A rapid transition to sustainable, fossil fuel-free Central American economies and societies powered and fueled entirely by renewable energy resources is not only technically possible and cost effective, but would be socioeconomically beneficial, according to a new report from the Worldwatch Institute, with support from the Climate and Development Knowledge Network (CDKN) and Costa Rica's INCAE Business School.
Central American governments and societies continue to try to cope with, manage and address deep seated socioceconomic and environmental problems and improve overall living standards and quality of life for fast growing populations. While contributing little in the way of global greenhouse gas emissions (they're in fact 'frontrunners' when it comes to renewable energy use), Central American countries – as is true for all nations around the world -- are nonetheless increasingly challenged to address the effects and potential threats climate change and ecosystems degradation pose to their economies and societies.
Though unique in significant aspects, Central America can serve as a microcosm for the state of regional and global affairs when it comes to energy policies, markets, industry and investment, and their ramifications across societies and the ecosystems upon which they ultimately depend. While blessed with an abundance of untapped renewable energy resource potential, Central American governments continue to subsidize fossil fuels heavily. Energy policies, incentives and practices that lock in and assure ongoing fossil fuel dependence and more in the way of carbon and greenhouse gas emissions remain in place, increasing the threats and costs.
It doesn't have to, and indeed should not, be that way, according to authors of “The Way Forward for Renewable Energy in Central America.” Whether or not unaccounted for costs to the health and integrity of society and ecosystems are factored into policy and investment decisions, the high, and growing, costs of fossil fuel reliance are becoming increasingly clear and real. So are the benefits, and cost effectiveness, of making a rapid transition to complete reliance on a diversified mix of renewable energy resources.
A “Roadmap of a Roadmap” for sustainable energy, economies & societies
The first phase of a holistic and comprehensive initiative to develop “a roadmap of a roadmap” for sustainable energy, economic and social development, “The Way Forward for Renewable Energy in Central America,” assesses the status of renewable energy technologies in Central America, “scopes the improvements that need to happen with regard to the key components of a sustainable energy system and establishes the necessary methodology and groundwork for comprehensive national energy strategies,” Worldwatch explains in a press release.
Among the report’s key findings:
- Central America, long a frontrunner in hydropower and geothermal energy, is exploring its potential for expanding these technologies in a more sustainable manner while also developing other renewable energy resources such as wind, solar, biofuels, and agricultural waste. Costa Rica is leading the world in its ambition to be “carbon neutral” by 2021.
- Still, as the economies of Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama expand, use of fossil fuels is on the rise, while the use of fuelwood, primarily for cooking, continues to be unsustainably high.
- Across the region, an estimated 7 million people still have limited or no access to electricity services. Renewables are the only convincing and affordable solution to provide underserved communities that are far from existing grids with access to modern energy services.
- Central America’s non-hydro renewable electricity share is 13 percent, impressive when compared to the global average of only 5 percent. The urgent challenge for the region is to build on past successes and avoid locking in economically, socially, and environmentally costly fossil fuels for decades to come.
- The potentials for renewables are enormous: Geothermal alone could satisfy nearly twice the region’s predicted electricity demand through 2020. Existing regional wind powerinstallations currently use less than 1% of the available resource potential. Solar and biomass have enormous potentials throughout the region.
- Despite their sustainable energy ambitions and policy statements, the seven countries of Central America have been unable to comprehensively design, synchronize, and implement the program of work necessary to promote sustainable energy solutions to their full potential.
- The full costs and benefits to society of specific energy development options remain unclear. What is evident, however, is that the region pays an enormous socioeconomic price for its reliance on fuelwood and imported fossil fuels.
- Most Central American countries have been able to greatly improve their investment climate for sustainable energy. Still, powerful financial barriers remain, ranging from the unavailability of capital and the lack of human expertise, to investment insecurity and costly administrative processes.
- Most countries in the region have concrete policy mechanisms in place for advancing renewables.These policies and measures, however, are not always sufficient to level the playing field with fossil fuels, which are subsidized (directly and/or indirectly) in all Central American countries.
Going beyond Levelized Cost of Energy
The Worldwatch report authors devote a significant amount of time and effort in analyzing the comparative costs and benefits of renewable versus fossil fuel energy. They found that an increasing range of renewable energy resources are cost effective and yield greater and wider benefits whether they are evaluated on conventional levelized cost of energy (LCOE) terms, or broader, more holistic and comprehensive terms, using LCOE+, a methodology that factors in the effects of fossil fuel that are typically ignored, or shunted aside, for the public sphere to bear. As they note,
“A recent LCOE 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 sources.
“The report estimates the cost of geothermal power at 5–8.9 U.S. cents per kWh (kilowatt-hour) and the cost of hydropower at 7–8 cents per kWh. In contrast, for plants powered by heavy fuel oil, generation can beas high as 12–15 cents per kWh; costs of coal-powered generation are 10–11 cents per kWh.
They go on to highlight that,
“standard LCOE estimates still fail to include the true cost of energy due to externalities associated with power generation, as well as the market distortions caused by the heavy use of subsidies. In Central America, both fossil fuels and renewables currently receive subsidies,but the balance leans disproportionally in favor of fossil fuels despite their detrimental external costs.”
A methodology exists to account for these unaccounted for costs exists, however. “Extending the standard LCOE analysis to account for these externalities—through an approach known as LCOE+—can help address these missing factors. Te LCOE+ is an important tool for analyzing the real societal costs of fossil fuel energy and to demonstrate the actual cost gap between renewable and non-renewable electricity production.”
Making climate change mitigation and adaptation a core, strategic element of decision making across the government, public and private sector spheres is increasingly seen as an imperative. Similarly, extending current decision making frameworks and methodologies to account for the unaccounted for public, social and ecological costs of industrial and commercial decisions -- as does LCOE+ -- is imperative if climate change mitigation and adaptation is to be "mainstreamed."