Cities consume more than two-thirds of the world’s energy and are responsible for 70% of greenhouse gas emissions. However, new electricity generation technologies such as distributed solar energy present a unique opportunity for cities to be more sustainable, resilient, and at the same time, support a true green recovery of the economy. This situation is much more critical in Latin America since it is the most urbanized region in the world and one of the most vulnerable to the impacts of climate change.
Distributed solar energy has shown significant growth in recent years, especially motivated by the reduction in the costs of technology, a greater awareness on the part of the population on environmental issues, greater awareness of climate change, policies to promote clean energy, and by the effective regulation that has enabled this type of technologies. Several of the governments of Latin America and the Caribbean have introduced some type of regulation so that communities and citizens can, in addition to generating their own electricity, reduce carbon emissions and combat climate change.
In countries like Brazil, more than 60% of the installed photovoltaic solar energy capacity corresponds to distributed generation, with more than half a million small generating plants connected to the electricity distribution network. At the end of 2006, Panama was the only country in the region that had implemented favorable regulation for decentralized energy generation, while by 2018, there were already 17 countries that had adopted some type of regulatory incentives for distributed generation.
Evolution of distributed generation in Mexico
Meanwhile in Mexico, the last decade has also marked the exponential advance of distributed generation. In the 2010-2020 period, the installed capacity has multiplied by more than 1900 times (see Figure 1). As a very remarkable fact, the largest annual installation occurred in 2020, characterized by the health crisis of COVID-9, which shows the resilient nature of the technology.
Today there are more than 240,000 small-scale generation systems connected to electrical distribution networks in the country. Photovoltaic solar energy is the most used technology, since it corresponds to more than 99% of the total generation capacity. Regulatory stability so far in this segment has been key to its continued growth.
Figure 1. Evolution of installed capacity and distributed generation facilities in Mexico from 2007 to the first half of 2021. Source: Energy Regulatory Commission, Requests for Interconnection of Power Plants with Capacity Less than 0.5 MW,
IDB supports distributed generation program in Mexico
The Inter-American Development Bank (IDB), within the framework of its Emerging and Sustainable Cities Program (CES) and with non-reimbursable financing from the Global Environment Facility (GEF) and its Sustainable Cities Platform, acted as the implementing agency of a distributed generation project in public buildings in the city of La Paz, Baja California Sur in Mexico.
The project was executed by the National Bank of Public Works and Services (BANOBRAS) for the channeling of resources. BANOBRAS is the institution responsible for financing activities at the subnational level in the country. The CES initiative is an IDB technical assistance program that provides direct support to central and local governments in the development and execution of urban sustainability plans.
CES employs a comprehensive and interdisciplinary approach to identify, organize and prioritize urban interventions that address the main obstacles that impede the sustainable growth of emerging cities in Latin America and the Caribbean.
The scope of the technical assistance provided by the IDB included conducting feasibility studies, monitoring the bidding process, and finally financing for the construction of the systems. These are self-generation systems from photovoltaic solar power plants located on the roofs of five state buildings, two public schools and two buildings of the La Paz city hall, representing a total of 620kW of renewable electricity generation capacity in a first phase .
This project takes advantage of the high levels of solar radiation existing in the city in order to diversify the local energy matrix, reduce CO2 emissions during the life cycle of the plants and reduce electricity billing for the State Government and the Municipality of Peace.
Competitive prices in the bidding process
Despite the fact that the award process for photovoltaic plants was carried out in the second half of 2020 under very challenging conditions due to the pandemic, the results were very positive and once again demonstrated the competitiveness and resilience of distributed solar energy.
More than 10 qualified offers were received from both local and international companies. One of the most notable results is the record cost of the plants, which was around US $ 0.8 per installed watt, one of the lowest prices for this scale and type of systems in Latin America and the Caribbean and worldwide.
The great potential for replication of distributed generation projects in the public sector could immediately translate into greater investments at a time of economic crisis for the entire region. It is important to note that in addition to being the largest employer in the electricity generation sector worldwide with more than 3 million workers, the solar industry is the most intensive in terms of employment generation of all electricity production technologies.
Solar distributed generation creates an average of 15 jobs in both construction and maintenance work for every million dollars in investment, more than 3 times that of jobs generated, for example, in the natural gas industry for electricity generation with the same level investment.
The public sector at the national level, but also local governments, have a decisive role in the energy transition, including distributed generation as an option within long-term policies and, above all, establishing regulatory frameworks that effectively and efficient enable users to access these options. Only with this option enabled will it be possible for users to actively contribute to the sustainability of their cities and the planet.
Photographs: Courtesy / Government of the State of Baja California Sur.
 Price not including taxes. By 2020, lower prices were only achieved for commercial scale systems in three markets such as India (US $ 0.651 / W), China (US $ 0.691 / W) and Brazil (US $ 0.71 / W), while for the rest of the large markets Higher prices occurred: Australia (US $ 1.28 / W), Germany (US $ 1.1 / W), Spain (US $ 0.85 / W), and the United States (US $ 2.97 / W) (California). Data according to IRENA, Renewable Power Generation Costs in 2020, International Renewable Energy Agency, Abu Dhabi, 2021.
 IEA Sustainable Recovery (World Energy Outlook Special Report), June 2020