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Social Agency and Energy Development

Analysts: Isabella Caravaggio, and Sydney Reis

Team Leader: Haliz Doskee


According to World Bank statistics, approximately 75% of the Guatemalan population lives under the poverty line and roughly 58% of the population lives below the extreme poverty line. This implies that most Guatemalans do not have the sufficient means by which to purchase basic goods and services necessary to survive. This situation of poverty is exacerbated by energy related issues. Firstly, residential electricity costs are, on average, over $100 USD/MWH more in Guatemala than the rest of the world, a high cost to pay for a population that earns an average of $1 USD per day. To make matters worse, a majority of rural inhabitants have a complete lack of access to electricity, reflecting the statistic that approximately 20% of people in Guatemala are living in the dark.. As a result of this lack of access to more sustainable, cheaper and modern forms of completing household tasks such as cooking and heating, approximately 81% of households have resorted to using firewood stoves in their homes. Despite its widespread use, the three stone, firewood stoves that most households use waste approximately 90% of the energy it’s intended to produce. As a result many use kerosene to heat their homes which is not only expensive but is known to produce significant respiratory problems when exposed to for long periods of time.
One way that this issue can be solved in poor and rural communities is with the introduction of renewable sources of energy in households and commercial buildings. Currently, many households are not connected to an electrical grid and even if they were, it is doubtful that they would be earning enough money to pay for electricity. However, with the introduction of renewable energy sources, labourers will be able to work longer hours at home and increase their productivity, save money on travel costs and save money on kerosene and firewood, all of which contribute to a higher income for average workers and the opportunity for them to spend more on renewable sources of energy in the future. This provides potential investors with a unique opportunity. Not only will renewable energy investors be able to in a sense ‘create’ demand for themselves but this strategy of helping the poor rise out of poverty will also mitigate against community’s fear of manipulation which often leads to the protest new foreign energy projects.
Despite the growing proliferation of green energy in Guatemala, the poverty trap - which consists of low-income, often indigenous individuals - prevents many Guatemalans from reaping the economic benefits. When individuals are ‘trapped’ in poverty, they lack the economic and government influence to invest capital, or receive investments, for green energy development upfront. This barrier to affordable and reliable energy resources has contributed to the economic stagnation of the average Guatemalan. When green energy is utilized efficiently, economic advantages that can facilitate economic development among the impoverished are opened. For one rural villager, the introduction of residential solar panels brought the means to build a garment making business to supplement farming income. In contrast, traditional energy generating methods (oil-based fuels and traditional biomass) currently used in much of Guatemala's agricultural sector increase production costs, reduce productivity, and leads to environmental and human health problems. This disparity in energy access demonstrates the demand for further green energy development in Guatemala.
Despite the benefits that this project is likely to bring there are also significant risks that potential investors must take into consideration. The relationship between poverty and social agency on the one hand and renewable energy development on the other is a double edged sword for investors. In the short run, investors will be able to capitalize off of those who have risen out of poverty through the use of renewable infrastructure and who have more disposable income to spend on renewable energy. However, in the long run, as more and more households become connected to the energy grid and renewable energy infrastructure become readily available, some households will inevitably begin to produce their energy independently.
Another major risk is a significant lack of infrastructure that will need to be developed before investors are able to receive profits. While in the long run this infrastructure is likely to provide the investors with high yields and return on investment, it will be a lengthy and large sum project that investors should be aware of. Another potential risk is the large influence that NGOs like Cause Canada have on trying to ensure that renewable energy strategies are largely dictated by communities and not foreign or national interests. This is mitigated by the fact that investors would be providing poor communities with more affordable and sustainable electricity. However, investors should be aware that NGOs are extremely active in Guatemala and they will need to ensure that their projects include significant community and interest group input to appease these groups.
During the initial stages of green energy development, particularly in rural areas of Guatemala, investors should expect to make education a central focus. As demonstrated in the past, many Guatemalans approach investment from foreign companies with suspicion and disdain. Recent bad experiences with foreign and domestic companies have tarnished the reputation of renewable energy development throughout the nation which is why social dissatisfaction with new projects is so high and why so many protests against foreign projects have occurred. Furthermore, the comfort of traditional energy methods may discourage some people from adopting green technologies. According to a report by the British Embassy in Guatemala city, “It is therefore advisable to create and develop a good communications program direct to the villagers in order to share with them the benefits of any particular energy project.”
Collaboration from the government, and any potential NGO groups should be sought in order to produce relevant and appropriate materials that explain how to operate, and the benefits of, green technology. Statistics detailing evidence of money saving, as well as the inefficiency of nonrenewable energy, should be utilized. High quality educational materials created for and in collaboration with locals in the form of pan flips, and town hall style workshops, will help mitigate suspicion in relation to foreign investment and encourage green technology use.
Considering that 58% of Guatemala's population lives below the extreme poverty line, the relationship between poverty, social agency, and energy development within Guatemala is a paramount question for green energy investors. Poverty, on the one hand, presents the possibility for major investors to capitalize off of new infrastructure and consumers, while aiding in the development process. Conversely, poverty also represents stagnation and tradition that will require substantial upfront investment to combat. Investors must be willing to provide the initial education and capital in order to jumpstart the economic development required to bring return to investment. Furthermore, the combination of education and collaboration with potential NGOs and residence can help to combat the prevalent suspicion of foreign projects.