The Scale of the Energy Transition

Friday, January 26, 2024
Latin America and the Caribbean will need to increase renewable energy generation exponentially in the coming years—and the region has the political will to make that happen, according to Andrés Rebolledo, Executive Secretary of the Latin American Energy Organization (OLADE). 


In an interview with the Energy and Climate Partnership of the Americas (ECPA)—an initiative of the Organization of American States (OAS)—Rebolledo talked about the progress so far in the energy transition and the challenges ahead, including the enormous scale of change that will be required.    

Take, for example, the potential for green hydrogen—in other words, hydrogen produced from renewable energy sources. By 2050, Rebolledo said, the production of green hydrogen alone is projected to use 30% of all electric power generated in Latin America and the Caribbean. And that 30% would be equivalent to the region’s total installed electricity generation capacity today.

If that magnitude of growth is hard to grasp, it’s important to keep in mind that changes in the energy sector have been occurring at a “dizzying” pace in recent years, Rebolledo said.

“We talk about all of this in terms of the current state of the art,” he said. “But this can change over time, because technologies can change and become cheaper and cheaper.”

Governments have played and will continue to play a central role in accelerating the energy transition, especially in the form of regulatory and policy decisions that encourage the development of renewables, Rebolledo said. Latin America already stands out in this regard on the world stage, he noted, with about 65% of the region’s electricity produced from renewable energy.

In Chile’s Atacama Desert, a photovoltaic plant called El Romero Solar produces enough electricity to power 240,000 homes. Credit: Acciona.

That includes vast amounts of hydroelectric power, of course, but solar and wind together now account for about 13% of Latin America’s installed capacity, according to Rebolledo. He said about 95% of new electricity generation projects in the region are based on renewable energy.

Electricity currently accounts for less than one fifth of total energy consumption in Latin America, he said, but that percentage will grow considerably in the coming years, as transportation, cooking, heating, and other activities become electrified.

The energy transition is well underway across the region, he said, whether through the expansion of wind power in Uruguay, geothermal in Central America, solar in the Caribbean, or biofuels in Brazil. Costa Rica and Colombia have made strides in developing the electric mobility market, while Chile and other countries have taken key steps toward the creation of a green hydrogen industry.

The region’s governments have a “shared vision” about the energy future, Rebolledo said. “There will be nuances, but in general, it seems to me that there is a willingness consistent with the need to accelerate this transformation,” he said. 


The RELAC Initiative


One sign of the region’s political will, he said, is the creation a few years ago of an initiative called RELAC—short for Renewables in Latin America and the Caribbean—which now includes 16 of OLADE’s 27 member countries. The Inter-American Development Bank (IDB) serves as technical secretariat of the initiative and OLADE handles monitoring.

A look at recent RELAC developments will be on the agenda at the Sixth ECPA Ministerial Meeting, to be held March 14-15 in Punta Cana, Dominican Republic. Rebolledo, who hosted the Third ECPA Ministerial as Chile’s Minister of Energy, plans to attend.

The RELAC countries (Barbados, Bolivia, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Nicaragua, Panama, Paraguay, Peru, and Uruguay) have set ambitious targets lately. In November, they upped their regional goal for renewable energy penetration in the electricity mix from 70% by 2030 to at least 73%. Plus, they announced a new target: to have 36% of overall energy needs—not just electricity generation—come from renewables by 2030.

In a separate sign of regional ambition, 21 OAS member countries, many of which also belong to OLADE and some of which participate in RELAC, have signed the Global Renewables and Energy Efficiency Pledge adopted at the recent United Nations Climate Conference, COP28. Under the pledge, the countries commit to work together to triple the world’s installed renewable energy generation capacity and double the average annual rate of energy efficiency improvements by 2030.

More than 120 countries around the world, including 21 members of the OAS, have signed the Global Renewables and Energy Efficiency Pledge adopted in December at COP28. Credit: COP28 UAE

Aside from political will, Rebolledo said, two other considerations are especially critical for the region to meet its climate goals: having the right regulations in place and having access to sufficient financing.

Countries in Latin America and the Caribbean have made considerable progress on the regulatory front, and many of them have comprehensive roadmaps for renewables, but new issues always arise, Rebolledo said. These may include the need for incentives to expand energy storage, for example, or policies to spur decarbonization in the transport sector or attract investment in green hydrogen or synthetic fuels.

Investment is needed on a massive scale to fund the energy transition; OLADE estimates the region will require some $500 billion in accumulated investment between now and 2030. But Rebolledo believes the abundant, reliable, and diverse green energy resources available in Latin America and the Caribbean will give the region a competitive edge over other parts of the world in attracting investment in renewable energy. 

Depending on how their energy systems are structured, some countries will rely primarily on private investment, either foreign or domestic, while others will turn to development banks or assistance from other governments, Rebolledo explained.


The Role of OLADE


Energy development and regional integration were among the topics on the table during OLADE’s ministerial dialogue held in November in Uruguay, where the organization marked its 50th anniversary. Credit: OLADE.

The Latin American Energy Organization got its start at the time of the 1973 global oil price shock; the organization marked its 50th anniversary at a meeting of energy ministers held in Montevideo, Uruguay, in November. 

OLADE continues to provide policy support to its member countries as they seek to transform their energy sectors. Based in Quito, Ecuador, the organization tracks regional data, provides technical training, and promotes cooperation and energy integration. At its latest meeting, it announced a new effort to work more closely with the private sector as well.

In recent months, OLADE and the IDB have also launched an effort to create a certification system for the clean hydrogen that will be produced in the region. CertHiLAC, as the system is called, will be structured to provide detailed, standardized information on carbon intensity, production technology, environmental and social sustainability, and other factors, to provide assurance to the export market. Fourteen countries have signed on to participate, Rebolledo said.

At COP28, OLADE and the IDB also met with representatives of the steel and cement sectors, among others, to strengthen cooperation on decarbonizing heavy industry. OLADE is also working with the Global Methane Hub to track the region’s methane emissions in the energy sector. 

For the first time in global climate negotiations, the agreement reached at COP28 calls for “transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner.” Progress on this front may seem slow to many—this type of process requires “the patience of multilateralism,” as Rebolledo put it—but the trend is toward a more sustainable energy future.

Of course, fossil fuel production will not end overnight, and crude oil is a key export commodity in some countries in Latin America and the Caribbean. Rebolledo noted that technologies such as carbon capture will provide opportunities to reduce emissions in this sector. As for coal, countries in the region are phasing it out, he said. Natural gas, which has a lower carbon footprint than oil or coal, will continue to be an important source of reliable baseload energy during the transition, according to Rebolledo.

Five decades into OLADE’s existence, he said, energy continues to play a strategic role in the region’s prospects. “It seems to me that today, more than ever, energy is at the center of countries’ economic development,” he said. 

Cover Image: Andrés Rebolledo speaks at the Latin American Energy Organization’s Energy Week, which took place in November in Montevideo, Uruguay. Credit: Olade.