Vice President of EnergyHamilton Moss

London, 2015

CAF and the energy sector in LA: How can we help in the energy storage issue?

 

Contents Some few words about CAF – Latin America Development BankCAF’s action in the energy sector in LA – an overview highlighting interface with storage issuesConclusions

Few words about CAF

CAF – development bank of Latin America

CAF is a development bank established in 1970. Its current shareholders are

19 countries of Latin America, the Caribbean and Europe, as well as

14 private banks from the Andean region

Membership Evolution

1990 2000 2011

• Bolivia

• Colombia

• Ecuador

• Perú

• Venezuela

• Argentina• Bolivia• Brasil• Colombia• Ecuador• Panamá• Paraguay• Perú• Trinidad y Tobago• Uruguay• Venezuela• Costa Rica• Chile• Jamaica• México• Rep. Dominicana• Barbados

• España• Portugal

5 countries 16 countries 19 countries

• Argentina

• Brasil

• Panamá

• Paraguay

• Uruguay

• Costa Rica

• Chile

• Jamaica

• México

• Rep. Dominicana

• Trinidad y Tobago

• Bolivia

• Colombia

• Ecuador

• Perú

• Venezuela

Financial Indicators

CAF’s Portfolio ( growth )

CAF and other multilaterals ( regional approvals )

Rating evolution

Comparative ratings in the region

CAF’s action in the energy sector

Support for Energy Projects

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 -

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

1,80% 2,57%3,19%

6,22% 13,80%18,70%

24,56% 29,51%

28,77%

28,17%28,48% 27,97%

Otros

VP. DE ENERGIA

USD 5.492 MM

USD 14.142 MMUSD

Mill

ones

CAF’s Direct Portfolio

TOTAL CAF

USD 19,634 MM

(Feb 2015)

CAF in numbers

USD 5.49 Billion

Infrastructure34.2%

Energy30.2%

Social Development15.9%

Productive and Financial Sector

14.9%

Country Programs4.7%

CAF’s Direct Portfolio 2015

TOTAL CAF

USD 19,634 MM

(Feb 2015)

CAF Energy Investment - Projects

Energy Portfolio (Feb 2015): USD 5.49 Billion

Venezuela48%

Argentina24%

Peru5%

Brazil4%

Ecuador5%

Uruguay6%

Colombia2%

Costa Rica1%

Bolivia2%

Multinational1%

Panama1%

Mexico0%

Jamaica0%

Paraguay0%

Energy Portfolio by countries (2015)

Thermoelectric28%

Hydroelectric34%

Transmission25%

O&G6%

Wind2%

Distribution3%

Other sources1%

Energy Portfolio by technology(2015)

CAF’s Energy Studies

Technical Assistance Portfolio: USD 6.1 MM

Infrastructure Devel-opment

2%

Energy Efficiency33%

Renewable Energy

43%

Institutional Strengthening

3%

Regional Inte-gration

10%

Energy Security6%

Regional Networks3%

T.A. Funds by theme(2015)

Bolivia20%

Brasil2%

Perú25%

Programas CAF6%

Regional43%

República Dominicana2%

Venezuela3%

T.A. Funds by country

Strategic Lines

12

345

Support to energy security

67

Promote a regional energy network

Encourage to regional integration projects

Sponsor energy efficiency

Promote clean and renewable energy

Expand rural electricity services

Technological innovation

8 agencies working together to

increase the synergies in LA’s energy

sector

Coordinating instututional efforts

Study: New Opportunities for Electricity Interconnection in Latin America

CAF & CIER studied new projects looking to

promote strategic exchanges to enhance

energy security in the region and

increase added value

Study: Hydropower Assessment (Brazil, Bolivia & Peru)

Hydropower Map of Sao Paulo

Technological Development

What is the purpose of this initiative?To establish a regional platform for the generation of patentable technological concepts through international applications for patents from Latin America and the Caribbean. This first call for proposals will focus on renewable energies and energy efficiency; however, future editions will take into consideration other priority sectors of the region.

