OPINION
Hugo Altomonte, Director of the Division of Natural Resources and Infrastructure:
The Region’s Energy Challenges in Terms of Inclusive and Sustainable Development
Hugo Altomonte
Photo: Lorenzo Moscia/ECLAC

Latin America and the Caribbean is facing growing energy demand driven by exogenous factors depending on the world market and endogenous factors, such as social inclusion, industrialization and larger urban centres. Over the next two decades, current demand is expected to require an additional two million barrels of oil per day, 200 million m3 per day of natural gas and 1,700 TWh (terawatt hours) of electricity.

As well as this pressure, the region is also facing challenges around the various aspects of sustainable development, as well as the need to plan and invest in energy in the medium and long term.

It is vital to reverse the downward trend in hydrocarbon reserve-to-production ratios in most producer countries. This does not apply to Venezuela and Brazil, if the fields of the Pre-Sal reserve get certified in this last country. It is also essential to restore regional refinery capacity using investment to change the current intermediate petroleum derivatives deficit resulting from increased demand due to the following two factors: the surge in the number of vehicles on the road and their growing dependence on diesel fuel.

Although the region’s power does come from a relatively clean energy mix - as 25% of total supply is renewable - this is mainly thanks to large-scale hydroelectricity and biomass, with a limited proportion of non-conventional renewables such as geothermal, solar and wind energy.

Compared with the world average, the region emits low levels of greenhouse gases in relative and absolute terms. In addition, the past 20 years have seen a slight dissociation between emissions and energy consumption (or a 3% reduction in CO2 emissions per unit of final consumption). This is partly due to a broad process of electrification, the expansion of natural gas and progress in energy efficiency.

However, the position of Latin America and the Caribbean in the world economy may depend on progress in acceptance of its products, which must adapt themselves to restrictive environmental standards imposed by world markets and in developed countries in particular.

It is hoped that the region will continue to receive technologies related to sustainable development. For this to happen, the region must be prepared to adapt such technologies while at the same time formulating clear strategies on the right energy mix according to the availability of natural, technical and financial resources.

The introduction and roll-out of non-conventional renewable energy (which is part of the sustainable development approach and has become one of the economic drivers of developed countries) should be seen by Latin America and the Caribbean as development opportunities provided that they help to create new production chains, added value and to improve the region’s standing in the global economy.

It cannot be denied, however, that this would also place a tremendous strain on funding requirements competing with other priorities (social spending and investment), as well as the potential negative impact on energy costs. It is therefore vital that the region addresses this pending issue to design price policies that provide for appropriate taxation including sustainability criteria.

Energy policy should be part of inclusive development policy, which means it should have the same or subordinated aims. From the social perspective, reform is needed on price and charge structures and subsidy systems, so that they meet the objectives of covering costs, equity, efficiency and reduced environmental impact. There is no doubt that this trade-off between social inclusion and energy system efficiency requires State leadership in terms of planning, promotion and regulation.

Regional energy integration could facilitate access to energy, optimize use of resources, help to care for the environment and reduce overall energy costs. In order to be successful, such integration must be based on long-term agreements rather than short-term business opportunities. Integration must also be based on the conviction that mutual cooperation and trust are essential, and must ensure non-discriminatory market access.

It will not be easy to fulfil these conditions. The ongoing debate in the region is based on the seemingly endless confrontation between what countries see as two opposing concepts: energy self-sufficiency as outlined in all plans, and the loss of sovereignty involved in the integration process.

 


 


 

 

 

 

 
  The region is facing challenges around the various aspects of sustainable development, as well as the need to plan and invest in energy in the medium and long term.
 
  The introduction and roll-out of non-conventional renewable energy should be seen as a development opportunity, provided that it helps to create new production chains, added value and to improve the region’s standing in the global economy.