Energy Outlook of Latin America and the Caribbean 2020

Andrés Schuschny

Director of Studies, Olade

REN21 Academy Session: Energy Outlook of Latin America and the Caribbean 2020

All PPTs from the REN21 Academy can be found on the Academy Knowledge Library page on the REN21 website

How is the Latin America and the Caribbean Energy Sector acting to confront the Covid-19 Pandemic?

http://biblioteca.olade.org/opac-tmpl/Documentos/old0450.pdf Impact analysis of the COVID-19 pandemic on the Energy Sector of Latin America and the Caribbean

http://bit.ly/ImpactosCovid Energy Barometer of Latin America and the Caribbean 2020: The challenges of the energy sector in the post- pandemic http://barometro.olade.org (Spanish version)

Effect of the Pandemic on the Energy Sector of Latin America and the Caribbean: Objective and methodology Objective Analyze the effects of the Covid-19 pandemic on the development of the LAC energy sector, for a timespan 2020-2040. Methodology Prepare and compare a forecast energy development scenario for the 2018-2040 period, considering the effects of the Covid-19 pandemic on energy demand and supply, with a reference scenario for the same projection period, based on to energy development policies and plans, established before the pandemic.

The study was carried out for the LAC region, divided into 4 subregions and 2 countries analyzed individually: • Brazil Computational tool • Mexico • Central America (Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama Simulation and Analysis Model of the • Andean Zone (Bolivia, Colombia, Ecuador, Peru and Venezuela) Energy Matrix(SAME – OLADE). • Southern Cone (Argentina, Chile, Paraguay and Uruguay) • The Caribbean (Barbados, Cuba, Grenada, Guyana, Haiti, Jamaica, Dominican Republic, Suriname and Trinidad & Tobago). Corresponds to demand and supply forecasts made before It incorporates the effects of the pandemic on the demand the Pandemic (policies and expansion plans in progress). and supply of energy, correlating GDP and energy Premises: consumption. • Implementation of energy efficiency programs • IMF GDP Projection (WEO 2020, Oct) for the period • Greater penetration of electricity in end uses. 2019 - 2025 were used. • Substitution of liquid fuels of fossil origin for natural gas. • From 2025 onwards, the latest projected GDP variation rates were held constant. • Substitution of firewood consumption by modern energy sources. • Final energy consumption was projected, using linear logarithmic correlation functions between this • Penetration of biofuels in the transport sector. consumption and the nominal GDP of each subregion. • Greater penetration of renewable energy sources in the • For the participation of energy consumption by sectors electricity generation matrix. and sources, the percentage structure projected in the • Greater penetration of natural gas in the electricity BAU scenario was taken, but considering for the years generation matrix, displacing other fossil fuels. 2020 and 2021, an increase in the participation of the residential sector. 2019-2020 2020-2021 2021-2022 2022-2023 2023-2024 2024-2025 (%) (%) (%) (%) (%) (%) % of GDP variation 2019-2020 Argentina -11.8 4.9 2.5 2.3 2.1 1.7 Barbados -11.6 7.4 3.9 1.8 1.8 1.8 -7.9 LAC Belize -16.0 8.0 5.0 3.0 2.0 2.0 -25.0 Venezuela Bolivia -7.9 5.6 4.3 4.0 3.7 3.7 -16.0 Belize Brazil -5.8 2.8 2.3 2.2 2.2 2.2 -13.9 Peru Chile -6.0 4.5 3.2 2.9 2.7 2.5 -13.1 Suriname -11.8 Argentina Colombia -8.2 4.0 3.7 3.8 3.8 3.7 -11.8 Grenada Costa Rica -5.5 2.3 3.4 3.0 3.1 3.2 -11.6 Barbados Cuba -8.0 2.1 2.1 2.1 2.1 2.1 -11.0 Ecuador Ecuador -11.0 4.8 1.3 1.7 2.0 2.3 -9.0 Panama El Salvador -9.0 4.0 3.2 2.8 2.5 2.2 -9.0 El Salvador Grenada -11.8 3.0 5.1 5.0 3.4 2.7 -9.0 Mexico Guatemala -2.0 4.0 3.8 3.5 3.3 3.3 Jamaica -8.6 Guyana 26.2 8.1 29.5 22.3 2.1 1.1 -8.2 Colombia Haiti -4.0 1.2 1.0 1.1 1.2 1.4 -8.0 Cuba Honduras -6.6 4.9 3.3 3.5 3.6 3.7 -7.9 Bolivia -6.6 Honduras Jamaica -8.6 3.6 3.8 2.9 2.5 2.1 -6.0 Chile Mexico -9.0 3.5 2.3 2.2 2.1 2.1 -6.0 Dominican Rep. Nicaragua -5.5 -0.5 2.7 2.0 1.8 2.1 -5.8 Brazil Panamá -9.0 4.0 5.0 5.0 5.0 5.0 -5.6 Trinidad & Tobago Paraguay -4.0 5.5 5.0 4.2 4.1 4.0 -5.5 Only Guyana will have a GDP Nicaragua Perú -13.9 7.3 5.0 4.9 3.9 3.8 Costa Rica -5.5 growth due to the take off of Dominican Rep. -6.0 4.0 5.0 5.0 5.0 5.0 -4.5 Uruguay its oil industry (but not affect Suriname -13.1 1.5 2.0 2.8 3.0 2.1 -4.0 Paraguay the Caribbean results Trinidad & Tobago -5.6 2.6 4.2 1.8 1.5 1.5 -4.0 Haiti -2.0 significantly) Guatemala Uruguay -4.5 4.3 2.5 2.8 2.6 2.4 26.2 Guyana Venezuela -25.0 -10.0 -5.0 -5.0 -5.0 -5.0 LAC -7.9 3.4 2.6 2.6 2.5 2.4 -30.0 -20.0 -10.0 0.0 10.0 20.0 30.0 %

