Past Initiative News

Investing in a Power Grid to Connect Communities across Central America

Tuesday, November 04, 2014
By Roberta S. Jacobson, Amos J Hochstein, and Scott Nathan

Western Hemisphere energy markets are in a period of profound transformation, as the United States and partners throughout the region seize opportunities to reform and expand energy production, integrate economies, create jobs, and enhance stabilityand citizen security. U.S. leadership in the energy sector is helping to catalyze and support more sustained and equitable economic growth.

Nowhere does this prospect of energy-led economic growth offer greater potential than in Central America’s electricity sector, where countries have the opportunity to build a future of clean, reliable, and affordable electricity by connecting power grids across borders and developing a regional electricity market.

Those of us who enjoy reliable access to affordable electricity are prone to take it for granted. However, without it, businesses of all sizes cannot compete in today’s global economy, pushing prosperity out of reach for too many workers and their families.

With this in mind, President Obama, Colombia’s President Santos and the region’s other leaders agreed at the 2012 Summit of the Americas to make electricity supplies cleaner, more reliable, and affordable by expanding electrical interconnections and scaling up low-carbon power generation. They set a ten-year deadline under the initiative Connecting the Americas 2022, or Connect 2022.

In the two years since, the United States, Central American countries, Colombia, and Mexico have worked to advance the Connect 2022 vision. President Obama and Vice President Biden have engaged the region’s leaders to build support for energy integration, especially in Central America and the Caribbean. As President Obama told leaders in Costa Rica last year, everybody stands to benefit from a more free flow of electricity across borders.

Through our energy diplomacy, we have brought Central American policymakers together with the private sector to identify a clear path forward. Through U.S.-funded technical assistance, we are helping Central American regulators and grid operators meet their power sector investment requirements and clean energy goals.

The results are promising. Last year, the Central American Electricity Interconnection System (SIEPAC) adopted rules for cross-border power trade that unleashed impressive growth in the regional electricity market. A more active market will make it easier to replace expensive, dirty oil-fired generation with cleaner, cheaper sources of power, whether renewable energy or natural gas.

And last month, the final stretch of the SIEPAC regional transmission line was completed. This is a milestone achievement that links six Central American countries and forms the backbone of the regional market. Countries have already used the SIEPAC line to swap power in times of shortage, keeping schools and businesses open, instead of suffering through blackouts due to droughts.

As a result of these efforts, power infrastructure is now connected from Canada to Panama.

Yet there is more to be done. Central Americans still pay the second highest electricity rates in the Americas, second only to the Caribbean. These high pricesconstrainneeded economic development and direct foreign investment that can create new opportunities for families and businesses alike.

Central America needs to upgrade and better integrate national and regional transmission capacity, improve market rules, and attract investment. If Colombia and Panama move forward with the planned interconnection, Andean markets would connect to Central America, increasing the market size and investment opportunity for all. If the region introduces natural gas, it will need to set clear and predictable rules.

These changes are not easy; some will require tough political decisions. But the result will be worth it: greater competition, increased efficiency, and reduced prices for consumers. It will create attractive new opportunities for investment and increase overall competitiveness.

It will also affect millions of lives throughout the region in real and immediate ways.Children will be able to do school work or read at night by electric light. Once towns are connected to the power grid, those children will be able to teach their parents how to use a computer and introduce them to the limitless opportunities of the internet. Health clinics will maintain cold chains for vaccines, and electric cooking will improve indoor air quality and the health of families.

On November 4, President Otto Perez Molina of Guatemala hosts energy policymakers, regulators, and private sector representatives to the Connect 2022 Mesoamerican Energy Investment Summit in Guatemala City.

The United States strongly supports this Investment Summit, in collaboration with the Inter-American Development Bank and World Bank. We urge policymakers from the region to use the Summit to demonstrate progress on regional integration and showcase the opportunities that are emerging as a result of increased electricity trade and new interconnections. We encourage the private sector to convey clearly what policymakers and regulators still need to do to attract private capital. We look forward to a successful Investment Summit that motivates all who participate to work hard to advance Connect 2022 goals and give Central America’s citizens the opportunity for prosperity that we all deserve.

Central America has set a strong example for the hemisphere by completing the SIEPAC line. Now it must take the next steps to allow energy to flow across the line in ways that reduce prices, spur economic growth, attract needed investment, and lead to broader regional integration. We congratulate the region and look forward to working together to achieve our Presidents’ vision for Connecting the Americas by 2022.

Source: Latin Business Chronicle