La Potencia de Energía Solar en Centroamérica

Today I gave a talk and presented information about barriers to solar photovoltaic (PV) development in the commercial and industrial (C&I) sector. I am currently researching this topic as part of a separate World Bank-funded project. Although that project focuses on Eastern Caribbean islands, the more I explore renewable energy challenges in Central America, the more I similarities I see, and I was excited to share them at Euroconvention Global's RENPOWER Central America.

Global electricity supply by source. Source: International Energy Agency.

As I note in the presentation, legal and regulatory factors often pose some of the biggest challenges. In the past, a centralized utility may have been the only entity able to provide the kind of electricity generation and delivery a country needed. Small-scale solutions, as well as technologies and business models that are more decentralized, or distributed, are thriving around the world. However, elements like existing licenses that give the utility sole authority to deliver or sell electricity can prevent would-be market entrants.

More competitive pricing solutions are also needed. In Central America and the Caribbean, existing pricing mechanisms and contracts that underpin a renewable energy project must be set in such a way that the project owner – be it an individual business entity or a third-party power provider – recovers investment costs within an acceptable window. Uncompetitive pricing can push payback timelines and discourage project development.

Solar irradiance in Central America during the third quarter of 2018. (Source: Vaisala.)

Familiarity and know-how are also common challenges. Banks often choose not to lend to a project (or technology) it does not understand. For example, a traditional mortgage has a house – a thing of value – connected to it should the customer default. Banks typically do not know what they would do with solar panels and inverters in the case of a failed project. Despite a strong track record of success around the world, known technologies – like solar PV – are still seen as risky. Until banks become more knowledgeable about them, they will continue to hesitate.

These are just a few examples among many that solar PV projects continue to face, especially in the C&I sector, which often comprises a large portion of a country’s economy. Renewable energy projects have proven to significantly decrease a company’s operating costs and increase its overall economic competitiveness, and more should be done to encourage their growth.

You can see these and other key information in the presentation, available here. Warning: it’s in Spanish. Much like the conference, there is no translation – a factor I only learned about the day before I took the stage! Have a look and feel free to connect with me to discuss it further.

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#LatinAmerica

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© 2020 by Mark Konold