Monday, January 2, 2012

Renewable Energy Best Practices in Promotion and Use for Latin America and the Caribbean

The global energy market is in the midst of a dramatic evolution,slowly shifting away from an economy based on fossil fuels that relies on cheap fuel and resource extraction toward a!market economy focused on sustainability,reliability,innovation,and energy independence. Although renewable!energy a only makes up 16 percent of the!world’s energy production, there is nearly1,320 GW of renewable energy capacity worldwide, employing over 3.5 million people (Renewable Energy Policy Network for the 21st Century [REN21], 2010).The! evolution toward clean energy has inspired generations and, as a result, has become increasingly popular,growing by 1.9 percent per year over the past two decades (Meisen and Krumpe ,2009)

According to the Renewable Energy Policy Network for the 21st Century (REN21), the!number of countries with policies directed at promoting renewable energy has doubled over the past five years (REN21, 2011). The United States, along with European and Asian countries, is actively promoting renewable energy to catalyze and achieve profound economic and environmentalchanges.By contrast,the countries of Latin America and the Caribbean (LAC) have beenslow to adopt renewable energy because of poverty, lack of awareness,and lack of government support to mitigate climate change, stabilize energy supplies, or invest in innovation (UN Industrial Development!Organization,2011). Although U.S. renewable energy markets are still emerging and over a dozen LAC nations rank higher than the United States in an Environmental Performance Index study (Yale University, 2010), there is a lot to be learned from the United States experience in promoting clean energy technologies.A robust and comprehensive renewable energy market in LAC,equal to or greater than that in the United States,might not only trigger a wave of innovation,but could open previously untapped opportunities for economic growth.And,as with most new technology markets,the more the public and private sectors invest in renewable energy, the more affordable it becomes.

For the purpose of this paper, all dollar amounts are in U.S. dollars,the term “Latin!America” refers to all Central American and South American nations and Mexico, the term “Caribbean” refers to the island nations, and the acronym “LAC” refers to both Latin America and the Caribbean.Given this broad topic,this paper aims to present a snapshot of some of the best practices in the promotion and use of renewable energy,and provide practical examples of the development of renewable energy markets that countries in LAC can replicate.This brief study provides an overview of some of the most widely used renewable energy technologies.It also examines current and potential renewable energy markets in LAC, economic development benefits of expanding renewable energy markets, policy tools and mechanisms that have been used to build and promote renewable energy in the United States,and the role governments and the private sector can play. Finally, this paper presents a few recommendations for LAC countries. There are two tables in the appendices.One shows where renewable energy incentives exist in LAC and the other where renewable energy markets are in active development in LAC.

Andrea Luecke.Inter-American Development Bank Capital Markets and  Financial Institutions Division DISCUSSION PAPER No. IDB-DP-190.November 2011