Measures to promote renewable energies for electricity generation in Latin American countries

1 MEASURES TO PROMOTE RENEWABLE ENERGIES FOR ELECTRICITY GENERATION IN LATIN AMERICAN COUNTRIES C. Washburna and M. Pablo-Romerob,c,* a. University of Guayaquil, Faculty of Economic Science, Guayaquil, Ecuador b. Department of Economic Analysis and Political Economy, Universidad de Sevilla, Spain c. Universidad Autónoma de Chile, Chile * Corresponding author: [email protected] Abstract This study analyses the measures used to promote renewable energy for electricity generation in the 18 Latin American countries that signed the Paris Agreement, in an electricity demand growth context. The Latin American countries have had a remarkable growth in the use of renewable energy for electricity generation. Biomass, wind and solar energy have experienced strong growth, however, their participation in the energy mix remains small. All the studied countries have established renewable energy targets, 16 having adopted at least one promotion measure. The most used measures are tax incentives, mainly through exemptions in income tax, value added or sales tax and on tariffs. Also, most countries are using auction systems, which are replacing the Feed-In Tariff system. The net metering system adoption is also growing in the region. The results of the study show a positive relationship between the most active countries in renewable energy promotion and the performance achieved in the studied years. Therefore active policies are considered necessary for the future development of renewable energies. Keywords: Latin America, Renewable energy, electricity generation, Promotion measures 2 3 MEASURES TO PROMOTE RENEWABLE ENERGIES FOR ELECTRICITY GENERATION IN LATIN AMERICAN COUNTRIES 1. Introduction According to the International Energy Agency (IEA, 2018), the increase in CO2 emissions between the five-year periods, 2006-2010 and 2011-2017, amounted to 3.72%, worldwide. These emissions were lower in Latin America in both periods. However, its increase of 10.06% was much higher than the worldwide figure. With the aim of reducing the increase in emissions, 195 countries around the world committed themselves, through the Paris Agreement, to reduce emissions and avoid the increase in temperature by more than 2°C, compared to pre-industrial values. Among these countries, 18 Latin American (LA) countries signed the agreement, aware of the need to reduce emissions. In signing the agreement, the signatory countries individually sent their Intended Nationally Determined Contributions (INDCs) in 2015, in which the specific objectives for the reduction of Greenhouse Gases (GHG) were established. Table 1 summarizes the commitments acquired by LA countries in their respective INDCs. The commitments may be summarized in the reduction of emissions in various percentages, for which countries propose and commit to adopt various measures, such as percentage increases in the participation of renewables for energy production. In this sense, the CO2 emissions growth has been linked, among other factors, to energy consumption and its evolution over time (Kasman and Duman, 2015; Omri, 2013; Robledo and Olivares, 2013; Saboori and Sulaiman, 2013). Thus, according to BP Global (2017), primary energy consumption went from 58448.6 to 64049.0 Mtoe worldwide, between 2006 and 2015, increasing by 9.58%. This growth was exceeded in 4 the Latin American region in the same period, which could explain its higher emissions growth. The energy consumption growth in LA countries has been associated with their economic expansion. Pablo-Romero and De Jesús (2016) indicate that these countries experience an exponentially growing energy consumption trend as their GDP per capita increases. Therefore they need to apply active energy policies to meet the objectives of their INDCs. Pablo-Romero and De Jesús (2016) and Zilio and Recalde (2011), point out the need to promote measures to diversify the energy mix, promoting the use of renewable energies (REs). In this same line, Hanif (2017) indicates that economic growth and increasing urbanization are generating greater consumption of fossil fuels, contributing to environmental deterioration. In addition, the author also considers that the use of renewable energy (RE) can help to meet the growing demand for energy with less environment damage. Table 1. Main targets in the INDCs: LA Countries Argentina Reduction of GHG emissions: 15% in 2030. With international financing, there could be a 30% reduction in 2030. Bolivia Targets related to three areas: water, energy and