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REPORT INT. November 2014 GREEN ENERGY LEADERS. Latin America s Top Countries In Renewable Energy

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REPORT INT 2014 November 2014 GREEN ENERGY LEADERS Latin America s Top Countries In Renewable Energy Stefano Ember / shutterstock.com / The hydroelectricity dam of Itaipu between Brazil and Paraguay CONTENTS
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REPORT INT 2014 November 2014 GREEN ENERGY LEADERS Latin America s Top Countries In Renewable Energy Stefano Ember / shutterstock.com / The hydroelectricity dam of Itaipu between Brazil and Paraguay CONTENTS Preface 4 Introduction 6 Costa Rica 8 Urugauay 12 Brazil 16 Chile 20 Mexico 24 Special mention: Peru 28 Nicaragua 32 Conclusion 36 References 38 vitmark / shutterstock.com / Floating Islands on Lake Titicaca Puno, Peru, South America PREFACE The Latin American and Caribbean has one of the richest sources of natural renewable energy in the world. It boasts enormous potential for non-conventional renewable energy. In fact, it is estimated that if the region exploited just a tiny fraction of its non-hydro renewable capability, it could meet the energy demands of the region s growing economies. So why has the region s uptake of non-traditional clean energy technologies been so slow? False perceptions have blocked what otherwise would be the most obvious way forward. The myth that renewable energy is highly expensive compared to fossil fuels remains, but it is a myth. Between 2009 and 2014 the generation costs for solar energy have fallen by 80 per cent; wind energy generation costs have declined about 60 per cent. Both technologies are highly cost competitive with fossil fuels in many markets. Besides, they provide numerous non-market benefits, especially those associated with climate change and reducing health risks. Another mistaken perception: that traditional energy technologies and an expanding grid are the best approach for delivering energy to the rural poor. The opposite is true. Renewable energy technologies are far more amenable to reaching rural populations, precisely because they are not dependent upon investment in a grid. But this scenario is rapidly changing. The myths surrounding renewable energy are being dispelled, particularly the myth that it is too expensive. In just a couple of decades, Latin America and the Caribbean has become a hub for clean energy technologies. In 2013, US$16 billion was allocated to invest in renewable energy in the region, accounting for seven per cent of global clean energy investments. The Latin America and the Caribbean region is experiencing a silent and complex renewables revolution, but progress is slow. The region is still dependent on fossil fuels and hydropower. Alongside renewable energy, its countries continue to explore non-renewable techniques such as fracking to access new oil and gas reserves. New hydroelectric complexes are being developed. It is estimated that more than US$40 billion is currently used to subsidise fossil fuels in the region. Traditional energy sources will not disappear any time soon in the region or elsewhere in the world. But the modern renewable energy market is growing quickly. There are many examples across the region of the development of clean energy projects. This report shows that Latin America and the Caribbean have significant potential to show what a clean energy future could look like. Costa Rica, Uruguay, Brazil, Chile and Mexico epitomise the work the region is doing to accelerate the necessary paradigm shift. Currently, only six per cent of energy in the region comes from modern energy sources like solar, wind, biomass or geothermal power. However, it is expected that by 2050 this will grow to 20 per cent. Clearly, there is a strong economic and financial case for investment in renewable energy, alongside an enormous global imperative to move away from the burning of dirty fossil fuels which cause global warming. The Latin American and Caribbean region has the opportunity to develop in a different and better way. It can move away from fossil fuels and become a global renewable energy leader. The region has all the renewable natural resources it needs to become a paragon for clean energy projects. It offers both an opportunity and a responsibility to future generations. It has all that it is needed to shape a green economy future. Let the clean energy revolution begin! Yolanda Kakabadse President, WWF International WWF Green Energy Leaders: Latin America s Top 5 In Renewable Energy Page 5 INTRODUCTION 7% THE TOTAL GLOBAL AMOUNT OF ELECTRICITY LATIN AMERICA GENERATES Latin America is the new frontier for clean and sustainable energy, the new hot spot for renewable energy. In 2013, Latin America attracted about US$16 billion of investment in the clean energy sector, representing over seven per cent of total global investments in renewable energy [1]. Decreasing technology costs and increasingly supportive policies in the clean energy field have allowed the region to become an exciting