Source: World Economic Outlook, IMF, October, 2020 Projections the GDP at constant prices

Brazil, Mexico, Southern Cone and Andean Zone Central America and the Caribbean

4,000 450 Fall due to the pandemic Fall due to the pandemic 3,500 400

3,000 350

300 2,500 -5.8 % 250

2,000 -6.4 %

USD of 2010 of USD 9

USD of 2010 of USD 200

1,500 9 -6.0 % 10 -9.0 % 10 150 1,000 -12.3 % 100 500 -8.9% 50

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

Brazil Mexico Southern Cone Andean Zone Central America The Caribbean

Source: Own elaboration based on IMF data. Projections of GDP at a constant prices LAC

Latin America and the Caribbean

10,000

9,000

8,000

7,000 The contraction of LAC's -7.9% 6,000 GDP due to the pandemic is equivalent to a setback 5,000 USD of 2010 of USD Fall due to the pandemic

9 of around a decade.

4,000 10

3,000

2,000

1,000

Years

Source: Own elaboration based on IMF data. Projections of the final energy consumption

Mexico - 9 % compared to 2019 -11 % compared to BAU (2020) The Caribbean - 3 % compared to 2019 - 5 % compared to BAU (2020) Central America - 3 % compared to 2019 - 6 % compared to BAU (2020)

Andean Zone ≈ - 10 % compared to 2019 Brazil -11 % compared to BAU (2020) - 7 % compared to 2019 Latin America and - 9 % compared to BAU (2020) the Caribbean

Final energy consumption would fall by 8% compared to Southern Cone 2019 and 10%, compared to -9 % compared to 2019 The arrows (green and red) and the ≈ -11 % compared to BAU (2020) approximate sign indicate the variations with 2020 of the BAU scenario respect to the prospective exercise that OLADE carried out in May 2020

