This document summarizes a presentation given by Juan A. B. Belt on energy sector planning in Central America in the context of volatile oil prices, the financial crisis, and global climate change initiatives. The presentation describes the MARKAL/TIMES energy modeling tool and how it could be used by Central American countries. It also outlines past and potential future US government support for the energy sector in Central America and Colombia, including through programs promoting regional integration and reforms. The conclusion emphasizes that regional energy market integration could reduce vulnerabilities to oil price fluctuations while supporting renewable energy and emissions reductions goals.

1. Energy Sector Planning in the Context of Volatile
Prices, Financial Crisis and Global Climate
Change Initiatives
Juan A. B. Belt
Presented at the Platts 12th
Annual Conference on Private Power
in Central America
Guatemala City, Guatemala, June 11-12 2009
Director, Office of Infrastructure and Engineering, US Agency for International Development
(USAID). The opinions expressed in this presentation are those of the author and do not
represent the views of the US Government. The author appreciates comments by Silvia Alvarado
(Globeleq) and the support of the International Resources Group (IRG) who provided many of the
slides related to MARKAL/TIMES. They are not responsible for any errors.

2. 2
Outline
1. The present context: rapid increase in
crude oil prices in 2008, financial crisis,
Global Climate Change
2. MARKAL/TIMES: description of model
& potential uses in Central America
3. US Government support for the power
sector in Central America & Colombia
– Past & on-going support
– Potential Support under the Energy and
Climate Partnership of the Americas

3. 3
Will Prices Increase Again as the World Economy Bounces
Back?
Saudi Light Crude
US$ per Barrel
$0
$20
$40
$60
$80
$100
$120
$140
1970
1971
1972
1973
1975
1976
1977
1978
1980
1981
1982
1983
1985
1986
1987
1988
1990
1991
1992
1993
1995
1996
1997
1998
2000
2001
2002
2003
2005
2006
2007
Annual data for 1970 - 1996 and Quarterly data from 1997 - 1008
US$perBarrel
Nominal US$
Constant 2000 US$
Source: Energy Information Association,
US Department of Energy
Crude price doubled in real
terms from the previous peak

4. 4
Central America: Vulnerable to Oil Price Variability
Hydrocarbon Imports as a Percentage of Exports of Goods
and Services
0 0.05 0.1 0.15 0.2 0.25 0.3 0.35
Nicaragua
Guatemala
El Salvador
Honduras
Costa Rica
Panama
Central America

5. 5
Financial Crisis & Private Infrastructure Projects
• Closure of private infrastructure projects Aug-Nov
2008 40% lower than same period 2007
• Projects impacted through higher cost of financing,
delays & cancellations
• Local public banks, multilateral, bilateral & export credit
agencies have been key finance providers
• Investors’ appetite for new deals seems to be declining
• Conclusion: Governments may need to further
improve the environment for private investment
• World Bank, Ada Karina Izaguirre, Financial Crisis Affecting New Private
Infrastructure Projects

6. 6
Havana, October, 2005, Ravaged by Wilma

7. 7
Bolivia: Retreat of the Chacaltaya Glacier

8. 9
MARKAL/TIMES Model: Basic Structure
Based on International Resources Group (IRG)
Demand
Conversion
technology
Primary
energy

9. 19
Central America: Why Use of MARKAL or Other Models
• Identify policies to:
– Reduce risk associated with
volatile prices
– Exploit economies of scale at
the regional level
– Reduce carbon emissions
efficiently

10. 20
Central America & Colombia: Past & On-Going Programs

11. 21
Past Programs in Central America: Promoting Reform
and Integration in the Midst of Conflict
• Panama: demand side management
• Costa Rica: law to permit co-
generation
• Support to reforms in Nicaragua &
Honduras
• Comprehensive reform of the power
sector in Guatemala and El Salvador
• Central America regional power pool:
USEA support to ACERCA

12. 22
Colombia: “fine tuning” the reforms
• Fine tuning a system working relatively well; the
most sophisticated power market in LAC
• EGAT staff, consultants, FERC, Texas regulator
• Auction system for capacity payments
• Strengthening market surveillance
• Rationalizing subsidies & universal access program
• Regulation for commercialization companies
• Results: over $2 billion in investment that will
increase the reliability

13. 23
Nicaragua: Support for Sector Governance and Efficiency
• Donor coordination
• World Bank
• IDB
• USAID
• Other bilateral donors
• Strengthening
regulator
• Texas PUC / NARUC
Partnership
• TA to measure losses
• Energy efficiency
Momotombo Volcano

14. 25
Global Climate Change: Some Principles
• The reduction of poverty is a moral imperative
• Going “with the grain of the market” is more efficient
than going against it
• USAID can be most effective in supporting developing
countries if it works at the policy level where effects
can be systemic
• Energy efficiency, renewable energy, demand side
management will not work if the power sector is “sick”
• Therefore, further reforms are necessary to promote
investment in clean energy by the private sector &
convert climate change issues into a solid business
opportunity for the region

15. 26
“Most of the required investment, however, must come
from the private sector. In order to mobilize that
investment, major policy and regulatory reforms are
needed in many countries. Neither public nor private
utilities and their investors can generate the capital
required to expand access to clean, sustainable energy
supply, for example, when regulatory regimes prevent
them from recovering their direct and indirect operating
costs.”
Secretary of State
Hillary Clinton
Answer to Question for the Record Posed by Senator Lugar

16. 29
Energy & Climate Partnership of the Americas
• “By increasing green energy
cooperation, we will set our
economies on a clean energy
growth path and curb global
greenhouse gas emissions”
• …a voluntary and flexible framework for advancing
energy security and combating climate change.
Countries will be encouraged to suggest tangible ideas
for cooperation, including on energy efficiency,
renewable energy, cleaner fossil fuels, and energy
infrastructure.
• President Obama expressed his commitment to
working with his regional counterparts toward a strong
international climate agreement at Copenhagen.

17. 30
SICA: political body; Unidad de
Coordinación Energética del SICA
(UCESICA) ES
CRIE: regional
regulator GU
ACERCA:
“club” of
regulators
P CR N ES GH
Ente Operador Regional: Independent
System Operator ES & other GRIDCOs
Empresa Propietaria de la Red
GRIDCO CR
Key CA Institutions
NARUC: OPSI or OMS
DOE: FERC
NARUC: State
regulators
USEA: ISO
USEA:
GRIDCO
PURC: training all market participants
Possible alliances
IDB/USG
conference to
launch CA market
IDB & World Bank significant support for regional power market
MARKAL/TIMES

18. 31
Conclusions
• Energy planning models like MARKAL do not provide forecasts but
are useful for determining the costs & benefits of different
strategies/policies
• MARKAL & similar tools can be used to model energy policies such
as:
– Reduction in the reliance on liquid fuels and the importance of
promoting fuel diversification & a well-balanced energy matrix
– Reduction of carbon emissions
• Governments must provide an investor-friendly environment
• Full integration of the Central American power market, including
Mexico & Colombia, can lead to:
– Reduced exposure to crude oil price variability
– Cheaper power & optimization of the use of renewables &
other domestic sources of energy
• Partnerships with appropriate US institutions, IDB & World Bank
can contribute to the consolidation of the regional power
market

19. Any questions?
Juan A. B. Belt
Director
Office of Infrastructure and Engineering (I&E)
Bureau for Economic Growth, Agriculture, &
Trade (EGAT)
US Agency for International Development
(USAID)
E-mail: jubelt@usaid.gov