Mexico’s Fuels Market and a “Double Whammy”

Mexico’s Fuels Market and a “Double Whammy”

This article was first published by the Wilson Center’s Mexico Institute

Jeremy Martin on March 30

Despite photos of the president hugging babies and shaking scores of hands across the country, Mexico is not immune to the double whammy hitting major economies and energy markets: low oil prices and demand destruction due to the coronavirus. Indeed, for Mexico there may actually be a quintuple whammy if you layer on top of the two global trends three more particular ones at home: a recession and spiraling peso, plummeting oil production, and a massively indebted and fiscally imbalanced national oil company in Pemex. (more…)

IOA Briefs New Energy Policy Makers in El Salvador and Shares Regional Renewables Insights at Conference

IOA Briefs New Energy Policy Makers in El Salvador and Shares Regional Renewables Insights at Conference

PRESENTATION

 

At the end of July, Institute of the Americas Energy Transition Initiative Director, Cecilia Aguillon visited El Salvador for strategic energy policy conversations and to participate in, the Salvadoran Association of Engineers and Architects ASIA Week 2019, “90 years of ASIA: El Salvador towards sustainable development.

Cecilia Aguillon was a featured speaker at ASIA 2019. During her keynote presentation, Aguillon spoke about the IOA’s work on energy transition issues and shared her insights on renewable energy markets in the Americas. Her remarks and presentation focused on best practices and lessons learned from renewable energy market leaders in the Americas such as California, Brazil and México.

Aguillon also joined a panel discussion with Valdemar Saravia, member of the board of directors of the regulatory authority SIGET and vice president of ASIA; Silvia Vides, Director of the UNDP for El Salvador; Victor Ventura, Chief of Energy and Natural Resources Unit at the UN Economic Commission for Latin America in Mexico; and Herbert Palacios of the El Salvador¬īs National Energy Council. The panel featured a robust discussion centered around the opportunities and challenges of making energy policies, energy efficiency and renewable energy more accessible to people from all socio-economic sectors of El Salvador.

During her time in El Salvador, Aguillon took the opportunity to meet with newly appointed Director of the National Energy Council, Salvador Handal and the new Superintendent of the Regulatory authority SIGET, Manuel Aguilar. The meetings with these officials proved an important complement to her remarks and presentation at the conference and are crucial for maintaining the close relationship the Institute of the Americas has enjoyed with energy policymakers in El Salvador.

 

Argentina Energy 2019: Oil & Gas, Lithium and Energy Transition

Argentina Energy 2019: Oil & Gas, Lithium and Energy Transition

On March 27-28, the Institute of the Americas convened its annual Energy Roundtable in Buenos Aires with the participation of over 100 representatives from the federal, provincial and city government, regulators, industry, academia and civil society.

The two day Roundtable counted several high level panels and an intense discussion of oil and gas issues as well as the emerging role for the lithium market and the broader contours of how the global energy transition is unfolding in Argentina. A unique lunch panel featured a debate with renowned political analysts and their insights on the intersection of energy and politics as the country heads into a presidential election this October.

Not surprisingly, much of the discussion centered on the ongoing structural adjustments and reforms enacted by the Macri administration, particularly those aimed at subsidies and fiscal incentives both in terms of consumers but also energy producers.

Vaca Muerta and the country’s success in developing the massive unconventional resource potential was also heavily debated. Though important gains have been made to reduce logistical and operation costs, continued focus on efficiency measures and creating a more competitive ecosystem is a must, panelists underscored. There is no doubt that further efforts are required to boost the amount and capabilities of service and equipment providers, but also to greatly increase the number of operators in the country’s oil and gas sector.

Furthermore, how to create sufficient infrastructure to ‚Äúmove the molecules‚ÄĚ remains a key piece to the challenge. Gains have been made utilizing long-inactive pipelines and infrastructure and reopening natural gas exchanges with Chile and Brazil in the short to medium term makes eminent good sense.

