Latin America could be seen as a sleeping giant in the renewable energy sector, blessed with abundant sunshine, vast hydroelectricity potential and favorable locations for onshore wind.
Brazil’s renewable capacity and generation far outstrips that of other Latin American markets, and it is a global leader in hydroelectricity production. However, an overreliance on hydro has left it susceptible to the impacts of drought. Solar power production has been hindered by local content requirements that often prevent developers from accessing long-term funding from the development banks. The country’s exchange rate is also presenting problems for companies seeking to import solar panels. However, the recent move to allow project financing in US dollars should give renewables developers a boost.
Chile has been a success story for the region, having achieved very low renewable auction prices, and it has some of the greatest potential in Latin America for solar power. The country is now targeting a leadership position in green hydrogen, according to research5 used by the Chilean government, where it will be able to produce green hydrogen at US$1.05 per kilogram by 2030.
Developing its renewables industry could become even more important, because Chile is an importer of LNG and faces increased competition in the market as Europe increases its imports rate.
Argentina has introduced programs such as RenovAR,6 which has aided the development of large-scale wind and solar photovoltaic projects. However, a change in government and priorities has resulted in such projects losing momentum. Mired by financial challenges, the market has been pushing for greater foreign investment. China has dominated investment7 in Argentina’s renewable energy sector and signed a deal to build the US$8b Atucha III nuclear power plant,8 which had previously stalled.
Despite possessing some of the world’s best potential for solar power, constitutional reform is threatening Mexico’s renewables sector, with the government seeking to restore state dominance9 in the electricity sector. While unsuccessful so far,10 the constitutional amendment would return control11 of the power sector to state-run utility Comisión Federal de Electricidad (CFE). To meet clean energy goals, Mexican wind and solar industry associations estimate that an additional US$10b of investment12 in renewables will be needed by 2024, but this could prove a tall order as proposed reforms have scared away investment.
Markets across Latin America are facing a variety of challenges and taking divergent approaches to enhancing their energy security. If some of these challenges can be overcome, however, the region will be able to make major gains in renewables.