a double-edged sword in Latin America’s energy transition

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Despite the enormous potential for the development of renewable energies, Latin American governments have turned in recent decades to the development of natural gas, a fossil fuel which, although less polluting than coal, still creates significant gas emissions. Greenhouse effect.

31%

The percentage of primary energy supply derived from natural gas in Latin America and the Caribbean in 2020

The importance of gas has grown over time: it accounted for 31% of the region’s total primary energy supply in 2020, according to data from the Latin American and Caribbean Energy Information System (sieLAC). In 2000, this figure was 24%.

This growth has been particularly visible in Mexico, Bolivia, Argentina, Venezuela and Peru, which are currently the main producers in Latin America. Venezuela has nearly 70% of the region’s proven gas reserves, while Argentina has huge unconventional resources, particularly at Vaca Muerta, a formation in the country’s Neuquén Basin.

If its current development trajectory continues, gas could replace hydropower as the main source of electricity generation in the region by 2030, according to an analysis by the United Nations Environment Program (UNEP). This would delay the region’s energy transition, experts say.

“It is the fuel that has grown the most in its expansion, despite the fact that there are cheaper and more sustainable alternatives,” said Gustavo Máñez, UNEP climate change coordinator for Latin America and the Caribbean. . “Governments are biased towards what they know, which is fossil fuels. This is a misuse of public funds.

Is gas a transition fuel?

The gas industry has been proposing for decades that fuel can act as a bridge between coal and oil and cleaner energy, but it has long been a contentious debate and a divisive issue not only in Latin America but also in Europe. .

When burned, natural gas emits 50-60% less carbon dioxide (CO2) than emissions from a coal-fired power plant. However, it is not a panacea, as its transportation and extraction must also be taken into account, especially given the potential for leakage of methane, the main component of natural gas. Over a 20-year period, methane is up to 80 times more potent than CO2 in its effect on global warming.

Switching from coal and oil to natural gas will not ultimately bring the emission reductions needed to avoid the most serious effects of global warming and the climate crisis. In addition, the exploration of newly discovered unconventional gas resources, such as shale gas, would affect environments that have not yet been exploited.

Although gas has fewer emissions than coal, that doesn’t mean it’s clean. It is a big risk to think that we can continue to use it in the long term.

According to the International Energy Agency, in order to limit the increase in the global average temperature to 1.5°C above pre-industrial levels, as foreseen by the Paris Agreement, there should be no more investment or development of fossil fuel projects. Production, however, remains “dangerously out of step” with climate targets, according to the UN.

“It’s being touted as a cleaner option, but for power generation, gas remains a fossil fuel,” said Isabel Cavelier, co-founder of Transforma, a Colombian NGO. “Although it has fewer emissions than coal, that doesn’t mean it’s clean. We run a big risk thinking we can keep using gas for the long term.

The greatest use of gas today is in the production of electricity. But in countries where data is available, wind and solar have been found to be cheaper energy sources. Although both of these renewable sources are variable, the fluctuations can increasingly be handled by batteries, the cost of which is falling and tends to be lower than that of intermittent gas-fired power plants.

But in the short term, gas can often be used to counteract fluctuations in renewable energy supply, and many consider that this will continue to be useful during the transition. “The role that natural gas should play in the energy transition is to support and complement the process of changing the energy matrix towards renewable and sustainable sources,” said Mauricio León, head of the non-renewable resources unit at the Economic Commission for Latin America. and the Caribbean (ECLAC).

Natural gas in Latin America

For Latin American governments, natural gas represents a bet on the future. In fact, in a recent statement by the Latin American Energy Organization (OLADE), the region’s energy ministers defined gas as “a viable, affordable and reliable option to accelerate the decarbonization process”. “.

Argentina has the second largest unconventional gas reserves in the world, at Vaca Muerta. Gas accounts for 55% of the country’s primary energy, and the goal is for the use of this fuel to continue to grow, with a project underway to develop a pipeline linking Vaca Muerta to major consumption centers.

In Mexico, 60% of electricity production depends on natural gas, a figure that has gradually increased. The country still depends on imports from the United States, although President Andrés Manuel López Obrador has expressed a desire to reverse this trend with new wells and infrastructure.

In the Peruvian region of Cusco, the Camisea fields are one of the largest natural gas reserves in South America. But geographic and logistical challenges have made it difficult to scale it up since production began in 2004. President Pedro Castillo, elected last year, hopes to complete a pipeline to extend gas to the south of the country after work halted in 2017.

In Brazil, President Jair Bolsonaro introduced a new legal framework for natural gas in 2021, with the aim of increasing investment and opening the market to more companies beyond state-owned Petrobras. Gas currently accounts for only 12% of electricity generation in Brazil, with hydroelectricity playing a larger role in the energy mix.

Any gas project with a useful life beyond 2030 should be considered a potential stranded asset

“Latin America has great natural gas resources and wants to take advantage of them until the last minute,” said Manuel Pulgar Vidal, head of climate and energy at the World Wide Fund for Nature and former Peruvian minister of health. ‘environment. “The region has not integrated a vision of the future to seek alternative sources, because the gas is available.”

A study by the Inter-American Development Bank (IDB) claims that up to 70% of proven natural gas reserves in Latin America and the Caribbean must remain untapped if the region is to meet the climate commitments of the Paris Agreement. This would, however, affect the tax revenues that countries now depend on for their exports, argue the authors.

For Jeremy Martin, vice president for energy and sustainability at the Institute of the Americas, a US-based think tank, it makes sense that countries in the region with already developed infrastructure continue to use natural gas. However, the development of new projects could lead to stranded assets.

“Anything with a useful life beyond 2030 should be considered a potential stranded asset,” Martin said. “Natural gas is not expected to increase in the region but will remain a complement to renewables, which are not going to grow at the rate they are expected to over the next 10 years.”

The potential of renewable energies

The cost of building and operating solar and wind power plants in many Latin American countries such as Peru, Argentina and Brazil is already at par with hydrocarbon-based electricity generation, which means that the energy transition is technically and economically feasible, as well as financially attractive.

Indeed, pursuing such an energy transition would allow the region not only to reduce its emissions but also to boost its economy. A 2020 IDB report claimed that decarbonizing the region would generate 15 million new jobs and 100,000 additional jobs in the renewable energy sector by 2030.

Believing that gas is a good transition fuel only dooms us to make investments that will soon be obsolete or blocked

Costa Rica and Uruguay, which use virtually no fossil fuels, have already made great strides in developing their renewable energy sectors. They were joined by Chile, which plans to close all its coal-fired power plants by 2025, thanks to the expansion of its solar and wind capacities, which now account for more than 20% of total energy production.

“The region’s energy matrix does not need gas. We have great opportunities in renewable energies and believing that gas is a good transition fuel only dooms us to make investments that will soon be obsolete or fail,” concludes Cavelier.

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