3 The IEA defines energy access as “a household having reliable and affordable access to electricity, which is enough to supply a basic bundle of energy services initially, and then an increasing level of electricity over time to reach the regional average.”
ANNEX | REGIONAL SUMMARIES: LATIN AMERICA AND THE CARIBBEAN
Untapped hydropower potential also remains significant. However, large projects designed to exploit hydropower seem increasingly complicated due to social and environmental concerns about the impact of large reservoirs. Further, the realities of climate change causing shifts in the availability of runoff and the uptake of intermittent variable renewable energy (wind and solar) have led to an increase in demand for LNG as a source of power due to its reliability and flexibility.
In a Modern Jazz world, digitalisation and innovation are viewed as the critical elements for energy leaders in the LAC region, as companies need to adapt to an increasingly complex energy supply and demand chain. The use of smart energy technologies, greater digital connectivity and diverse energy storage options in the midstream lead to electrification of end-use sectors and to energy efficiency improvements.
In this market-dominated world, technology choices and developments are driven by competitiveness, cost and reliability. Markets give a stronger voice to consumers, while changing societal values drive behavioural shift to products and services that meet environmental and social compliance.
However, with greater digitalisation, the region struggles to handle unemployment due to the exten- sive application of automated processes. This leads to social unrest as traditional economic policies appear unable to accommodate fast-paced innovation.
The increased share of intermittent renewable energy sources in the power system creates new grid reliability, but also introduces new demand management challenges, especially making full use of the excess solar and wind production that could foster power-to-heat and power-to-hydrogen technolo- gies. However, better demand-side management and storage and enhanced transmission and distribu- tion infrastructure help to bring the required flexibility to the system.
The falling costs of new technologies and the growing electricity demand resulting from end-use elec- trification in industry, buildings and the transport sector lead to increased penetration by new market entrants. In addition, innovative financing models encourage the development of distributed energy systems that blur the lines between consumers and producers.
hydropower, some countries are more advanced in terms of renewable energy as a share of installed power capacity: Uruguay (38%), Honduras (27%), Nicaragua (24%), Costa Rica (17%) and Chile (13%), among others.
REGIONAL PATHWAYS TO 2040 – KEY HIGHLIGHTS
Modern Jazzgreen measures in harmony with each other. In LAC, a large fraction of electricity is already produced by hydropower, so many LAC countries focus attention on decarbonising total final energy demand in the transport sector, especially where transport is the largest consumer of energy.
Regional integration happens at a fast pace, building on common goals. A milestone occurs when the HVDC link between Panama and Colombia is built, connecting the entire region from Mexico in the North to Argentina in the South. This integration is also reflected in regional climate targets involving low-emission energy systems and an integrated effort to comply with, and periodically increase, Nationally Determined Contributions (NDCs).
Swifter transition of power from one political leader or ruling party to the next leads to a more stable investment environment, especially where a consistent long-term energy strategy generates trust. In this world, investments are directed towards infrastructure for risk prevention and recovery systems that build greater system resilience to deal with climate threats to the water-energy-land nexus. A concerted effort to invest in digital skills and to encourage the uptake of business digitalisation in relation to renewable energy systems provides new employment opportunities, that, combined with socio-economic progress and overall job creation, reduce the threat of social unrest.
In Unfinished Symphony, energy policy plays a leading role in the rapid development of renewable energy sources. Regional cooperation enables an enhancement of infrastructure that creates dynamic resilience in response to climate change. The region also takes advantage of complementarities of variable renewa- ble energy endowments, especially hydropower in some regions complementing wind and solar in others.
The electricity share of final energy demand increases by one-third in two decades and reaches 23% by 2040. Hydro accounts for 53%, while in the same period, the share of wind and solar grows from only 7%
to 18% by 2040.
In Hard Rock, the LAC region experiences constant and radical political regime shifts, which impact the consistency of energy policy and overturn plans and processes started in previous regimes.
Fragmentation in political and economic systems weakens regional and international governance, resulting in trade relationships driven by national economic and energy security concerns.
Vertically oriented and nationally owned energy companies dominate investments and trade in the energy system. However, limited regulatory reform allows for deployment of alternative energy led by private sector investments. Even though strong and stable energy markets is one of the major concerns in Hard Rock, market rules and structures and legal, financial and regulatory institutions fail to establish a competi- tive wholesale market that could provide the maximum possible benefits to consumers.
One reason for this failure is the lack of investment in energy infrastructure. Without a resilient energy system, the isolated efforts to mitigate the effects of climate change are ineffective. Facing the challenge of extreme weather events and hydropower generation uncertainty, some governments begin to develop gas-fired thermoelectric capacity and nuclear energy.
Governments attempt to deal with the increasing numbers of displaced people in order to avoid economic losses and major labour market shifts. While politicians and government planners try to design ways to reap the benefits the energy transition offers, their major concern is how to mitigate the unemployment that comes along with it.
Investment required for energy infrastructure remains centralised in Hard Rock, leading to centralised energy supply systems instead of distributed generation. Lower economic growth and reduced capacity
Hard Rock
In this world, electricity growth in final energy is constrained, reaching only 19% by 2040. Hydro contin- ues to account for half of electricity generation (52%), while wind and solar increase moderately to 10%
relative to the other two scenarios.
for electric transport infrastructure mean that fossil fuel vehicles dominate the sector, and the electric vehicle share is marginal.
ANNEX | REGIONAL SUMMARIES: LATIN AMERICA AND THE CARIBBEAN