Chris Dalby talks about Renewable Energy and Indigenous Communities, as well as InTrust Global Investment’s approach on such matter

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¨Learning the right lesson¨

In a few areas of Brazil and Mexico renewable developers are pioneering new kinds of community engagement, which are more likely to result in long-term sustainable projects, which will provide clean power, jobs, infrastructure and a new model for the industry. In fact the failure of Mareña Renovables, once viewed as Latin America’s largest wind farm, in Mexico stands testament to how renewable developers have failed to learn the right lesson…

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Mareña Renovables was meant to be a game-changer for the Mexican and Latin American wind industry. A 396MW wind farm in the southern state of Oaxaca, it was supposed to accomplish three things: become the largest wind farm in Latin America, provide a blueprint for doing business with indigenous communities, and provide a lasting source of income and jobs.

Unfortunately, it achieved none of these. Unhappy with what they saw as unfair negotiations, in January 2012, the Huave community entered the town hall of San Dionisio del Mar, the town nearest the project, and forced the mayor to rip up the original land use contract.

Coming shortly before the launch of Mexico’s Energy Reform, Mareña Renovables brought the importance of relationships with indigenous communities to the fore.

Francisco Acuña, CEO of InTrust Global Investments, an advisory firm which specializes in linking investors with communities in Latin America, says that “certain renewable energy developers have fallen prey to a tradition of not always requiring the consensus of the less informed. Violent responses from communities have opened a debate around the subject, but numerous opportunities to find common ground passed some developers by.”

However, he believes a solution to the hostilities could lie in engaging communities in a wholly different way.

According to the executive, becoming an equity partner or offering added value changes the way a community sees a project, making its members feel invested in its success. InTrust Global has one suggestion for how communities can make this leap.

Wind projects in Mexico

“The process of setting up a wind project in Mexico can be complex. Indigenous communities could act as pre-developers, organizing the land and obtaining the right permits from different government institutions,” says Acuña. “This would add a lot of value and allow developers to come in, with this part already taken care of. Furthermore, partnering up with indigenous communities in this way would play well in investors’ reports.”

Faced with this, the civil sector is pioneering new approaches. One British NGO, Yansa, is currently developing a wind farm in a new way: pledging that the Ixtepec indigenous community in Oaxaca will keep control of its resources and will take the lead in transitioning to renewable energy. After six years of opposition from Mexico’s Federal Electricity Commission, this socially entrepreneurial approach was approved in September 2015.

Speaking in late January at a World Wind Energy Association symposium in Germany, Yansa Director, Sergio Oceransky, explained that 50 percent of the revenue from the 100MW wind farm would be re-invested into community development.

The project has been moving forward, albeit slowly, in recent years. It received two major objections, from the Ministry of Energy and the Federal Electricity Commission. The Ministry, however, removed its objection in October 2015, which was seen by many as the project’s biggest hurdle. This came about after protracted negotiations concerning the way this project’s model would work. With this roadblock out of the way, the Commission’s objections are expected to topple soon.

Despite such potential, InTrust Global and developers wrestle with other problems. Communities can often feel frustrated by years of disenfranchisement and refuse to believe they can influence a project in a meaningful way. Other times, misinformation spreads, such as a recent rumor among indigenous communities that wind turbines are spreading the Zika virus.

The broad hope is that Mexico’s ongoing Energy Reform will be the answer to these ills. An effort to open up the sector while ensuring new and effective regulation, the Energy Reform would have several advantages for wind developers and indigenous communities.

Letting indigenous communities take the lead always works better…
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Chapter Eight of Mexico’s new Electricity Law makes it clear that the electricity sector is now of public and social interest. This means companies must come to terms with landowners for rental or purchase before any further steps can be taken.

This reform bring a new era of transparency to the Mexican energy market. One of its major clauses is the creation of arbitration and dispute resolution mechanisms, with neutral parties helping to bring developers and communities together.

This transparency has also allowed for the details of other deals, both successful and not, to be released. Energy companies listed on the Mexican Stock Exchange or seeking funding from development banks must comply with openness rules, publishing every stage of a project’s planning process ahead of time for consultation.

So far, this seems to be working. Since Mareña Renovables, Oaxaca has welcomed a number of new wind projects each year. In 2015 alone, three new wind farms began operating, Energia Eolica del Sur I and II, and Sureste I, providing 498MW of combined wind power generation. In November 2014, the first ever official indigenous consultation since the Energy Reform began between Eolica del Sur and the Binizza indigenous community, with the participation of the Ministry of Energy. While the project has since been suspended again for irregularities, the Binizza did sign off on it, showing that common ground can be found. Five other wind farms came online in 2014, seeming to show that developers are getting the hang of closing the deal.

The government is also seeking to provide guarantees to communities that collaborating on such projects is in their best long-term interests. While the amount of jobs created by wind is uncertain, President Enrique Peña Nieto has vowed that the Energy Reform will create over half a million new jobs during the current government’s term. By 2025, the reforms are expected to increase Mexico’s GDP by 2% and to create an additional 2 million jobs.”

There are other positives to be considered. While wind and solar have dominated headlines in Mexico, they are not the only options available. Dr. Victor Hugo Garduño, head of the Mexican Innovation Center for Geothermal Energy (CeMIE-Geo), believes that the country has not properly explored its geothermal potential, particularly for small-scale geothermal projects.

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In Indonesia, for example, such small geothermal plants (under 10MWe) are currently being built for rural electrification purposes.

“Small geothermal projects have never been considered important as large geothermal fields gave good results,” says Garduño. However, CeMIE-Geo now has 30 projects in the pipeline, focused on exploration, generation and training human resources for geothermal energy.

This could potentially allow small projects to be developed, without facing the same challenges as more popular energy sources. “The market is huge as we are not taking advantage of geothermal for purposes such as heating houses or agriculture,” explains Garduño.

“CeMIE-Geo is trying to inform indigenous communities of these developments and include them, when possible. We seek to inform but we also take into account the owners of the land we are seeking to use. We are merely invited to that wealth,” stated the geothermal expert, adding that involving young people in a new type of energy project is also a solution to avoid conflicts.

According to Garduño, convincing the private sector of the usefulness of geothermal energy has proved to be challenging. However, young people have risen to meet this challenge and apply geothermal energy in new ways. Many of these ideas envision the deployment of small-scale geothermal projects that could be particularly useful in Mexico’s rural areas and indigenous communities, some of which have no or unreliable access to the electrical grid.

Garduño’s vision meshes well with Oceransky. Despite the legal troubles dogging Yansa’s project in Ixtepec, he remains convinced that these obstacles can be overcome. He spoke of how other communities in Mexico and across Latin America, including Bolivia, Brazil and Colombia, have expressed an interest in replicating his initiative.

According to the British entrepreneur, Latin America has two great advantages, which will allow this business model to spread: a great interest in energy transition and the social need to empower communities.

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