Water and Energy nexus in Latin America and the Caribbean

Foto cari 2. jpgCaridad Canales, ECLAC

Background 1

Latin America and the Caribbean is an extremely heterogeneous predominantly middle-income region. The production and transportation of products in which the region specializes is often highly energy and water intensive. Favourable terms of trade and improvements in macroeconomic policies have allowed the region to enjoy a steady period of economic growth.
Water and energy interrelationships in the region are diverse, complex, and intense. Current trends suggest that this interdependence will be subject to increased stress in the future mostly because of population growth and urbanization, rising income levels and economic growth, competition for water in river basins with concentrated economic development, and tendencies towards increasing water-intensity of energy production and energy-intensity of water provision for different uses, all this in the context of climate change. There are two principal areas of the water-energy nexus that stand out at the regional scale:

  • Water use for hydropower generation; and
  • Energy consumption in the provision of water services.

Water use for Hydropower (water for energy)

Latin America and the Caribbean has the second largest hydropower technical potential of all regions in the world – about 20% (of which almost 40% is in Brazil) or approximately 700 GW. Less than one quarter of this is developed (IEA, 2012; OLADE, 2013).At present the region has almost 160 GW of installed capacity. As a result, hydropower provides some 65% of all electricity generated (even more in Brazil, Colombia, Costa Rica, Paraguay and Venezuela). In 2011, hydroelectricity accounted for 11% of the total primary energy supply in some of the countries of the region (Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay and Venezuela), a far higher proportion than the sector’s 2% share of the world total. Hydro power has thus been clearly demonstrating its importance in the region, not only because of the availability of water but because of the sector’s development capacity in countries such as Brazil, Colombia and Paraguay. Brazil is something of a special case because, according to the World Commission on Dams, 91% of all the dams built in Latin America (84% of reservoir capacity) in the last decade (2000-2011) are in this country. These large shares obviously reflect a State policy that has generated a plan to develop and build dams for multiple water uses, especially hydroelectricity. The region has huge technical potential to exploit water for energy. Brazil has 12% of the planet’s surface water and hydroelectric potential of 260 GW, 41% of it in the Amazon basin.

Hydropower projects play a central role in the expansion plans of many countries (IEA, 2012), and are expected to be a major driver of new water demands in the future. At present, the emphasis is not only on large plants, capable of multi-year regulation, but also increasingly on smaller single-purpose reservoirs.
The largest hydroelectric installations in  the region are the hydroelectric plants of Itaipú (jointly operated by Paraguay and Brazil) and Yacyretá (operated by Paraguay and Argentina).  It has traditionally been argued that hydroelectric reservoirs regulate the water flow and make it more constant downstream, thus ensuring an adequate supply of water in dry periods, controlling spates, allowing fertile land to be farmed and making navigation and water sports possible, as well as generating electricity (Mekonnen and Hoekstra, 2012).
Nonetheless, this type of operation has been heavily criticized from a number of perspectives. For one thing, it is pointed out that large reservoirs force out the populations inhabiting the areas to be flooded; for another, land is lost and water flows and quality are affected. All this has an impact on communities and ecosystems downstream (Mekonnen and Hoekstra, 2012).

Another criticism is that the lakes which form behind large dams consume water because of surface evaporation. By contrast, run-of-river or small-scale hydroelectric generation has been vigorously promoted as a source whose social, economic and cultural impacts are much smaller than those of large dams. The main advantage is that there is less diversion of the natural flow of water, making it unnecessary to flood large areas and avoiding the loss of land. It is also argued that this type of generation is more environmentally friendly, making it a green or low-impact source. At the same time, it must be borne in mind that the installed capacity of projects of this type is normally far less than that of major power plants.

The sustainability of water as a natural resource is jeopardized by three factors. One is the lack of formal institutions to deal with the problems of water allocation, water management, financial viability and the influence of the political and macroeconomic cycles. Another is climate change, which is expected to result in large alterations in water availability in some parts of the region. A third factor is the vulnerability of ecosystems, since unless determined efforts are made to protect water catchment basins and glaciers that carry water downstream, the resource may become more expensive or even run short as availability and environmental quality decrease.
Energy consumption in the provision of water services (energy for water)
In comparison with other developing regions, Latin America and the Caribbean is well advanced in the provision of water supply and sanitation services, however, rising energy expenditures present challenges for water industry: energy is often the highest component of operational costs (30 to 40%) associated with water supply services in the region.  Some of the reasons for these higher costs are: inefficient system design and operation, high unaccounted-for water losses, bad asset condition, low level of household metering and heavy reliance on groundwater, amongst others.
Increased energy costs have direct implications for service affordability and sector financing, especially considering that the vast majority of water utilities struggle to attain self-financing and that sector investment, and sometimes even operation and maintenance, are often financed through state budgets (Jouravlev, 2004; Fernández, 2009; Ferro and Lentini, 2013).

Regional experience suggests that the most promising strategies to more efficiently manage the water–energy nexus include the following:

  • Development of effective coordination mechanisms between water and energy authorities,
  • Improvement of water and energy regulatory frameworks, and harmonization of control, policy-making and financial mechanisms
  • Transition and enhance the integrated water resources management perspective,
  • Effective conflict prevention and resolution systems,
  • Protection of watershed ecosystem services and environmental flows.


ECLAC/UNASUR (Economic Commission for Latin America and the Caribbean and Union of South American Nations) (2013), Natural resources within the Union of South American Nations Status and trends for a regional development agenda, LC/L.3627, Santigo de Chile.

Fernández, D. 2009. Sustentabilidad financiera y responsabilidad social de los servicios de agua potable y saneamiento en América Latina. D. Fernández, A. Jouravlev, E. Lentini and A. Yurquina. Contabilidad regulatoria, sustentabilidad financiera y gestión mancomunada: temas relevantes en servicios de agua y saneamiento. LC/L.3098-P. Santiago, UNECLAC.

Ferro, G. and Lentini, E. 2013. Politicas tarifarias para el logro de los Objetivos de Desarrollo del Milenio (odm): situacion actual y tendencias regionales recientes. LC/W.519. Santiago, UNECLAC.

IEA (International Energy Agency) (2012), Technology Roadmap: Hydropower. Paris, OECD/IEA.

Jouravlev, A. 2004. Drinking Water Supply and Sanitation Services on the Threshold of the XXI century. Serie Recursos Naturales e Infraestructura. LC/L.2169-P. Santiago, UNECLAC.

Mekonnen, Mesfin and Aarjen Hoekstra (2012), “The blue water footprint of electricity from hydropower”, Hydrology and Earth System Sciences, vol. 16 [online] http://www.waterfootprint.org.

OLADE (Latin American Energy Organization) (2013), Sistema de Información Económica Energética (SIEE). OLADE.

1 Based on ECLAC/UNASUR (2013) and ECLAC’s contribution to the World Water Development Report 2014.


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