forests and agriculture. In terms of energy, it is set to reduce CO2 emissions in energy production to 0.04 MT / MWH. The time horizon is 2030. Brazil Reduction of GHG emissions by 37% below 2005 levels in 2025. Chile Reduction of CO2 emissions per unit of GDP by 30% compared to the 2007 level, in the year 2030. Additionally, with international financing, the country commits to increase its reduction to 35-45%. Colombia Reduction of GHG emissions by 20% with respect to projected emissions for 2030. With international financing, the country commits to increase its reduction to 20%-30%. Costa Rica Absolute maximum emissions of 9374000 net tCO2eq in 2030, with a proposed trajectory of per capita emissions of 1.73, 1.19 and 0.27 net tons per capita in 2030, 2050 and 2100, respectively. Ecuador Reduction of emissions by 20.4-25% in 2030. With international financing, the country commits to increase its reduction to 37.5-45.8%. El Salvador Renewable energy increase in electricity production of not less than 12% compared to total electric power generated in 2014, by the year 2025. It will also define GHG emissions reduction goals, without concrete mitigation actions. Guatemala Reduction of up to 22.6% of its total GHG emissions in the base year 2005 in 2030. This reduction implies that the emissions will be reduced to 41.66 Mtoe in 2030. Honduras Emission reduction by 15% in 2030. Includes: CO2, CH4 and N2O. 5 Mexico Reduction of between 25-30% of GHG and short-term climate pollutants emissions by 2030 and reduction of black carbon by 51%. Nicaragua Officially joined the agreement on October 23, 2017. Panama Participation of renewable energies in electricity generation of 15% in 2015 and 30% in 2050. It establishes a reforestation program for degraded areas to increase carbon absorption by 10%. With international financing of up to 80%. Paraguay A 20% reduction based on the performance of projected emissions by 2030. Unilateral Target: 10% reduction in projected emissions by 2030. Conditional Target: 10% reduction in projected emissions by 2030. Peru Reduction of CO2 emissions of 20% in 2030. With international financing up to 30%. Suriname Reduction of emissions through anti-deforestation projects and renewable energy production. Biofuels and renewables may contribute 25% of the energy generation in 2025. Uruguay Reduction of emissions per unit of GDP by 25% in 2030, with international financing up to 40%. In addition, it expects to become a net sink of CO2 by 2030. Venezuela Reduction of CO2 emissions by at least 20% in 2030. Source: own elaboration from UNFCCC (2018) Despite the impulse in the use of fossil energies, the Latin American region continues to maintain a level of clean energy use superior to other regions of the world. Thus, according to the CEPAL (2018), the region was considered a world leader in RE, since it reached almost 28% of total energy consumption, while the world average stood at 18%. In this sense, it is worth highlighting the high presence of REs in the electricity generation. This is due, according to Vergara et al., (2013), to the high use of hydraulic energy. However, it is important to note that its use has tended to decrease in recent years. For this reason, a greater promotion of REs may be considered appropriate in order to meet the targets of the INDCs. In addition to the use of hydroelectric energy, it is also worth highlighting the high potential for the use of Non-Conventional Renewable Energies (NCRE), such as solar, biomass or wind energy. The aim of this paper is to thoroughly analyze what measures Latin American countries are currently using to promote the use of RE in generating electricity, in a demand growth context. Similar analyses have been undertaken for other economies such as the European Countries. For example, Cansino et al. (2010), analyze the fiscal incentives to promote green electricity. In the same line, Pablo-Romero et al. (2017), offer an 6 overview of feed-in tariffs, premiums and tenders to promote electricity from biogas. Following these studies, this paper focuses only on the electricity sector, comparing and detailing the promotion measures established in the sector in the 18 LA countries analyzed, in the studied period. The paper is structured as follows. After this introduction, Section 2 shows the evolution of the electricity consumption and the role of REs in the electricity generation. Section 3 analyzes the objectives and measures established to promote the use of REs in the electricity generation. Section 4 discusses the use of current policies and, finally, Section 5 concludes. 