The Way Forward for Renewable Energy

The Way Forward for Renewable Energy

in Central America

1. Introduction –

        Worldwide, renewable energy has shown remarkable growth in recent years. Nearly 22 percent of the world’s electricity is now supplied by renewable energy, and Central America is part of this global transition. The region is a worldwide leader in hydropower and geothermal energy, and most Central American countries are developing wind power projects. Yet the region is far from harvesting its enormous renewable energy resources to their fullest potentials.

        Central American governments are aware of the importance of renewable energy as a means to reduce traditional dependence on unsustainable large hydropower and rising reliance on imported fossil fuels. As the economies of Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama expand, regional use of fossil fuels is growing quickly. These developments come with significant health, societal, and economic costs, including rising greenhouse gas emissions and worsening air and water pollution. Central America has the potential to meet 100 percent of its electricity needs with sustainable renewable energy, but the proper policies and measures need to be put in place now.

2. Text Development –

        Central America’s energy mix is dominated by imported petroleum products, used for transportation and other purposes, and by traditional biomass (primarily fuelwood), used for cooking. Prior to 1990, thermal power generation from fossil fuels was almost nonexistent in Central America. Between 1990 and 2010, however, the region’s electricity sector shifted from relying almost exclusively on hydropower to producing a significant share of electricity from fossil based fuels (38%).

        Renewable energy accounts for an estimated 62% of Central America’s total electricity generation. Hydro is the longest-standing form of power generation, governments across Central America have encountered serious domestic and international resistance to large hydropower projects, and are actively seeking alternatives for electricity generation. Most of Central America’s geothermal potential has yet to be tapped. Wind has been harnessed to produce utility-scale power since the 1990s, but the energy produced by wind represent only 1.7% of the total generation in the region. Solar power is in the early stages of market development.

        Energy is key to human development. Rather than being an end in itself, it is the means by which communities have access to clean water, cooking, lighting, and temperature control. Gaining access to modern forms of energy can expand important social and economic opportunities such as health care, education, and income generation. Across Central America, social and economic conditions have improved markedly over the past decade. The rapid economic development and industrialization have had an immense impact on people and the environment in Central America. The burning of oil and other fossil fuels is responsible for local air, ground, and water pollution. As renewable energy becomes more affordable and readily deployable, Central America has an unprecedented opportunity to bypass the carbon-intensive practices that drove an unsustainable course of development.

        In Central America, subsidization gives petroleum-fueled thermal power plants an advantage, undermining the market opportunity for renewable energy. Like many regions, Central America is extremely vulnerable to high and unpredictable oil prices. Across Central America, governments have used energy subsidies to shield their economies from high oil prices, improve people’s access to energy, and promote economic growth. When energy subsidies are administered effectively, they can facilitate energy access for low-income consumers by making energy more affordable. But reducing the price of electricity to the consumer through subsidies can have adverse effects as well. With electricity prices low, consumption often increases, which deters consumers from using electricity in a more efficient manner.

        Making the switch to renewable energy can have significant advantages. A recent Levelized Cost of Energy (LOCE) study of Central America by the World Bank compared geothermal, hydropower, and fossil fuel technologies and concluded that renewables are more cost competitive than fossil fuel energy. Another driving force behind renewable energy deployment is climate change mitigation through the reduction of greenhouse gas emissions. The labor required to implement energy efficiency measures will create new job opportunities in Central America.