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ENERGY: Crisis Has Hurt Investment in Renewables

Emilio Godoy

LEÓN, Mexico, Oct 9 2009 (IPS) - In Latin America, Brazil is the leader in the development of renewable energies, while nations like Mexico, Peru, Chile and Argentina are taking slow steps to change their energy mix.

“The transition process towards renewable energies is slow, because it faces many barriers,” Argentine expert Daniel Bouille told IPS.

“This is not the best time for alternative energy sources,” said Bouille, vice president of the Fundación Bariloche, a non-profit institution established in 1963 to carry out scientific research on issues of energy, human development, the environment, philosophy and the quality of life. Along with some 1000 representatives of governments, international organisations, academia, civil society and the private sector from around the world, Bouille attended the Oct. 7-9 Global Renewable Energy Forum 2009 in the city of León, 350 km northwest of Mexico City.

The three-day meeting, organised by the Mexican government and the United Nations Industrial Development Organisation (UNIDO), discussed political, financial and technological aspects of renewable energy sources.

According to the “Renewables 2007 Global Status Report”, renewable energy sources accounted for 18 percent of the world’s total energy consumption in 2006, including traditional biomass, large hydropower, and “new” renewables: small hydro, modern bio-mass, wind, solar, geothermal, and biofuels.

But new renewables represented just 2.4 percent, while 13 percent came from traditional biomass – wood-burning, primarily for cooking and heating.

There has to be a change in energy consumption and production patterns,” André Aranha, director of the energy department at Brazil’s Ministry of Foreign Relations, told IPS. “It is necessary to diversify and invest. In Brazil, we have achieved a clean energy mix.” At the 2004 International Conference for Renewable Energies in Bonn, Germany, this region presented the Latin American and Caribbean Initiative for Sustainable Development, which suggested that countries commit themselves to reaching a goal of 10 percent of renewable energy sources in their total energy supply mix by the year 2010 – a goal already reached by this region.

In 2008, investment in renewable energies totalled 155 billion dollars, according to the United Nations Environment Programme (UNEP), including 30.1 billion dollars for North America and 12.3 billion for South America – nearly double the 2007 level of 7.6 billion.

But the current global economic crisis reduced the global total by 40 percent, according to UNIDO. In Mexico alone, some 25 projects have ground to a halt due to lack of funds.

“There is an absence of specific merchanisms for financing R&D in renewable energies. We have a legal framework, but we were hit by this major economic crisis,” Isabel García, head of Fundación Emisión, a non-profit organisation in Mexico that promotes biofuels like sugarcane ethanol, told IPS.

Interest in investing in renewable energies seems to have waned as a result of the recession and the drop in oil prices, despite the pressing need to find ways to cut greenhouse gas emissions like carbon dioxide, which are blamed for global warming.

In Brazil, 85 percent of energy supplies come from hydropower. But huge oil reserves – estimated at between 50 and 80 billion barrels of oil, up to six times the country’s entire proven reserves – were found off the country’s Atlantic coast in 2007, seven km below the surface of the ocean.

Exploitation of the oilfield, which is located beneath a thick layer of salt and sand, would likely threaten progress towards a more renewable energy mix in South America’s giant.

In Mexico, Congress passed a new law in October 2008 that regulates production and use of renewable energies. Currently, eight percent of the country’s energy comes from sources other than oil, like wind, geothermal energy and hydropower. But the goal is to reach 26 percent by 2012.

In Argentina, where hydropower represents 41 percent of the total, a 1998 law to foment the use of solar and wind energy sets a goal for these sources to account for eight percent of energy supplies by 2016.

Chile’s law on renewable energy stipulates that electric generators with a capacity of over 200 megawatts must produce 10 percent of their energy from renewable sources by 2024.

A similar law in effect in Peru since 2008 establishes that five percent of the country’s electricity must come from renewable sources within the next five years.

“There are no simple recipes,” Ecuadorean Energy Ministry adviser Luís Sotelo told IPS. “Each country has to move ahead with this in accordance with their own capacities.”

The Ecuadorean government is carrying out a project to replace thermal energy with cleaner sources.

Renewable energies will face a major challenge at the climate change conference in Copenhagen in December, to give rise to a successor treaty to the Kyoto Protocol, which expires in 2012.

The new global agreement should refer very explicitly to alternative energy sources, said the experts who spoke to IPS.

A new organisation, the International Renewable Energy Agency (IRENA), created in Bonn last January to speed the adoption of renewable energies, now has 137 signatory countries, to be joined by Mexico soon.

“The role of renewables will depend on the political decisions taken by the states,” said Bouille. “I’m optimistic that the new global treaty will make a strong reference to them.”

Brazil and Mexico are the biggest sources of carbon dioxide in the region. One of the most controversial aspects of the climate change negotiations involves the inclusion of these large emerging nations and others like China, India and South Africa in a scheme for binding emissions reduction commitments, like the ones that currently apply to industrialised nations.

The reform of the oil industry passed by the Mexican Congress in October 2008 included the creation of a 200 million dollar fund for the development of renewable energies and a 300 million dollar fund for technological research and training. But the funds have not been set up yet.

“Dependence on fossil fuels could be reduced and energy sources could be diversified by developing clean, sustainable energy alternatives,” said García.

The goal is for global investment in renewables to climb to 450 billion dollars by 2012 and 600 billion dollars by 2020.