market for renewable energy. Today Latin America generates about seven percent of total global electricity, and almost 65 per cent of that comes from renewable sources [2]. The largest share comes from hydropower: more than 725 terawatt-hours (TWh) 1. Non-traditional renewable electricity sources (such as solar, wind, geothermal, etc.) account for only six percent of the power mix in the continent. It is expected that by 2050 over 20 per cent of the electricity generated in the region will come from non-hydro renewables [4]. From the northern Sonora Dessert in Mexico to southern Argentinian Patagonia, the region is loaded with vast renewable energy resources. They alone could supply over 20 times the electricity demand expected by 2050, which will nearly triple to about 3,500 TWh [5]. The region s estimated onshore wind energy potential, about 1,600 TWh, would alone be enough to fully power the continent s current electricity demand [6]. Electricity consumption is expected to increase annually by three per cent. By 2030, this rate of growth will require the region to almost double its installed power, to about 600,000 MW [5]. Taking into account these massive power infrastructure requirements, renewable energy could be established as leading source of power. It could shift the region s energy model towards a more sustainable one. In the period between 2006 and 2013, total renewable energy capacity in Latin America and the Caribbean grew more than 270 per cent 2. In the same period, more than 3,000 MW of new additional renewable capacity were brought on line [2]. There is no reason why the region s success in renewable energy could not continue to be extended over the coming decades. There are several renewable energy success stories offering exciting examples of the potential for a clean energy revolution in the region. Five of the 26 countries of Latin America distinguish themselves for renewable energy performance. They shine thanks to the enabling environment created by their energy and industrial policies, the growing renewable energy investment attractiveness they have created, and the high speed in which clean technologies have penetrated into their energy markets. Latin America is booming for renewable energy, but these five countries are particularly raising the bar for clean energy transformation. This report is WWF s compilation of renewable energy success stories in Latin America. Based upon different indicators such as the Bloomberg New Energy Finance (BNEF) s Climate Scope Score 2014, 2013 & 2012 [2][7][8]; the Ernst and Young (E&Y) s Renewable Energy Country Attractiveness Index 2014 & 2013 [9][10]; and the World Energy Council (WEC) s Sustainability Index 2013 [11], this report ranks the five countries with the most exciting development in clean energy. This compilation promotes their achievements in reshaping the energy paradigm of the continent. They are making renewable energy Latin America s new normal. 1 terawatt-hour (TWh) is equal to 1,000,000 gigawatts-hour(gwh). For reference, the electricity consumption of the USA (2011) was around 4,100 TWh [3]. 2 From 11.3 GW in 2006 to 30.6 GW in 2013 [2][7]. WWF Green Energy Leaders: Latin America s Top Countries In Renewable Energy Page 7 #1 Roberto Lucci / shutterstock.com / Aubergines cooking on a solar cooker, Costa Rica #1 COSTA RICA [Best positioned Latin American country in WEC s Sustainability Index 2013] Key Figures Population (millions) (2013): 4.9 GDP (billion USD) (2013): 49.6 Five-year GDP growth (%) ( ) 11 GDP per cap (USD/ cap) (2013): 10,122 Growth rate of power demand (%) ( ) Installed power capacity (GW) (2013) 3 Non-hydro renewable share (%) (2013) 31 RES Non-hydro power generation (GWh) (2013) 3,952 RES Non-hydro energy investments (billion USD) ( ) 1.7 Electrifi cation rate (%) (2013): 99.4 Source: [2] WWF Green Energy Leaders: Latin America s Top Countries In Renewable Energy Page 9 COSTA RICA Over a century ago, San Jose became the third city in the world and the first in Latin America to light up its streets with electric power [54]. In 1984, 25 lamps powered by a small hydroelectric plant were the first steps towards a bright and clean future for Costa Rica [55]. COSTA RICA HAS DECIDED TO GO FOR A TARGET OF 100 % RENEWABLE ENERGY BY 2021 Today, the country is close to achieving another milestone in the country s energy history: to become the first 100 per cent renewable energy-powered country in Latin America. As for many countries in Latin America, climate change is the biggest threat to its power system. Among the many dangers climate change poses to the region, it is likely to have significant impacts by reducing rainfall [56][57]. Shifts in rainfall patterns could particularly imperil generation of electricity by hydropower [58], Costa Rica s main source of electric generation. Aware of the risks of a single major source of power generation, the government has decided to go for a target of 100 per cent renewable energy by Ultimately, the target aims to boost the penetration of non-hydropower technologies and diversify options for electricity