically at least equals those benefits coming solely from changes in the generation sector. This is because electrification also involves significant net job creation in the transportation sector and displaces fossil-based transportation fuels, thereby reducing emissions, po- llution, energy imports and BOP deficits. See Annex 4 for details.84

The Social Benefits from Renewable Energy and Future for Latin America and the Caribbean WALTER VERGARA, ANA R. RIOS, CLAUDIO ALATORREPolicies for NRET for Power Generation in LACJustificationAlthough the policies and regulations that define the electricity marketsare by and large supposed to be “technology-blind”, the reality is thatthis framework and implementing institutions were designed on the ba-sis of conventional generation technologies available a few decades ago.Therefore, an inherent bias in favor of such conventional technologiesexists. NRETs require rethinking this framework given their particulari-ties; among others (see also Table 3):Table 3. Differences between conventional and renewable energy technologiesCost pattern Conventional technologies Renewable technologies Lower capital costs and higher fuelGeneration costs emphasize short term market Higher capital costs and lower fuel costspattern operation, particularly spot market. require long-term bankable contracts instead of direct market participation.Geographic Predictable short term generation High penetration of zero variable cost ca-pattern puts focus on following demand pacity changes the dynamics of marginal through a mix of peak gas turbines cost-based electricity markets.Societal and large hydropower. Ancillary ser-benefits vices are relevant, but not critical. Unpredictable short term generation require devoting more resources to fo- Large fossil fuel plants are generally llow variation, particularly setting up a more flexible in terms of location, market for short term demand response. which eases joint transmission- Ancillary services are critical. generation planning and rate setting for the former. Distributed and remote locations may require the need of specific transmission Besides energy, power (in some ca- planning and rate setting mechanisms. ses) and ancillary services, there are The geographic pattern may also imply no more products in a conventional that the scale of projects is smaller. electricity market. NRETs require redesign of electricity mar- kets to incorporate new “products”, such as climate change resilience, price hed- ging, and lower environmental footprint, among others. 85

Clima y energías  NRETs have a different cost structure. Whereas most of the long- term costs of fossil-fuel fired generation are linked to their opera- tion (fuel costs), upfront investment makes for most of the cost for NRETs. This capital-intensive nature of NRETs can be a hurdle to project development and has consequences in terms of the risks investors are willing to take.  NRETs have a different generation pattern over time. Many NRETs depend on the availability of natural resources which do not necessarily match demand. Therefore, they can generate electricity only when such resource is available. This is the case in particular of technologies such as wind, solar and marine. Accord- ingly, market rules, distribution network design, and transmission interconnectivity need to accommodate variable generation.  NRETs have a different geographical pattern. Some NRETs such as PV are widespread; others are available only in specific sites. This particularity of NRETs has consequences in several areas of policy and regulation, including land-use considerations, transmis- sion network design and specifications, and adequate rules for in- tegration of small scale power plants.  NRETs provide a number of societal benefits. NRETs deliver social and environmental benefits that are usually unrecognized and un-priced in the market. Policies and regulations need to be designed so that these benefits are internalized in investment deci- sions. In order to accommodate these differences, mechanisms can beimplemented to compensate for the current biases, and/or the marketrules can be changed altogether so that they provide a truly evened play-ing field.Entry mechanismsRenewable energy policy is rapidly evolving. New policies have been in-troduced every year and many existing policies have been continuouslyrevised. There have been numerous studies devoted to describing and86