Source: Energy Outlook of Latin America and the Caribbean 2020, OLADE. Projection of the sectoral energy consumption Mexico -2% (2019)-5 % respecto & -2% (2020BAU)del 2019 -7 % respecto del BAU (2020) -10% (2019) & -12% (2020BAU) -11% (2019) & -12% (2020BAU) The Caribbean -11% (2019) & -12% (2020BAU) +8% (2019) & +4% (2020BAU) Central America -6% (2019) & -8% (2020BAU) +4% (2019) &-5 +3% % respecto (2020BAU)del 2019 -3% (2019) & -8% (2020BAU) -7 % respecto del BAU (2020) -8% (2019) & -12% (2020BAU) -6% (2019) & -8% (2020BAU) -8% (2019) & -12% (2020BAU) -8% (2019) & -12% (2020BAU) Brazil Latin America and Andean Zone +2% (2019) & +0% (2020BAU) +1% (2019) &- 9+2% % respecto (2020BAU)del 2019 -11 % respecto del BAU (2020) -8% (2019) & -10% (2020BAU) the Caribbean -11% (2019) & -13% (2020BAU) -6% (2019) & -10% (2020BAU) +1% (2019) & +0% (2020BAU) -11% (2019) & -13% (2020BAU) -8% (2019) & -10% (2020BAU) -11% (2019) & -13% (2020BAU) -10% (2019) & -11% (2020BAU) Southern Cone -9% (2019) & -12% (2020BAU) 0% (2019) &-9 -%2% respecto (2020BAU)del 2019 -10% (2019) & -12% (2020BAU) -11 % respecto del BAU (2020) The green arrows indicate the variations with -12% (2019) & -14% (2020BAU) respect to the prospective exercise that -11% (2019) & -14% (2020BAU) OLADE carried out in May 2020 -12% (2019) & -14% (2020BAU)

Source: Energy Outlook of Latin America and the Caribbean 2020, OLADE. Projection of the electricity generation

Mexico -7 % compared to 2019 The Caribbean -10 % compared to BAU (2020) 1 % compared to 2019 (NG and Coal fall) 3 % compared to BAU (2020) ≈ (Coal and Diesel – Fuel, Central America NCRE increases) -1 % compared to 2019 -6 % compared to BAU (2020) (Diesel – Fuel falls)

Andean Zone -6 % compared to 2019 Brazil -9 % compared to BAU (2020) -4 % compared to 2019 Latin America and (NG falls) -7 % compared to BAU (2020) (cae GN, Carbon Mineral) the Caribbean

Electricity Generation would suffer Southern Cone a drop of 5% compared to 2019 and ≈ -5 % compared to 2019 8%, compared to the 2020 BAU ≈ -8 % compared to BAU (2020) scenario(NG, Diesel – Fuel and Coal (NG falls) The arrows (green and red) and the approximate sign indicate the variation with fall) respect to the prospective exercise that OLADE carried out in May 2020

Source: Energy Outlook of Latin America and the Caribbean 2020, OLADE. Projection of the CO2 emissions

Mexico -11 % compared to 2019 -12 % compared to BAU (2020) The Caribbean -5 % compared to 2019 -6 % compared to BAU (2020) Central America --9 % compared to 2019 -13 % compared to BAU (2020)

Andean Zone -11 % compared to 2019 Brazil -13 % compared to BAU (2020) -12 % compared to 2019 Latin America and -14 % compared to BAU (2020) the Caribbean

CO2 emissions would fall by 11% in 2020, compared to the Southern Cone 2019 and 13% compared to -13 % compared to 2019 The arrows (green and red) indicate the 2020 of BAU scenario -13 % compared to BAU (2020) variation with respect to the prospective exercise that OLADE carried out in May 2020

Source: Energy Outlook of Latin America and the Caribbean 2020, OLADE. Renewables: 58.5% Renewables: 59.4% ≈

Source: Energy Outlook of Latin America and the Caribbean 2020, OLADE.

25 Multiple/other energy sources 25 Geothermal energy Wind energy

Solar energy Averageinvestment project per 20 Hydropower 20

Latin America and the Caribbean (USD million) (USD 15 15

10 10

5 5

International financial flows to flows financial International developing countries (USD (USD billion) countries developing

0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: OECD & IRENA (2020), Renewable Energy Public Investments Database In 2017, hydro power projects received 46% of flows, 19% solar, 7% wind, and 6% geothermal. Latin America and the Caribbean received 21% of the total. Source: Economic Commission for Latin America and the Caribbean (2018) • •

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