2. Electricity consumption and participation of REs in electricity production in LA countries 2.1. Electricity production and consumption trend in LA countries Columns 2, 3 and 4 in Table 2 show the per capita electricity consumption trend worldwide, in the LA region and in the LA signatories of INDCs. The last row of the aforementioned columns shows that the average consumption of electricity per capita worldwide was 2.77 MWh in the period 2006-2010, and 3 MWh in the subsequent five years, the growth rate being 8.30%. In the LA region, the per capita electricity consumption was 1.63 MWh and 1.88 MWh in the first and second periods, respectively, the growth rate being equal to 15.40%. Thus, although the Latin American region had lower per capita consumption than the global level, the percentage increase between the periods almost doubled that recorded worldwide. It should also be noted that, according to KPMG (2016), the demand for electricity in the region will grow by 91% in 2040, due to industrialization and the improvement of the middle class. Table 2 also shows that the LA country with the highest electricity consumption per capita increase was Paraguay, followed at a certain distance by Ecuador, Bolivia, Panama, 7 Peru, Nicaragua, Colombia and Suriname. Among the countries with the lowest growth rates are Mexico, Guatemala and Costa Rica. The only country that registered a negative growth rate was Venezuela. It should also be noted that the only two countries with per capita electricity consumption values higher than the world level, in the second period, were Chile and Suriname. In terms of electricity production, columns 5, 6 and 7 in Table 2 also show that the LA growth rate was higher than that worldwide. Bolivia, Ecuador, Panama, Peru and Uruguay stand out in this growth, which presented higher rates than those registered both worldwide and in the LA region. In terms of the participation of REs in the electricity generation, the previous pattern in the LA region, with respect to the world, changes radically. The share of REs in electricity generation in both periods was higher in the LA region. Thus, while the last row of columns 8 and 9 in Table 2 show that the worldwide average value was 19.28% during 2006-2010, and 22.18% during 2011-2015, the LA average values significantly surpassed those percentages, being 59.55% and 58.66%, respectively. However, when comparing the participation of REs in the electricity generation growth rate, it can be observed in the last column in Table 2 that the worldwide value was slightly lower, but similar to the electricity generation growth rate, while the LA region had a negative value. Thus, although the production of REs increased in the LA region, it did so at a rate lower than that of electricity production. Finally, it should be noted that the countries with the greatest decrease in participation were Bolivia, Chile, Peru and Suriname. Table 2. Electricity consumption per capita, electricity production and participation of RE in the electricity production 8 Electricity consumption per capita 2006-2010 (MWh/pc) Electricity consumption per capita 2011-2015 (MWh/pc) Growth rate (%) Average electricity production 2006-2010 (GWh) Average electricity production 2011-2015 (GWh) Growth rate (%) Renewable energy participation 2006-2010 (%) Renewable energy participation 2011-2015 (%) Growth rate (%) Argentina 2.63 2.99 13.69 116940.0 137888.0 17.91 30.36 30.76 1.32 Bolivia 0.55 0.70 27.27 5949.8 8045.8 35.23 39.68 31.62 -20.31 Brazil 2.18 2.50 14.68 461883.4 565556.0 22.45 86.74 79.76 -8.05 Chile 3.29 3.80 15.50 58937.8 71096.4 20.63 46.91 39.67 -15.43 Colombia 1.00 1.22 22.00 56300.0 66385.8 17.91 78.42 75.86 -3.26 Costa Rica 1.88 1.95 3.72 9222.8 10254.0 11.18 93.44 92.03 -1.51 Ecuador 1.03 1.33 29.13 17468.4 23357.8 33.71 53.14 52.28 -1.62 El Salvador 0.87 0.96 10.34 5842.0 6160.8 5.6 59.49 60.23 1.24 Guatemala 0.53 0.56 5.66 8716.0 10060.2 15.42 53.59 65.48 22.19 Honduras 0.68 0.77 13.24 6455.2 8094.0 25.39 41.02 45.79 11.63 Mexico 2.02 2.21 9.55 267136.0 303987.8 13.80 15.31 15.02 -1.89 Nicaragua 0.47 0.58 23.40 3363.0 4209.2 25.16 32.50 46.61 43.42 Panama 1.62 2.03 25.31 6633.6 8993.2 35.57 58.75 58.93 0.31 Paraguay 1.04 1.47 41.35 54399.6 57853.4 6.35 100.00 99.99 -0.01 Peru 1.01 1.26 24.75 31707.6 43335.0 36.67 63.69 54.21 -14.88 Suriname 2.97 3.58 20.54 1655.2 2109.0 27.42 73.19 61.24 -16.33 Uruguay 2.54 3.00 18.11 8734.8 11871.6 35.91 73.84 78.78 6.69 Venezuela 3.05 2.96 -2.95 115455.6 121619.4 5.34 71.76 67.63 -5.76 LA 1.63 1.88 15.40 1236800.8 1460877.4 18.12 59.55 58.66 -1.49 Worldwide 2.77 3.00 8.30 20238859.4 23360836.4 15.43 19.26 22.15 15.01 Source: own elaboration from IEA (2018). 