The Social Benefits from Renewable Energy and Future for Latin America and the Caribbean WALTER VERGARA, ANA R. RIOS, CLAUDIO ALATORREanalyzing these different policy types and enumerating best practices,including several recent studies focusing specifically on policy models inLAC (Gischler & Janson, 2011; Luecke, 2011; Pérez Arbeláez & Mar-zolf, 2010). Recent studies have identified over 100 different categoriesof policy support mechanisms (Glemarec, 2011; Mitchell et al., 2011). National renewable energy targets have usually been a key buildingblock for market entry of non- traditional renewables. In 2005, 45 coun-tries had national renewable energy targets in place (Martinot, 2005).By 2012, the number had increased to close to 120 (REN21, 2012). Al-though many of these targets are not accompanied by mechanisms topenalize stakeholders for non-compliance, they are nevertheless veryuseful in providing a political direction and driving policy change. The primary mechanisms for accelerating large-scale, on-grid re-newable energy market growth and for meeting renewable energy tar-gets at the international level, have been feed-in tariffs (FITs) and re-newable portfolio standards (RPS) supported by tradable credits. Bothpolicies compel utilities to procure renewable electricity by fixing eitherthe price or the amount of energy, respectively. Auctions represent athird model in which a specific capacity or energy is competitively pro-cured. Auctions are overtaking other mechanisms as NRETs increasetheir level of competitiveness. Significant time and effort has been devoted to describing FITs(Rickerson, Laurent, Jacobs, Dietrich & Hanley, 2012) and auction de-signs (Maurer, L. T. A., & Barroso, L. A. (2011) as well as discussingthe comparative merits of each (Elizondo-Azuela & Barroso, 2011; Li-ebreich, 2009). The practical differences between these two policy types,however, are fairly limited. Beyond the rate setting mechanism, bothpolices can be designed to be similar in terms of long-term and standardcontracts, capacity caps, technology eligibility, priority and guaranteedinterconnection, priority dispatch, etc. Incentive levels that are too highcreate excess profits for generators, whereas incentives that are too lowmay not support market growth and may not achieve policy objectives. Inpractice, both policy types can be (and have been) designed to be efficientand effective and to meet a broad range of different policy objectives. 87

Clima y energías FITs were the most prevalent national policy mechanism interna-tionally and have supported the majority of global wind and PV ca-pacity (Glemarec, Rickerson & Waissbein, 2012). Although FITs wereinitially used in Europe, the majority of FIT policies are now in emerg-ing economies and developing counties. A number of countries in theLAC region adopted FITs (or policies closely related to FITs) duringthe last decade, including Argentina, Brazil, Dominican Republic, Ec-uador, Honduras and Nicaragua (Rickerson et al., 2010). More recently,however, there has been a strong trend toward competitive bidding inthe region with Argentina, Brazil, Costa Rica, El Salvador, Honduras,Jamaica, Mexico, Panama, Peru, and Uruguay introducing auctions.Chile and Nicaragua are the only countries in the region whose policiesresemble a RPS, mandating generators and distributors to comply withspecific quotas of NRET in their sales or purchases, respectively. FITs and auctions were originally designed to achieve incremen-tal rather than structural change in the electricity markets, but in somecases they have been refurbished to enable scaled-up renewable energypenetrations by putting in place sophisticated mechanisms to managegrowth such as cost control and ratepayer protection (Kreycik, Cou-ture, & Cory, 2011). These procurement policies coupled with broaderelectricity market reforms attempted to steer structural change in thecountries they were implemented. Mexico offers a unique case of offsite self-supply regulations thatare driving the development of NRETs, and notably that of wind powerin the Isthmus of Tehuantepec (with more than 770 MW of installedcapacity, AMDEE, 2012). Mexican regulations include an energy bank,post-stamp wheeling (transmission) charges, and capacity recognitionto offset demand charges (Davis, Houdashelt & Helme, 2012). In manyof these projects consumers and generators have created self-supply as-sociations through cross-sharing agreements. In addition to procurement or self-supply policies, a set of comple-mentary policies are used that strengthen the enabling environment for re-newable energy (e.g. streamlined permitting, property tax exemptions,import tax exemptions), provide market support (outreach, education,88

The Social Benefits from Renewable Energy and Future for Latin America and the Caribbean WALTER VERGARA, ANA R. RIOS, CLAUDIO ALATORREcapacity building, and institutional strengthening), and enhance thecontribution of NRETs to local development.New Energy MarketThe energy market regulation has traditionally been technological-ly biased in favor of fossil fuel technologies and neglects their nega-tive societal impacts. Repairing these two missing pieces is what the“new” energy market needs to do in order to efficiently allocate scarceresources. This involves changes in market rules, network design andenabling policies. As the current generation of policies enacted in theLAC region continues to mature and policy makers continue to strivetoward national targets, a set of best practices for addressing the upfrontcosts of renewable resources and scaling up regional markets is likelyto emerge. LAC has the opportunity of leapfrogging towards innovativeframeworks to anticipate and then manage high penetrations of renew-able generation, and in particular of variable generation.Variable generationIn order to incorporate variable generation in the region there is a needto understand both the electricity markets structure and the types oftechnologies available in each electricity grid. Electricity market struc-tures vary widely across the LAC region, and include vertically integrat-ed monopolies in many Caribbean countries, single-buyer markets inseveral Central American countries, and wholesale electricity marketsin many other countries in the region. The commonality among thesestructures is that these were designed around large, centralized powerplants that provide steady “base load” power and peaking plants thatsupplement the base load generators when demand rises. An electricity grid with a high penetration of renewable energy,however, would require a different mix of generator types. Given thetechnical difficulties to store power, electricity systems can accommo-date some share of inflexible technologies (“must-take” technologiesthat cannot be dispatched, i.e. turned on and off at will), but require as 89

