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New Study Addresses Renewable Energy Market Barriers in Latin America and the Caribbean



Washington, D.C.—The region of Latin America and the Caribbean (LAC) is already a global low-carbon leader in terms of power generation from hydrological and biomass resources. Declining costs, maturing technologies, and vast untapped potentials including geothermal, solar, and wind offer an unprecedented opportunity to further develop the market for other renewable energy sources in the region. Continuing to support sustainable energy investment will provide LAC with the opportunity to address key economic, social, and environmental challenges and help countries mitigate and adapt to climate change, according to the latest report from the Worldwatch Institute (, prepared for the Inter-American Development Bank (IDB). 


“Our goal was to prepare a concise and comprehensive report on the current status of, and powerful drivers for, renewable energy in the LAC region,” says Alexander Ochs, Worldwatch’s Director of Climate and Energy and the project leader. “We identify key technology, market, and policy barriers, as well as concrete instruments to overcome them. Because of the region’s high vulnerability to extreme weather events, we specifically address the energy sector’s climate change adaptation needs. And we provide a clear set of recommendations to multilateral banks for how to best fulfil their important role in supporting renewable energy development and deployment.”


Approximately 34 million people in LAC still lack access to electricity, and the region will need to double its installed power capacity by 2030 to meet rapidly growing electricity demand.


“Self-sufficient, domestic renewable energy supply is a key component to increasing energy security, eliminating the need for expensive fuel imports, and reducing the burden on national budgets,” says Ochs. “What is more, local renewables are the only logical foundation of climate-compatible development and sustained economic growth.”


Access to electricity is not the only challenge, as the region faces serious grid reliability and stability challenges. On average, system distribution losses reached 15 percent of total power output (1,379 Terawatt-hours, TWh) in 2011—almost twice the world average. In most parts of LAC, the grid infrastructure is outdated and in need of significant modernization and expansion. This creates a unique opportunity to build a 21st-century electricity system through integrated energy planning that can support growing shares of renewable energy, increase energy efficiency, and provide reliable service at the least cost in the long term.


In addition to contributing to climate change mitigation, renewable energy can help make the region’s energy systems more reliable and resilient in the face of a changing climate. Climate change is already having, and will continue to have, profound impacts on the regional economy, ecosystems, and human well-being in LAC.


“The region has the world’s greenest electricity mix in terms of carbon intensity,” says Ochs. “But its large dependence on hydropower creates a security risk for many countries, given changing rainfall patterns, melting glaciers, and the competition for scarce water resources among economic sectors. New distributed renewables have world-class potentials in many parts of LAC and are an effective and cost-efficient way to both mitigate and adapt to climate change.”


LAC has only begun to tap its renewable energy resource potential. Even excluding hydropower, the region could produce more than 78,000 TWh of electricity from renewable sources. This is enough capacity to meet the region’s current (1,400 TWh) and future (2,500 TWh) electricity needs many times over.


“The falling prices of renewables, their abundance, their complementarity, and their reliability today make renewable energy an economically favorable alternative to all conventional technologies in almost all countries of the region—if there is open and fair competition,” says Ochs. “But in many places, existing policies still support fossil fuels, and additional hindrances often exist, including social, market, and finance barriers. Governments have a responsibility to address these, and multilateral banks have important tools to support them.”


Effective policies and measures can greatly improve the investment environment for domestic and international, as well as public and private, actors. Considering the longevity of current investments in power system infrastructure, it is imperative that policymakers carry out integrated resource plans that seek to lower overall electricity system costs in the long term by considering technical, socioeconomic, market, and policy analysis and by taking advantage of synergies among different renewable sources, energy efficiency, and smart grid technologies.



Category/ies:Articles, Regional Articles.
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