RENEWABLE ENERGY COOPERATION With HONDURAS

UNCLAS TEGUCIGALPA 001125 STATE FOR WHA/CEN, TRANSISTION TEAM, WHA/EPSC, OES, EEB/ESC (Matt McManus) PASS USAID FOR EGAT, EE PASS PRESIDENT'S COUNCIL ON ENVIRONMENTAL QUALITY SIPDIS E.O. 12958: N/A TAGS: BEXP ECON ENRG EINV KGHG KPAO SENV HO SUBJECT: RENEWABLE ENERGY COOPERATION With HONDURAS REF: A. TEGUCIGALPA 963 ¶B. STATE 113530 ¶1. This is an action request. See para 8. ¶2. Summary: Embassy Tegucigalpa is launching an initiative to deepen cooperation with Honduras on renewable energy. Recent steps, such as the approval of a 100 MW wind energy project and Honduras' inclusion in the U.S.-Brazil biofuels assistance program, allow the Mission to capitalize on current momentum in favor of renewable energy to make the issue a positive pillar of the bilateral relationship while advancing U.S. global goals. Honduras is currently highly dependent on imported oil and gas for meeting a significant proportion of its energy needs. A strong case can be made for environmental, security and business reasons for Honduras to seek to promote renewable energy sources. Post proposes to arrange a reverse trade mission, led by senior GOH officials (possibly including President Zelaya),to the National Renewable Energy Laboratory in Colorado. We also intend to launch a public diplomacy campaign, support the hosting of a renewable energy conference, and lobby for government and private sector financed renewable energy projects. Addressees are invited to comment on Post's ideas and suggest additional ways to increase linkages in this area. End Summary. -------------- Background -------------- ¶3. Honduras has developed renewable energy projects with success over the last few decades. With the construction of the El Cajon hydroelectric dam in 1985, Honduras integrated a major renewable source into its grid that then generated 75 percent of the country's electricity. Over the last 20 years, however, priorities shifted; now about two-thirds of electricity is generated by burning imported fossil fuels, while about 8 percent comes from biomass and the rest from hydro sources. The net result of this trend is that in 2007, Honduras, which has no oil or gas reserves, imported USD 1.375 billion of hydrocarbon products; in the first half of this year alone, imports reached USD 1.25 billion because of the jump in oil prices. This situation has significantly weakened Honduras' balance of payments, as well as contributed significantly to inflationary pressures. ¶4. In October 2007, the GOH passed a law to promote the generation of renewable energy by private developers. An abundance of small-scale hydroelectric projects are in the pipeline, and the GOH recently approved a 100 megawatt wind project. The Honduran Association of Renewable Energy Producers (AHPPER) estimates there is a medium-term potential for an additional 5,000 MW of wind and hydro energy in the country, as well as opportunity to begin development of solar and geothermal capacity. But implementing regulations for the 2007 renewable energy law are yet to be promulgated, and projects continue to languish within the bureaucracy. Current producers of fossil energy actively thwart development of small renewable projects. ¶5. Honduras also has considerable potential to produce biofuels -- both ethanol from sugar cane and biodiesel from African palm, jatropha, switch grass, and other sources. Although there is no commercial-scale production yet, there are several small plants producing biodiesel on a trial basis for their own vehicle fleets or on-site power generation. The United States and Brazil recently included Honduras in their biofuels assistance program; with the technical assistance and feasibility studies offered under this alliance, the GOH has additional opportunities to expand its renewable energy arsenal. -------------- U.S. Interests -------------- ¶6. A United States-Honduras renewable energy cooperation initiative will: - Strengthen bilateral relationship with Honduras through joint promotion of renewable energy initiatives; - Promote sustainable development and energy security in Honduras; - Create new markets for U.S. renewable energy technologies; - Demonstrate U.S. commitment to addressing climate change in Central America; - Improve public health; and - Reduce poverty in Honduras by reducing and stabilizing energy prices and giving poor, remote communities access to cheap, reliable power. -------------- Strategies for Partnership -------------- ¶7. Current circumstances provide the United States a unique opportunity to strengthen our bilateral relationship with Honduras while advancing U.S. global goals (climate change, energy security, sustainable development) through the promotion of renewable energy. The following strategies represent post's initial ideas to move this agenda forward: - Establish partnerships within USG agencies. The Mission will establish points of contact within Department of State (DOS) bureaus, U.S. Agency for International Development (USAID), Department of Commerce (DOC),Department of Energy (DOE),Department of Agriculture (USDA),Overseas Private Investment Corporation (OPIC),Office of Science and Technology Policy (OSTP),U.S. Trade and Development Agency (USTDA),Export Import Bank (EXIMBANK),President's Council on Environmental Quality (COQ),and others to coordinate USG renewable energy efforts in Honduras and maximize the impact of our investments. - Identify local and international partners. Several organizations are already working to support and finance renewable energy initiatives in Honduras, including the World Bank, Inter-American Development Bank, Central American Bank for Economic Integration, the United Nations Development Program, and bilateral donors. The Mission will research existing programs and develop complementary partnerships with these organizations. - Establish Renewable Energy Working Group. Regular meetings will be held with government, industry, and other partners in the renewable energy sector in Honduras. We will identify areas of shared interest and coordinate efforts where appropriate. - Encourage Honduras to take full advantage of the US-Brazil biofuels initiative. Honduras agreed to participate in the second tranche expansion of projects under this program. The United States funds technical assistance and consultation efforts for target countries as they design and implement biofuels legislation and projects. - Lobby for approval of renewable energy projects. According to AHPPER, dozens of projects with a total generating capacity of 125 MW have completed all regulatory requirements but are waiting - in some cases for several years - official GOH approval. In addition, biofuels capacity is sitting idle for lack of market-friendly rules to permit its commercialization. - Organize Reverse Trade Mission to National Renewable Energy Laboratory (NREL). A delegation possibly led by President Zelaya to NREL and renewable energy installations in the region will foster understanding among GOH officials and private sector participants. The President and relevant ministers have expressed interest in this idea. - Coordinate Trade Mission to Honduras. DOC will bring a selection of U.S. renewable energy firms to make contacts and identify potential exports to Honduras. - Promote favorable policies. The Mission will organize a renewable energy policy conference/exhibition, involving experts and industry figures, to educate the Honduran public and policymakers on the benefits of renewable energy and the sorts of policies necessary to promote its development. We will also bring in periodic speakers with expertise on different aspects of renewable energy technology and policy. - Initiate Ambassador's Clean Energy Award. The Mission will identify Honduran government agencies, firms, business associations, and NGOs who are leading the way in the development of renewable energy in the country. An award will be given annually to one of these innovative partners at a reception hosted by the Ambassador. - Launch public diplomacy campaign. The Mission plans to launch a major public diplomacy campaign making the climate change, security, and business case for renewable energy. The Mission has drafted a speech and talking points for use by the Ambassador and Country Team members in reaching out to local audiences. -------------- Action Request -------------- ¶8. Post seeks reactions from Washington agencies to the initiatives proposed in para 7. Post also welcomes any suggestions for additional ways to increase linkages in this important area, including points of contact from other USG agencies. Contact Sarah Duffy at DuffySA(at)state.gov for more information. Post looks forward to working with addressees on this important matter. End Action Request. LLORENS