Clima y energíaswell flexible technologies that can ensure that the generation matchesthe load at any instant. In conventional power systems base load technologies such as nu-clear or coal occupy the inflexible (i.e. non-dispatchable) niche, whereaspeak technologies such as hydropower (with seasonal or hourly storagereservoirs) or gas turbines occupy the flexible niche, with other technol-ogies with limited flexibility occupying intermediate positions. In con-trast, in renewable energy systems, non-controllable (non-dispatchable)technologies such as wind, solar, marine, and also geothermal poweroccupy the inflexible niche. NRETs such as hydropower and somebiomass technologies are available to occupy the flexible niche. Otheroptions are available as well to achieve the flexibility that renewableelectricity systems include (for instance) regional integration, energystorage, and demand control (Cochran, Bird, Heeter & Arent, 2012;Chandler, 2011). The LAC region is well-positioned in terms of flexible generationtechnologies: With the highest penetration of hydropower in the world, ithas the ability to absorb significant penetrations of variable renewableenergy. However, current policies and regulations hamper, rather thanfoster, synergies between hydropower and NRETs. New mechanismsare required to enhance the value of hydropower as a technology thatcompensates the short-term variability of NRETs.Power systems integrationIn LAC, a regional electricity system has been pursued as a key elementfor economic integration. Interconnection projects have been proposedfor South America, Central America, and the Caribbean. Today, theobjective of scaling up NRETs provides a further powerful reason toimplement these projects. As compared to large countries such as Brazil, which clearly havethe land area and the renewable resources to take advantage of geo-graphic diversity, smaller countries such as those in Central Americaand the Caribbean will benefit more from greater regional transmission90

The Social Benefits from Renewable Energy and Future for Latin America and the Caribbean WALTER VERGARA, ANA R. RIOS, CLAUDIO ALATORREinterconnection.38 Regional integration would permit variable genera-tion to be balanced across international borders. More importantly,integration would allow drawing on the large hydro resource as a stor-age tool to balance demand and supplies. In this regard, the significanthydro power reservoir capacity can play an enabling role for regionalentry of renewables. Specifically, regional power pools can:  improve system reliability and unlock investments by creating op- portunities to capture greater economies of scale;  enable the integration of variable renewable energy by comple- menting greater geographic and resource diversity;  allow operating reserves to be shared and coordinated (in the Nor- dic power pool, for example, it has been estimated that reserve requirements would need to be twice as high if each country op- erated in isolation given the high regional penetrations of wind) (Holttinen et al., 2009); and,  higher penetration of variable renewable generation, providing additional incentives to harness resource-rich areas such as the Patagonia (tidal and wave resource) or the Atacama and Sonora deserts (solar radiation). Wind and solar output may be variable at a single site, but theoverall variability to the system can be smoothed out by geographicallydispersed resources. In other words, while wind speeds may be low atone wind farm, they may be high at another at the same time. Simi-larly, clouds may temporarily reduce output at one solar plant, but theskies may be sunny over another on the system many kilometers away.Larger power systems can more readily incorporate variable renewa-bles because the output from geographically dispersed renewable energysystems is less correlated. Wind forecast errors, for example, can be re-duced by as much as 30% - 50% when wind is aggregated over a broadgeographic area (Milligan & Kirby, 2010). Since generation is less vari-able in aggregate, it reduces the need for operating reserves and lowersintegration costs.38 For a discussion of potential regional interconnection strategies, see Nexant (2010). 91

