The Inter-American Development Bank Fostering ECPA

ENE-Innovation Center – Fostering ECPA

Introduction

In April 2010, The Inter-American Development Bank (IDB) and the United States Department of Energy (DOE) joined forces to support the Energy and Climate Partnership of the Americas (ECPA), launched at the Fifth Summit of the Americas in April 2009. ECPA brings countries across the Western Hemisphere together to facilitate the acceleration of clean energy development and deployment, advance energy security, and reduce energy poverty by sharing best practices, encouraging investment, and cooperating on technology research, development and deployment. ECPA is shaped by the seven pillars:

Energy efficiency;
Renewable energy;
Cleaner fossil fuels;
Infrastructure;
Energy poverty;
Sustainable Forest and Land use and
Adaptation.

The Latin America and the Caribbean region (LAC) is confronted with a crucial energy situation. While LAC has large oil reserves and significant hydroelectric generation capacity, such resources are unevenly distributed and some countries are not able to keep pace with the growing demand for energy to fuel economic growth and development. The high price of oil and natural gas has increased the energy bills for the majority of the countries in LAC region. Unlike previous energy conditions, this energy situation has the added dimension of an environmental challenge: countries are vulnerable to the potential significant impacts of climate change which are expected to materialize under various scenarios, where the poorest countries in LAC are usually the most vulnerable. At the same time, LAC has sources of non-conventional renewable energy, which have largely been untapped (i.e., geothermal, biomass, wind, and solar, among others), and energy efficiency, which remain the cheapest and least utilized source of energy.

Research and development is an important component to reduce the barriers to: (i) the development of clean energy technologies; (ii) sound public policies; and (iii) a regulatory framework to attract investments. In addition, as a result of the most recent international economic crisis, LAC countries are focused on mitigating the economic downturn and addressing social issues that have captured public resources from the energy and climate change challenges. It is expected that financial liquidity constraints are still affecting development, to the detriment of long-term capital investments (required to implement capital-intensive energy projects).

ECPA is envisioned to promote energy cooperation, which has the potential to serve as an engine of growth, job creation, technology transfer, competitiveness, energy security, and trade, creates an important opportunity for the Americas to advance this agenda and yield meaningful results in achieving sustainable energy for the region. As a result, increasing the availability of technical expertise in non-conventional renewable, energy efficiency, energy access, and energy security and establishing innovative and forward thinking mechanisms to access capital are necessary to respond to LAC’s demand. Nations are in agreement that such energy cooperation and concrete steps have been taken, particularly in the form of individual Regional Energy Centers (RECs). The ECPA objective is to establish a non-exclusive framework of cooperation and to facilitate collaboration between the participants to support the development of clean sustainable energy and energy efficiency investment projects and technical cooperation in the IDB’s member countries, with an intention of creating a center to serve as a regional incubator for project finance and to offer technical assistance and capacity building as a regional hub for other regional IDB-supported centers. As such the IDB created the Energy Innovation Center or ENE-Innovation Center.

IDB Energy Innovation Center

In 2010, the IDB launched the ENE-Innovation Center to promote energy innovation and knowledge exchange by serving as a regional incubator for implementation and financing. This will allow the ENE-Innovation Center to also offer technical assistance and execute capacity building programs. Through the ENE-Innovation Center, the IDB is partnering with Governments and the private sector, both regional and non-regional, to provide support for sustainable energy innovation through: (i) knowledge dissemination; (ii) technical assistance; and (iii) capacity building.

The ENE-Innovation Center will serve as a hub to the various renewable energy centers that are currently being developed throughout LAC. It will be staffed with professionals from the IDB and its partner institutions. This would include member country energy experts, assignments from leading research centers on renewable energy, energy efficiency, energy access, and energy security. Furthermore, the ENE-Innovation Center will not only house IDB member countries’ experts (from the North America, Europe, Asia, and LAC), but it will also cooperate closely through personnel exchange and research with the region’s energy research centers.

Action of the IDB to support ECPA through the ENE-Innovation Center

Since the creation of the partnership between the IDB and the DOE to support ECPA and its benefits for the region, throughout the creation of the ENE-Innovation Center, there have been key advancements in the development of the objectives of the ENE-Innovation Center. The main objectives reached during the last 12 months was in cooperation with the Secondees from Japan and South Korea that joined the ENE-Innovation Center under the secondment program, and the projects and knowledge products approved and financed by the IDB, which fold under the ECPA objectives. The IDB is firmly committed to ECPA and is continuously supporting the development of the region within the pillars of ECPA: Energy efficiency; Renewable energy; Cleaner fossil fuels; Infrastructure; and Energy poverty, through the objectives of the ENE-Innovation Center: Information Dissemination & Knowledge transfer; Pre-feasibility and Feasibility Studies; and Capacity Building.

Contribution to the Energy Innovation Center through the Secondmentprogram from Japan and Korea:

JICA (Japan): JICA’s Contribution to the Energy Innovation Center

On January 14, 2011, Japan International Cooperation Agency (JICA) signed the Minutes of Understanding (MOU) with the IDB, to formalize the framework of cooperation to support the promotion of renewable energy and energy efficiency for the mitigation of climate change in LAC region, and by co-financing and coordinated technical assistance through the ENE-Innovation Center. IDB has received JICA’s contribution to the ENE-Innovation Center so far as follows;

A Secondee from JICA:

Mr. Toshitaka Takeuchi was dispatched from JICA and started working in the Center from May 17, 2010. He had been working as a director in the Planning and Migration Affairs Division of LAC Department in JICA head office and is expected to work in the ENE-Innovation Center for the next three years, coordinating co-financing and joint technical assistance to the renewable energy and energy efficiency programs/projects with JICA.

