I come from a country that generates 70% of its electricity by burning imported diesel─creating a serious imbalance in Honduras’ economy. There is no reason why we cannot emulate our neighbor Costa Rica that generates 90% of its energy needs using hydroelectricity. As President of Honduran Renewable Energy Association for Small Scale Projects (AHPPER), representing 66 Honduran companies dedicated to the development of small scale renewable projects, I believe that barriers which local entrepreneurs must overcome are the lack of funds for pre-investment activities, equity consolidation and institutional delays.
For the last six months I have served as Latin-American observer to the Scaling Up Renewable Energy Program (SREP). This is one of the funds under the Clean Investment Funds (CIFs) thatwill pilot and demonstrate the viability of increasing renewable energy applications for energy access in low income countries. A Honduras investment plan came up for review and was approved in the CIF meetings held in Washington DC last week.
I strongly believe this innovative SREP fund will provide the much-needed bridge needed for local entrepreneurs facing financial barriers in low income countries. By allowing local private developers to access equity funds and financial resources, countries can achieve democratization of how energy is supplied. Allowing them a level playing field, eliminating monopolies and adding more actors to the energy sector will trigger competition and benefit the final consumer. An important characteristic of SREP is that it is designed to harmonize with existing initiatives and the overall institutional architecture, enabling small scale renewable energy projects to be constructed. These would ultimately add clean energy to the national energy grids and reduce greenhouse gas emissions while serving as role-models to the rest of the region.
This is particularly relevant for Honduras which has ample but untapped energy resources in the form of geothermal, wind, hydro, solar and biomass. There is no reason why consumers in the mid-sized islands should pay as much as 40 cents per kwh. It should not take five years to get the initial permit and the cost of guarantees should not be as high as 150% of the total project cost─which is what has been happening until now.
Attending these meetings, it struck me that SREP funds are often mistaken to be a panacea for low income countries. Instead, they are meant to harmonize and provide impetus to existing efforts in the country. They are the much-needed funds to supplement or trigger activity on the ground. However, SREP would be more effective if it started financing `hybrid’ projects─for example, adding a wind component to a regular diesel energy plant. In most islands for instance, the wind projects could serve as back-up when the wind is good, enabling the utility company to substitute expensive diesel with clean energy.
In addition, renewable energy projects are typically located in remote and rural areas. They will help eradicate poverty by creating new jobs for the communities located in the area of influence and provide environmental programs for river basins. I look forward to the start of an important chapter in Honduras energy and will keep you all posted on this journey.