The energy transition still limps in Latin America | future america | The USA Print

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Latin America is a diverse region and that can also be seen in how countries are progressing in their energy transition. While Chile, Mexico and Brazil have increased their renewable energy production by more than 60%, and Uruguay and Costa Rica lead the energy transition indices, others, former oil jewels such as Venezuela, are barely making the rounds. But in a region like this, where the extraction of fossil fuels has been marked by socio-environmental conflicts, it is not enough to see this change as a path towards renewable energy. It is also a path towards justice, participation and an economy that leaves no one behind. This is how some countries in the region walk:

Chile, the cheapest green hydrogen

The 4,000 kilometers of Chilean territory give the South American country a privileged advantage to produce green hydrogen. The radiation in the north is higher than in any other part of the world and in the extreme south, the high intensity and consistency of the wind also benefits it. The main objectives of the national strategy are to produce the cheapest green hydrogen on the planet by 2030, to be one of the main exporters by 2040, and to have 5 GW of electrolysis capacity under development by 2025.

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There are 42 green hydrogen projects in Chile, of which 14 are in the feasibility phase, according to the Chilean Hydrogen Association. In March, the pilot project Haru Oni, of the company Highly Innovative Fuels (HIF)will start its production on a commercial scale in Patagonia and will become the largest plant to produce synthetic gasoline based on clean fuel in Latin America.

Chile reached a milestone last year when solar and wind power surpassed coal in electricity generation in a 12-month period, according to the National Electric Coordinator (CEN) and the National Energy Commission. 29% of annual generation came from solar and wind energy sources and 27% from coal. The South American country needs investment in new transmission lines and energy storage to meet the goal – ratified last year – of decarbonization by 2050.

Wind farm in La Serena (Chile).
Wind farm in La Serena (Chile).SOPA Images (LightRocket via Getty Images)

The Government of Gabriel Boric signed agreements last November with the Inter-American Development Bank (IDB) and the World Bank (WB) to promote the green hydrogen industry. The sum of both loans to develop the industry is 750 million dollars (350 million from the World Bank, divided into two stages; and 400 million from the IDB).

To promote the energy transition, the Government had the purpose of promoting three major regulatory reforms in Congress: promoting an electricity transmission scheme, generating more bidirectional networks in electricity distribution and managing a remuneration system in the wholesale market. The Minister of Energy, Diego Pardow, assured last week that “the political moment” that the country is going through cannot be ignored, so during the next legislature they will advance in only one of these reforms. It is not yet known which one.

Colombia: big announcements, but no plan

The energy transition was once again at the center of the discussion in Colombia after the Minister of Mines, Irene Vélez, reaffirmed during the World Economic Forum, in Davos, that no new oil and gas exploration contracts will be signed. Although it is a good sign at the climatic level, the way of announcing it – without a plan on how to do it – left many doubts as to whether it is simply an announcement that wants to leave the Government standing behind the scenes. As the expert Giovanni Pabón, part of the Transforma think tank, points out, communicating this cessation without an economic and social transition plan only generates more doubts.

“There are close to 400 exploration contracts, but the question is whether what is there is enough to maintain energy in the coming years, between now and 2030 or 2050, for example. And we do not have figures in this regard, ”he comments. Or, at least, those that Minister Vélez has given are not clear and, according to the Minister of Finance, José Antonio Ocampo, to make a decision we must wait for new studies.

In Colombia, according to the National Administrative Department of Statistics (DANE), extractive industries can represent around 60% of exports, so the energy transition is also an economic one. In fact, according to a calculation by WWF Colombia and Conexión Análisis, a Colombian productive model not based on oil, gas and coal implies that an economic activity is found that generates, in the short term, more than 50 billion pesos of GDP annually.

Hydraulic pumps near an Ecopetrol refinery in Barrancabermeja, Colombia, on April 20, 2018.
Hydraulic pumps near an Ecopetrol refinery in Barrancabermeja, Colombia, on April 20, 2018.Nicolo Filippo Rosso (Bloomberg)

But the energy transition, as the Government is planning it, also forgets the part of justice. Andrea Cardoso, a professor at the University of Magdalena, Santa Marta, explains that it is urgent that the economic alternatives for regions that depend on extractivism be debated, how the labor reconversion will take place and what is the regional reindustrialization policy. “It’s a mistake for me that it’s not something that all ministries are talking about,” she says. “It is happening like when the departure of Prodeco was announced [una de las empresas de carbón más fuertes de Colombia]which is done without a plan, without a combo of measures, which is why it creates confusion”.