A majority of panelists agreed that the key to fully monetizing Vaca Muerta‚Äôs potential was to fully plug Argentina into the global liquefied natural gas (LNG) market. To do so will require all segments of the country‚Äôs energy sector to participate in the strategic development of the resource ‚Äď the government, YPF, private sector participants, regulators and civil society. The technology, geography and volumes, not to mention contractual arrangements, are but a few of the elements that will require attention and crucial decisions in the coming months and years. Further, one panelist argued that political consensus and a law supported across party lines stipulating and protecting investment in such a major infrastructure project is needed to reduce the so-called country risk component.

Beyond the fiscal impacts debated, Argentina’s energy sector is also undergoing a broader transformation and disruption brought about by global trends. Indeed, the policy efforts aimed at increasing renewable energy deployment through the government’s RenovAr program was discussed. Panelists agreed that the effort to date had been important but a thorough cost benefit analysis was required in order to best consolidate and determine the gains and to continue forward momentum. Moreover, a new distributed generation law passed last year is being developed for implementation. Benchmarking against international examples from California to Germany to Chile were discussed during the Roundtable.

And, of course, the role that mobility and electric vehicles are playing in the discussion of energy and emissions reduction is an increasing topic for debate in Argentina. Programs and goals set by the City of Buenos Aires, but also efforts made at the provincial level, have led to an uptick over the last year or so in options for citizens to utilize electric transportation, both mass transit and individual vehicles.

Finally, the topic of lithium featured an illuminating discussion of the potential for Argentina to position itself as a global player. However, the market is still quite small, prices are volatile and the number of projects that exist solely on paper far exceeds the reality that global headlines portray for lithium. But as several panelists argued, therein is the opportunity for oil and gas companies to bring to bear financing and operational insights to the sector and perhaps facilitate some of the dormant projects and boost the development of Argentina’s lithium market.

Mercado de generación distribuida de Argentina: El diablo está en los detalles

Mercado de generación distribuida de Argentina: El diablo está en los detalles

Cecilia Aguillón
Institute of the Americas Director, Energy Transition Initiative
March 8, 2019
This article was fist published in PV Magazine

Durante d√©cadas, los mercados de generaci√≥n renovable distribuida (GD) han estado creciendo en el hemisferio occidental en √°reas fuera de la red. Sin embargo, los proyectos fotovoltaicos conectados a la red est√°n en apogeo, en la mayor√≠a de los pa√≠ses Am√©rica Latina que est√°n desarrollando sus programas de transici√≥n energ√©tica. El √ļltimo pa√≠s en anunciar la promulgaci√≥n de leyes para el mercado GD es Argentina.

En diciembre de 2018, Argentina public√≥ regulaciones para implementar la ley No. 27.191 para acelerar su mercado GD, descentralizar las fuentes de energ√≠a, reducir las emisiones y crear empleos. Al igual que con la mayor√≠a de las medidas legales y reglamentarias incipientes, el √©xito depender√° del dise√Īo de pol√≠ticas adecuadas que atraigan la inversi√≥n local y hagan crecer su mercado GD en forma sostenible. El momento no podr√≠a ser mejor, ya que los costos de la tecnolog√≠a renovable se encuentran en su nivel m√°s bajo en la historia, y Argentina puede aprender de las lecciones significativas de mercados m√°s maduros, evitar errores y adaptar las mejores pr√°cticas a su conjunto √ļnico de condiciones.

 

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Los mercados de generaci√≥n distribuida en Am√©rica Latina han estado creciendo en los √ļltimos diez a√Īos gracias a la r√°pida ca√≠da en los precios de los equipos solares y al aumento de los costos de la energ√≠a convencional. En enero, PV Magazine inform√≥ que Brasil alcanz√≥ un total de 500 MW en instalaciones de GD. Un a√Īo antes, la revista inform√≥ que M√©xico hab√≠a superado los 400 MW en 2017; y es muy probable que el mercado mexicano ya haya superado los 500 MW. Los pa√≠ses centroamericanos tambi√©n han estado desarrollando sus mercados, aunque a un ritmo m√°s lento Pero vale la pena mencionar que el l√≠der del mercado en las Am√©ricas sigue siendo California, donde la Comisi√≥n de Servicios P√ļblicos (CPUC) inform√≥ que 7.6 GW de capacidad instalada acumulada fue lograda al final del a√Īo 2018.