supply, but also to pursue a carbon neutral economy [59]. Costa Rica is perhaps the greatest renewable energy paradise in the whole Central American region. The country is privileged by its 223,000 GWh a year of potential hydroelectricity, out of which at least 10 per cent are already economically exploitable [60]. It is also among other countries in the region with the largest geothermal potential: up to 2,900 MW are available for it s exploitation [61]. Finally, due to its geographical location, Costa Rica enjoys excellent potential for generating wind energy, with speeds between 4.8 and 5.6 m/s [60]. Today, Costa Rica is taking every opportunity to exploit its renewables. One decade ago, total installed capacity of geothermal and wind power was 145 MW and 62 MW respectively. By 2012, total installed capacity of geothermal and wind power grew to 217 MW and 148 MW respectively. An additional 210 MW for geothermal power and 215 MW of wind power are expected to be in operation throughout the next decade [58]. By 2013, total clean energy installed capacity (excluding large hydroelectricity) reached over 900 MW [2]. In 2013, Costa Rica generated some 10,100 MWh of electricity out of which 87 per cent were from renewable energy sources. Although the majority came from hydropower generation, around 20 per cent of the total renewable electricity was generated from non-hydropower renewables [62]. With these figures, Costa Rica establishes itself among the leader countries in Latin America for nonhydro renewable power generation 14. Costa Rica is a regional leader in implementing policies that favour renewables. The country has established at least two key mechanisms that have facilitated the penetration of renewables to the power mix. Firstly, a specific technology auction system, which by 2012 allowed 138 MW of additional clean energy capacity to be contracted (38 MW small hydro; 100 MW wind power) [7]. Secondly, a programme to promote local generation by consumers, who can sell surplus energy back to the grid. Under this program, a total of 5 MW of additional capacity was made available by small producers who connected their solar, wind, biomass, and small hydropower or cogeneration systems to the grid. By early 2012, 225 kw of additional clean electrical capacity were achieved (mostly from solar sources) [61]. Thanks to its great potential and its favourable policies, Costa Rica has created an attractive environment for renewable energy financing. During the period from 2006 to 2013, its US$50 billion economy attracted over US$1.7 billion funding for renewable energy projects [51]. In 2013 a record US$600 million were committed to renewables. Around 40 per cent of that went straight to non-hydro renewables [2]. 14 In 2012, El Salvador and Nicaragua were the largest producers of non-hydro renewable electricity relative to total electricity production: 24 per cent and 21 per cent respectively [63]. WWF Green Energy Leaders: Latin America s Top Countries In Renewable Energy Page 10 Given its high proportion of renewables in the energy mix, Costa Rica s energy performance is outstanding in terms of environmental sustainability. Costa Rica boasts achievements in energy efficiency as well as renewable energy and other low-carbon developments, making it one of the cleanest countries on earth in terms of electricity generation [11]. In the Latin American region, it is the cleanest country in terms of a range of factors: energy consumption per unit of GDP; carbon intensity in energy conversion processes; impacts over air and water pollution related to energy production; and amount of emissions for electricity produced [11]. Moreover, consistent with its commitments towards carbon neutrality by 2021, Costa Rica is also moving forward on its greening agenda for the transport sector [59]. Aiming at reducing its dependence on oil for transportation, Costa Rica started developing the electrification of its transport system. By 2030, Costa Rica plans to have nine per cent of vehicles in country s transport sector running on electricity [59]. Despite its small size, Costa Rica is taking giant leaps and leading by example: a 100 per cent sustainable one. It is an inspiring example for other countries in the region. h Overall, auctions have resulted in 31 GW of contracting new capacity, 40% which is conventional hydro, 20% which is non- conventional renewables, and 40% conventional fossil fuels, mostly gas[43]. WWF Green Energy Leaders: Latin America s Top Countries In Renewable Energy Page 11 goldnetz / shutterstock.com #2 URUGUAY [Latin American country with the highest share GDP invested in renewable energy in 2012] Key Figures Population (millions) (2013): 3.4 GDP (billion USD) (2013): 55.7 Five-year GDP growth (%) ( ) 13 GDP per cap (USD/ cap) (2013): 16,382 Growth rate of power demand (%) ( ) 10.1 Installed power capacity (GW) (2013) 3 Non-hydro renewable share (%) (2013) 10 RES Non-hydro power generation (GWh) (2013) 745 RES Non-hydro energy investments (billion USD) ( ) 22 Electrifi cation rate (%) (2013): 98.6 Source: [2] WWF Green Energy Leaders: