Wind power is poised to play a greater role in meeting Latin America’s growing demand for electricity. Brazil, Chile and Mexico are expected to have added more than 3.7 GW of wind power from 2010 through the end of 2012, according to a study from IHS Emerging Energy Research (EER). Brazil comprises 70 percent of the Latin America wind market, but has tapped just a fraction of its wind power potential.
Demand for diversity of supply is expected to grow wind generation in Latin America, as is a decline in costs through local manufacturing. Renewable energy developments in North America are largely driven by climate change concerns, which are not of primary concern in Latin America. Instead, Latin American developers and governments are turning to wind energy because of the proven technology and its potential to grow local industrial activity.
While the economic crisis softened electricity demand in many portions of the world, Latin America was relatively unaffected by the recession. Instead, power demand has continued to rise at an astonishing rate. Brazil experienced a 4.5 percent power demand growth rate between 2003 to 2008, while Mexico saw a 3.8 percent growth rate from 2003 to 2007. Chile was also unaffected by the recession. Pablo Faúndez, general manager and co-founder of Ecoingerios, said that demand for electricity in Chile grew 6 percent per year during the economic crisis. “The recession was virtually inexistent here.”
In 2010 alone, the installed generating capacity in Latin America grew 50 percent, adding 703 MW of wind power, according to BNamericas. As of February, Brazil has approximately 1.6 GW of installed wind capacity, Mexico’s installed wind generation capacity has surpassed 1 GW, and Chile has about 300 MW.
Challenges to Growth
In order for the Latin American wind market to continue to expand, a few hurdles must be crossed. In some parts of Latin America, like Chile, obtaining secure financing for projects can be difficult. Due to the lack of a support system with fixed prices, banks are hesitant to take risks on renewable energy.
A larger infrastructure for access to materials also needs to be built, said Steve Sawyer, secretary general of the Global Wind Energy Council. “More long load trucks for cranes and staging facilities to unload blades are needed.”
Logistical concerns are an ongoing challenge for the growing wind energy market, said Marcos Costa, vice president of renewable power and thermal power for Alstom. “The region has to receive investments in railroads to transport the equipment in a fast and safe way.”
Other concerns, Costa said, include obtaining licenses for permitting and building interconnection in countries where expansive electrical networks are inexistent.
The role of other forms of emerging generation could also suppress the growth of the wind industry. In recent years, shale gas exploration has mushroomed not only in the U.S., but also in Mexico. Miguel Ángel Alonso, managing director of Acciona Energy Mexico, said the greatest obstacle that wind developers are currently facing is the low price of natural gas and the entry of shale gas into the market. In order for wind and other renewable resources to remain competitive in Latin America, local governments will need to offer tax grants and other subsidies to build an industry that can be cost-heavy upfront.
Brazil is predicted to house 69 percent of the total Latin American installed wind capacity in 2025, positioning the country as a leader for development, turbine manufacturing and wind turbine component supply chain assembly. Despite its current and forecasted leadership in wind energy, it is predicted that wind penetration will reach just 8.5 percent of Brazil’s generation mix by 2025.
Part of Brazil’s growth in the wind industry is expected to be spurred by international manufacturers opening wind turbine facilities in the nation. General Electric (GE) has already announced plans to build a $35 million plant to assemble wind turbines in the northeastern state of Bahia. The plant is expected to be completed by March 2013.
In total, Brazil is home to 11 manufacturing facilities, including a new facility built by Alstom. In November 2011, the French company opened its first wind facility in Latin America, a turbine plant in Camaçari, state of Bahia.
The decision to construct the turbine plant in Bahia was a strategic move, said Costa. “The industrial complex of Camaçari is well located in terms of logistics, especially for exportation and the offer of specialized labor found in the region.”
Prior to the start of its manufacturing operations in Brazil, Alstom had already won two contracts for wind farms. In July 2010, Alstom signed a contract with Desenvix, a subsidiary of the Engevix group, for the contruction of a 90-MW wind compex, also in the state of Bahia. The Brotas Complex will be composed of three wind farms equipped with 57-1.67 MW Alstom ECO 86 wind turbines.
In 2011, Alstom signed a $130 million contract with Brasventos S.A. for the construction and maintenance of three wind farms that will be installed in the state of Rio Grande do Norte. Recently, Alstom was awarded a contract by Odebrecht Energia for the supply of four wind farms in southern Brazil. The projects, Corredor do Senandes II, III and IV, and Vento Aragano I, located in the state of Rio Grande do Sul, will reach a total capacity of 108 MW.
