OAS AND IOA HOLD REGIONAL CONFERENCES ON RENEWABLE ENERGY

UNCLAS SAN SALVADOR 000006

STATE FOR WHA/CEN, WHA/EPSC FAITH CORNEILLE, EEB/ESC/IEC/EPC MATT
MCMANUS, BRIAN DUGGAN AND NOEL GURWICK

SIPDIS

E.O. 12958: N/A
TAGS: ECON ENRG EINV EPET ES
SUBJECT: OAS AND IOA HOLD REGIONAL CONFERENCES ON RENEWABLE ENERGY


1. SUMMARY: The OAS and the Institute of the Americas (IOA)
organized two USG-funded regional conferences on renewable energy in
San Salvador on December 11-12. At the December 11 OAS conference,
delegates from Central and North America discussed their current
energy matrices and policies to improve cooperation and boost
investment in renewable energy. The IOA event brought a diverse
group of energy specialists and private sector leaders to discuss
global economic trends, regional integration and other factors
affecting investment in renewable energy. Speakers at the IOA
meeting also provided numerous examples of renewable energy projects
in Central America and illustrated the regional opportunities and
challenges that face project developers. Panelists at both
conferences noted constraints posed by oil price volatility and the
global financial crisis but underscored the long-term environmental
and economic benefits of renewable projects. During panels and
separate press roundtables, biofuels consultants highlighted
technical assistance projects promoting biofuels development under
the U.S.-Brazil initiative. END SUMMARY.


2. Ambassador Glazer joined Minister of Economy Ricardo Esmahan and
OAS Executive Secretary for Integral Development Alfonso Quinonez to
open the OAS Forum on Sustainable Energy for Central and North
America on December 11. In his remarks, Ambassador Glazer
highlighted U.S. engagement in promoting renewable energy through
support for sub-regional OAS meetings on renewable energy and
technical assistance to promote biofuels under the U.S.-Brazil
initiative. To underscore U.S. sponsorship of both conferences, the
Ambassador also hosted a reception on December 11 for guests from
both events.

HIGH POTENTIAL FOR RENEWABLES IN CENTRAL AMERICA
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3. During the opening panel, energy specialists from regional
organizations noted Central America's dependency on oil imports and
the expected doubling of energy demand over ten years, but
underscored the high potential for renewable energy projects. An
energy specialist from the Central American Bank for Economic
Integration (CABEI) estimated that Central America can potentially
produce 36,000 MW of renewable energy, nearly six times current
demand, with most of this potential - 31,000 MW - in hydroelectric
projects. Several panelists pointed out that carbon credits have
increased the economic incentives for renewable projects and
commented that environmental benefits will grow more important with
increasing focus on climate change initiatives.


4. Delegations and regional organizations discussed policies and
programs for promoting renewable energy. Panelists from the
Inter-American Development Bank and CABEI discussed regional
programs for financing renewable energy projects. The planning
director from Mexico's energy agency described detailed energy
conservation and diversification strategies that Mexico is
implementing to reduce dependency on oil and lower its carbon
footprint. A generation company manager from Panama discussed how
regulatory frameworks allowing long-term energy contracts have
helped to encourage investment in Panama.

TRANSPARENT RULES NEEDED FOR REGIONAL INTEGRATION
-------------- --------------


5. During the private sector forum organized by the Institute of
the Americas on December 12, many speakers emphasized the importance
of establishing a clear and consistent regulatory framework to
encourage investment in renewable energy and regional integration.
Several panelists noted that the Central American Energy Electrical
Interconnection System (SIEPAC) is developing a regional
transmission line, but participating countries have lagged in
developing a regional regulatory framework necessary for regional
energy markets to develop.


6. Some business leaders expressed doubts that Central American
countries will agree to a regulatory framework to allow significant
long-term trade in electricity within the region. With regional
leaders having diverse views on state intervention in markets,
companies fear they may be reluctant to curtail their ability to
restrict energy exports during energy shortages. Nevertheless,
U.S.-owned Cutuco Energy expressed confidence that a regional
framework will be developed that will enable Cutuco to develop a 550
MW gas-fired power plant in El Salvador targeting the regional
market.

7. Panelists in both conferences commented that recent reduction in
oil prices and credit shortages caused by the global financial
crisis may delay future renewable energy projects. Several noted,
however, that those companies that can secure financing will find
turbine and investment costs lower due to sharp cutbacks on new
generation projects around the world. A representative of
Mesoamerica Energy discussed ongoing projects to develop 400
megawatts in wind power projects in Central America, showing that
wind energy remains economically viable despite low oil prices and
financial constraints. Speakers also emphasized that recent oil
price volatility underscores the long-term need for energy
diversification, and that energy policies need to rest on a
long-term vision.

U.S.-BRAZIL BIOFUELS INITIATIVE
--------------


8. During the IOA conference on December 12, consultants from
Energy Security Group (ESG),Arkel Sugar and Winrock International
discussed their projects to promote biofuels in El Salvador, Haiti
and the Dominican Republic under the U.S. Brazil initiative. David
Walden provided an overview of prospects for biofuels projects in El
Salvador, Haiti and the Dominican Republic and described Winrock's
mission to identify technical assistance projects to promote
biofuels in these three target countries. ESG and Arkel consultants
described their ongoing projects to develop an ethanol policy
framework and conduct a feasibility study for sugar mills to invest
in ethanol production. Biofuels researcher George Philippidis
presented a recent study showing high potential for ethanol
production in Central America, once a supporting policy framework is
established.


9. During two separate press round-table discussions, the biofuels
consultants and EEB/EPSC Office Director Matt Rooney discussed U.S.
involvement in promoting biofuels under the U.S.-Brazil partnership.



10. Presentations from both forums are available on the following
websites: http://www.oas.org/dsd/reeep/ReunionElsalvado r.htm and
http://www.iamericas.org/ presentations/energy/Salvador08/


Glazer