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then be included in their Power Purchase Agreements). This would mean that fossil fuel generators would need to get long-term fuel hedge contracts. In reality, fossil fuel-fired generators are almost always allowed to pass through the fuel price volatility to the consumers or to the government, and this becomes a further bias against NRETs. Innovative mechanisms need to be designed in this respect Energy subsidies also have a direct connection with the deployment of NRETs. LAC made up over 7.5% of global energy subsidies. Pre-tax subsidies115 accounted for approximately 0.5% of regional GDP or 2% of total government revenues (although in some countries energy subsidies account for over 5% of GDP).116 NRETs need to compete in unfavorable terms when fossil fuels used for electricity generation are subsidized while subsidized energy leads to consumers lacking the appropriate incentives to implement self-supply alternatives. Some countries that rely heavily on fossil fuels for electricity generation have set up subsidies to dampen the effect of fuel price volatility on the consumers. The challenge in these cases is to ensure a transparent subsidy mechanism (well-targeted subsidies that benefit the most needed population that are not necessarily implemented through electricity tariffs) without jeopardizing the creditworthiness of utilities and thus their ability to scale up NRETs. Looking forward The region can meet its future energy needs in a cost-effective manner through renewable sources, leading the way globally, and building a strong green economy. Regardless of the view that each country has on the long-term future of its electricity system, increasing the penetration of NRETs today makes sense from all perspectives. These issues lie at the heart of current debates about the role that different generation technologies can and should play in the short and long term, with some stakeholders claiming that 100% renewable electricity systems are both technical and economically possible and desirable.117 Rethinking our energy future p. 25PDF Image | White Paper on Renewable Energy for the 3GFLAC
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