News

IDB Highlights Competitiveness of Renewables in Latin America

IDBJanuary 2014: A technical note by the Inter-American Development Bank (IDB) finds that non-traditional renewable energy technologies (NRETs) are sufficiently abundant and economically competitive to meet the growing demands for energy in Latin America and the Caribbean. 

According to the technical note, titled 'Societal Benefits from Renewable Energy in Latin American and the Caribbean,' solar, wind, marine, geothermal, and biomass sources could, under full deployment, generate 34 terawatts at peak capacity—or seven times the current installed capacity worldwide.

The study warns, however, that perceived cost disadvantages and regulatory bias against NRETs means that fossil fuels are likely to capture most of the expected doubling of installed capacity to 600 gigawatts in the region by 2030. It forecasts that, by 2050, business-as-usual will lead to fossil fuels increasing their share of the generation mix from 37% to 41%, mostly through natural gas.

The authors compare fossil fuels with NRETs in terms of both the levelized cost of electricity (LCOE) and societal benefits. These societal benefits include: avoided costs from climate change impacts, pollution control, and energy security; and economic benefits from job creation and improvements in the balance of payments.

The study finds that these social benefits more than compensate for the higher initial capital costs of NRETs, even without including avoided costs from change climate. It also notes that recent developments in Uruguay, Brazil and Chile suggest that the cost disadvantage of wind and photovoltaic power is disappearing on a pure financial basis, where social benefits are not included at all. In general, however, the study concludes that the exclusion of social benefits from the public policy and regulatory decisions is a severe impediment to facilitating investment and adoption of NRETs in the region. [Publication: Societal Benefits from Renewable Energy in Latin American and the Caribbean] [IDB Publication Webpage]