The case for deregulating Latin America’s energy markets

The Ibero-American Energy Traders Association (AICE), founded last August, is promoting a thriving free energy market to advance the development of renewable energies. 

In this first part of an interview with BNamericas, AICE vice president Emili Rousaud, who is also the CEO and co-founder of Factor Energía, talks about the outlook for independent electricity suppliers in Latin America and the Caribbean.

BNamericas: What are AICE’s priorities in Latin America and the Caribbean?

Rousaud: The main objective of AICE is the defense and promotion of the interests of companies that are associated within the framework of a liberalized market in which large consumers have the right to choose a supplier, being able to decide according to price and service conditions, while the smallest consumers, small and medium-sized companies, SMEs or the residential market, which would be households, are not yet given that possibility.

Our obligation as an association is to promote liberalized energy markets, understanding that free competition is the best mechanism to ensure that both companies and households receive or have the right to receive the best price and service conditions, unlike regulated markets in which a market does not really exist. That is a regulated system in which the State makes decisions and consumers are in a situation not of choosing but of accepting what is given to them because they don’t have any possibility of exercising the right of option.

BNamericas: Apart from implementing new regulations that allow greater supply flexibility, the region also needs to advance the energy transition to be able to offer different energy sources to consumers. How do you see Latin America in this transition compared to Europe?

Rousaud: I’m telling you that, surprisingly, the majority of Latin American countries – not all – have a vision of the necessity of an energy matrix that is as renewable as possible and an energy transition is beginning because governments are aware of the impact climate change can have.

For example, Brazil has a very green energy matrix. It has very important hydroelectric power generation because it has a lot of water reserves, but now it is combining that with wind and photovoltaic generation because in countries that depend on water for energy production, phenomena such as El Niño or La Niña can cause them to have sufficient energy or an energy deficit.

If we cover this deficit not with thermal plants, for example natural gas or coal, but with other renewable plants such as photovoltaic, wind or other ones, the matrix will be increasingly renewable and these countries will be major drivers of the energy transition.

BNamericas: Aside from the proliferation of large-scale wind and solar farms, Brazil has a thriving distributed generation market…

Rousaud: The case of Brazil, where there is a business closely linked to local collective self-consumption, is very interesting because the security of supply is improved through distributed energy, that is, the generation plant is very close to the place of consumption.

When this is not the case, then you have to have meshed systems to prevent supply interruptions that threaten the well-being of people or the operation, for example, of companies.

BNamericas: So Brazil serves as a reference in that sense?

Rousaud: The case of Brazil is very special because it is also trying to impose sustainable mobility.

In Europe we are seeing sustainable mobility above all as electrification based on electric cars and in Brazil, the comment I heard is that they were surely going to base it on sugarcane ethanol because it is still renewable in the sense that in the end you’re producing sugarcane. Sugarcane retains the alcohol that you then use again when you produce ethanol.

BNamericas: That shows there is no rigid formula to address the transition, right?

Rousaud: That’s right. Each country in Latin America has a differential vision of the market, but we do see that all countries have a clear commitment to renewable energies. Now, I also want to clarify something that’s important. Today, renewable energies, if we take into account the investment cost, are relatively cheap.

That is to say, 20 years ago in Europe, energies such as wind or solar photovoltaic plants relied heavily on subsidies, on there being state aid. Today these technologies are cheap and compete perfectly and in an important way with other more traditional technologies that have a great climate impact, such as natural gas combined cycle or coal thermal power plants.

BNamericas: Is it feasible to make the energy matrices in Latin America completely clean?

Rousaud: In Latin America, we see a strong commitment to the energy transition, but at this time, renewable energies also…