Latin America s Top Countries In Renewable Energy Page 13 URUGUAY Uruguay is a country that, other than in football, often goes unnoticed. With less than 180,000 km 2 in surface area this tiny country ranks second as the smallest in South America [42]. Uruguay is neither one of the most populated (3.4 million [43]) nor the richest in the region. In 2013, its GDP was 55.7 billion US$ [30] 8. However, thanks to its accomplishments in the policy arena, it is considered as one of the most talented nations on Earth. The Economist elected it as the country of the year 2013 [44]. What makes Uruguay so special in the policy field? Uruguay is a country that has put in place pathbreaking reforms that have served to improve local wellbeing, setting a precedent for other nations across the globe. During the last 10 years, Uruguay has pursued good governance, and achieved real transformational changes in education, energy, environment and inland security [45]. It has sought long-term economic stability, social inclusion and environmental sustainability for all Uruguayans. In 2008, in line with country s development aspirations, Uruguay s administration approved its national Energy Policy strategy [46][47] 9. The energy policy constituted a long-term vehicle to enhance productivity and social development, while improving and fostering industrial competitiveness, energy independence, economic and environmental sustainability, and social integration [47]. Embedded on four main strategic axes 10, the energy policy defined the guidelines, timescales and various lines of action to achieve a central objective: to satisfy all national energy needs cost-effectively. Two of the priorities of Uruguay s energy policy are to promote energy supply diversification; and to provide adequate energy access to all social sectors. HIGHEST SHARE OF GDP INVESTED IN RENEWABLE ENERGY The priorities reflect Uruguay s determination to achieve a 100 per cent country electrification rate by 2015 and renewable energy supply optimality by And it is in this context that Uruguay s government has sought to provide universal access to energy through supporting energy generation like photovoltaic electricity and solar water heating. Through its Energy Policy strategy, Uruguay took leaps towards a long lasting clean future. Perhaps, in Latin America, there is no country that will achieve what Uruguay is aiming for: 100 per cent electrification; 50 per centre share of renewables in the primary energy supply; and 15 per cent power generation from modern renewables by 2015 [47] 12. It has meant Uruguay is now one of countries with the highest electrification rate of the whole continent: 98.6 per cent [48]. The country is defining global trends in renewable energy investment [1]. In 2012, it ranked first in the global top five countries with highest share of GDP invested in renewable energy [49] 13. In 2013, it ranked fourth as the country that attracted the largest absolute amount of investment in Latin America, about US$1.1 billion [1]. In 2014, it ranked first in Latin America with the fastest growth rate of clean energy investment [51]. Uruguay is indeed achieving a renewable energy transformation. The country will soon reach 40% cent of its primary energy matrix from renewables. Given the great availability of renewable resources, Uruguay is already able to cover over 80 per cent of its electricity needs from renewables [50]. 8 For comparison, in 2013, Argentina and Brazil s GDP was US$612 billion and US$2,246 billion respectively [30]. 9 The policy was then rattifi ed by Uruguay s Parliament multi-parties Energy Commission in Viz. institutional frameworks, energy supply diversifi cation, energy demand management and social integration. 11 Optimality is the accepted level of balance, based on stability and sustainability concerns, that the energy system can achieve when considering renewable and natural gas supply and energy demand management measures. 12 That is, excluding large hydros. 13 About three per cent[50] WWF Green Energy Leaders: Latin America s Top Countries In Renewable Energy Page 14 Inside Uruguay s 2030 energy vision, solar plays a fundamental role in promoting universal access. Photovoltaic electricity and solar water heating systems are at the heart of its energy supply strategy. Uruguay s regulatory framework for solar technologies is perhaps one of the most complete in the region. It includes at least 17 legal instruments that enable solar technologies to expand [52]. In particular, solar water heating has become a priority for Uruguay. In 2009 the government enacted the Solar Thermal Energy Law which declares research, development and capacity building on this technology a matter of national interest for the country [53]. Uruguay s vision makes the country a one-of-a-kind leader for renewables in Latin America. WWF Green Energy Leaders: Latin America s Top Countries In Renewable Energy Page 15 Thiago Leite / shutterstock.com #3 BRAZIL [Best positioned Latin American country in BNEF Climate Scope Score 2014 &] i
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