Initiative's contribution• Educate the population about the process of obtaining patents internationally• Increase international applications for patent from the region (through USTPO).• Implement pilot projects for the selected technologies• Promote the creation of patent incubators in the region.• Generate regional knowledge and training networks related to technological patents• Principles• Aimed at Latin America and the Caribbean countries• The technological sectors chosen for technological patent development will be those

prioritized by the initiative

Investment has increased in LA over the past years

Investment by year and sector as a percentage of GDP, 11 countries (current dollars)

Private investment has kept growing in the region

What to expect…

• Modest growth rates

• We do not expect an economic collapse

• LA has developed buffer mechanisms to navigate through the deterioration of the external economic conditions

• It is necessary to invest in infrastructure in order to prepare for the next growth cycle

LA’s Energy Context

Latin American energy resource base

693 GW of Hydropower Potential

20% of World’s Oil Reserves

4% of World’s Gas Reserves

1,5% of World’s Coal Reserves

Source: OLADE (2012)Source: CAF (2013)

Proven Reserves

Oil

Natural Gas

Coal

Uranium

Hydropower

Potential Energy Resources

Wind

Photovoltaic

Solar

Geothermal

Biomass

Biodiesel

Ethanol

Latin America is an urban region

8 out of10

Latin Americans

live in cities

Souce: World Bank (2012)

35% lives in cities with over1 Million inhabitants

Energy resources are unevenly distributedMexico

Wind (W/m2) 22Geothermal (MW) 3.650Hydro (MW) 53.000Solar (W/m2) 506Natural Gas(Gm3) 358Oil (Mbbl) 13.810

VenezuelaWind (W/m2) 39Geothermal (MW) Hydro (MW) 58.000Solar (W/m2) 484Natural Gas(Gm3) 5.561Oil (Mbbl) 297.735

BrasilWind (W/m2) 33Geothermal (MW) Hydro (MW) 260.093Solar (W/m2) 471

Natural Gas(Gm3) 459Oil (Mbbl) 15.320

ArgentinaWind (W/m2) 68Geothermal (MW) 120,6Hydro (MW) 40.400Solar (W/m2) 412Natural Gas(Gm3) 867Oil (Mbbl) 2353

PeruWind (W/m2) 62Geothermal (MW) Hydro (MW) 58.937Solar (W/m2) 508Natural Gas(Gm3) 436Oil (Mbbl) 632

ColombiaWind (W/m2) 55Geothermal (MW) Hydro (MW) 93.000Solar (W/m2) 417,8Natural Gas(Gm3) 161Oil (Mbbl) 2.377

BoliviaWind (W/m2) 57Geothermal (MW) 120Hydro (MW) 40.000Solar (W/m2) 503Natural Gas(Gm3) 231Oil (Mbbl) 169

Source: OLADE, SIEE (2012)

Growing tendency for electricity consumption

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012600000

700000

800000

900000

1000000

1100000

1200000

1300000

1400000

Electricity Consumption in Latin America and the Caribbean (GWh)

YearSource: OLADE, SIEE (2013)

Average annual 4.2% growth during last 10 years

Total North America

Total S. & Cent. America

Total Europe & Eurasia

Total Middle East

Total Africa Total Asia Pacific

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Regional energy consumption pattern(2013)

Coal Oil Natural Gas Nuclear Energy Hydro electric Renewables

Latin America’s Energy Mix

Source: Data BP Statistical Review (2014)

LAC’s vulnerability to climate change

Source: Wikipedia

40 N

35 S

“Solar Belt”

Latin America’s Electricity Generating Installed Capacity

Hydro49%

Steam19%

Gas21%

Diesel8%

Geothermal0%

Nuclear1% Others

1%

Source: OLADE, SIEE (2013)

Total:

316.745 MW

Electricity: high growth in a volatile prices environment

• Elevated coverage: 92.7% (98.7% urban, 70.6% rural). Relatively high, although some countries lag behind

• Sustained growth of energy demand and power capacity: 36% and 25%, between 2000-2010. Volatile prices shape regulatory frameworks to secure generation

• Generation: installed capacity accounts 56% hydro and 40% thermal; reserve margins are shallow

• Transmission is expensive due to low density of consumption sector• Tendency to incorporate renewable sources to reduce carbon emissions• Important participation of the private sector, particularly in the generation segment

More people, more income… bigger energy consumption

Source: BP Energy Outlook 2030

+1.3 billion people

x2World GDP

>36%Primary energy

consumption*

*93% belongs to No-OECD

Energy trends in LAC

In 20 years, LAC will daily demand:

12.3

5,2 2900

6.5 million bpd

of oil

4.5 billion m³pd

of gas

1200 TWh

of electricity

According to CAF estimations, based on

national plans and private sector

announcements, LA will demand at least USD

71 Billion per year over the next decade in

the energy sector

Resources needed

Renewable Energy in Latin America

Renewable Generation

Hydropower accounts for 47,7% of electricity generation in the region, which has been displaced by generation from fossil fuelsNCREs share in generation: 3.3% in 2005 to 6.0% in 2013