Impsa has also staked a claim in the Brazilian wind development sector. In 2011, the company completed the last of 10 wind farms that compose the Santa Catarina wind project, which totals 222 MW of capacity. The wind farms are powered by 77-1.5 MW IV wind turbines, provided by WPE, an Impsa subsidiary. The project created more than 7,000 indirect jobs for the low-income families living in Santa Catarina, according to Impsa.
Acciona Windpower continues to grow its development base in Brazil through a contract for 40 of its 3 MW turbines with CPFL Renovaveis. The turbines will be installed at the 120 MW wind farm in Rio Grande do Sul state. Acciona also plans to add a manufacturing plant in Brazil.
Sawyer said that Brazilian wind developments are poised for financial success due to funding for infrastructure projects from the Brazilian Development Bank (BNDES). “Wind is outperforming all other forms of power generation at auctions in Brazil.”
Total investment in Brazil’s wind power sector totaled $2.86 billion in 2011. These projects received a total of $1.85 billion in BNDES funding, which was divided among 38 wind farms. The lender also announced in March that it has approved a $211 million-real loan for five wind projects in the northeastern states of Rio Grande do Norte and Bahia, according to BNamericas. The parks are expected to have an installed capacity of 138 MW and are operated by Iberdrola Renováveis do Brasil and Neoenergia.
The Inter-American Development Bank (IDB) has also been instrumental in providing loans for projects in Brazil and throughout Latin America. IDB in November committed to provide Impsa with a $150 million loan for the construction of three wind farms – three in Brazil and one in Uruguay.
Jose Luis Menghini, vice president of Impsa Wind Brazil, said that obtaining a loan for a Latin American project was difficult in the past, but not anymore. “International credit agencies like IDB are realizing that this area of the world is growing constantly.”
According to EER, reduced political support in Mexico is expected to cause the wind energy market to stagnate until 2020. For now, though, the wind energy market is booming. The Mexican Wind Energy Association projects the country’s wind power potential to be around 30 GW. While Mexico does not currently have a national wind energy target, GWEC says that a national target of 12 GW by 2020 would be feasible.
The region best suited for wind development is the Isthmus of Tehuantepec in Oaxaca. GWEC estimates that 10 GW of wind energy could be developed in the region, despite challenging wind and seismic conditions. The 1 GW milestone will likely be reached in the second quarter of 2012, and could be doubled by early 2013, according to GWEC. Currently, 1.9 GW is under construction and scheduled to come online by 2015.
Acciona is currently the leading wind power company in Mexico with 556.5 MW throughout the country. Alonso of Acciona said that Mexico is a strategic location for the company, due to its excellent wind resources, development capacity and temporary support for renewable energy by the Mexican government. However, Alonso said, the government has yet to produce a long-term plan for renewable energy development. “This would provide the required certainty for the development of a local industry around wind power.”
At the end of 2010, Mexico had a total of just 519 MW of installed wind capacity connected to the grid, with only 10 MW installed outside of Oaxaca. In 2011, an additional 50 MW were installed and interconnected, but 304 MW have already come online in early 2012.
The Mexican wind energy market has been dominated by four main turbine manufacturers: Acciona, Gamesa, Vestas and Clipper. GE also announced its first wind project in northern Mexico in 2011 – a 22 MW wind farm operated by Next Energy México that is expected to begin commercial operations later this year.
Parts manufacturers that have found a home in Mexico include Vientek, a joint venture of Japan’s Mitsubishi and U.S. firm TPI Composites, which manufactures blades in Ciudad Juárez; and Potencia Industrial, which manufactures generators for wind turbines.
Mexico is home to the largest wind project in Latin America – three wind parks totaling 306 MW in the Isthmus of Tehuantepec in Oaxaca. Oaxaca II, III and IV, owned by Acciona, were inaugurated by Mexican President Felipe Calderón Hinojosa in March. Acciona also developed the 204-1.5 MW wind turbines used at the Oaxaca project.
In addition to the Oaxaco project, Acciona also owns a 250.5 wind park in Eurus that has been in service since 2009. This project supplies electricity to the plants of the large Mexican cement company, Cemex. These installations represent 65 percent of the country’s operating wind capacity, and over $1 billion of investments by Acciona.
