Will Latin Americas be the leader in producing renewable energy?

Energy security, environmental sustainability and economic competitiveness are all at stake in the region’s delicate balancing act. With low technology costs, rapid policy learning curves and some of the world’s best resources, rising energy demand presents an opportunity for the region to move to a more sustainable energy system based on higher shares of renewables.

Latin America is recognized by its natural richness. Unfortunately, the natural resources are limited and in danger by the climate change. Some countries were relying in these resources for their economic development. This high dependency in commodities (cooper, oil, etc.) and its lowered price has generated an economic slowdown and strong impact in the region’s growth. As a reaction some countries started to look for sustainable solutions.

Oil was considered as the black gold. Factors like the oil shortage, climate change, social problems including inequality and health, have promoted the evaluation of alternative technologies and renewable sustainable technologies to replace the use of oil.

Considering that renewable energy and energy efficiency programs in developing countries is of world’s interest. Global initiatives have been promoted and also in force in Latin America. The ambitious 2030 Agenda for sustainable development and the 1 Gigaton Coalition between others; are making great strides towards implementing efficient renewable energy and  looking to reach the goal of limiting global warming to 2 degrees Celsius in a sustainable development.

Today, the region already leads the world in clean energy. Already by 2014, Latin America as a whole produced 53% of its electricity from renewable sources, compared with a world average of 22%, according to the International Energy Agency. Moreover, Costa Rica, Uruguay and Paraguay already get all their energy from clean sources. It is expected that in the next 25 years, the current investment in renewables will increase tenfold.  But not only renewable energy is a safe strategy, for example Costa Rica has realized that its high dependence to hydro-power is not a sustainable solution for example due to danger of weather disasters and its environmentally sensitive areas. Therefore a mix of technologies according with the countries geography and needs could be considered as a long term strategy.

The implementation of different technologies will certainly better protect the environment and make energy cleaner and more accessible for remote areas. Therefore, it is consider that an energy revolution is spreading across Latin America

Areas of opportunity

It is expected that the energy consumption in the Latin American region increases around 3% per year, so that for 2030 it will be required to have double the installed electric capacity reaching 600,000 MW.

In 2015, total renewable energy investment in Latin America amounted to USD 16.4 billion, representing about 6% of the global total. The compositions of these investments represent an evolution of the region’s energy mix towards a more diversified portfolio of renewable energy sources. Source: The Economist

Countries such as Chile, Brazil, Mexico and recently Argentina have open their regulations to encourage alternative energy without having to offer subsidies. Motivating and making it easier for foreign companies to participate in this industry. Source: The Economist

One of the latest examples can be seen in Chile. In El Romero, north of Santiago, is the largest solar-energy plant in Latin America with 775,000 grey solar panels spread out across the undulating plateau of the Atacama desert as if they were sheets of water. Recently built by Acciona Energía with a cost of $343m. El Romero should reach full strength, generating 196MW of electricity—enough to power a city of a million people. A third of its output will be bought directly by Google’s Chilean subsidiary, and the rest fed into the grid.

Photovoltaic plant- El Romero Solar Chile by Acciona Energía.

Countries with different degrees of power sector liberalization, such as Chile or Brazil, ranked among the top destinations of renewable energy investments. Yet, top performers also include Uruguay and Costa Rica, which have vertically-integrated utilities and where private participation in the power sector follows the model of independent power producers.

By today, Spanish companies have profit the most for these opportunities, including Acciona Energía which during 2016 was awarded in Latin America – Chile and Mexico – 825 megawatts: the Spanish company is the first renewable operator in Mexico. Rafael Mateo, CEO of Acciona Energía recently stated the position of renewable energy  “They do not have technological risk, they are economically competitive and they are fast in their implementation, in addition, the resources are unlimited, local and clean”.

Luis Jesús Sánchez de Tembleque, Director Energía Eléctrica en CNE, recalled that there are still thirty million people who have no access to electricity in Latin America and the public institutions have to promote projects that provide solutions to the core, with photovoltaic panels or mini deficit Hydroelectric plants, for example – and also recalled that demand is growing in the region at a high rate, for example, 6% per year in Peru and 4.5% in Brazil. In addition, he insisted that the resources are very high and the objectives of the countries ambitious: Brazil wants 86% of its energy matrix to be renewable in 2023 and Peru wants to increase its percentage from 53% to 60%.

Renewable technologies

Hydropower is the main renewable energy source in the region, though alternative technologies such as wind, solar and geothermal, still only account for around 2% of Latin America’s output, compared with a world average of 6%. Nonetheless, there are several reasons to think this share will grow quickly.

Costa Rica hydroelectric dam

Costa Rica the first Latin American country to reach 100% renewable energy.

Costa Rica is a country that values and depends in its natural resources. In 2014, The Travel & Tourism industry contributed 12.5% of the GDP: and it is forecast to raise 4.5% pa to reach 13.2% of GDP in 2025. One of the biggest challenges of the small country is also the climate change.

Dangers like changes in rain patters could jeopardize the economy of the country, not only because of natural disasters but also because of its strong dependence in the hydroelectric energy. In the other hand, the untapped opportunities like the volcanic Central America and the Caribbean have geothermal potential. In order to avoid dependence on a single source of electricity generation, Costa Rican government established as a goal “2021: 100% production of renewable energy technologies”. The ultimate goal is to boost non-hydroelectric energies and diversify electricity supply options, achieving a carbon-neutral economy.  Already by 2013, 87% of the generated electricity was for renewable supply from which 20% were no hydroelectric.  Therefore, Costa Rica is a small example of great achievements and potential implementation of their natural resources.

Opportunities for Swiss companies

Swiss Cleantech companies have developed an extraordinary knowHow and developed innovative technologies that certainly can be implemented in Latin America.

Also federal initiatives like: The Swiss State Secretariat for Economic Affairs SECO, the Swiss Agency for Development and Cooperation SDC and the Swiss Federal Office of Energy SFOE created REPIC (Renewable Energy and Energy Efficiency Promotion in International Cooperation) which is an interdepartmental platform for the promotion of renewable energy and energy efficiency in international cooperation supporting projects with up to CHF150,000. For more information visit REPIC

Conclusions

The Latin American and Caribbean region is seeking to develop its energy matrix in a sustainable way. The region aim is to move away from fossil fuels and become a global leader in renewable energy. The region has an incredible variability of geographic sources to produce energy in an equilibrated mix and its working to open their markets and simplyifing regulations to obtain Knowhow and innovative technologies.

In the other hand, millions of inhabitants and the increasing demand of alternative technologies, as well as the governmental interest in promote clean energy and fulfill challenging environmental goals, set the background for a growing demand of innovative technologies from European countries.

We recommend Swiss companies to consider these opportunities and take part in the dynamic change of Latin America. If you are further interested in this topic, take a look of our interesting monthly interview rounding our month’s topic and do not hesitate to contact us for a personal consultation.