Summit Implementation Review Group December 10, 2008 El Salvador

2. Energy Security in Latin America and the Caribbean and the role of the World Bank Summit Implementation Review GroupDecember 10, 2008El Salvador Philippe Benoit Sector Manager, Energy Latin America and the Caribbean The World Bank

3. Outline • Energy Security Defined • Energy Security Challenges Facing the Latin America and Caribbean Region • World Bank Strategy to Promote Energy Security in the LAC Region

4. Part A: Energy Security Defined

5. A. Energy Security “Energy” for the WB means: • Power (P) [Gx, Tx, Dx; Hydro, Thermal, Wind, Coal, etc.] • +Oil & Gas • +Biofuels, Biomass, Nuclear • with concerns regardingClimateChange • E=P++C2

6. A. Energy Security • Focus is on electricity • -- but other sources also important (oil, gas, biomass, etc) • Energy security for electricity means: • Sufficient, secure, quality electricity at a reasonable price • Different countries face different challenges, but many common issues • Approach: respect differences while looking to leverage off commonalities and synergies

7. Part B. Energy Security Challenges Facing the LAC Region

8. 1. Meeting the Increasing Demand for Electricity B. Energy Security Challenges Facing the Region • Projected growth in electricity demand of 4.8% p.a. • Concern over supply gap • Load shedding in some countries • Other countries face prospect of future supply deficit • Concern over increasing cost of power supply • Capital costs (hydro, wind, etc.) • Fuel costs (thermal, etc.) • 100,000 MW needed in next ten years (current capacity: 250,000 MW) • Annual investment of about US$20 billion required for related • generation, transmission and distribution • Investment requirements still large under lower demand scenarios

9. 2. Coping with Impact of High and Volatile Oil Prices B. Energy Security Challenges Facing the Region • Impact on region mixed, with certain countries in the Caribbean and Central America especially vulnerable • Challenges both for producer and consumer countries • Despite recent fall in prices, still historically high • Great uncertainty regarding future prices ?

10. 2. Coping with Impact of High and Volatile Oil Prices (cont’d) B. Energy Security Challenges Facing the Region • Changes in oil prices affect electricity costs (in some cases over US cents 3/kWh per US$10/bbl increase) • GDP impact of higher electricity costs varies: • High impact (per $10/bbl): Jamaica (2.3%), Grenada (1.5%), Nicaragua (1%) • Low impact: Paraguay, Trinidad and Tobago (0%)

11. B. Energy Security Challenges Facing the Region 3. Including Climate Change in the Energy Equation • Opportunity to increase role of clean energy sources; renewed interest in hydropower • Climate change will impact energy resources (e.g. impact on hydrology) • {Other environmental and social impacts – e.g., local pollution, impact on indigenous peoples}

12. 4. Increasing Access to Electricity B. Energy Security Challenges Facing the Region • About 50 million people, mostly in rural and poor urban areas, still lack electricity service • About US$14 million in total needed to increase coverage to above 95% by 2015

13. 5. A World in Flux B. Energy Security Challenges Facing the Region Financial crisis Oil prices Impacts on the real economy

14. Part C. World Bank Strategy to Promote Energy Security in the LAC Region 14

15. C. WB Group Strategy to Promote Energy Security World Bank IFC MIGA SUPPORT THROUGH IN A CONTEXT OF The Approach: Financing Analytical work Policy Reform Collaboration Volatile Oil Prices Climate Change Macroeconomic Considerations Regional Relations Public/ Private Mix

16. C. WBG Strategy to Promote Energy Security • Increase Power Supply • Increase investments in electricity infrastructure: • Generation, tranmission and distribution • Diversify energy matrix: • Promote development of lower-cost and clean power sources • Greater focus on renewables: hydro, wind, biomass, biofuels, geothermal, solar

17. C. WBG Strategy to Promote Energy Security 1. Increase Power Supply (cont’d) • WBG Energy lending has increased in recent years: • Total energy lending in FY08: $7.6b • IBRD/IDA : $4.2b FY08 ($1b FY04, $2b FY07) • IFC: $2.9 billion • MIGA guarantees $ 110 million • New focus on clean energy: • EE, new renewable energy and large hydro represented 35% (US$2.7billion, an 87% increase from FY07) of WBG energy lending in FY08 • World Bank is back in hydropower

18. C. WBG Strategy to Promote Energy Security 1. Increase Power Supply (cont’d) • Support regional integration (synergies, etc.)

19. 2. Promote Energy Efficiency C. WBG Strategy to Promote Energy Security • Demand-side management • end-users (e.g. lighting, domestic appliances) • policy advice and investment • Supply-side interventions • loss reduction • efficiency in generation • Energy conservation 19

20. C. WBG Strategy to Promote Energy Security 3. Strengthen Power Sector Planning • Better Planning for System Expansion: • Low-cost options • Consider all options: thermal, clean sources • Focus on renewables, with special attention to hydro • Managing High and Volatile Oil Prices: • Stronger Analysis of Impacts and Options • Improve energy efficiency • Diversify energy matrix, reducing dependency on thermal generation • Support a sound public-private mix: • Support reform of sector utilities • Recognize differing country-specific views on appropriate public-private mix 20

21. C. WBG Strategy to Promote Energy Security 4. Integrate Climate Change in Power Sector Management • Mitigation: Support renewables (large and small hydro, wind, biomass, biofuels, geothermal) and gas WBG: Share of renewable and EE in total energy lending is increasing • Adaptation/Resiliency: Understand impacts and plan accordingly (e.g. analyze hydrological changes as part of hydro dev. planning) {Maintain attention on local pollution and other environmental and social issues -- incl. Impacts on local populations}

22. C. WBG Strategy to Promote Energy Security 5. Improve Access to Modern Energy Services for the Poor • Support rural electrification • Support electrification in poorer urban areas • Improve Access to other modern energies (e.g., gas) • Protect Affordability

23. C. WBG Strategy to Promote Energy Security Financial crisis 6. Responding to a World in Flux Oil prices Impacts on the real economy WBG and other Multilaterals need to help countries to adapt to a rapidly changing world with evolving development challenges

24. THANK YOU