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

LAC: generation by source(TWh)

Nuclear

ERNCs

Fosiles

Hidro

50

100

150

200

250

300

LAC: generation by source(2003=100)

ERNCs

Fosiles

To-tal

Hidro

Nuclear

NCREs have grown within the Latin American electricity mix On average, 7.4 TWh per year have been added during this periodGeneration based on NCREs: 34.2 TWh to 91.8 TWh within a decade12.8% annual growth rate on average since 2007

Fossil

Fossil

Source: CAF (2014)

NCRE

Hydro

Hydro

NCREs

Wind Power in Latin America

Aggregated growth of approximately 900% during this period

LAC: wind power: installed capacity(MW)

Normalized generation costs in LAC(USD/MWh)

Source: CAF (2014)

Wind energy has reached critical a mass in several markets in LACLAC is currently developing an important wind power industry to complement its vast hydropower resources and biomassIn the short term, increasing the competitiveness of this technology will enhance its attractivenessIn the long term, growing pressures to consolidate regional energy security and diversification of its energy supply will continue to foster wind power growth in LACAccording to the latest projections of the International Energy Agency (IEA), the region will generate around 59.8 TWh of wind power by 2018, a significant increase compared to 10.9 TWh generated in 2013

Drivers of wind energy in LAC

Wind Power in Latin America

LAC: Wind Power Generation Forecast(2014-2018, TWh)

Source: CAF (2014)

LAC: generation based on solar energy is still incipient It has shown clear signs of increasing dynamism: installed capacity went from 37.2 GWh in 2013 to 373 GWh in 2013Within those three years it registered 90% of the growth accumulated in the last twelve years

200020012002200320042005200620072008200920102011201220130.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

LAC: Generation based in solar energy(GWh)

Otros

Brasil

Ecuador

Chile

Venezuela

Argentina

Mexico

Peru

Solar Energy in Latin America

The significant expansion is mainly explained by the growth experienced by Peruvian solar marketPeru, Mexico and Argentina concentrate almost three quarters of the solar energy generated in the regionRapid expansion of solar farms in LAC: 68.5 MW in 2012, 131 MW in 2013 and 433 MW till September 2014it is estimated that the additions in 2014 reached 805 MW

Source: CAF (2014)

The normalized average cost of photovoltaic generation in LAC has been declining. Currently solar generation costs averages US $ 200 per MWh, with a maximum of $ US 312 and a low of $ US 115.

Solar Generation in Latin AmericaSo

lar F

VSo

lar C

P

Sola

r cen

tral (

torre

)Geo

term

icaHi

dro

≤ 20

Hidr

o >

20

Eolic

a (c

lase

6 y

7)

Biom

asa

/ bio

gas

Ciclo

com

bina

do G

NCi

clo si

mpl

e GN

Com

busti

on d

iese

l

Com

busti

on fu

el o

ilTe

rmica

fuel

oil

Carb

on

0

50

100

150

200

250

300

350

Costos normalizados de generacion en LAC($US/MWh - media, minimo y maximo)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

LAC: generacion en base a energia solar(GWh)

Otros

Brasil

Ecuador

Chile

Venezuela

Argentina

Mexico

Peru

Normalized costs of generation in LAC($US/MWh- media, min and max)

LAC: Generation based on solar energy(GWh)

Source: CAF (2014)

Additions to solar PV installed capacity in LAC during 2014 are expected to have reached 805 MWProjects pipeline: 2,300 MW of photovoltaic capacity will be incorporated in 2015During the last quarter of 2014, nearly 2.9 GW were incorporated into the generation projects pipeline224 GW in Power Purchase Agreements (PPAs) have been signed

2012 2013 2014 2015 2016 2017 20180

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

-50%

0%

50%

100%

150%

200%

250%

300%

350%

69 131

805

2,313

1,874

2,690

3,664

Additions to installed PV capacity

MW

Δ% annual (izq)

Solar Generation in Latin America

Source: CAF (2014)

Overcoming the challenges

• So far, LA has performed well in satisfying its population’s energy needs. Nonetheless, investments must be intensified, especially in electricity generated by new renewables.

• Energy demand has grown and thus the requirements to reduce the impact of resource use. The constant search for new sources and an increase in energy efficiency are key elements for the sustainable development of LA’s energy sector.

• The storage issue is very important for the effective use of new renewable sources, and can bring new opportunities both for urban and rural applications. Cost is a key factor to improve its use.

• Cooperation amongst different actors and institutions is fundamental to overcome the new challenges that lie ahead.

Everything we do begins with you.

www.caf.com