La Jolla – Disruptors are not just for the tech industry anymore. Speaking at the Institute of the Americas on July 22, United States ambassador to Panama, John D. Feeley, called the $5 billion dollar expansion of the Panama Canal a “disruptor of international commerce.”  Ambassador Feeley’s remarks centered on what he called the three reasons to be interested in Panama: history, prosperity and US foreign policy.

Amb. Feeley was quick to note that the US and Panama have a long history and the two nations are inextricably linked; he added that the historical connection goes back to long before the Panama Canal. Indeed, he underscored the role Panama played, and the Trans-isthmian railroad, as a primary route for Americans to get from the East Coast to California for the gold rush in the middle part of the 19th Century. More recently, the epic construction and operation of the Panama Canal was a major piece of interconnection between the US and Panama, eventually culminating in the Carter-Torrijos agreement that saw the US hand over the Panama Canal and its operations to full Panamanian control at the end of 1999.

Opened on June 26, the expansion of the Panama Canal was a 10 year plus infrastructure project that cost over $5 billion and is the aforementioned disruptor. The expanded Canal will shave between 12-14 days off shipping times from the US East Coast. Additionally, it will considerably reduce shipping time for liquefied natural gas (LNG) exporters from the US Gulf Coast to Asian buyers. But it is also the center piece of Panama’s prosperity.

Panama has for several years been a leading economy in the region with GDP growth averaging around 8% per year and GDP per capita steadily climbing each year. Much of the country’s prosperity is linked to the Canal, its expansion, but also a broader services industry. Counting no significant natural resources, Panama has developed an economy focused on services and, as Amb. Feeley put it, “being useful” to global commerce.

When it comes to US foreign policy, Panama has long played an outsized role for the nation of just under 4 million at the intersection of Central America and South America.  Indeed, as Amb Feeley noted in discussing the historical connection, even prior to independence from Colombia, the Isthmus was instrumental for US citizens heading to the West Coast, but with the development of the Canal came a critical juncture.

Panama was home to not only the Canal and the Canal Zone, a 10 mile wide swath of US territory cutting through the middle of the country, but also found in Panama were several vital US military assets including the headquarters of the US military’s Southern Command. The 1989 invasion and removal of Manuel Noriega on drug trafficking charges to stand trial in the US also is a key moment in the country’s connection to US foreign policy.

More recently, the Panama Papers, the leak of thousands of pages of law firm information regarding offshore accounts and tax evasion has brought international attention to Panama. The name, which unfortunately invokes Panama due to the location of the Mossack Fonseca law firm, is really a conversation on global tax policy and international banking underscored Amb. Feeley. He added that it is not an issue directly related to Panama per se.

Amb. Feeley exuded a tremendous amount of optimism for Panama’s outlook and implored everyone in attendance to consider the country and what it has to offer, not just in terms of business and commercial opportunities, but also tourism and historical attractions.

As the 25th annual La Jolla Energy Conference approached, the landmark climate agreement reached in Paris dominated headlines and pervaded the energy world. The focus on decarbonization and emissions reduction, and particularly the role of technology in the global energy transition cut across the Conference’s panels and discussions on May 25-26, and clearly was on the minds of attendees.

But the need to manage expectations also emerged as a central theme, whether in terms of the Paris Accord, renewable energy, oil prices, Latin America’s upstream, Argentina, or the future of transportation. Thinking about energy, as State Department Deputy Assistant Secretary for Energy Diplomacy Robin Dunnigan noted, is critical and particularly so for managing expectations surrounding the intersection of national security and energy.

The Paris Agreement and nationally determined contributions, or NDC’s, have been roundly applauded for the bottom-up approach. The discussions at La Jolla concurred with the critical nature and great value in this element of the agreement.  But as Professor Tim Duane aptly noted, the Paris Agreement is like a plane where all the passengers have agreed it’s time to land, but the destination and at what pace demand determination. Managing expectations will be required.

State Department Deputy Assistant Secretary for Energy Diplomacy Robin Dunnigan and Roger Tissot, Research Fellow at the King Abdullah Petroleum Studies and Research Center (KAPSARC) discuss energy security and cooperation with Energy Program Director Jeremy Martin.The State Department’s Robin Dunnigan spoke in bold terms about the energy transformation occurring in the United States and its impact on foreign policy and diplomacy. As the US has reasserted itself as an energy super power, so has energy security grown in terms of impact and importance for foreign policy. The State Department, along with several other US government agencies, are working on myriad programs across the globe to boost energy security, access to energy, regional energy integration and the deployment of renewables and emissions reduction initiatives.

Volatility in commodity markets, and particularly oil prices, continues to cast a long shadow over the hemisphere and globe. But despite the continued commodity price downturn, Gil Amengualof Solar Turbines noted that mining economies in Latin America such as Chile, Peru and Colombia have demonstrated greater diversification than their oil exporting brethren, and thus a more positive economic growth outlook.