2.2. RE use for electricity generation in LA countries The electricity energy consumption and production growth trend, together with the relative weight loss of the REs in the production of electricity in the LA countries, makes the analysis of the evolution of the use of REs in the region interesting. Table 3 shows the annual average growth rate of the electricity production by renewable sources worldwide and in the analyzed LA countries, in the two periods considered and throughout the whole period. It is worth highlighting that the use of all REs grows worldwide in both periods considered, although higher solar and wind energy growth 9 may also be highlighted. In LA countries, the use of all REs also increases, except for the use of hydraulic energy, which decreases by 0.81% in the second period considered, with the increase in solar and wind energy being noteworthy. The growth is noticeably higher than that registered worldwide, which is mainly due to the scarce or null initial levels of RE use in many LA countries and their strong impulse in others. It is also worth highlighting the increased growth in the use of biofuels. The evolution of RE use in both regions (LA and worldwide) changes the energy mix. Table 3. Use of REs in electricity generation: Average annual growth rate (in percentages). Worldwide Latin America 2006-2010 2010-2015 2006-2010 2010-2015 Hydroelectric 3.22 2.53 1.96 -0.81 Biofuel 15.08 9.87 22.83 11.28 Geothermal 3.57 3.62 0.99 0.57 Wind 39.15 29.10 123.05 157.26 Solar 113.98 130.40 - 1200.59 Source: own elaboration from IEA (2018). Figure 1 shows the changes in the share of RE sources in the electricity generation between the 2006-2010 and 2011-2015 periods, worldwide and in the LA region. It can be seen that hydroelectric energy is the main source of renewable electricity generation for all periods and in both areas. In LA countries, however, its percentage and its decrease between periods are significantly higher. It also highlights the significant increase in the share of wind and photovoltaic energy worldwide, which contrasts with the low value and lower growth in Latin America. Figure 1. Share of renewables in electricity generation: worldwide and LA region 16 established in the first program affected the electricity generated from biomass and waste, geothermal, small hydroelectric plants, solar and wind sources. The photovoltaic solar energy was omitted from the second program. Differentiated prices were established for technologies used and size or capacity. In addition, higher values were established for projects located in the Galapagos Islands (IEA, 2018). The countries in which the FIT system is still in force are currently Honduras and Panama. Honduras has had a generous system. On the one hand, Decree 70 of 2007 established a preferential price of 10% in RE projects for 15 years. Additionally, photovoltaic solar projects installed before July 31 2015, were granted a price equal to the short-term marginal cost, plus US$ 0.03/kWh. This system has recently experienced payment difficulties, although it can be said that it has had great success, making the country the leader of the solar park in the Central America region (Climatescope, 2017). In the case of Panama, Law 6 of 1997 established 5% premiums for the generation of electricity by biomass and waste, geothermal, mini-hydroelectric, wind and solar (Proinvex Panama, 2017). 3.2.2. Net-metering Net-metering is a system that has been used to a large extent in LA countries. This system is used in Argentina, Brazil, Chile, Colombia, Costa Rica, Guatemala, Mexico, Nicaragua, Panama, Suriname and Uruguay. In general, these policies focus particularly on the residential and small-scale sectors, but in some cases they also include programs on an industrial scale (Coviello and Ruchansky, 2017). At the end of 2017, Argentina approved Law 27427 that regulated the distributed generation of RE. This law establishes that users of the electricity network can install photovoltaic systems or others that use RE sources to generate electricity for their use, so that surplus energy can be injected into the country's electricity grid. It should be noted that the Law establishes that, if the installation has a capacity greater than the self- 17 consumption needs, users must request special authorization from the energy distributor. The law is ambitious because it forces all public building construction projects to use distributed generation facilities from renewable sources. In