Latin America and the Caribbean is a hotspot in low-carbon power generation. Declining costs, maturing technologies, and the sheer untapped potential for renewables offers an promising opportunity for continued development in the coming years. In particular, continuing investment in renewables will provide the Caribbean with the opportunity to address key economic, social, and environmental challenges in the energy sector.
A new report published by the Worldwatch Institute has analysed the particular market barriers and growth pathways available for both Latin America and the Caribbean.
“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.
Renewables are often the best economic option for new generation capacity, especially for countries that depend on fuel oil for power generation, such as many in Central America and the Caribbean. Resource advantages give the region the potential to match or even undercut the lowest costs achieved in other parts of the world. Low-cost financing and the scaling up of local industries are important keys to realizing that potential.
Effective policies and measures can greatly improve the investment environment for domestic and international, as well as public and private, actors—particularly given a market that is distorted due to both direct and indirect subsidies for fossil fuels. 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 taking advantage of synergies among different renewable sources, energy efficiency, and smart grid technologies.
“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.”
The report identifies several key challenges and the best ways for addressing each, including:
- Achieving universal access to electricity
- Meeting future electricity demand
- Transforming the electricity system
- Mitigating and adapting to climate change
The report also then analyzes the impacts of climate change in the Caribbean and suggests adaptation strategies for the power sector.
Finally, the report concludes with recommendations to Multilateral Development Banks on how they can best position and strengthen their role as a driving force behind the development of a future energy system powered by a large share of renewables in Latin America and the Caribbean .
Credit: Worldwatch Institute