Latin America can become a global benchmark for a just energy transition
A mix of technological, economic, social and political factors has been brewing in Latin America and the Caribbean for some time now, making the region a place with the right conditions to become a global benchmark for a just energy transition. The Relac (Renewables in Latin America and the Caribbean) initiative, with 15 signatory countries, established that by 2030 70% of the region’s electricity consumption will come from renewable energies. A goal that is achievable.
Let’s start with the tangible evidence. According to the World Bank (2020), about 20% of the world’s population lives in 70 countries with excellent conditions for photovoltaic energy, where daily averages exceed 4.5 kilowatt hours/kilowatt peak (kWh/kWp, the measures of performance and production), enough to boil about 25 liters of water. The Latin American countries that fall into this category are Chile, Peru, Mexico and Argentina. However, the rest of Latin America is not far behind, as they are in the 3.5 – 4.5 kWh/kWp range. In terms of wind energy potential, Chile and Colombia lead the way.
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This wealth of resources has translated into an accelerated pace of investment in recent years in the region. In 2019, Brazil, Mexico and Chile were among the 20 countries in the world with the highest investment in renewable energy capacity. More recently, installed renewable energy capacity in Latin America and the Caribbean totaled 291,770 megawatts (MW) by the end of 2021, up 6% from 2020. The largest installed capacity in 2021 was in South America with 244,975 MW, representing 84% of the total installed capacity in the region. In the last ten years, the countries with the highest growth in the generation park from renewable energy are Chile with 111%, Uruguay with 101%, Mexico with 99% and Brazil with 66%.
All this has been accompanied by advances in the regulation and roadmaps of different types of energy, such as offshore wind energy in Colombia and its recent incorporation to the Global Offshore Wind Energy Alliance, for now being the only country in the region that is part of this Alliance. Additionally, the current and future installed capacity of renewable energies make Latin America an area with high potential for the generation of green hydrogen. This can be used as energy in the industrial sector, one of the most difficult to electrify, as well as in transportation and in the energizing and heating of buildings. Several countries, such as Chile, Uruguay, Paraguay, and Colombia, have already published their green hydrogen roadmaps.
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These investments can help the region drive the progressive and responsible decarbonization of its economy and advance both energy and economic transitions at the same time. In this sense, the just energy transition is an opportunity to align financial flows with the Paris Agreement – the most important climate treaty at the international level – including the treatment of subsidies, tax reforms, promotion of savings and investments in clean energy. Additionally, according to data from the International Labor Organization, if the world manages to limit global temperature rise to 2°C by the end of the century, it could lead to 15 million more net jobs in Latin America and the Caribbean by 2030, thanks to productive changes in food and energy.
However, the pace at which countries advance will differ, as those that are not economically dependent on fossil fuel extraction will find the process easier, as is the case for El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Paraguay and Uruguay. In this sense, the just energy transition presents itself as an opportunity.
And although it may be simple, it does not mean that it should be done at all costs, because we cannot repeat past mistakes. According to the Atlas of Environmental Justice, which maps more than 3,300 cases of socio-environmental conflicts globally, more than half of these are related to the development of infrastructure in the energy sector, as well as the extraction of minerals and hydrocarbons. With the entry into force of the Escazu Agreement in several Latin American countries, access to participatory processes and clear, truthful and timely information can provide more guarantees in the development of energy transition projects. This will help to demonstrate the alignment of governments and the private sector with environmental policies that, among other benefits, allow them to access new credits.
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In addition, several countries in the region such as Guatemala, Belize, Honduras, Costa Rica, Colombia, Suriname and Chile have already included just energy transition concepts in their international climate commitments, which opens up the potential to strengthen policy frameworks at the sectoral level. To accelerate investment in the technology transition, work must continue on sound policy and regulatory frameworks, in particular, regulations regarding energy storage systems and grid reliability, energy efficiency policies and standards, targeted demand for green hydrogen in energy expansion plans, behavioral change aimed at long-term impacts, among others.
According to the Energy Transition Index (ETI), Latin America and the Caribbean performs better than the global average in energy system performance, environmental sustainability, and capital and investment, among other aspects, and consequently is considerably better in energy infrastructure, but these investments need to be distributed across the region to reduce the disparity in renewable energy development among various countries.
There are still 17 million people lacking access to electricity in the region, mainly in Central American countries, where energy demand is expected to continue to grow in the coming decades. This is an opportunity for actors in the clean energy value chain to focus efforts, resources and innovative ideas on transforming our energy matrix to a cleaner and fairer one. The transition cannot be limited only to a technological one, and must affect the way in which energy is produced and consumed today, seeking a balance between natural resources and society.