Brazil, the net-metering system has been in force since 2012. Retail electricity consumers can install hydroelectric (less than 3 MW), solar, biomass, wind and cogeneration systems of up to 5 MW and deliver surplus energy to the network. Users get compensation in the form of a later billing credit that must be used up to 60 months after the billing date. Similar systems are used in Costa Rica, Guatemala, Suriname and Uruguay. Nevertheless, in Costa Rica, the credit must be used within a year. In Suriname, the credit cannot exceed the annual consumption, and in Uruguay, it is compensated in the next month’s invoice (Climatescope, 2017). Since 2014, retail electricity consumers in Chile can sell excess electricity to the grid if the RE cogeneration facilities are less than 100 kW. In Panama, a similar system is used, so that they can sell the excess electricity. In Mexico, there are three categories of facilities that can be connected to the network: small scale (residential 10 kW or small businesses up to 30 kW power), medium scale (industries with capacity up to 500 kW) and community generation (real estate of several houses or commercial centers). In any case, the balance in favor of the user can be recovered in 12 months, without being able to sell the excess (Madrigal, 2017). Finally, it should be noted that in Colombia and Nicaragua this system has been approved in 2018. In Colombia, the Energy and Gas Regulatory Commission approved, in March, Resolution 030 on distributed solar generation of up to 100 kW and the distributed renewable sources generation of between 100 kW and 1 MW. The resolution includes a simple mechanism for residential, commercial and small-scale energy consumers who produce energy to meet their own needs, to sell surplus electricity to the 18 grid. In Nicaragua, in January, a new renewable distributed generation regulation for self-consumption came into force, published on December 18 2017, in the Official Gazette of Nicaragua. According to this regulation, the owners of electricity generators of renewable origin with up to 5 MW are able to sell the surplus energy to the distribution companies. The electricity sold is paid at 80% of the lowest price of the reference band approved by the Nicaraguan Ministry of Energy and Mines. 3.2.3. Tax incentives This support measure is the most used by the LA countries. In fact, 15 of the 18 countries had different tax incentives, with the exceptions of Bolivia, Suriname and Venezuela. Table 6 shows the tax incentives used. Table 6. Tax incentive to promote REs Exemptions on tariffs or import taxes Exemptions or refund on VAT or sales taxes Exemptions and deductions on income tax Accelerated depreciation Transmission and distribution tax Exemption Carbon Tax Argentina ✓ ✓ ✓ ✓ Bolivia Brazil ✓ Chile ✓ ✓ Colombia ✓ ✓ ✓ ✓ Costa Rica ✓ ✓ Ecuador ✓ ✓ El Salvador ✓ ✓ Guatemala ✓ ✓ ✓ Honduras ✓ ✓ ✓ Mexico ✓ ✓ Nicaragua ✓ ✓ ✓ Panama ✓ ✓ ✓ ✓ ✓ Paraguay Peru ✓ Suriname Uruguay ✓ ✓ ✓ Venezuela Source: Own elaboration from IEA (2018) and Climatescope (2017) The most used tax measures are tax exemption. Firstly, there are countries that apply an exemption or tariffs/taxes reduction on the equipment, machinery and materials imports 19 destined for RE projects. This measure is applied in Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Panama and Uruguay. Colombia´s case may be highlighted, as it applies an import duties exemption if the environmental incentive certificate, issued by the Ministry of Environment and Sustainable Development, is obtained (Moreno, 2017). Secondly, exemptions and a Value Added Tax (or sales tax) reimbursement of up to 100% on the purchase of machinery, equipment, materials and supplies for investment and construction of specific RE projects are also applied. Specifically, this measure is applied in Argentina, Colombia, Costa Rica, Guatemala, Honduras, Nicaragua, Panama and Uruguay (IEA, 2018). It should also be noted that some countries apply exemptions or rebates on specific sales taxes. Thus, wind turbine components, whether domestic or imported, are exempt from sales tax (PIS and COFINS) in Brazil. Likewise, there are also exemptions on the value-added tax on services and circulation (ICMS) and on industrialized goods (IPI), for equipment goods of mini-hydraulic installations, wind turbines and PV power generators (Climatescope, 2017, IRENA, 2015). Thirdly, incentives on income tax are established in Argentina, Colombia, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Panama and Uruguay. In Argentina, the affected assets are not included on the Presumed Minimum