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Nations in Central America can increase energy production and
maintain affordability without sacrificing the goal of reaching
net-zero carbon by 2050, according to a new report by the International Renewable Energy
Agency (IRENA).
The countries can do this with a push to make their power sector
nearly 100% green—and for the same cost that would likely to
incur with a more traditional mix of fossil fuels and renewables,
IRENA said in "The Renewable Energy Roadmap for Central
America," published in March.
The seven nations in Central America—Belize, Costa Rica, El
Salvador, Guatemala, Honduras, Nicaragua, and Panama—produce
less than 150 million metric tons (mt) of GHGs annually, only 0.3%
of global GHG emissions. But the amount has approximately doubled
since 2020, due largely to transportation use.
Source: IRENA
GHG emissions could continue to increase over the next three
decades, as the countries are expected to double their GDP by 2050
and to increase in population from 48 million people to 65 million.
IRENA's modeling found that a business-as-usual scenario would
result in emissions reaching about 110 million mt by 2050, compared
to 55 million mt in 2020.
Instead, a commitment to deeper decarbonization and
electrification would reduce annual emissions to 30 million mt,
IRENA said. To change the emissions trajectory, it recommends more
renewable generation, electrification of transportation, investment
in green hydrogen for heavy-duty trucks, and energy efficiency
measures.
Moreover, this can be done at no additional cost beyond what the
countries are expected to do in order to meet rising energy demand,
IRENA said.
Analyzing the seven countries' current energy use and policies,
as well as the emissions programs stated in their nationally
determined contributions to reach Paris climate goals, IRENA found
that that they are facing investment costs of $1.95 trillion by
2050. IRENA dubbed that the "planned energy scenario," or PES, and
compared it to a "decarbonizing energy scenario," or DES, that it
says would cost slightly less, at $1.93 trillion.
The renewables-heavy DES would reduce fossil fuel use in the
power sector by 90% compared to forecasts, and by 65% in end-use
sectors such as transportation and manufacturing. Mass
electrification of the transportation sector alone would reduce CO2
emissions by about 70% from forecasts, or 43 million mt.
Tripling renewable installations annually
To pursue the DES, Central American nations would triple their
annual renewable power installations from under 500 MW per year
currently to about 1,400 MW annually. This would require annual
spending of $3.5 billion, or 1.6% of the region's GDP in 2018,
IRENA said.
IRENA did not discuss where money would come from, except to
note it would be a combination of government and private funding,
both from Latin American nations and through foreign direct
investment. However, a report by the UN Economic Commission of Latin
America and the Caribbean (ECLAC) last year found that foreign
direct investment in Latin America fell to $105 billion in 2020,
due to COVID-19, with fossil fuels investments falling by nearly
48%.
ECLAC recommended "a big push for sustainability" in new
investments, specifically identifying the "transition to renewable
energy, electricmobility in cities … [and] the bioeconomy" among
sectors that should receive priority attention.
At COP26 in November, wealthy
nations raised their commitment to supporting the global energy
transition with $100 billion per year of
funding, some of which could find its way to Central America as
well.
Already, the seven nations studied by IRENA are well on their
way to become economies driven by clean energy, with renewables
contributing 70% of the region's power generation in 2018, led by
Costa Rica at 99%. IRENA's scenario envisions the region's mix
rising to 97% renewables regionwide by 2050, but also extending
electric power deeply into transport for electric vehicles and
indirectly through green hydrogen for trucks.
Electricity in 2018 was 13% of the region's energy consumption,
but it would surge to 49% in 2050. Traditional biomass, which is
one-third of current energy use and correlates to high emissions
and health problems, would be nearly eliminated at 6% of energy
consumption.
Improving power grid interconnections across borders will be
critical to the transition as well, IRENA said.
Central America shares an electrical interconnection system
known as SIEPAC, a single transmission line through six of the
countries with a capacity of 300 MW. IRENA recommends upgrading
this to 2,000 MW, extending the line to connect with new renewables
projects, and ending various restrictions on how the line can be
used.
Source: IRENA
"In addition, joint co-ordination in regional energy planning
for the medium and long terms, including in end-use sectors and the
selection of projects, will be required to develop the [grid]
system in the most cost-efficient and secure way, which is not
possible if each national system is separately planned," it
said.
Renewables to the forefront
More inroads across Central America, as well as Latin America
and the Caribbean, can be expected, as IRENA is working with
countries on a series of programs to propel renewables to the
forefront of the energy sector.
IRENA reported that the weighted-average levelized cost of
electricity (LCOE) has been plummeting in the region, as it has
around the world. For large hydropower plants in Central America
and the Caribbean LCOE reached around $0.10/kWh in by 2020, onshore
wind was at $0.059/kWh, and solar PV was $0.078/kWh—each down
by more than 35% in a decade.
IRENA signed a memorandum of understanding with the Latin
American Energy Organization in January to establish a general
framework of collaboration to stimulate low-carbon investments in
the region. This builds on the Renewable Energy for Latin America
and the Caribbean Initiative, signed in 2020 by Chile, Colombia,
Costa Rica, the Dominican Republic, Ecuador, Guatemala, Haiti,
Honduras, Paraguay, and Peru. In that agreement, the 10 countries
set a goal of 70% renewables in power generation by 2030.
Under the new framework, the countries are encouraged to
leverage their investments in COVID-19 economic recovery to create
more than 3 million clean-energy jobs, said IRENA Director General
Francesco La Camera in a press statement.
The downside to not making these types of commitments is
illustrated in a new report by Institute of the Americas about
the experience of Mexico's state power authority, CFE.
Since 2014, CFE has been legally obligated to sign long-term
contracts for renewable generation, as part of an effort to lower
Mexico's GHG emissions and diversify its energy mix. CFE has
resisted the mandate, arguing that it's more costly than using
existing power plants fired by coal, diesel, and natural gas.
Analyzing the results of Mexico's renewable power auctions and
the costs of purchased fossil fuels for traditional thermal power
plants, the researchers found that renewables are cheaper.
"The clean energy contracted by CFE through the first three
long-term auctions represent substantial savings compared with the
carriable generation costs require to bring thermal plants online,
regardless of the fuel to operate them," the researchers
concluded.
Even within fossil fuel use, they found huge variations, as
running gas-fired turbines for peak power demands one-third to
one-tenth the cost of using diesel units for the same purpose. The
institute recommends investing in efficient gas-fired turbines as
well as renewables.
"Imposing the use of fuel oil instead of natural gas or imported
coal in dual fuel power plants, as has been done in the last couple
of years, cause important economic losses as well as significant
damage to human health and the environment," they said.
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