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.

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Background
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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.

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U.S. Interests
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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.

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Strategies for Partnership
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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.

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Action Request
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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