Income Tax base until the eighth year from the beginning of the project. This measure will be cancelled as of 2019. Likewise, the project's financing interests can be deducted from the company's losses. Finally, it should be noted that beneficiaries who prove that 60% of the investment is made with national components are entitled to receive a tax certificate for the payment of national taxes. Its value is equal to 20% of the component value (PwC, 2017). In Colombia, 50% of the total investment made in electricity generators from biomass and wind power can be deducted annually, during the 5 years following the 20 year in which the investment was executed, provided that they comply with requirements related to carbon emissions (Moreno, 2017). In Ecuador, the electricity generators from solar, wind, geothermal and biomass energy are exempt from income tax for five years, this is 10 years in Guatemala and Honduras (IEA, 2018). In Panama, there are several income tax exemptions that depend on the technology used. In the case of biomass, there is a total exemption, in other cases there are exemptions of up to 25% of the direct investment in the project, which can be applied for 10 years. The tax relief value is calculated using the tonnes of CO2 decreased as a reference. The relief can reach 100% of the income tax if the projects are less than 10 MW, and up to 50%, if they are higher (Climatescope, 2017; Proinvex, Panama, 2017). Finally, in Uruguay, Decree 354/009 establishes two categories for income tax reductions on energy cogeneration and for RE sources. The percentage of tax reduction decreases with time, from the start of the activity (Climatescope, 2017). Another applied tax incentive is accelerated depreciation. It only applies in five countries: Argentina, Colombia, Mexico, Panama and Peru. In Argentina, the beneficiaries can choose to apply the linear depreciation method, consisting of 3, 4 or 5 equal consecutive annual installments in income tax (PwC, 2017). In Colombia and Mexico, accelerated depreciation of 100% of investments in machinery and equipment used to generate RE can be applied (Moreno, 2017). In Panama, accelerated depreciation can only be applied on relevant equipment of a special nature for wind and solar energy (Proinvex, Panama, 2017). Finally, in Peru, accelerated depreciation only applies in up to 20% of investments in machinery and equipment used for the generation of RE. Likewise, there is a transmission and distribution tax exemption on RE projects in Argentina, Chile and Panama. In Argentina, it applies to the distribution of dividends. In 21 Chile, the exemption is 100% of the transmission load for RE projects under 9 MW, and there is a partial exemption for projects between 9 and 20 MW. In Panama, 100% exemption is granted to RE projects with a capacity of less than 10 MW, and to the first 10 MW generated for projects ranged between 10-20 MW (Climatescope, 2017; Proinvex, Panama, 2017). Finally, it should be noted that two countries, Chile and Mexico have established carbon taxes. In Chile, it consists of US$ 5 on CO2 emissions, applied to thermal power generators with an input of 50 MWt, except for power plants that use biomass. In Mexico, it is imposed as an obligation on the carbon content of the fuel. These taxes can be considered adequate, especially in a context of reduced oil prices. According to Griffith-Jones et al. (2017), the decline in oil prices can harm private investment in RE by making them less profitable. Thus, the authors advise governments to reduce subsidies on the prices of these fuels or to increase taxes on them. 3.2.4. Auctions The public auction system is the second most recurrent mechanism among the LA countries to promote the use of REs for electricity generation. Table 7 summarizes that 13 of the 18 countries have organized public auctions: Argentina, Brazil, Chile, Colombia, Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Panama, Peru, Suriname and Uruguay. Likewise, it is worth highlighting the sustained growth of this system (Coviello and Ruchansky, 2017). Brazil stands out with more than 30 public auction processes, followed by Uruguay, Peru, Chile and Argentina. In general, auctions of several technologies are established, although it is also common to find specific ones, especially in countries with a greater number in total. Table 7. RE Auctions Total number Diverse technologies Solar PV Wind Solar and wind Mini hydro Biomass and waste 22 Argentina 4 3 1 Bolivia Brazil 31 14 2 2 6 5 2 Chile 5 3 2 Colombia Costa Rica 2 2 (without solar and biomass) Ecuador El Salvador 3 1 