Special Briefing
Senior State Department Official
New York, NY
September 27, 2012


MODERATOR: Okay, everybody. So for our second briefing today, to give you a preview of the Connecting the Americas 2022 Ministerial that the Secretary will host, we have [Senior State Department Official], hereafter Senior State Department Official.

Go ahead, [Senior State Department Official].

SENIOR STATE DEPARTMENT OFFICIAL: Very good. [Moderator], thank you. Thanks for coming and joining this discussion, especially when so many other things are going on around town right now. I want to try to give you a sense of the Connect 2022 Initiative, what’s going to happen today, how we continue in the future, why it’s important, why it’s important for the Americas more generally, why it’s good for jobs and for the U.S. economy as well.

The initiative was launched in Cartagena at the Summit of the Americas in April. It was formally put forward as an initiative by Colombia. The concept of it is to begin with regional – sub-regional interconnections throughout the hemisphere in Central America and parts of South America and the Caribbean, but eventually link to wider interconnectivity across the Western Hemisphere. The concept is one that is – has been tested in other parts of the world, in particular the – Europe has already moved in this direction. There is a European electricity market.

This has had a huge impact on creating greater resiliency and flexibility in the European market. Just to give you a sense for the – its importance, the reason that Germany was able to make its decision to phase out its nuclear power is because it has the ability now to import from a wider European market. When you have that breadth of market, it can create a whole range of potential benefits. And so while this may seem something big and technically complicated and challenging, in fact, the nature of it, the concept of it, has already been developed, and we’re bringing to the Americas something that Europe already has.

Why is it important? If you can create these interconnections in electricity across country, it helps you begin reevaluating where you make your power generation investments. It allows you to have a more rational investment profile so that you can lower the total investment costs relative to the amount of power that you generate. If you can lower those investment costs, it could help you lower, then, the costs of electricity that you charge to people. It can help you expand the number of people who have access to power for the same level of investment. And so this becomes a mechanism and a tool to get more investment and power, expand access, reduce the price of electricity, and, in particular for renewable energy, becomes a huge tool in expanding access to renewable energy.

One of the constraints that many of the countries in the region were facing as they developed wind and solar power is that the markets immediately around them were too small to be able to commercially advance their renewable energy investments. And so if you have a wider market in which to be able to sell that power, whether it’s hydropower, wind, or solar, than you have a greater potential for then making it commercially viable.

So if you can do all of these things, then it translates into another agenda, another kind of economic agenda. It makes economies more competitive, it helps create more jobs, it helps bring about economic stability, it helps create bigger markets that can be counterparts for American trade and investment, it helps improve educational opportunities, it helps improve healthcare opportunities from – everything from the expansion of coal chains to be able to maintain the operations of health facilities and hospitals. And so while this is an initiative that is focused around energy, and in particular power and the interconnections on power, it has huge implications for economic activity, for social development, for economic development.

The aspect of jobs, also really critical here; between now and 2035, there will be $700 billion worth of power sector investments that are made in the Western Hemisphere, not including the United States. This is a huge business opportunity, and the United States has a cutting-edge capability in so many of the critical sectors. This is going to apply to power generation technology, to power distribution, so companies that are involved and working as utilities that we see in the United States, it could have a role internationally. It could support investments in power transmission. It involves the IT companies that have been so critical in the development of smart grids and communications in the power sector. It creates a market for those – for companies that have a cutting edge in renewable technology, whether that’s solar or wind or other forms of bio-energy.

And so not only is this something that has immediate economic benefits for others in the region. To the extent to which we have interconnections, standards that are compatible, that also then helps expand and open markets for the United States and for our ability to be able to export these technologies into them.

Final thing I’ll say is that there has been a lot of work already done on this. The World Bank, the Inter-American Development Bank, the Organization of American States, have been widely involved. The United States has been extensively engaged and providing technical support. And as I said, Colombia has been a leading force in this. Today, as we speak, the power – the energy ministers from Colombia, Ecuador, Peru, Bolivia, Chile, are meeting in Santiago, Chile, looking at how they create an interconnection across that Pacific – Western Pacific Rim all in – throughout the Southern Cone.

This past week, the – all of the Central American countries with Mexico and Colombia met in Guatemala to look at how to expand what is already an existing interconnecting power line in Central America, but how to make it more commercially attractive. In a few weeks, Puerto Rico will be hosting a Caribbean Renewable Energy Forum, and we’ll participate – be participating in that with them. But that will look at how you take the huge potential in geothermal, for example, of small countries like Dominica or St. Kitts & Nevis and potentially look at subsea interconnections that could use that geothermal power in a wider market.