As for the income of renewable energies, it is still small. The current installed capacity represents only 6.53% of the energy if small hydroelectric plants and cogenerators that use biomass are taken into account, and only reaches 1.58% if it is only solar and wind. And although the last government, that of Iván Duque, said that with the auctioned projects it could increase to 12%, the challenge, as Cardoso comments, is that these clean projects do not reproduce the non-participatory logic of the extractive industry.

A post-oil Venezuela that has not thought about the transition

Being the country with the largest oil reserves in the world is too heavy a burden for a Venezuela that, over the last decade, has become dizzyingly impoverished despite its energy wealth. The country is in the queue for an energy transition, an issue that is not on the agenda or in the conversation, but that President Nicolás Maduro recently mentioned, just when he is experiencing the lean times of an economy that has become post-oil, after carrying out the industry to collapse during years of corruption and mismanagement, and in the midst of a serious erosion of democracy.

The country ranked 111 out of 115 in the most recent report of the Energy Transition Index of the World Economic Forum, being among the most backward. “Political and economic actors continue to cling to the fact that fossil fuels will continue to be hegemonic,” explains Antulio Rosales, an assistant professor of Social Sciences at the University of New Brunswick, Canada, a Venezuelan researcher on economics and politics of natural resource extraction. . Venezuela is not only in the tail, warns Rosales, but the country is also energy poor, which implies enormous suffering for the population. “Venezuela is coming to a predatory, unplanned transition, a mix of mismanagement, corruption and sanctions that led to a deep debacle.”

Abandoned oil infrastructure in Cabimas (Venezuela), on December 3, 2021.
Abandoned oil infrastructure in Cabimas (Venezuela), on December 3, 2021. Gaby Oraa (Bloomberg)

Although the crisis could be an opportunity, the issue is not being taken into account in crucial instances such as the negotiating table between the opposition and the government in Mexico. There has been talk of investments to recover the oil industry without thinking about the future of that industry and what are the costs and benefits of doing so leaving aside renewable energy. Energy geopolitics, disrupted by Russia’s war in Ukraine, is not helping either. For some, it can be a brake and for others an opportunity to speed up the transition. Venezuela seizes the moment to put itself under the spotlight as a global energy provider. And a part of the world is also pressing for it in the midst of the crisis.

The Tocoma dam, one of the great projects to generate hydroelectricity, was abandoned more than a decade ago, not without great embezzlement of assets. A small wind farm built in the west of the country never got off the ground. The Maduro government, although it talks about the energy transition and congratulates the initiatives of neighboring Gustavo Petro on the subject, seems focused on reissuing the oil diplomacy of the Chávez times with the reactivation of alliances around Petrocaribe. When PDVSA’s production is at its lowest, it does not pick up and the sanctions have made its commercialization difficult, the Chavista leader has leveraged his finances in mining extractivism, with the exploitation of the Orinoco Mining Arc and its serious environmental consequences. “It is time for Venezuela to have a serious discussion on this issue,” says Rosales. “At some point, the global economy is going to be faced with catastrophic scenarios if we don’t set out to reduce fossil fuels. At some point, we are going to stop using fossil fuels.” At that point, much of the 1.5 billion barrels of recoverable crude in Orinoco Belt reserves will stay underground.

Mexico, between a strike to renewables and lithium

The six-year term of Mexican President Andrés Manuel López Obrador at the end of 2018 began with a slam that echoed worldwide. One of his first instructions was to cancel the renewable energy auctions that the previous government had started, in which the state offered licenses to generate electricity from wind and/or solar sources to private companies (many of them foreign) at the best price. In addition, López Obrador (AMLO) reversed much of the legislation that opened up the energy market, concentrating power in the state company, the Federal Electricity Commission (CFE). The CFE, for its part, has criticized clean energy and has even blamed it for blackouts.

Some companies have had to abandon their investments in wind farms, as part of an effort by the regulator to not renew and grant new licenses to private renewable energy companies. However, the AMLO Administration, as the president is known, has shown signs of openness in recent weeks. He has said that he is willing to allow renewable energy companies to operate in the country if the project is managed by the Ministry of Energy and CFE.

A wind farm in Santa Catarina, Nuevo León State (Mexico), on March 26, 2021.
A wind farm in Santa Catarina, Nuevo León State (Mexico), on March 26, 2021. Gary Coronado (Getty Images)

Without a doubt, López Obrador’s most ambitious plan in the energy transition is Plan Sonora, which includes five solar power plants with a capacity of 1,000 megawatts. The investment of 1,685 million dollars will benefit more than four million inhabitants of Sonora and Baja California, according to authorities. In addition, Mexico has one of the largest unconfirmed lithium reserves in the world, so the Plan also contemplates the creation of a parastatal company to exploit, produce and export the mineral. According to the decree sent by the Executive to the Diario de la Federación, private companies will have the opportunity to invest in lithium projects under certain conditions.

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