2 Guatemala 3 3 Honduras 2 2 Mexico 3 2 1 Nicaragua Panama 5 2 3 Paraguay Peru 6 3 1 1 1 Suriname 1 1 Uruguay 10 1 1 5 3 Venezuela Source: own elaboration from IEA (2018), Climatescope (2017) and IRENA (2015) In Brazil, there have been RE auctions since 2007, reaching more than 15 GW in a total of 600 projects. Throughout this time, two types of auctions have been made, general and reserved for certain technologies. In general, wind and biomass projects contracted for a period of 20 years, and mini-hydro projects of 30 years, have been the most contracted (GlobalData, 2017). However, in the most recent auctions, an effort has been made to develop PV solar energy. According to the AURES report (AURES 2016), auctions in Brazil have been able to significantly reduce support levels compared to FIT. This has been partly due to the auction design, the final price guarantee for companies, and the continuous costs decline. Thus, the cost of wind energy is between a third and a quarter less than 25 years ago, and that of solar energy has fallen by almost half since 2010 (Netto et al., 2016). Uruguay carried out 10 auctions, mostly related to wind power, and this wind energy boost has determined its strong growth, becoming one of the countries with the highest percentage of electricity produced from this type of energy, more than 22% in 2015 (Ruiz Campillo, 2017). In Peru, three of six renewable auctions implemented since 2008 were of several technologies, this tool being considered key to increase the participation of RE generation in the country's energy matrix (Mitma, 2010). 23 Other countries with a high number of auctions are Argentina, Chile, Mexico and Panama. In Argentina, the auction process has involved the reactivation of the Argentine electricity sector, previously based on the FIT system. The auctions have been established in rounds. In October 2016, 117 offers were received, awarding 1.1 GW. Then in January 2017, 1.3 GW were awarded, and in November 2017, projects totaling 2 GW were awarded. The first two rounds were dominated by wind and PV technologies, while the last one also awarded biomass and mini-hydraulic projects (PwC, 2017 and Climatescope, 2017). In Chile and Mexico, developers submit bids for a single project, or a portfolio of projects, and companies do not need to disclose the specific plants behind their bid submissions. In Mexico, offers are sent every September and, until 2016, more than 24 offers were received totaling 20.7 TW. Purchase contracts are fixed in US$ ($/MWh) for a term of 20 years. Panama organized energy auctions in which developers offer their price to secure energy purchase agreements of up to 20 years and offers are accepted in order of the lowest price. In El Salvador, Guatemala and Honduras, auctions have been carried out in the hydroelectric, solar, biogas and wind sectors. In El Salvador, the company "Del Sur", together with the National Energy Council, contracted up to 4 MW of small hydroelectric plants and 6 MW of photovoltaic solar energy, in a total of 35 projects. Through these tenders, Guatemala signed energy purchase agreements with biomass projects, large hydroelectric plants, small hydroelectric and solar power plants, setting the price paid by electricity distributors to suppliers for 15 years. Likewise, Costa Rica held a tender process to contract up to 140 MW of RE capacity (wind and small hydro), with offers to contract up to 100 MW of wind energy and 40 MW of small hydroelectric projects, with a maximum term of duration of 20 years (Climatescope, 2017). Likewise, since 2016, RE offers were submitted in Suriname. The winners of the tenders obtain a 24 permit from the Minister of Energy Affairs to build, commission and operate their projects. Finally, it should be noted that Colombia is going to launch the first auction in 2018 under the 0570 Decree. The auction would allow all RE projects to participate. 3.2.5. Other mechanisms (subsidies and funds) In addition to the mechanisms discussed above, some countries have also used other specific measures to encourage the use of RE. In Brazil, the ERNC Incentive Program provides a subsidy of up to 75% of the investment cost of electricity generation plants based on REs, to be used in isolated areas. This is because several cities in the Amazon were not connected to the main transmission network, which created a high consumption of diesel with relatively low cost, but with high emissions (Sauma, 2012). In addition, Brazil and Mexico have created funds to stimulate the use of REs. BNDES, ANEEL, and the financial development institution, Finep, have jointly created a fund (inova energía) to fund grants and loans for projects related to the intelligent network and the transmission of ultra-high voltage, solar and wind technology and energy efficiency of vehicles (IRENA, 2015). In order to encourage research in the field of sustainable energy, a fund was created in Mexico in 1982. This fund receives 20% of its income from the 0.65% tax on the extraction of crude oil and natural gas (Climatescope, 2017). 4. Discussion Table 8 summarizes the LA countries that use some kind of incentive, measure or energy policy to encourage the use of RE in electricity generation, and the main performance indicators of their RE use. It is appreciated that, despite having specific RE targets, the only countries that do not have any economic incentive for their promotion 25 were Bolivia and Venezuela. All the other countries have at least one form of incentives. Venezuela did not consequently have any increase in the use of unconventional REs for the electricity generation, although in the case of Bolivia it did obtain small growth in its use. In the case of Bolivia, the Ministry of Energy intends to implement incentives in the future, since they have the support of international organizations such as the Inter- American Development Bank, the Danish International Development Agency (DANIDA), and the GIZ of Germany. Venezuela presents a similar situation, although in this case it is necessary to point out that it is a traditional oil power, so that producing electricity from this non-renewable resource is of lower cost. Table 8. Measures to promote REs for electricity generation and main REs for electricity generation indicators Feed- In Tariff Netmetering Tax incentives Subsidies and funds Auctions REs for electricity increase 2010-2015 (GWh) REs for electricity rate growth 2010-2015 (%) Share of REs in electricity generation (%) Argentina ✓ ✓ ✓ 4 532 23.96 28.38 Bolivia 86 72.27 31.29 Brazil ✓ ✓ ✓ ✓ 31 36825 109.40 73.97 Chile ✓ ✓ 5 6412 248.62 43.60 Colombia ✓ ✓ -194 -7.90 68.22 Costa Rica ✓ ✓ ✓ 2 956 56.90 98.99 Ecuador ✓ ✓ 304 127.20 52.80 El Salvador ✓ 3 302 16.70 57.82 Guatemala ✓ ✓ 3 974 53.25 60.39 Honduras ✓ ✓ 2 1290 806.25 42.28 Mexico ✓ ✓ ✓ 3 8466 98.26 15.96 Nicaragua ✓ ✓ 1147 134.94 50.05 Panama ✓ ✓ ✓ 5 447 2031.82 65.33 Paraguay ✓ 0 0.00 100.00 Peru ✓ 6 1058 156.97 52.73 Suriname ✓ 1 0 0.00 60.05 Uruguay ✓ ✓ 10 2934 303.10 88.56 Venezuela 0 0.00 63.70 Source: Own elaboration from IEA (2018), Climatescope (2017) and others 32 1379. Pablo-Romero, M. P., De Jesús, J. (2016). Economic growth and energy consumption: The Energy-Environmental Kuznets Curve for Latin America and the Caribbean. Renewable and Sustainable Energy Reviews, 60, 1343–1350. Proinvex Panamá. (2017). Energía Renovable. Proinvex Panama.Ministerio de Comercio e Industrias: Panama PwC. (2017). Energías renovables en Argentina - Oportunidades en un nuevo contexto de negocio. PwC:Buenos Aires Robledo, J. C., Olivares, W. (2013). Relación entre las emisiones de co2, el consumo de energía y el pib: el caso de los civets. Semestre Económico Universidad de Medellín, 16(33), 45–65. Ruiz Campillo, X. (2017). Latinoamérica y España: caminos opuestos en el fomento de las energías renovables.Universidad Interncional de Valencia: Valencia Saboori, B., Sulaiman, J. (2013). CO2 emissions, energy consumption and economic growth in Association of Southeast Asian Nations (ASEAN) countries: A cointegration approach. Energy, 55, 813–822. Sauma, E. (2012). Políticas de fomento a las energías renovables no convencionales (ERNC) en Chile. Centro de Políticas Públicas, Pontificia Universidad Católica de Chile: Santiago de Chile UNFCCC (2018). Framework Convention on Climate Change. INDCs as communicated by Parties United Nations Framework Convention on Climate Change:Washington. Retrieved form http://www4.unfccc.int/submissions/INDC/Submission%20Pages/submissions.asp x (last acces may 2018) Uruguay XXI. (2014). Energías renovables Oportunidades de inversión. Uruguay XXI: 33 Montevideo Vergara, W., Deeb, A., Toba, N., Cramton, P., Leino, I. (2010). Wind Energy in Colombia. A Framework for Market Entry. The World Bank: Washington DC Vergara, W., Rios, A. R., Galindo, L. M., Gutman, P., Isbell, P., Suding, P. H., Samaniego, J. (2013). The Climate and Development Challenge for Latin America and the Caribbean Options for climate-resilient, low-carbon development. Banco Interamericano de Desarrollo: Washington DC Zilio, M., Recalde, M. (2011). GDP and environment pressure: The role of energy in Latin America and the Caribbean. Energy Policy, 39(12), 7941–7949.