Chile’s power consumption is expected to increase 6 to 8 percent per year in the coming decade, according to GWEC. Coupled with the region’s excellent wind resource, Chile is positioned to be an up-and-comer for wind power in Latin America.
Renewable energy is currently in high demand since the country relies heavily on energy imports. Chile is prone to long dry spells during the summer months, which has resulted in the tripling of energy prices over the last five years. As a result, increased generation from natural resources has the potential of filling the generation gap.
However, Chile has a number of challenges to face when it comes to wind power developments. It can be difficult for developers to secure financing for projects, Faundez said. Due to the lack of a support system with fixed prices in the Chilean market, banks are not willing to take the risk.
Currently, Chile has about 300 MW of total wind power capacity, Faundez said. The Chilean government is facing the possibility of adopting new legislation, “Law 20/20,” which would establish a target of 20 percent renewable energy by 2020. If approved, it could establish a 4.5 GW market for renewables over the next nine years, including 2 GW for wind energy.
According to a study by Mainstream Renewable Power, Chile’s wind potential is 44 GW.
When it comes to siting a project, Faundez said that developers often have to obtain mining rights for a property, since Chilean mining law is prevalent. Developers most also acquire environmental and transmission line permits. “It can easily take two years to have those rights duly established,” Faundez said.
Additionally, developers must become familiar with the typography they wish to site on. Faundez said the wind resources in Chile can differ greatly over just one kilometer. “The typography is quite complex. You can have a very good project near a very bad project.”
A number of new wind projects, totaling 256.8 MW, are expected to come online this year.
Ecoingerios will start construction on its Parque Eolico Pacifico in March 2013. The project’s first phase will bring 40 MW online, and the second phase will bring an additional 30 MW onto the grid.
Other wind projects expected to be completed beyond 2012 include Focus Energy SA’s 186 MW San Juan de Chanaral de Aceituno and Grupo Ibereolica’s 170 MW Cabo Leones.
Other Areas with Wind Potential
Argentina, Peru, Uruguay, Nicaragua and Costa Rica are among the other regions of Latin America with a potential future in wind energy. In Argentina, it is estimated that 75 percent of the surface area experiences strong winds and is ideal for wind power generation, according to BNamericas. Argentina saw 79 MW of wind power come online in 2011.
The Argentine government is currently studying available options to encourage the development of a more robust wind power equipment industry, according to BNamericas. The potential of wind development in Argentina is “a bit of a wild card,” according to Sawyer. “They have enough wind resources in Argentina to supply the whole continent with energy seven times over,” he said, “but policy and fiscal stability would be needed to put to rest the assumption that it’s a risky country in which to invest.”
Impsa, a country whose home base is Argentina, has moved progressively away from Argentina and more towards a focus on Brazil. “Argentina is a touchy subject,” said Impsa’s Menghini. “It’s part of our job to understand the government and try to collaborate the energy the government needs for its growth.”
Sawyer said Uruguay has an aggressive plan to integrate wind energy as a resource, having already auctioned 500 MW of wind developments and with another 500 MW slated to be up for auction in the near future. A prospect for increasing wind power in the region could be a proposed interconnection between Argentina, Uruguay and Chile. “It’s expected that Uruguay will have 2,000 megawatts of wind power installed by the end of this decade,” Sawyer said.
Nicaragua is the country in Central America with the lowest electricity generation as well as the lowest percentage of population with access to electricity. In 2011, however, the nation brought 150 MW of wind capacity online, increasing its generating capacity by 20 percent. Interconnection must be ramped in Nicaragua in order to ensure future growth, Sawyer said.
Other countries have breached an interest in renewable developments but lack consistency. In Panama, multiple projects have been canceled, stifling its wind potential. Venezuela has also had several announcements for a renewable energy push on the political level, but implementation has been lacking.
Despite political, financial and technical challenges, the wind market in Latin America continues to grow. By 2025, the region is expected to reach 46 GW of total installed wind capacity, according to the EER study, “Latin American Wind Power Markets and Strategies: 2010 – 2025.” Brazil is expected to lead the Latin American region with 31.6 GW of installed capacity by 2025, followed by Mexico with about 6.6 GW. As Latin American countries continue to place an increasingly higher priority on renewable energy, wind power will find its place as a leader, especially in regions where the geography and political atmospheres favor wind.