With its energy demand expecting to more than double over the next 25 years, Latin America remains locked in an environmentally and economically costly dependence on fossil fuels. The region’s principal economies, excepting largely hydro-powered Brazil, rely overwhelmingly on oil, natural gas and coal for their electricity. Poorer nations, especially in Central America, are addicted to a mixture of fossil fuels and firewood.

But the outlines of a different picture emerged on Jan. 26, when German Federal Environment Minister Sigmar Gabriel formally announced in Bonn the establishment of a new International Renewable Energy Agency (Irena) dedicated to providing technology transfer and practical know-how for renewable energy.

The existing world energy-policy center, the International Energy Agency (IEA), has long drawn fire for dragging its feet on alternative energy, with only 2% of its budget targeting renewables. Moreover, its members are mostly all rich Organization for Economic Cooperation and Development (OECD) countries, with Mexico the only Latin American representative.

Two-track strategy

Irena, whose 55 member nations include Latin American countries Argentina, Brazil, Chile, Colombia and Costa Rica, aspires to be different. Though its initial annual budget is a measly 25 million euros (US$32.8 million), the agency is expected to acquire considerable funding from member countries and help kick-start alternative energy around the world.

“We’re focusing on a two-track strategy: expanding renewable energy use and reducing energy consumption through energy-efficiency measures,” Gabriel said at Irena’s launch. “There is such great potential in solar, wind and hydropower, geothermal energy and biomass...”

Renewable energy has advanced, albeit slowly, in Latin America in recent years. That’s due partly to the Clean Development Mechanism (CDM), a program under the Kyoto Protocol allowing industrialized countries to fund greenhouse-gas-reduction projects in developing countries.

The number of Latin American projects already approved or under evaluation by the CDM executive board has jumped from 41 in 2004 to 757 in September 2008. Latin America and the Caribbean now account for over 20% of the CDM projects being developed worldwide. But the vast majority of those projects are concentrated in just a few countries, with more than 65% of emissions reductions carried out in Brazil and Mexico, according to the United Nations Environment Program.

Moreover, outside the CDM, the bulk of the renewable-energy projects are large-scale dams, which can do significant environmental damage, and biofuels, which can compromise food security and biodiversity, experts say.

A prime example of retarded development is wind power. On Jan. 22, Mexico inaugurated a US$550 million wind farm near the town of La Ventosa, Oaxaca State, which will have an installed capacity of 250 megawatts and avoid the equivalent of 600,000 tons of CO2 annually. The wind farm, a joint venture of the Spanish energy company Acciona Energía and the Mexican firm Cemex, is part of an effort by Mexico to increase its wind-energy capacity tenfold, or by 5,000 megawatts, in the next few years.

Wasted wind

But with wind-energy production currently representing just 2% of national energy production, Mexico—as well as Central America—remains wedded to petroleum. And that’s despite constant, thermally driven winds in the region that could supply immense quantities of energy to big companies such as Cemex and impoverished rural communities alike.

“The majority of Latin American countries have been very timid in providing incentives for renewable energy and specifically wind energy,” says Mauricio Trujillo, executive director of the Latin American Wind Energy Association, a nonprofit industry group based in Guadalajara, Mexico. “The prices for things like wind towers and turbines have fallen considerably in the last three or four years and wind power has become more competitive. But the region needs regulatory frameworks that offer preference to wind energy as opposed to thermal energy. And it needs long-term contracts so wind projects can be fundable over time.”

That is where Irena’s organizers believe the new agency can help. They say Irena will offer the possibility of financing, technology and training, and is likely to contribute most by sending experts to countries whose regulatory systems need to be rebooted to get alternative energy going.

“The failure of most [Latin American] countries to develop their renewable resources could be corrected fairly quickly if they changed their policies,” says Christopher Flavin, president of the Worldwatch Institute, a Washington D.C.-based research organization on sustainable development. “...There has been only minimal effort so far, mostly centered on hydro and biofuels. But the continent is incredibly well-endowed. It has essentially every energy resource, with world class possibilities in solar and wind.”