Bridging the clean energy financing gap (Part 2)

The following is the second of a two-part interview with Fernando Alvarado, director of the Climate Technology Initiative (CTI)-Private Financing Advisory Network (PFAN) partnership's Central America and Caribbean program.

BNamericas: What about bank experience with other technologies apart from hydroelectric?

Alvarado: Banks may not have as much experience with other technologies, such as solar, but there are many experiences with financing for wind projects.

In the case of solar, in particular photovoltaic, the technology was very expensive until a couple of years ago. Now the cost of the components, especially photovoltaic solar panels, is at levels that it is possible to install them. I believe these projects little by little will begin to reach banks.

There are other technologies, like biomass, where there is a lot of experience for example with sugarcane bagasse, but maybe not with other biomass types. With biogas there already are some experiences with methane capture in some processes that use residual biogas at agroindustrial plants, alcohol distilleries, etc.

BNamericas: What stage is PFAN at in Central America and the Caribbean?

Alvarado: We are in the initial phase. A few weeks ago we issued a public call for project proposals and the window is open until September 30. We are in the process of receiving proposals and probably will try to promote the process with a couple of road shows in Panama and Honduras at month end to receive more support requests.

We already have some from the Caribbean and Central Americas but the idea is to reach 20 projects to support and to select 10 that will compete in April to secure support for their business plans.

BNamericas: More and more, small and medium scale projects are coming under socio-environmental scrutiny, not just large ones. What is the key to overcoming these doubts?

Alvarado: Certainly now there is much more sensibility from communities toward projects, but we would have to analyze case by case with regard to technology.

In addition country by country, because some have been better able to demonstrate the benefits of clean energy projects to their populations and communities. Other countries have not addressed the issue much, even when dealing with modern technologies, but have not addressed community worries.

For example, in Honduras I feel there is a very receptive environment for clean energy technologies due to government promotion and campaigns to demonstrate the benefits of renewable technologies instead of continuing with fossil fuels. Thermo generation is responsible for high energy costs in the country. Granted, there also exist environmental groups that sometimes ask for more clarifications.

The same does not occur in Guatemala, not due to lack of hydroelectric potential, but because I feel the government lost the opportunity to work with communities, mayorships and others regarding the important role of renewable technology that allowed development of very organized community opposition.

But in general, I feel a distinction is made between large and small scale projects. Large scale projects do have a series of evident impacts that have to be addressed in a very technical manner. It is not to say smaller projects do not have these challenges, but generally impacts are much more manageable and therefore more possible to carry them out.

BNamericas: And finally, a number of countries in the region are advancing projects and initiatives to expand or introduce natural gas use. Is this something we should see as natural in the search of reaching a balanced energy matrix?

Alvarado: I see it as a positive alternative, because for good or bad it is a reality. The majority of countries in the region depend on thermo generation, which is costly and highly pollutive, with diesel used to a high extent and bunker to a lesser degree. These could be replaced with natural gas, which is a bit more clean and less costly.

I do not believe a country can depend exclusively on renewable sources. We have the case of Costa Rica, which has 90% renewable generation, but still needs thermo energy, especially in peak hours.