Clima y energías Progress in regional integration is limited, however. The CentralAmerican Electrical Interconnection System (SIEPAC for its Span-ish acronym) has created new opportunities for power trade – andvariable generation integration – among nations. It has been estimatedthat the interconnection on its own will result in a 3% reduction in en-ergy cost and 4% fuel savings for the connected countries (Reinstein,Mateos, Brugman, Johnson & Berman, 2011). Nonetheless, differ-ences in electricity market structures and regulations have constrainedefforts to integrate the markets. These same challenges are mirroredacross the continent. For example, the Andean region countries arecurrently intending to ease electricity exchange through the AndeanElectrical Interconnection System (SINEA). Likewise, Uruguay hasbeen vocal with respect to the relevance of the interconnection withBrazil to transmit surplus wind power and import in low wind times39.Although there are an increasing number of plans and proposals toconnect across international borders, artificial barriers created by mis-matched regulations currently constrain trade and will likely continueto do so in the near to mid-term (Chamba, Salazar, Añó, Castillo,2012). An integrated power system could be made even more effectivethrough the adoption of complementary measures, including:  Demand response, which consists of mechanisms to incentivize end-use customers to adopt measures or technologies leading to changes in their real-time electricity consumption to match avail- able supply. It can be used as a cost-effective resource to balance variable renewable energy generation, by adjusting in real-time the load curve in response to resource availability (North Ameri- can Electric Reliability Corporation, 2010).  Storage technologies, to provide further system flexibility and thus enable a higher penetration of variable NRETs. Technologies39 Interview to Oscar Ferreño, generation manager for UTE, included in UNIDO and OLADE’s “Observatory of Renewable Energy in Latin America and the Caribbean: Uruguay”92

The Social Benefits from Renewable Energy and Future for Latin America and the Caribbean WALTER VERGARA, ANA R. RIOS, CLAUDIO ALATORRE currently being deployed40 include pumped hydro and lithium- ion batteries. Both technologies are already present in the region (the Rio Grande pumped hydro 700 MW plant in Argentina,41 and the two Battery Energy Storage Systems of Angamos and Los Andes in Chile, with a combined capacity of 32 MW) (Uni- versidad Católica de Chile, s. f.). Most pumped hydro systems in the world use freshwater, but there is one that uses seawater (IEA, s. f.) a technology that could be applied in LAC. Small-scale bat- tery storage systems are another promising technology for the medium term. In particular, electric vehicles will have in the near future the capacity to soak up generation at times of low demand to address two problems at once. Storage technologies serve other purposes in addition to scaling up NRETs (as in the case of the above mentioned systems in LAC), and NRET deployment pro- vides additional reasons to implement them. Water hydrolysis for hydrogen synthesis could also be used to store energy during wet, rainy periods.  Shorter scheduling and dispatch intervals. In wholesale markets, generation dispatch is typically scheduled on an hourly basis. Once generation is scheduled, it is required to hold its output at a fixed level until the top of the next hour. Since wind and solar are more likely to vary within the course of an hour than other resources, this means that they may require higher operating reserves. This type of regulation draws from the most expensive ancillary service resources introducing a further cost barrier for the integration of variable renewable energy into wholesale markets. In order to ad- dress this, markets can be designed to schedule generation at sub- hourly intervals, such as 5, 15, or 30 minutes. Shorter scheduling intervals reduce the probability that variable renewable generation will diverge from scheduled output, reduce the need for operating40 These are storage technologies that can operate independently from power plants. There is in addition one technology that enables energy storage within a power plant, namely, thermal storage in concentrated solar power plants.41 See EPEC website: http://bit.ly/EPECArg 93

