Technology

Energy revolution for Latin America

 By Nicholas Newman

Latin America already leads the world in clean energy. For almost seven months in 2016, Costa Rica was powered entirely by renewable power, and Uruguay came close to achieving that goal. In 2014, according to the International Energy Agency, Latin America produced 53 percent of its electricity from renewable sources compared with a world average of 22 percent. Hydro contributed the lion’s share of renewable-generating capacity at 83 percent, with the rest derived from bioenergy, wind, solar and geothermal. This feature highlights the role of wind and solar power in Latin America’s renewable energy sector.

(Imagine by Worldwatch blogs)

Latin America’s transition towards a low-carbon economy based on solar and wind is driven by a combination of demographic pressure, economic necessity and environmental considerations. Over 34 million people in Latin American and the Caribbean combined lack access to electricity. Population growth, without a commensurate increase in power generation, will only widen the gap between demand and supply. Many countries in Latin America still depend on fossil fuels for their power generation. However, Venezuela, Mexico, Colombia and Argentina have all seen oil output decline. This trend, combined with government budgets constrained by the cost of fuel subsidies, has encouraged private investment in energy generation in many of the region’s countries.

The growing demand for power, a shortage of fossil fuel resources and stricter environmental policies have created a surge in foreign investment in renewable energy deals. According to PWCs annual Power & Renewables Deals report, investments reached $7.6 billion in 2015, up from $2.7 billion in 2014. Weak local currencies and ongoing energy reforms have attracted Britain’s Richard Branson’s Virgin Group, Enel from Italy, Iberdrola from Spain and 1Malaysia Development Berhad as well as China Yangtze Power. “Between 1980 and today, the generation of renewable power in Latin America has nearly quadrupled,” says James K Alford Senior Counsel King & Spalding. This is just the start. According to the U.S. Energy Information Administration, Latin America and the Caribbean will need to invest a total of $700 billion by 2030 to double power generation and satisfy the needs of a rising population and industrialization. The power sector, enticed by cost reductions and rising efficiencies of green technologies, is turning to wind and solar as an economic way to boost megawatts. The International Finance Corporation estimates that Latin America and the Caribbean could support $1 trillion worth of clean energy investment by 2040, of which Brazil, Chile and Mexico could account for over half.

Drivers

“Latin America has a history of reliance on clean energy sources such as hydroelectric power and biofuels,” says Alford. Higher living standards, energy security considerations and rising demand for power from a population set to rise by 55 million by 2025 to 680 million has focused government attention on the need for new generating capacity. Many governments have set targets for renewable energy and offered financial incentives to wind and solar power suppliers. For instance, Jamaica aims to increase its use of renewable energy from 11 percent to 20 percent by 2030, while Nicaragua is expected to increase renewable energy in its energy mix from 54 percent to 94 percent by 2017.

Wind power

The Andean mountain ranges, the islands of the Caribbean, and Central America’s vast grasslands are ideal for producing wind energy. In comparison to solar power, wind technology is more efficient and robust—turbines generate more power in terms of their land requirements and productivity increases exponentially with scaling-up. Moreover, wind technology is proven and understood by both policymakers and investors. It is therefore not surprising that in 2014, wind captured 84 and 86 percent of renewable energy investments in Brazil and Mexico, respectively.

Richard Branson to acquire BMR Jamaica Wind Limited.

Main Markets

Brazil and Mexico are the two biggest markets in South America for wind power. Brazil, has its own wind manufacturing industry and local content requirements. One of the region’s key players is Argentine company IMPSA, which is in the process of delivering two hundred and eighty-seven 2.0 MW IWP-111 wind turbines, with a capacity of 574 MW, at a cost of $528 million. Costa Rica has installed the largest number of wind power turbines in Central America followed closely by Honduras. In the Southern Cone, Chile and Argentina are aggressively investing in wind power and both countries are expected to overtake Mexico in terms of total installed capacity over the next ten years. New projects are also taking shape in Peru and Uruguay.

In the Caribbean, wind power take-up is growing in Jamaica, Cuba, the Dominican Republic and Aruba. In 2016, Richard Branson bought Jamaican-based wind power company BMR Jamaica Wind Limited, which is involved in a $89.9 million wind project to supply around 15,000 customers in Malvern. Its 36 MW wind farm, which uses Vestas turbines, is expected to generate 120,000 MW per year, roughly equivalent to 3 percent of Jamaica’s current energy demand at a cost of 12.9 cents per kwh. Currently, the island meets 90 percent of its energy needs from oil and coal. As Jamaica’s Energy Minister, Andrew Wheatley commented, “The wind farm in Malvern formed part of the government’s drive to significantly reduce reliance on fossil fuels.”

In the Caribbean, wind power take-up is growing in Jamaica, Cuba, the Dominican Republic and Aruba

Obstacles to widespread renewables use

Until very recently, the dominance of hydro and fossil fuel sources of power have restricted take-up of new sources of fuel for power generation. Nevertheless, high costs of mega-dam construction and the increasing unreliability of rainfall—resulting in droughts and power cuts—have encouraged policymakers to seek alternatives. Similarly, the cost and fluctuations in fossil fuel prices and high emissions have reinforced the case for alternative energy sources. To advance this renewable energy revolution, Latin America’s governments will also need to improve transparency, as well as legal and regulatory frameworks. In addition, energy infrastructure, such as transmission and distribution networks linking power plants with cities, needs to be enhanced. National grids may need extensions. A case in point is Chile, which is building a new 3,000-kilometer interconnector to link two separate grids.

The industry also requires investment in new energy storage facilities to balance supply and demand using traditional solutions such as pumped storage hydro or new technologies such as battery storage. Above all, the speed of progress will depend on the bankability of projects, which in turn are dependent on favorable financial, regulatory and legal conditions.

Future

As of today, the future of wind and solar power looks bright in Latin America. As James K Alford notes, “Today, 19 countries have legislation in place that set targets for the percentage of renewable electric power on which the country will rely in 10, 15 or 20 years.” These range from 25 to 100 percent.

SEE MORE: Learning the right lesson by Chris Dalby

about the author
Nicholas Newman
Freelance energy journalist and copywriter who regularly writes for AFRELEC, Economist, Energy World, EER, Petroleum Review, PGJ, E&P, Oil Review Africa, Oil Review Middle East. Shale Gas Guide. https://nicholasnewman.contently.com/