JICA-IDB Special Capacity Building Seminar on Energy Efficiency (November 7-18, 2010 in Tokyo)

The Special Capacity Building Seminar on Energy Efficiency was held as the first activity of the ENE-Innovation Center with JICA, to share energy efficiency and conservation policies in Japan and Asian Countries. Representatives from 12 LAC countries* participated and identify potential future cooperation areas and fields in the energy efficiency sector. There were 21 participants from each country’s ministry of energy on IDB’s recommendation and they made an action plan by country. An information and dissemination product from JICA was developed and titled: “Energy Efficiency and Conservation Promotion in LAC Countries - to make the best use of lessons learned in Japan and Asian Countries”, in order that the ENE-Innovation Center can disseminate this product with countries in LAC.

*Peru, Brazil, Colombia, Ecuador, Honduras, Nicaragua, Guatemala, Panama, Costa Rica, Dominican Republic, Belize, Surinam

Co-Financing Scheme for Renewable Energy and Energy Efficiency in Central America and the Caribbean

JICA and the ENE-Innovation Center agreed to set up a new co-financing scheme to renewable energy and energy efficiency promotion programs and projects in Central America and the Caribbean Region, including provision of long-term concessional loans from JICA, up to the amount of US$300 million, available for five years on such terms and conditions as may be determined by each of the parties concerned. The ENE-Innovation Center is discussing the outline of this scheme with JICA to sign the Framework Agreement in 2011

Ministry of Knowledge Economy of Korea(MKE) Contribution to the ENE-Innovation Center

Korea and the LAC region have the great potential for energy cooperation even though the two regions are geographically distant. Korea has advanced technologies in areas of energy efficiency, renewable energy including solar photovoltaic and wind power. Even though some of the Latin American countries have abundant hydrocarbon and mineral resources, it is important to have balanced industrial structure to offset the cyclical volatility of hydrocarbon and mineral industry. In this regard, the Korean energy companies can contribute to nurturing promising industries related with energy efficiency and renewable energy in the LAC region. After the Korean President Lee, Myeong-Bak took office in 2008, the Korean government adopted “green growth” as national agenda to transform the Korean economy into low-carbon economy by promoting renewable energy and energy efficiency. Korea’s policy experience will help countries in LAC shape green growth strategy in order to cope with climate change and strengthen energy security.

For this reason, the Korean government strongly supports the activities of the ENE-Innovation Center. In 2010, Korea and the IDB started institutional cooperation by signing the MOU between the IDB and the Ministry of Knowledge Economy (MKE) of Korea for the ENE-Innovation Center Secondee Program. In addition there is a Knowledge Concept Product (KCP) proposal to promote mutual understanding in the area of smart-grid and sustainable energy. The Korean government is constructing smart-grid test-bed in Jeju Island, located in the southern part of the Korean peninsula, investing US$200 million by 2013. The construction of this test-bed will be completed in 2011 and integrated smart-gird will be tested for 24-months. The smart-grid test-bed project will focus on real-time energy metering, harnessing renewable energy into the electric grid, remote control of electronic appliance to save energy, and building electric car charging station. In March, 2011, the IDB announced the Sustainable Emerging Cities Platform to harness sustainable solutions to housing, transportation, water and energy use, public services, and related areasin emerging cities. The experience of Korea will provide good example when some countries in LAC begin to develop their sustainable cities agenda.

In terms of energy cooperation between the two regions, much needs to be done to identify mutually beneficial energy projects. Korean companies still lack information on the energy policies of the LAC countries. The joint ventures between the Korean companies and companies in LAC are still in the beginning stages. By strengthening exchange of information through the ENE-Innovation Center, joint projects between the two regions will grow significantly.

IDB Advances in ECPA and ENE-Innovation Center

The energy sector presents a set of features that demand the joint involvement of developers and partners in both the public and private sector. As the major development institution in the region, the IDB participation in the countries energy sector must seek to reach and maintain sustainable energy matrices in the country, while improving energy security, social equity and environmental impact mitigation.

The current situation of the energy sector present the opportunity to leverage the experience in policy making and technology development from donor countries to IDB borrowing members to support knowledge transfer and dissemination, pre-feasibility and feasibility leading to co-financing schemes, and capacity building, all through the ENE-Innovation Center.

The IDB is uniquely suited to offer an array of instruments for supporting the sustainable development of the energy sector in LAC. In this sense, the Energy Division participation has prioritized the following Areas: (i) Information Dissemination & Knowledge Transfer: the IDB has been paying attention to close the knowledge/information dissemination gap in the energy sector. In this regard, the Energy Division of the IDB under the ENE-Innovation Center is preparing studies and analysis concerning energy issues in order to maximize the impact of the IDB intervention; (ii) Pre-Feasibility and Co-finance Projects: this area of interventionis mainly related to promote pre-feasibility studies as well as to support potential future projects for the IDB; and (iii) Capacity Building: one of the main barriers to the development of energy sector can be related to the externalities associated with the lack of sound public policies and predictable regulatory frameworks for attracting investments. The IDB, under the ENE-Innovation Center will foster development and strengthening regulatory framework and institutional arrangements that adequate for the sustainable development of the energy sector of the countries in LAC.