In their assessment of oil prices and markets, panelists asserted that OPEC still matters and, according to Pedro Haas of Hartree Partners, the cartel has proved itself extremely resilient. More broadly, oil markets are facing a question of peak demand now instead of peak production.

The need to manage expectations when it comes to the price of oil, and what it means for National Oil Companies and economies in Latin America is of utmost importance. Nowhere is this more evident than at Pemex. Gustavo Hernandez’s call for partners as Pemex develops opportunities in the new upstream environment in Mexico was emphatic and consistent throughout his remarks.

Gustavo Hernandez of Pemex highlights the importance of partnerships for the company during the question and answer session with Energy Program Director Jeremy MartinBeyond the role of NOC’s, Latin America’s upstream continues to face challenges. Panelists agreed that given the price environment, and particularly when it comes to deepwater, the industry will become more selective. Expectations must be managed by companies and governments seeking to attract investment, such as Mexico’s Round One and efforts in Colombia, Peru and Argentina, given the constraints on capital to invest in exploration.

Argentina has emerged from more than a decade of a statist and interventionist energy model. Secretary of Strategic Energy Planning, Daniel Redondo, admitted that there may still be perceived risks when it comes to investing in Argentina but he emphasized that the new government was committed to a model of competitive markets, effective regulation, and with a focus on ramping up renewable energy. He asserted that waiting to invest might not guarantee opportunity and reminded attendees that investing early has significant upside.

At the same time, major advances in deployment of renewable energy and electric vehicles, and increasingly competitive costs for these technologies added to the narrative. Renewable energy has seen huge increases in investment despite the persistent downturn in the price of oil. Many speakers pointed to this as a paradigm shift. Similarly, while low oil prices may slow electric vehicle sales, it will not kill them.

Orlando Ribeiro of Petrobras responds to a question about Brazil’s upstream as BP’s Felipe Arbelaez, Berkeley Research Group’s Walter Pesenti and Energy Program Director Jeremy Martin look on.Channeling the theme of managing expectations, Adrian Katzew of Zuma Energia, while touting the April power auction in Mexico and huge gains in cost reduction for renewables, underscored that to be competitive, prices must be at $40 per megawatt hour. He added that storage and intermittency, as well as a focus on enhancing electric grid infrastructure must be taken into account.

The Conference’s final session brought together a series of themes that had echoed throughout the panels and sidebar discussions: the role of technology, decarbonization and the future of energy. In particular, when it came to the element of managing expectations, Tom Doughty from California’s Independent System Operator (CAISO) spoke of CAISO’s efforts to balance peak demand and the so-called Duck Curve, that is the increased load from renewable energy and distributed generation being fed into the California system.

Panelists agreed that technology and data could also provide much of the solution to meeting these issues across the hemisphere. Indeed, energy storage remains one of the key pieces to managing expectations for renewable energy, but also the future of energy markets in the Americas and across the globe.

But CAISO’s Doughty emphasized that the most important expectation power systems and the energy sector across the Americas must manage is that of reliability. Consumers expect the lights to come on when they flip the switch. And all panelists agreed that consumers are more informed, discerning, and better able to manage their energy needs than any time in history.

BUENOS AIRES – Mauricio Macri’s election in late 2015 sent shockwaves across the hemisphere and unleashed a torrent of optimism. Indeed, there was a period of euphoria as he announced his cabinet, economic team and desire to pursue unity and reset Argentina’s regional and global standing. President Macri embraced the expectations for his administration when, during remarks to open this year’s legislative session in Argentina, he said that his government will change the country’s history.

Quickly focusing on the nation’s nearly bankrupt energy sector makes good sense for the Macri administration. Not quite 100 days into his term optimism abounded, as did the necessity to focus on the enormity of the needs for the nation’s energy sector that has ushered in an increasingly workmanlike atmosphere. That was the clear consensus across two days of intense discussions at the Argentina Energy Roundtable convened by the Institute of the Americas on March 9 and 10 in Buenos Aires.

Throughout the election, the Macri campaign made clear their intentions with regards to revitalizing the country’s economic outlook, investment climate and particularly the energy sector. Since assuming power in December, the government has moved swiftly on a variety of fronts from navigating a path to a solution for the long-standing impasse between Argentina and international creditors and confronting onerous capital controls, the country’s currency, export duties and jury-rigged inflation statistics.

The Macri government also brought a technical seriousness to the nation’s energy bureaucracy, as well as a strong push to move beyond the “disorder” and “poor management” they inherited. There have been clear marching orders from the top as the administration works to “normalize” the many government institutions that had languished for years.  In addition, little time was wasted to confront strongly entrenched market distortions and massively costly inefficiencies in the country’s energy system.

Over the last few years, energy contributed around 5 percent of the nation’s GDP, 6 percent of its export revenue and 17 percent of imports. Indeed, the interconnection between the nation’s fiscal imbalance and the cost of energy subsidies and imports was clear and demanded immediate attention. Energy subsidies cost on the order of 12% of all government spending in 2014 while energy imports that same year totaled $6 billion.

