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Latin America and the Caribbean Has All the Right Conditions to Become a Renewable Energy Hub with Great Potential in Green Hydrogen

ECLAC’s Executive Secretary, Alicia Bárcena, gave a presentation on a high-level international panel held in the framework of Latin America Energy Week, where she affirmed the urgency of the transition towards renewable energies with full social inclusion.

22 June 2021|News

The renewable energy sector is a powerful engine of growth, job creation and innovation. We must start by giving access to electricity to the 20 million Latin Americans who still do not have it, Alicia Bárcena, Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), indicated today during a high-level panel held in the framework of Latin America Energy Week, organized by the international company Siemens Energy.

ECLAC’s highest authority participated in the session of the event entitled “Energizing society to ensure successful and sustainable growth,” the central theme of which was “Shaping the Future of Energy,” where she exchanged reflections with Duncan Wood, Vice President for Strategy and New Initiatives and Senior Advisor to the Wilson Center’s Mexico Institute; Enrique Alba, CEO of Iberdrola Mexico; Tim Holt, a member of the Executive Board of Siemens Energy AG; and Peter Sauer, Deputy Chief of Mission at the German Embassy in Chile.

In her presentation, she explained that Latin America and the Caribbean has all the right conditions to become a global renewable energy hub with great potential in green hydrogen. She indicated that countries such as Argentina, Brazil, Chile, Peru, Bolivia, Costa Rica and Mexico have significant possibilities for developing a competitive green hydrogen industry and taking advantage of and replicating opportunities and capacities already developed in other regions, while also serving as an impetus for this resource in other countries of the region.

“Several countries in Latin America and the Caribbean have advantages for entering this market because their electricity matrices are relatively clean or are in the process of being decarbonized. These advantages are, in themselves, opportunities, which give rise to other opportunities. But to take advantage of them, some hurdles that could hamper the launch of this industry and/or its continuity must be resolved quickly and effectively by formalizing H2 (hydrogen) in the political, institutional and legal framework, including it in public agendas and giving space to and supporting the private sector, building a regional agenda and taking advantage of synergies to increase competitiveness,” Bárcena emphasized.

“Within the developing world, our region has been the hardest hit by the pandemic. It is time for an energy transition. The transition towards renewable energies is a powerful engine for growth, for combating poverty, creating jobs and contributing to climate action,” she indicated.

She also explained that in 2020, due to the COVID-19 pandemic, there was an average decrease of 15% to 20% in electricity demand, reaching, for example, 25% in Argentina, 31% in Peru and 5% in Chile. However, the pandemic’s impact worldwide on electricity demand last year was seven times greater than what was observed during the 2008 financial crisis.

She added that despite the drop in announcements of Foreign Direct Investment (FDI) in the context of the pandemic, renewable energy held firm as the sector of greatest interest, equivalent to 33% of the total amount of investments announced for the region in 2020.

“The pandemic has exacerbated inequalities in the region, which is why priority should be given to investments that close the gaps in access to quality and affordable electricity. First, we must provide electricity to the 20 million inhabitants who do not have it yet. This type of investment improves the social conditions of vulnerable segments, generating jobs and promoting the use of more sustainable technologies, which will ultimately contribute to the reactivation of the regional economy,” Alicia Bárcena indicated.

She noted that with an annual investment of 1.33% of regional GDP, between 2021 and 2032, equivalent to $114 dollars per capita ($80 billion dollars in constant 2010 prices), and utilizing renewable technologies (meaning solar and wind) in line with the targets of Sustainable Development Goal 7 on access to affordable and clean energy (SDG 7), the region can close the gaps in coverage and attain an electricity matrix with more than 86% of renewable energies. “This could create 7 million jobs and reduce greenhouse gas (GHG) emissions by 30%,” she stated.

“We definitely need modern energy services that can bolster people’s health, education and livelihood and increase society’s resilience,” she said.

In her remarks, Alicia Bárcena also pointed up the example of regional energy integration between Mexico and northern Central American countries, which is one of the objectives included in the Comprehensive Development Plan (CDP) for El Salvador, Guatemala, Honduras and south-southeast Mexico that ECLAC is coordinating with those four governments.

This Plan includes proposals with budget estimates to promote the Connection of Mexico with the Electric Interconnection System of Central American Countries (SIEPAC) and a second circuit of SIEPAC ($530 million USD) as well as a gas pipeline between Mexico and the countries of northern Central America ($1.67 billion USD). Central American countries have quantified the annual benefits of SIEPAC at around $125 million dollars.

“The CDP recognizes the role of electrification in energy transition and decarbonization and the role of electricity transmission to connect the great potential of renewable energies with the rising demand for electricity. We believe that the south-southeast of Mexico and the countries of the CDP can be at the heart of the first clean energy corridor of the Americas,” Bárcena underscored.

In addition, ECLAC’s Executive Secretary emphasized that financing for off-grid entrepreneurs and affordability for poorer households is one of the biggest challenges that must be resolved in order to achieve energy equality throughout the region.

“Firms in the energy sector can create value by supporting the region in addressing the challenge of energy poverty and inclusion, generating employment and playing a central role in decarbonization and the green transition… We must look to SDG 7 on affordable and clean energy. This is key. What we really need is for companies to not worry about big ventures alone but to also support small and medium-sized enterprises to create better jobs and services,” she indicated.

Finally, the senior United Nations official called for fostering the diversification of energy sources and supporting a subregional energy strategy, not just between northern Central America and Mexico but also in South America. “To achieve that, governments must understand that they have to work together. They cannot do anything on their own. That is why we must aim for integration,” she concluded.

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