In recent years, countries in Latin America and the Caribbean (LAC) have experienced sustained economic growth, urbanization, and industrial development. With these advancements come increasing energy demands, placing pressure on existing energy infrastructure systems that would already benefit from additional resiliency and flexibility. Energy efficiency represents one key contributor to effectively enabling and dealing with load growth. In this article, we explore the utility of energy efficiency in LAC by providing an overview of its potential benefits and their associated impact in the region, its current state, and its enablement opportunities.
Benefits of Energy Efficiency
In essence, energy efficiency aims to reduce the total amount of energy needed to perform an energy-consuming process. In other words, it helps create the same amount and quality of output with a reduced amount of energy. It brings a multitude of benefits such as reduced energy costs, enhanced economic competitiveness, and environmental preservation. According to the International Energy Agency (IEA), countries that have consistently invested in energy efficiency over the last decades have seen lower consumer costs, a more reliable energy supply, less volatile energy prices, and lower emissions.
The Need for Energy Efficiency in Latin America and the Caribbean
The need for energy efficiency is evident in the growing energy demand and supply issues across the region. The region is a laggard in terms of energy efficiency adoption. Compared to the United States, the European Union, and the rest of the world, Latin America and the Caribbean is the region that has experienced the lowest decrease in energy intensity of GDP between 2000 and 2015, highlighting the need for further effort in this space.

Source: The World Bank
In Brazil, energy demand has surged, putting a strain on the national grid. Venezuela's electricity infrastructure has been strained due to outdated technology. Energy efficiency programs can help address the challenges currently experienced by strained electricity grids in the region while investments on additional supply are made.
What Has Been Done
Below are examples reported by the World Bank and Enerdata of some of the energy efficiency programs that have been deployed in Latin America and the Caribbean. These highlight the transformative potential of energy efficiency within the region, despite not always reaching their maximum potential.
Argentina: Energy Efficiency Program (2015-2017)
Funded by the Global Environment Facility (GEF), this program was financed by an international grant and was not maintained beyond the length of the program. However, it did result in 20 sets of norms and standards.
Mexico: PRESEMEH program (2016)
Example of a well-designed program, but faced implementation challenges due to lack of municipal capacity and lack of flexibility in the regulatory framework.
Mexico: Mexico’s voluntary agreements for energy efficiency (Launched in 2019)
Companies agree to cut the energy intensity of their activities and measure the impact of their efforts. Companies pledge a goal to reach over the term of the agreement.
Mexico: Energy Efficiency Labelling and Minimum Energy Performance Standards (MEPS) (launched in 1995)
Includes technical specifications to be met by the equipment (minimum efficiency values or maximum energy consumption), the test methods, the conformity assessment method, and the respective energy efficiency label.
Uruguay: National Energy Efficiency Plan (2019-onwards)
Reviewed and assessed every five years, it creates energy efficiency targets for the country. Along with this plan was created the Uruguayan Saving and Energy Efficiency Fund (FUDAEE) and an Energy Efficiency Certificates (EEC) system, which provides subsidies for companies’ energy saving actions through a competitive process.
Current Gaps
Despite these efforts, challenges persist.
Many countries face issues related to policy and regulatory frameworks. For instance, the lack of supportive regulations has hindered energy efficiency investments in Peru, as highlighted in an Asia-Pacific Economic Cooperation Energy Working Group report. There is an even worse outcome in Brazil, where policy, among other factors, can be blamed for the emission intensity of its GDP increasing in recent years.
The limited awareness, lack of understanding of energy efficiency's potential and its measurement, along with broader information gaps are other challenges which accentuate these shortcomings—especially in the industrial sector, where emissions are most intensive. This is exemplified by a study in the Argentinian electricity sector.
Finally, financing energy efficiency projects remains a significant barrier. Many of the successful programs led in the region were reliant on international grants which were not sustained, despite positive outcomes.
These three barriers are accentuated by a lack of enforcement of regulations, coordination between public and private stakeholders, and price distortions due to unfavourable energy subsidies (for emitting energy sources).
Enablement Opportunities
To address these gaps, a multifaceted approach is necessary. Public-private partnerships, such as those outlined in the European-Union & Uruguay's intent to cooperate in pursuing energy efficiency (among others), can drive positive change forward. Leveraging innovative technologies and data analytics, as seen in the smart grid initiatives in Brazil, can provide real-time insights. Capacity building and education for stakeholders, like the programs in the Dominican Republic, are crucial in enabling progress.
Additionally, the World Bank identified three pivotal factors to be considered to intensify energy-efficiency efforts in the region:
Long-term commitment and a comprehensive vision as key aspects of successful policy
Incentives for integrating more efficient technologies throughout sectors and improved access to information on the impact of these advancements
Reducing fossil fuel subsidies while safeguarding vulnerable populations
These changes cannot occur overnight. They will require planning and an all-hands-on-deck approach.
Energy efficiency is not merely an option but a necessity in Latin America and the Caribbean. It holds (at least part of) the key to economic growth, environmental sustainability, and energy security. By learning from success stories, addressing existing challenges, and incorporating insights from other regions, countries within Latin America and the Caribbean can empower themselves for a brighter and more sustainable future.
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