Already, a lot of work has been done that could show that you could lower the average cost of electricity in the Caribbean, which is 20 to 50 cents a kilowatt hour, depending on the country, to something that could be half of that ballpark through a more rational use of power and through power investments that allow you to take advantage of, for example, the geothermal in Dominica. So these processes are going to be continuing, but what I think is absolutely key is that the focus that we have here is not as a development assistance initiative; it’s really a strategically targeted application of public sector funds in a way that can leverage private investment because the real winner here is not the hundred million dollar investment here or there with IDB money or World Bank money. Those are important facilitators. What is absolutely critical is the $700 billion in private investment and power generation that can come over time.

And so if we can do this in a way which is more rationally interconnected, that expands the nature of this market, and allows us to have all of these economic and social benefits that come in association with these interconnections across countries, than we can do something which is phenomenal for the region, is in fact visionary in the sense of interconnecting physically the regional economies, but also brings back quite a significant benefit to the United States in terms of our export and investment capabilities and jobs that we create in the United States in order to be able to export to those markets.

MODERATOR: All right. Exciting stuff.

Andy.

QUESTION: That’s the background – can you tell us what exactly – I mean, what’s the Secretary’s role in this meeting today, and are they hoping to achieve anything in particular, or is this just sort of a status update?

SENIOR STATE DEPARTMENT OFFICIAL: So the meeting will bring in most of the foreign ministers, in some cases vice ministers, from the Western Hemisphere countries. It will provide an opportunity to reinforce the importance of political support that needs to underpin the kind of regulatory cooperation that has to exist across countries.

The reason that this is important is that in order to achieve success, you have to advance political trust and cooperation and the political relationships that go with that to underpin regulatory relationships. The constraint that many countries face, and this is true all around the world, is that eventually you have to put in the assurances across countries so that if individual countries do not make power sector investments themselves, they can be assured that they will have access to the power which is being generated in their neighbors if they have those kinds of relationships, and if they put the regulatory mechanisms in place.

They also – if you want to encourage private investments you have to give the private sector the sense that if they make, for example, a 400 megawatt power investment and its bigger than what you can use in a given market, that they’re going to have the ability to actually export that across borders and that you’re going to have access to the transmission lines for an extended period of time – like 25 to 30 years – to be able to pay off the investment.

So what they’ll do in this meeting today is to begin to dig into the kind of political and regulatory steps that need to be taken in each of the sub-regions to build that trust, and where the foreign ministers can play a very important role. While they’re not the individual regulators, they play an important policy dimension within their countries to be able to argue and present to the rest of their governments why it’s important to continue to develop the policy, the diplomatic and the regulatory relationships that really create the environment for the investments to take place.

MODERATOR: Other questions?

No? Excellent. Because it was so clear on the front end. Thank you very much.

SENIOR STATE DEPARTMENT OFFICIAL: Okay. Good.

QUESTION: (Inaudible.) (Laughter.)

SENIOR STATE DEPARTMENT OFFICIAL: I mean, it’s a phenomenally cool thing. I mean, when you just basically think about this reality that you have, markets that are increasingly interlinked, and you have the ability to sell into a wider market – and if you’re a poor country with wind or solar power and you’re trying to sell that and you only have your local market with a very low income base, your ability to sell it is limited. But if you have the ability to actually expand into a market – for example, Columbia will be able to sell its hydro as this is developed all the way down the line through Ecuador, Peru, Bolivia, and into Chile.

And despite all of the other issues that might be out there, you get countries like Ecuador saying that, other political issues aside, we need these interrelationships between our countries because we absolutely need that power from Ecuador to drive our economy. And so it’s, interestingly, something which is good for countries that are poor to be able to bring in power. And it’s really important for countries that are big and rich, like Brazil, because their economy is expanding so fast that they can’t expand their power sector internally fast enough to keep up with that.

So if Brazil wants to keep up its growth rates, it has to develop the relationships with Paraguay, with Guyana, with Uruguay, that have hydropower or potentially other renewable power available that can be exported across the borders. And so then they need to have the kind of policy and regulatory relationships that gives them the security that if they get into these contractual arrangements, that if five years down the road circumstances change, that the power isn’t just going to be cut off because they won’t necessarily then be able to fill in behind it.

So it’s really been quite fascinating because it’s not only an important economic tool, it’s been a win-win across the really big countries and across the small countries, and across the political spectrum. And if we can keep everybody working on this with that mentality, it can in a more – in a broader way actually be a stronger unifying force across the hemisphere.

MODERATOR: It’s interesting, the sort of – power interdependence could create better political binding.

QUESTION: Right.

MODERATOR: Yeah. It’s interesting, like the Common Market in Europe.

SENIOR STATE DEPARTMENT OFFICIAL: Yeah.

MODERATOR: Good. Thanks.



PRN: 2012/1533