Energy Summit: Ways to cut energy costs in Latin America
If your electric bill were suddenly to triple, imagine how that would change your life, how you'd need to shift spending on everything from food to entertainment to transportation.
Many people in Latin America now spend triple or more on electricity compared to the costs in the United States: up to 55 cents per kilowatt hour in Honduras, versus about 7-8 cents per kWh in the USA.
Ways to cut electricity costs in Latin America were a key topic discussed at WorldCity’s first annual Latin America Energy Summit, held Oct. 25 and featuring visiting panelists from Washington, D.C.
One plan to help Central America: Build a grid across the region that can connect power plants, boost economies of scale and improve reliability, said speaker Julie Doherty, an energy specialist now advising the U.S. Department of Energy’s Office of American Affairs.
Another option for the Caribbean islands: Expand production of renewable energy - such as solar and wind - to reduce costly imports of oil and other fossil fuels, Doherty told the Energy Summit.
Not enough supply to meet demand
Electricity costs in Latin America are high, partly because of supply and demand.
Supply, provided mainly by government companies, cannot keep up with fast-growing demand from businesses and homes in the developing region, said speaker George Calienes, who leads Latin America business for air-conditioning giant Daikin McQuay, a Japan-based multinational with sales around $20 billion per year.
That means companies expanding in Latin America should consider energy-efficient systems such as air-conditioning and appliances to cut their operating costs, Calienes and other speakers said.
But increasing the supply of energy in Latin America requires new financing.
That’s partly why the InterAmerican Development Bank (IDB) in Washington, D.C. now directs more than $2 billion per year in loans to energy-related activities in the region, including renewable energy and energy efficiency.
Part of that money must go to education about more efficient energy use. That means teaching new habits like closing windows and doors properly when the air-conditioning is on and enacting new building codes that require building insulation, said IDB energy specialist Christiaan Gischler Blanco.
Hurdles to renewable energy
Developing renewable energy in Latin America holds promise but also, faces major challenges. For example, many Caribbean Basin countries are so small that they cannot get volume discounts for solar panels, making costs for solar energy higher than those in the United States.
“The issue is how to we bundle projects in such a way to create scale at a good price,” Gischler said.
In addition, some utilities in Latin America limit how much electricity their customers can generate, so they can maintain control and prevent competition in the electricity business.
The IDB is encouarging utilities instead to enter the solar business and earn from it, he said.
In the meantime, many countries with costly electricity are seeing their economies stymied, with new investors turned off and existing businesses struggling to be globally competitive.
“The tourism industry in the Caribbean is suffering because of the high prices of energy,” said Gischler. Worse yet, some 31 million people in the Americas still remain without access to electricity.
That includes about 37 percent of residents in Honduras and nearly 30 percent in Nicaragua, said Doherty.
Speeding energy efficiency through technology and standards
Leadership to boost energy supply and efficiency must come from varied sources, panelists said.
The private sector needs to continue creating new technologies, said panelist Edward Glab, co-director of the Global Energy Security Forum at Florida International University, pictured at the top of the story.
Air-conditioners today are 50 percent more efficient and trains 60 percent more efficient than they were in 1973, when oil prices first spiked with joint action by the Organization of Petroleum Exporting Countries (OPEC), said Glab.
Individuals and nonprofit groups also can lobby for new energy standards from governments and for builders, said panelist Tom Watson, a leader with ASHRAE, formerly the American Society of Heating, Refrigerating and Air-Conditioning Engineers and now, a global energy conservation group.
"You are the leaders,” Watson told executives participating at the morning event in Coral Gables.
Why aren’t banks and other finance companies more involved in helping finance the switch to more energy-efficient lights, appliances and other systems that can save businesses money?, asked audience member Charles Kropke, an executive with travel company Dragonfly Expeditions.
In the United States, part of the problem that the payback period for investment takes long, based on relatively low energy costs compared to Japan, Europe and other areas, panelists said.
“Tax rebates make sense,” said Glab. “But distributing money, I worry about, because it opens you up to corruption.”
The Energy Summit was part of Global Connections, one of six event series organized by WorldCity to bring together executives on international business topics. The Global series is sponsored by Florida International University School of Business, real estate group Waterford, air-conditioning and heating system manufacturer Daikin McQuay.
The next Global Connections is set for Nov. 22 on “Access to Health Care Innovation in Latin America.”