Ten years ago, the renewable energy market didn’t really exist in Latin America. Total installations during 2007 in the region amounted to 30MW, to bring total installed capacity up to 537 MW, about half of which was in Brazil. The rest was scattered in mostly single projects in half a dozen countries. At the end of 2017, total installed capacity was about 22,000 MW, still dominated by Brazil with nearly 13,000 MW, but with substantial markets in Mexico, Chile and Uruguay, and a major market developing in Argentina. Peru, Honduras, Nicaragua and Panama have small but interesting markets, and there are indications that Colombia could develop a prominent wind market in the coming years.
Ambitious plans to tackle climate change are positing Latin America as a new leader in renewable energy. At the recent United Nations Climate Change Conference (COP23) many Latin American countries showed their desire for a greener world through developing strategic plans to increase the deployment of renewable energy.
Investment in renewable energy is on the rise for several reasons. Firstly, the frequency of natural disasters in the region has helped drive encouragement from local governments to relay more on renewable energy and move away from energy sourcing that are proven to contribute to climate change. Last year, 2017, several natural disasters hit the region.
Hurricanes like Irma and Maria devastated areas in Cuba and the Dominican Republic displacing more than 150,000 people from their homes. In Peru and Colombia, the magnitude of last year’s floods killed hundreds and destroyed areas in the region.
Secondly, many countries are increasing the deployment of wind and solar energy supporting the reduction of global emissions of carbon dioxide. According to scientists’ greenhouse gas emissions from fossil fuels will rise by 2 percent by the end of this year. According to National Geographic, there are positive trends showing in Mexico and other Latin American countries, especially Uruguay, Brazil, and Costa Rica. Costa Rica was the first country in the world to run entirely on renewable energy for 300 days in 2017, leading by example for other countries in the region.
Lastly, the leadership shown by Latin American countries at the COP23 last year in Germany led to heavy investment in solar and wind energy in the region. Brazil, Mexico and Chile are all investing heavily in the sector. Brazil invested US$7.1 billion into the sector in 2015, whilst Chile is leading solar energy with the implementation of the biggest photovoltaics plant (El Romero) in the region with a capacity to produce energy for almost quarter of a million Chilean homes. On a commercial side initiative by larges companies such as Google is driving the pursuit of achieving renewable energy goals. Google Chile currently receive 100 percent of their energy from the El Romero plant. Mexico excelled by being the first developing country in the world to submit a climate pledge to the Paris Climate Agreement in 2015. Mexico have several giant wind and solar projects underway.
With this booming energy market, the world’s energy giants are being attracted to the region and the big developers are willing to fight for their share of the market. Big players like Enel SpA, AES Corp. and Iberdrola SA are entering Latin America at an accelerated rate. In 2017 investment grew more than 35 times faster than the global rate and huge projects are being undertaken across the region.
A brief snapshot of the Latin American Wind Power Market
Private sector initiatives began to unlock Mexico’s wind potential just over ten years ago, and for the following years almost all installations were in the windy southern state of Oaxaca. With Mexico’s major energy reform in 2013/14, increased privatization in the power sector and the introduction of competitive auctions in 2016, Mexico is set to have its first annual market with more than 1000 MW in 2018. With a 2017 year-end total of just over 4,000 MW, a rapid rise in installation rates is expected for the sector and the country to meet the clean power goals of 35 percent of electricity by 2024, with 12-14,000 MW of wind by 2022.
Uruguay has quietly gone about becoming the first country in South America to have a close to 100 percent renewable energy power sector. A remarkable wind power market has been established over the past five years. Wind power provided 30 percent of Uruguay’s electricity in 2017, complementing its large existing hydro resources. With a 2017 year-end total of just over 1,500 MW, and one more project (54MW) coming on line in early 2018, Uruguay is set to get about 40 percent of its power from wind in 2018 and for the foreseeable future, second in the world only to Denmark.
Chile’s wind power market has struggled to establish itself over the past ten years, but has now installed 1,500 MW, with another 375 MW under construction, and more than 7 GW approved. SolarReserve are developing a 260MW solar farm in Chile’s Atacama Desert and they were ready to begin construction in 2017. The only thing missing was a deal to sell power. Big companies dominated the bidding event. Europe’s largest utility company bid US$27, compared to average market price of US$47.59. A month after the record low bid of $27, Enel offered to deliver wind power in Mexico for US$17.70, the lowest ever for wind according to Bloomberg New Energy Finance.
Argentina is arguably one of the most exciting new market in Latin America. With the goal established to supply 20 percent of the country’s power with renewable energy by 2025, the implementation of the country’s first renewable energy auctions in 2016 and 2017 resulted in more than 2,400 MW of wind power being contracted, with private and legacy projects adding another 500+ MW, creating a solid pipeline of nearly 3 GW. New auctions are anticipated for 2018 (although it may be delayed due to transmission bottlenecks) and there is growing interest in the private market for large consumers. While the country and the market remain ‘high-risk’, the rewards are great, and many major international players have jumped into the market.
With major operators and energy giants entering the region and the amount of investment going into a wide array of projects and locations the job market will be opening to experienced professional. Paolo Romanacci, Enel’s head of renewable energies for Central America recently stated that “Mexico will be the place to be in the next 3-7 years“.