Greening Latin America
Long a renewables powerhouse thanks to its vast hydropower plants, Latin America is making a big push into wind and solar
petróleo has long pulsed through the veins of Latin America's politics, economics and culture, it is renewables that are now quietly revolutionising the region's energy landscape.
In September, Chilean power producer
Colbun won the rights to erect a vast wind farm in a desolate stretch of the country's Atacama Desert. It will run out enough power to supply every home in Valparaíso, the nation's second city. The company will drop $1bn on the project, and with a capacity of 600 megawatts it will be the largest wind farm in Latin America. Meanwhile, in a quiet corner of northeast Brazil, the local unit of Italy's Enel Energy is building the Nova Linda solar array, which when finished will be capable of producing 290MW of power, making it Latin America's largest solar installation.
The projects highlight the swift take up of wind and solar power across a continent that has long epitomised dependence on non-renewable commodities. In one sense, Latin America has always been a leader in renewable energy. A network of vast hydroelectric dams across the region mean that, for years, more than half of its electricity has come from renewable sources. But it was undoubtedly late to the wind and solar party. That is changing. Combined wind and solar capacity across Latin America and the Caribbean was a puny 2GW in 2010, but had topped 22GW by 2016.
As the Atacama wind farm and Nova Linda solar projects show, there is plenty more to come. Governments across the region have taken up the clean energy mission with gusto. Brazil wants nearly 90% of its electricity to come from renewable sources by 2024, including a quarter from non-hydro installations. Argentina plans to lift the share of its electricity produced from renewables from around 8% this year to a fifth by 2025. Mexico's energy reforms are aimed at lifting its crude production, but also bringing cash into a new generation of clean-energy projects it hopes will be generating a third of its electricity by 2024. Gas-dependent Chile wants to get 60% of its power from renewables by 2035.
The stage is set for a boom in Latin America's renewables business
Costa Rica has by far the most ambitious green agenda. It says it wants 98% of its electricity to come from renewables by the mid-2030s. If that sounds fanciful, consider that the nation already pulled it off in 2016—running on 98.1% renewables including 271 days totally powered by green energy. Costa Rica is a unique case. It is a small nation with huge hydro and geothermal resources; a luxury most don't have.
The targets are being backed up by serious government action. Key to the rapid buildout has been a string of successful capacity auctions held in Brazil, Chile, Mexico, Argentina and elsewhere, which have helped drive costs lower. Some of these auctions have tendered bids specifically for wind or solar capacity. But others have pitted renewables against other energy sources like gas-fired generation, with renewables often winning out, especially where countries are reliant on costly gas imports.
The competitive auctions, as well as government openness to foreign investors, state-supported financing and generous terms, have helped the region shake its reputation as a trying place to do business—at least for clean energy developers.
Ernst & Young's renewable energy country attractive index puts China, India and the US in the top three spots, but Chile, Mexico and Argentina all make the top 11. It is rare to see South American nations rank so high in any international competitiveness table.
It's not all sunny for the region. In Brazil, the renewables sector has not been immune to the country's wrenching recession. The government hasn't held an auction in two years and had to cancel 16 wind projects and 9 solar ones because power demand flatlined as the economy struggled. However, with the end of recession in sight, the government plans to restart the auctions in December. Financing is another difficulty. Much of the cash for early era projects have come from state development banks like Brazil's BNDES, and the World Bank has played a critical role in Argentina, but private financing will have to step into the breach at some point to sustain growth.
Still, the stage is set for a boom in Latin America's renewables business. The
International Energy Agency reckons 22.9 gigawatts of new wind and solar capacity will be added over the next five years, doubling current capacity. Another 15.4GW of hydropower production is in the pipeline, says the IEA. Latin America won't be giving up its hunt for oil riches anytime soon, but when it comes to power it is chasing green gold.
Source: Petroleum Economist
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