Electricity integration: key to ensuring energy security in the Americas
By Alfonso Blanco: Director of the Energy Transitions and Climate Program of the Inter-American Dialogue. Former Executive Director of OLADE and Co founder of Ivy Foundation.
Electricity systems are undergoing a major transformation. The electrification of demand, the irruption of renewable sources and the cheapening of new technologies are reshaping the way we produce, transport and consume energy. But this energy revolution does not come without challenges: networks, planning and the way systems are operated must adapt to a new scenario that is more uncertain, more interconnected and profoundly affected by climate change.
For decades, our electricity systems operated under a hydrothermal model: hydroelectric and thermal power plants that operated according to demand, like someone who opens or closes a faucet. But today the panorama has changed. Renewable sources -such as solar and wind- have become more competitive, and markets are called to prioritize them, gradually replacing fossil technologies. However, these new sources have a peculiarity: they cannot be turned on or off at will. They depend on wind, sun, water… and these natural resources are increasingly variable.
This implies a fundamental transformation. Planning must be rethought, operating mechanisms must be redesigned and new risks must be mitigated. How to guarantee supply if the wind does not blow or river flows drop? How to adapt infrastructure investments in the face of greater uncertainty?
Added to this is another challenge: distance. The best renewable resources – such as the sun in northern Chile or the winds of Patagonia – are usually far from urban centers. This geography requires more extensive, robust and modern transmission grids, something that many countries have not yet achieved.
Recent crises: urgency and traumatic lessons
The last few years have left a traumatic mark. In 2024, Ecuador faced a serious electricity crisis with outages of more than 12 hours a day for several months. The cause? An electricity matrix highly concentrated in hydroelectric generation with scarce reservoir capacity, located in non-independent hydrographic basins very sensitive to climatic phenomena and seasonality. The lack of planning, investment and demand management tools aggravated the problem. Some blamed the high share of renewables, but this criticism is superficial. The real problem was not “renewability”, but the lack of diversification and preparation of the system for increasingly frequent extreme events.
Chile also experienced its own crisis this year, although with a different logic. There, the problem was in the transmission infrastructure. For more than two years, the country has been unable to evacuate all the solar energy generated in the north. Nearly 17% of this electricity from renewable sources cannot enter the system due to lack of line capacity. The regulatory design bet that the market would close this gap, but the works did not arrive on time. In a long system, with little redundancy and little international interconnection, technical failures were only a matter of time.
Meanwhile, other countries faced similar scenarios. In 2021, Brazil went through a severe drought (the worst recorded in 90 years) that put its hydroelectric generation in check, but managed to overcome it thanks to imports from its neighbors and a package of other measures aimed at its domestic supply. Uruguay, two years later, experienced a similar situation and also relied on its interconnections with Brazil and Argentina to maintain supply.
The pattern is clear: countries with more integrated networks, capable of taking advantage of the complementarity of resources between systems, with greater sector planning, are better able to cope with crises. On the other hand, those that operate in isolation are much more exposed to the vagaries of the climate, to the variability of their own matrices and to the bottlenecks in their infrastructure.
More integration, more resilience
Electrical integration is no longer a luxury or an aspiration of diplomats. It is an urgent necessity. Connecting electricity systems between countries makes it possible to take advantage of the diversity of sources, reduce costs, increase efficiency and, above all, improve resilience in the face of increasingly frequent crises and severe weather events.
For a long time, energy integration was tied to political or ideological affinities. But success stories show otherwise: when there is economic rationality, technical will and mutual benefits, projects prosper and show great benefits. The best example of this economic rationality of exchanges is the interconnection between Uruguay and Brazil, which in a few years proved to be key to the energy security of southern Brazil and Uruguay itself.
However, beyond the obvious benefit of integrated regional markets, in a global context of geopolitical tensions, growing protectionism and trade barriers, moving in the direction of greater electricity interconnection, with a new message aimed at strengthening regional integration, is a major challenge.
Aligning interests in uncertain times
For electricity integration to advance at a faster pace and become consolidated, it will be essential to align interests regionally, articulate national visions with a regional outlook, and translate the benefits into concrete results that are easily identifiable by political decision-makers and the different market agents. In an international scenario marked by fragmentation and distrust, energy integration must be based on data and technical evidence that arouses political interest. It is not enough with speeches: it is necessary to demonstrate that integration generates shared value, greater security and more robust responses to future challenges. Committing to a regional electricity grid is not just a strategic option: it is an urgent decision that requires determination, coordination and a long-term vision of integration.
Posted at https://www.elpais.com.uy/economia-y-mercado/la-integracion-electrica-clave-para-garantizar-la-seguridad-energetica-en-las-americas