Desde los mercados altamente promocionados como California, M√©xico y Brasil, vemos pol√≠ticas en com√ļn como son el aumento de los costos de la electricidad convencional, la f√°cil interconexi√≥n y la medici√≥n neta. Sin embargo, la medici√≥n neta puede no ser un motor de arranque en Argentina donde los distribuidores de electricidad y los operadores de la red parecen opuestos a esta pol√≠tica. Adem√°s, los precios de la electricidad en Argentina son artificialmente bajos, y actualmente se encuentran cerca de los USD $ 0.05 / kWh. Sin embargo, a partir de ese desaf√≠o hay una oportunidad para que el gobierno reduzca sus subsidios a la electricidad al mismo tiempo que sustituye las fuentes de energ√≠a limpia con un programa de GD bien dise√Īado y ejecutado. Cada vez est√° m√°s claro que existen opciones para que Argentina pueda superar su conjunto √ļnico de desaf√≠os.

Si reducir los subsidios a la energía es políticamente prohibitivo en Argentina e incluso los precios solares actuales no son rentables para la mayoría de usuarios, el mercado de GD podría beneficiar a los grandes consumidores de energía en el sector industrial que actualmente pagan más de USD $ 0,10 / kWh.

El Salvador y Guatemala, por ejemplo no ofrecen medici√≥n neta y el exceso de generaci√≥n de sistemas fotovoltaicos se compensa a los precios de mayoreo, pero su recuperaci√≥n es de casi menos de 5 a√Īos, seg√ļn los instaladores locales, porque las tarifas de electricidad actuales son de dos d√≠gitos. Para mercado de grandes usuarios de energ√≠a, la facilidad de las reglas de interconexi√≥n y el acceso a financiamiento de bajo costo pueden ser incentivos suficientes. Esto podr√≠a crear un impulso para acelerar la industria local, ya que los proveedores e instaladores de tecnolog√≠a fotovoltaica pueden crecer, competir y reducir los costos de instalaci√≥n. Si el pa√≠s desea llegar a los consumidores residenciales que pagan menos de USD $ 0,10 / kWh, el desaf√≠o es mucho mayor.

La Comisi√≥n de Servicios P√ļblicos de California enfrent√≥ una situaci√≥n similar al implementar la Iniciativa Solar del Estado. Aunque las tarifas de electricidad eran altas para comenzar, la tecnolog√≠a era un 80% m√°s cara que hoy, por lo que la energ√≠a solar no era factible cuando se cre√≥ la Iniciativa. Los subsidios se dise√Īaron para pagar los kWhs de energ√≠a solar producida por los clientes, pero los subsidios solo duraban cinco a√Īos porque ese fue el tiempo estimado y aceptable para el retorno de la inversi√≥n. De manera similar, los clientes de energ√≠a solar argentinos podr√≠an obtener un subsidio basado en la producci√≥n de kWhs por un corto per√≠odo de tiempo como incentivo para acelerar el mercado, especialmente cuando la medici√≥n neta no es una opci√≥n.

El f√°cil acceso y el bajo costo de financiamiento pueden ayudar a Argentina a promover el mercado de GD de manera efectiva. Am√©rica Latina es conocida por sus altas tasas de inter√©s, a menudo m√°s del 10%. A pesar de que los costos de la energ√≠a fotovoltaica se encuentran en un m√≠nimo hist√≥rico, el pago de una tasa de inter√©s del 12% para un proyecto fotovoltaico industrial cambiar√≠a la rentabilidad desde un par de a√Īos si se compra en efectivo hasta diez a√Īos o m√°s cuando se financia. Por lo tanto, Argentina podr√≠a dise√Īar un programa de pr√©stamos con tasas de inter√©s m√°s bajas que las actuales. El fondo podr√≠a recuperarse y regenerarse para ayudar a los futuros clientes. Un financiamiento factible podr√≠a hacer que los proyectos de GD sean rentables y el mercado crecer√≠a de inmediato.

