Platts guatemala june 2009 juan belt (june 2)


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  • Annual Prices from 1970 – 1996, Quarterly Prices from 1997 - 2008
  • “flooded cities from last year's string of devastating storms in Haiti, do-gooders across South Florida and the Americas felt compelled to act.” Several “back-to-back storms last year left nearly 800 dead, hundreds of thousands homeless and $1 billion in wreckage.”
  • Pew Center, Climate change mitigation in developing countries
    Brazil, China, India, Mexico, South Africa, and Turkey
  • Who is using MARKAL?
    Globally: IEA, EIA, ETSAP, EFDA
    Regionally: EC, BNL, EPA-ORD, NESCAUM, China, ASEAN
    Nationally: UK DTI/ERC, US BNL/EPA-ORD, numerous EU countries (Germany, France, Italy, Spain, Switzerland, Denmark, Norway, Sweden, Belgium, etc.), SEE-8, Russia, several developing countries (e.g., China, India, South Africa, ASEAN, Colombia, etc.)
    Other: several states (e.g., CA, CO, OH, TX), several European cities (e.g., Geneva, Torino, etc)
  • Platts guatemala june 2009 juan belt (june 2)

    1. 1. Energy Sector Planning in the Context of Volatile Prices, Financial Crisis and Global Climate Change Initiatives Juan A. B. Belt Presented at the Platts 12th Annual Conference on Private Power in Central America Guatemala City, Guatemala, June 11-12 2009 Director, Office of Infrastructure and Engineering, US Agency for International Development (USAID). The opinions expressed in this presentation are those of the author and do not represent the views of the US Government. The author appreciates comments by Silvia Alvarado (Globeleq) and the support of the International Resources Group (IRG) who provided many of the slides related to MARKAL/TIMES. They are not responsible for any errors.
    2. 2. 2 Outline 1. The present context: rapid increase in crude oil prices in 2008, financial crisis, Global Climate Change 2. MARKAL/TIMES: description of model & potential uses in Central America 3. US Government support for the power sector in Central America & Colombia – Past & on-going support – Potential Support under the Energy and Climate Partnership of the Americas
    3. 3. 3 Will Prices Increase Again as the World Economy Bounces Back? Saudi Light Crude US$ per Barrel $0 $20 $40 $60 $80 $100 $120 $140 1970 1971 1972 1973 1975 1976 1977 1978 1980 1981 1982 1983 1985 1986 1987 1988 1990 1991 1992 1993 1995 1996 1997 1998 2000 2001 2002 2003 2005 2006 2007 Annual data for 1970 - 1996 and Quarterly data from 1997 - 1008 US$perBarrel Nominal US$ Constant 2000 US$ Source: Energy Information Association, US Department of Energy Crude price doubled in real terms from the previous peak
    4. 4. 4 Central America: Vulnerable to Oil Price Variability Hydrocarbon Imports as a Percentage of Exports of Goods and Services 0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 Nicaragua Guatemala El Salvador Honduras Costa Rica Panama Central America
    5. 5. 5 Financial Crisis & Private Infrastructure Projects • Closure of private infrastructure projects Aug-Nov 2008 40% lower than same period 2007 • Projects impacted through higher cost of financing, delays & cancellations • Local public banks, multilateral, bilateral & export credit agencies have been key finance providers • Investors’ appetite for new deals seems to be declining • Conclusion: Governments may need to further improve the environment for private investment • World Bank, Ada Karina Izaguirre, Financial Crisis Affecting New Private Infrastructure Projects
    6. 6. 6 Havana, October, 2005, Ravaged by Wilma
    7. 7. 7 Bolivia: Retreat of the Chacaltaya Glacier
    8. 8. 9 MARKAL/TIMES Model: Basic Structure Based on International Resources Group (IRG) Demand Conversion technology Primary energy
    9. 9. 19 Central America: Why Use of MARKAL or Other Models • Identify policies to: – Reduce risk associated with volatile prices – Exploit economies of scale at the regional level – Reduce carbon emissions efficiently
    10. 10. 20 Central America & Colombia: Past & On-Going Programs