Clima y energías reserves, and therefore reduce integration costs. Market gate clo- sure42 times that occur closer to actual generation delivery time can also help reduce forecast error. Depending on the electricity sector structure, challenges related tothe use of market mechanisms to integrate variable renewable energyand introduce analogous ancillary service and regulation functions intoelectricity systems might differ between countries. In particular, thereare not yet well-established demand response markets in the LAC re-gion that could be used to support variable renewable generation, al-though Chile’s market is perhaps the furthest along (Martínez & Rud-nick, 2012).Expanding Transmission InfrastructureTransmission expansion is an issue closely related to regional integra-tion. Countries in the LAC region are already seeking to expand theirtransmission networks in order to strengthen existing connections, ex-tend service to new locations within their borders, and interconnect withneighboring countries. Higher penetrations of renewable energy mightrequire additional layers of planning for the transmission system. Newtransmission capacity may be needed to integrate and balance variablerenewable energy resources as well as access many of the best renew-able resources (such as those shown on Figure 5) often located far frompopulation centers. Transmission planning methodologies are in place throughout theregion to accommodate the growth of conventional centralized genera-tion, but the expansion of smaller-scale power plants may call for newapproaches to transmission planning and implementation. New trans-mission can be difficult to finance and build because of the upfront capi-tal cost, planning and development risks, and timing challenges. Sincetransmission and generation are generally not built simultaneously, gen-erators face the risk that sufficient transmission capacity might not bebuilt if it is not already in place, whereas transmission developers bear42 Gate closure is the time at which the market commits to deliver electricity.94

The Social Benefits from Renewable Energy and Future for Latin America and the Caribbean WALTER VERGARA, ANA R. RIOS, CLAUDIO ALATORREuncertainty related to the probability that the line might not be fullyutilized due to insufficient generation. To address the challenges, severalcountries and states43 have enabled the construction of dedicated trans-mission lines to renewable resource-rich areas, supported by specialregulations and cost recovery provisions. The open seasons implementedin Mexico provide a good example (Comisión Reguladora de Energía,2012). The options available will depend on each country’s electricitymarket structure. Large concentrations of renewable energy resources exist thatcould meet significant proportions of regional demand if they couldbe developed. Near-term opportunities could be unlocked, for example,renewable energy scale-up in Mexico and Brazil could be enabled witha $660 billion investment in immediate transmission (Madrigal & Stoft,2011). To realize such opportunities, regional policymakers will needto identify innovative models for transmission capacity planning, costallocation, and financing.Energy pricesAlthough many regulatory frameworks are leaned to leave electricityprices to be set through a market or market-alike dynamic aiming to-wards efficiency, market agents clearly play according to a set of rulesthat in some cases explicitly deters or keep NRETs from participatingin such market dynamic. The way in which biddings for the expansionof the power system are designed determines the incentives for the dif-ferent technologies. Market rules in generally lack mechanisms to value the benefitof RETs in terms of long-term price stability -one of the benefits thatNRETs provide is to stabilize electricity prices in single-buyer mar-kets. In order to achieve a truly level playing field between NRETsand conventional technologies, all generators would need to be askedto offer a constant electricity price over the long term (which wouldthen be included in their Power Purchase Agreements). This would43 For example, the Competitive Renewable Energy Zone (CREZ) in the US state of Texas. 95

Clima y energíasmean that fossil fuel generators would need to get long-term fuelhedge contracts. In reality, fossil fuel-fired generators are almost always allowedto pass through the fuel price volatility to the consumers or to thegovernment, and this becomes a further bias against NRETs. Innova-tive mechanisms need to be designed in this respect Energy subsidies also have a direct connection with the deploy-ment of NRETs. LAC made up over 7.5% of global energy subsidies.Pre-tax subsidies41 accounted for approximately 0.5% of regional GDPor 2% of total government revenues (although in some countries en-ergy subsidies account for over 5% of GDP) (IMF, 2013). NRETs needto compete in unfavorable terms when fossil fuels used for electricitygeneration are subsidized while subsidized energy leads to consumerslacking the appropriate incentives to implement self-supply alternatives.Some countries that rely heavily on fossil fuels for electricity generationhave set up subsidies to dampen the effect of fuel price volatility on theconsumers. The challenge in these cases is to ensure a transparent sub-sidy mechanism (well-targeted subsidies that benefit the most neededpopulation) without jeopardizing the creditworthiness of utilities andthus their ability to scale up NRETs.Looking forwardThe region can meet its future energy needs in a cost-effective man-ner through renewable sources, leading the way globally, and buildinga strong green economy. Regardless of the view that each country hason the long-term future of its electricity system, increasing the penetra-tion of NRETs today makes sense from all perspectives. These issues lieat the heart of current debates about the role that different generationtechnologies can and should play in the short and long term, with somestakeholders claiming that 100% renewable electricity systems are bothtechnical and economically possible and desirable (Roberts, 2012; Janz-ing, 2010).44 These estimations do not take into account externalities and tax subsidies.96

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