President Macri assumed power with a clear understanding that these statistics must be met head on if the country is to revitalize the energy sector and use it as a motor to jumpstart economic growth and be a significant driver of reform.

Only days after taking office in December a state of emergency was declared for the nation’s electric system to avoid what the energy minister called the possible collapse of the system. The presidential decree granted powers through the end of 2017 in an effort to stave off outages, deal with the challenges of the market distortions, and begin medium and long term planning for the system.

As part of the emergency decree, the government also moved swiftly to complete a campaign promise to liberalize prices in the electric sector and deal with the long-standing problem of distortive subsidies.  New prices for the national wholesale power market were introduced in January covering the three months between February and March. Further cuts to electric subsidies are likely later this year in an effort to move electric prices toward more market based rates. The goal in confronting these distortions and fiscal issues is to foster a more attractive investment climate and one that overturns years of confrontation between the government and private investors.

Another early move that was applauded by markets and the investment community, was the government’s creation of a ministry of energy and mining. The new ministry brought into government a wide range of experienced practitioners and energy sector veterans. The ministry replaced a Secretariat of Energy that had ceased to provide policy direction or vision.

As part of the new ministry, several new secretariats and undersecretariats were created including a renewable energy undersecrariat that will work to comply with the national goal of 8% renewables by 2017, a secretariat of energy scenarios to manage energy planning in the medium and long term (15-40 years) and an undersecretariat for energy savings and energy efficiency, which seeks to reduce consumption by 5% by 2020.

Though still early days, the Macri government has clearly been busy in an earnest effort to construct a vision for the energy sector. The first draft, along with several first steps, is in place with the formal energy outlook for the government set to be finalized and published later this year in September.

A key tenet was set forth in opening remarks at the Roundtable by Secretary of Strategic Energy Planning Daniel Redondo: Energy planning and projects must balance supply and demand in Argentina at the same time as reducing imports and supporting modest GDP growth.

Washington, DC – Energy integration is back in vogue in the Western Hemisphere. That was the clear consensus of a panel of government and industry experts convened by the Institute of the Americas on December 3 in Washington, DC.

After a period when economic and political factors conspired to set back the gains of regional integration efforts from the 1990’s and early 2000’s, a booming US natural gas market, myriad initiatives of the US government, and November’s change election in Argentina has reinvigorated the appetite for integration.

The well-known story of booming US oil and gas production from shale played a starring role in reviving the importance of regional energy integration. Natural gas trade between the United States and Mexico has more than doubled since 2005 and will double again by the end of the decade. At the same time, natural gas via LNG from the US Gulf Coast is imminent and will surely plug into the import markets of Chile, Central America and the Caribbean.

The United States government, oft-maligned for “not doing enough” in Latin America and particularly the energy sector, has embarked on a long list of energy diplomacy efforts aimed at the hemisphere’s energy market and integration.

Led largely by the US State Department’s Energy Bureau, programs such as Connecting the Americas 2022, the Caribbean Energy Security Initiative and the Energy Task Force all seek to redouble efforts at regional energy integration as well as energy transition, and boosting diversification of Central America and the Caribbean’s energy matrices. Most importantly, significant financial resources are being made available for the programs, including a $20 million clean energy fund being managed by the Overseas Private Investment Corporation, or OPIC.

The State Department representative on the panel, Chris Davy from the Energy Bureau, spoke enthusiastically and optimistically about the programs and the United States’ embrace of energy diplomacy, as well as the upside these initiatives will bring to the Caribbean, Central America and the entire hemisphere.

In addition to the important push from the United States government, there has been a shift in what may be best termed geopolitical forces in Latin America, forces that long caused countries to focus on security of supply and allow domestic concerns to supersede those of the region or regional integration.

An example is the advance and utilization in Central America of the SIEPAC electric interconnection infrastructure to realize regional electric transactions and trade. But also, countries across the Southern Cone have signaled their desire to recapture their pioneering integration efforts. These trends have been greatly buoyed by the change election in Argentina of Mauricio Macri and his pre-inauguration rhetoric on integration writ large, and the role of the energy sector.

Panelist Ricardo Iglesias of Engie pointed to what can be called a wide range of low-hanging regional integration fruit – the under-utilized energy infrastructure that is in place that with minimal investment can be restarted to usher in the next chapter of regional energy integration in the Southern Cone.

Panelists also agreed on the importance to consider the ongoing COP21 meeting in Paris and the global emphasis on confronting the challenges of emissions. Indeed, as the State Department’s Chris Davy put it: energy policy is climate policy and climate policy is energy policy.

The concept that companies are grappling with both internally and as they manage their investments in Latin America and across the globe is that of what can be summarized as an “energy transition” suggested Engie’s Ricardo Iglesias.

The role of renewables and offgrid solutions such as microgrids work hand in glove with the rational for regional integration, Mark Nelson of Sempra Energy noted. In responding to a question on the role of migrogrids across the region, Mark highlighted the lessons Sempra has garnered from their microgrid project in Borrego Springs, California and how it has informed his companies’ international portfolio as well.