    11. 11. 21 Past Programs in Central America: Promoting Reform and Integration in the Midst of Conflict • Panama: demand side management • Costa Rica: law to permit co- generation • Support to reforms in Nicaragua & Honduras • Comprehensive reform of the power sector in Guatemala and El Salvador • Central America regional power pool: USEA support to ACERCA
    12. 12. 22 Colombia: “fine tuning” the reforms • Fine tuning a system working relatively well; the most sophisticated power market in LAC • EGAT staff, consultants, FERC, Texas regulator • Auction system for capacity payments • Strengthening market surveillance • Rationalizing subsidies & universal access program • Regulation for commercialization companies • Results: over $2 billion in investment that will increase the reliability
    13. 13. 23 Nicaragua: Support for Sector Governance and Efficiency • Donor coordination • World Bank • IDB • USAID • Other bilateral donors • Strengthening regulator • Texas PUC / NARUC Partnership • TA to measure losses • Energy efficiency Momotombo Volcano
    14. 14. 25 Global Climate Change: Some Principles • The reduction of poverty is a moral imperative • Going “with the grain of the market” is more efficient than going against it • USAID can be most effective in supporting developing countries if it works at the policy level where effects can be systemic • Energy efficiency, renewable energy, demand side management will not work if the power sector is “sick” • Therefore, further reforms are necessary to promote investment in clean energy by the private sector & convert climate change issues into a solid business opportunity for the region
    15. 15. 26 “Most of the required investment, however, must come from the private sector. In order to mobilize that investment, major policy and regulatory reforms are needed in many countries. Neither public nor private utilities and their investors can generate the capital required to expand access to clean, sustainable energy supply, for example, when regulatory regimes prevent them from recovering their direct and indirect operating costs.” Secretary of State Hillary Clinton Answer to Question for the Record Posed by Senator Lugar
    16. 16. 29 Energy & Climate Partnership of the Americas • “By increasing green energy cooperation, we will set our economies on a clean energy growth path and curb global greenhouse gas emissions” • …a voluntary and flexible framework for advancing energy security and combating climate change. Countries will be encouraged to suggest tangible ideas for cooperation, including on energy efficiency, renewable energy, cleaner fossil fuels, and energy infrastructure. • President Obama expressed his commitment to working with his regional counterparts toward a strong international climate agreement at Copenhagen.
    17. 17. 30 SICA: political body; Unidad de Coordinación Energética del SICA (UCESICA) ES CRIE: regional regulator GU ACERCA: “club” of regulators P CR N ES GH Ente Operador Regional: Independent System Operator ES & other GRIDCOs Empresa Propietaria de la Red GRIDCO CR Key CA Institutions NARUC: OPSI or OMS DOE: FERC NARUC: State regulators USEA: ISO USEA: GRIDCO PURC: training all market participants Possible alliances IDB/USG conference to launch CA market IDB & World Bank significant support for regional power market MARKAL/TIMES
    18. 18. 31 Conclusions • Energy planning models like MARKAL do not provide forecasts but are useful for determining the costs & benefits of different strategies/policies • MARKAL & similar tools can be used to model energy policies such as: – Reduction in the reliance on liquid fuels and the importance of promoting fuel diversification & a well-balanced energy matrix – Reduction of carbon emissions • Governments must provide an investor-friendly environment • Full integration of the Central American power market, including Mexico & Colombia, can lead to: – Reduced exposure to crude oil price variability – Cheaper power & optimization of the use of renewables & other domestic sources of energy • Partnerships with appropriate US institutions, IDB & World Bank can contribute to the consolidation of the regional power market
    19. 19. Any questions? Juan A. B. Belt Director Office of Infrastructure and Engineering (I&E) Bureau for Economic Growth, Agriculture, & Trade (EGAT) US Agency for International Development (USAID) E-mail: