Skip to main content

Sustainable Energy & Infrastructure As Components of Economic Recovery

COVID-19 is not helping to curb climate change despite a moderate decrease in pollution due to less industrial activity and transportation, but it allows us to rethink energy policy decisions that will have a relevant, decades-long impact on the climate, and should help mitigate the problem.
AUGUST 28 2020


With the news of blue skies and animals reemerging in parks during the COVID-19 lockdowns, one might think that the deadly virus had at least helped address our global climate change problem. But nothing could be further from the truth.

It is true that the economic freeze caused by the lockdowns has led to a drop in energy consumption, with subsequent reductions in price and generation at polluting power plants — those that burn fossil fuels to produce electricity. But it is also true that the effect of this drop in emissions has been minimal, given the amount of greenhouse gases already accumulated in the atmosphere, and the fact that the coming economic rebound will bring with it a rebound in emissions.

One might think that the pandemic has little relevance to the renewable energy sector, beyond the brief decrease in emissions. However, it allows us to measure the effects on humanity of a global catastrophe, just like climate change, and the need to address it decisively and urgently.

You may also like:

The pandemic also forces us to rethink the status quo in many public policies, including energy, due to its impact on the climate and also on the economic and employment recovery. A shift towards green policies must serve as a guide for investment decisions that will define our relationship with the environment and the fight against climate change for decades.

A recent study by BloombergNEF found that the drop in renewable energy prices, which for years has been the biggest obstacle to fully decarbonizing the economy, has accelerated in recent years. According to the report, prices of photovoltaic units have dropped from US$2 per watt generated to US$0.21 over the last decade, and land-based wind turbine costs have dropped from US$1.7 per watt to US$0.7.

It is therefore no surprise that Latin America and the Caribbean's (LAC) experience with renewable energy has been very positive, and that the increase in this type of power generation has had a significant impact in terms of compliance with UN sustainable development goals. Despite a spectacular increase in electricity generation in LAC, more than half of the new capacity over the last six years has come from renewable sources, helping reduce emissions of gases that contribute to climate change.


At the same time, there is plenty of room for improvement: 22 million people in LAC did not have access to electricity in 2017, and 12% of the population cannot cook in healthy conditions due to air pollution in their homes.

IDB Invest's work in this field is focused on promoting financing solutions throughout the energy chain. From industrial-scale projects that supply energy to entire cities, to electrification solutions to the most vulnerable and remote sectors of the region. We also help to inject liquidity into the energy markets of the region in the most complex moments of the pandemic.

Recent examples are the Villanueva 1 and 3 and Don José projects, in Mexico, which brought an influx of solar energy to said market, or our investment in Kingo, a platform that provides self-generation solutions in rural sectors of Guatemala and Colombia.

In recent years, LAC has shown it can take advantage of its favorable natural conditions, such as high solar radiation and sustained wind profiles that can be used to generate electricity. The fact that the region has taken longer than some developed countries to join the green revolution means that new renewable installations may use more efficient technologies at more competitive prices.

The health emergency and the subsequent economic contraction that COVID-19 has generated is an example of the consequences of global-level threats. The decarbonization of the economies in LAC is thus key to help prevent a climate crisis from following the current pandemic. A shift towards renewable and non-polluting energy sources is the way to achieve sustainable growth.








Related Posts

  • Building resilience to health risks in the private sector

    A Six-Step Roadmap to Enhance Private Sector Resilience to Health Risks

    An IDB Invest poll shows nearly 60% of projects have temporarily ceased work or faced major project delays because of COVID-19. Early lessons coupled with existing best practices in public health and safety principles provide a six-step action road map to build resilience against such risks.

    Read more
  • Can 'flotovoltaics' be a future partner for hydropower systems?

    Can 'flotovoltaics' be a future partner for hydropower systems?

    To address changing paradigms, a new technology has been proposed: hydropower plants that enable solar generation or hybrid hydro-solar systems.

    Read more
  • Solar energy: The revolution spurring development in Honduras

    Solar energy: The revolution spurring development in Honduras

    When Invema plant, the main plastic recycler in Honduras starts operating, a success formula resonates. It is one of the commercial companies that took advantage of the photovoltaic energy boom in the country. Its case demonstrates how the private sector’s investment in solar energy can facilitate greater economic and sustainable development for the country. Six years ago, the executives of the firm decided to install solar panels in the company, so it could generate its own power. This initiative promised a 20% reduction in energy consumption as well as a significant reduction in greenhouse gases emissions of polluting gases. And so it was. Today, Invema obtains energy savings up to 30% in electricity and reinvests in the focus of its business, recycling, so much so that it is now manufacturing the bottles that Coca-Cola uses in Central America. “We are very proud, because thanks to the solar panels, IDB Invest’s doors/channels opened up and allowed us to make the investments we dreamed,” says George Gatlin, the manager of Invema, which is located in the northern city of San Pedro Sula. Invema is part of many companies and private consortia that have opted for photovoltaic energy since Honduras decided to reform its electricity subsector to revert its electricity matrix from thermal to renewable. The reforms began in 2012, when generation using fossil fuels accounted for 70% compared to 30% for renewables. This thermal hegemony was reflected in increasing oil billing, carbon dioxide emissions, high tariffs up to US$0.30 per kilowatt (KW) produced, and frequent rationing. Following the reforms, led by the government with the advisory services of the Inter-American Development Bank (IDB), there was an upsurge in renewable energy until the energy matrix was completely reversed compared to 2012. The latest report from the Central Bank of Honduras (BCH) in 2018 records a 75% electricity generation based on renewable sources, and an 11% share of photovoltaic energy. This percentage translated into 433 megawatts (MW) of installed capacity at the end of 2016, placing Honduras in the lead of solar generation in Central America and third in Latin America, after Chile and Mexico. “We are witnessing a revolution in the electricity sector, not just in Honduras, but worldwide, because energy storage is changing the concept, points out Carlos Jácome, IDB energy specialist who has participated in the reforms process in Honduras. “The Bank support comprises studies and soft financing. Later, the savings make it possible to improve the productivity of these companies because they can use what they no longer pay in energy to expand their businesses,” comments Jácome. Since 2012, the IDB and IDB Invest have provided technical assistance to Honduran commercial, industrial, and institutional sectors to investigate the technical and financial feasibility of photovoltaic projects. To date, 22 studies have been completed for projects ranging from 40 kilowatts (kW) to nearly 3 MW of installed capacity. Official reports indicate that interest in photovoltaic projects have increased due to a reduction in about 40% of the installation costs over the last five years. Behind this innovation there are three combined components that have resulted in a successful formula: i) the impetus of government that created favorable conditions for investment; ii) the decisions made by entrepreneurial companies; and iii) the IDB’s ability to evaluate and finance the projects. The initial investments in photovoltaic development in Honduras involved a shared risk for IDB Invest and its clients. Nonetheless, what made the difference is the technical capabilities of the Bank for evaluating and support for this type of investments. The Honduran experience encourages entrepreneurship and new markets while demonstrating that IDB Invest is the partner of choice for innovative markets. Experiences of this kind should be replicated in the region. The first photovoltaic investments began in 2015, when 388 MW were installed, followed by 45 MV more in 2016, according to reports from the National Electrical Energy Company (ENEE). According to the ENEE, the Honduran commercial and industrial solar energy market is quite different from what it was in 2012, starting with changes in electricity billing (between 11 and 18 cents per kW per hour), installation costs for panels, legal regulations, and the availability of photovoltaic manpower in the region. In addition to this, national capacities have developed with the installation and administration of photovoltaic projects. “Before, if a Canadian, Spaniard or a Costa Rican person did not show up to supervise the project it didn’t move forward. Now the Hondurans themselves have been strengthening all these positions. There is a friendly environment for investment,” notes Elsia Paz, President of the Honduran Renewable Energy Association (EHER), one of the entities that emerged in the context of these reforms. Download the full story here: “Solar Energy: The Revolution Spurring Development in Honduras” Subscribe to receive more content like this! [mc4wp_form]

    Read more