Para que la Generaci√≥n Distribuida prospere en Argentina, las inversiones en energ√≠a solar deben obtener un retorno de inversi√≥n razonable. Tener eso en mente y al mismo tiempo asegurarse de que los distribuidores de energ√≠a paguen una tarifa justa por el exceso de kWhs puede parecer complicado, pero estos son dos de los detalles m√°s importantes a considerar para que las pol√≠ticas de GD muevan al mercado. Afortunadamente, varios pa√≠ses en el mundo le brindan a Argentina un men√ļ de herramientas de pol√≠ticas que se pueden modificar y adaptar para arrancar un mercado con √©xito.

 

USMCA and Latin American Energy Diplomacy Under a New US Congress

USMCA and Latin American Energy Diplomacy Under a New US Congress

Dec 11 2018 – Washington DC

November’s midterm elections altered the balance of power in Washington, and the new Democratic majority in the House of Representatives, which will mean new chairs on key committees, will play an important role in shaping US energy diplomacy and energy markets in the Western Hemisphere. At an event co-hosted by the Inter-American Dialogue and the Institute of the Americas, panelists discussed how the new Congress will approach key issues affecting energy within the context of Latin America’s evolving role in US trade and foreign policy.

In his keynote remarks, Nelson Cunningham, president of McLarty Associates, stressed that the approval of the United States Mexico Canada Agreement (USMCA) will take center stage as the new Congress assumes power, with major consequences for North American trade. Though the Democratic base has become increasingly pro-trade, Speaker-designate Nancy Pelosi and House Democrats may be reluctant to yield a major political win to President Donald Trump, and Pelosi could attempt to stall a vote on the deal as she did with the Colombia Free Trade Agreement in 2008.

At least publicly, Democratic leaders have expressed their desire to work with the president on reaching an agreement, which could deliver some minor improvements over the original North American Free Trade Agreement (NAFTA), but they have concerns about elements related to labor and the environment, as well as about the deal’s overall enforceability, panelists noted. It remains to be seen whether the president is willing to negotiate or will resort immediately to his nuclear option: a unilateral withdrawal from NAFTA, which would leave Democrats with six months to decide between the USMCA and the grim alternative of no free trade deal at all. All parties would lose in North America’s highly integrated energy industry, including US refiners and gas producers that import crude oil, steel, and aluminum from both neighboring countries and export heavily to Mexico.

Beyond trade, Congress also has broad powers in global energy diplomacy. The House has important influence on areas such as foreign aid, tax policy, and natural gas exports. Panelists discussed strategic goals the new Congress can pursue next year, such as preventing oil from becoming part of conflicts in the region and reinforcing political stability and good governance. In particular, two new committee chairs will shoulder special responsibility in setting the agenda. Representative Eliot Engel, who will take the helm as chair of the House Foreign Affairs Committee, brings a strong track record in US-Latin America engagement, having previously chaired the Western Hemisphere Subcommittee. Representative Albio Sires will assume the top role on that subcommittee, and will emphasize his tough stance on Venezuela and on Cuba, where he was born. Closer cooperation on energy in the hemisphere will benefit both the US and Latin American partners, and in the current complex political environment, the new Congress should resolve not to let it fall by the wayside.

Transición Energética en Centroamérica

Transición Energética en Centroamérica

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Por muchos a√Īos, Centroam√©rica ha buscado la forma de alcanzar la seguridad energ√©tica de diferentes maneras. Los pa√≠ses han considerado una amplia gama de alternativas para reducir la importaci√≥n de petr√≥leo, como han sido la incursi√≥n del gas natural y una mayor penetraci√≥n de energ√≠as renovables m√°s all√° de la hidroelectricidad.
Mesa Redonda sobre la Transición Energética en Centroamérica