Reaching a Feasible Utopia for Renewables in Latin America and the Caribbean

Since 1970 there has been great interest in using renewable energies in the 46 countries of Latin America and the Caribbean (LAC), where currently only three countries have no policies or strategies for the promotion and/or development of this energy source.

Combining the objectives set by the six largest economies in the region — Brazil, Mexico, Argentina, Colombia, Chile and Peru — we see that LAC countries aim to add at least 120 GW of renewable capacity to their electrical grid by 2030.

Will It Be Possible to Meet the LAC Renewable Energy Objective?

LAC is a fully heterogeneous geographical area, where six large regional integration processes coexist, with very different interests and approaches to deal with a common challenge: how to provide affordable, reliable and sustainable electricity throughout the region.

Considering that the installed power generating capacity in the countries mentioned above is over 250 GW, with more than a half being generated by hydroelectric sources, LAC’s goal of adding 120 GW of clean energy in the next 15 years is a feasible utopia.

A Feasible Utopia?

At the regional level, LAC has significant power shortage, not only in generation, but also in transmission and distribution. So, technically and commercially, 120 GW by 2030 is potentially feasible — as long as prices are related to those handled internationally.

Nonetheless, the political, economical and social conjunctures in the different countries that form the region are very different and quite independent, so the utopian component to achieve the goal will be to ensure that all stakeholders in the region work strategically and jointly.

What to Expect for Solar PV in the Region?

The solar PV market in LAC is being led by Chile, but it will gradually see tremendous growth in other countries in the region, especially in Brazil, Mexico, Argentina and Peru. It is estimated that the region will exceed 11 GW of PV installed capacity by 2018.

LAC is the global frontier for unsubsidized solar markets. With high insulation levels (AbraPampa, Jujuy State, Argentina enjoys 2.32 MWh by square meter annual energy) and growing demand, the region is positioned to be one of the most attractive on the planet for solar development in the mid- and long term.

By 2030 — at least — 30 GW of solar capacity may be commissioned in the LAC region. That estimate takes into account studies published by United Bank of Switzerland — in collaboration with Massachusetts Institute of Technology and the International Energy Agency — where they expressed that solar could become 25 percent of the global installed base by 2050, as well as the geographical conditions at the region for the development of solar energy.

To carry out this process successfully, I suggest considering some aspects of the Indian Solar Model. India has begun a transforming process to shift its energy matrix, setting a target for 100 GW of solar power by 2022. At the beginning, India was thinking of imposing an anti-dumping duty to foreign equipment, but it quickly understood that the local industry lacked the capacity to provide the modules for the solar projects it wanted to implement. Thus the country created a program where a percentage of the capacity is tendered under Domestic Content Requirement (DCR), between 10 percent and 25 percent, and in the tenders where this program is used, the customer pays a higher price per MWh.

Renewable Energy in LAC: Business Development

The enactment of renewable energy policies, by public entities, provides the tangible and favorable framework for the development of electricity from renewable sources; development that is carried out mostly by private companies under different structures, e.g., joint ventures and special purpose vehicles.

The countries that have made significant progress in developing renewable energies are those that have understood and incentivized the private sector, with simple and clear rules for the private companies focused on generation with clean sources. With this clean energy, each country established a business environment for growing their competitive industries. In Chile, for example, they ensure electricity for the mining sector or the export fruit sector.

Coincidentally, those countries that do not have an attractive scenario for developers and/or generating companies are the countries that have made less progress towards a clean energy generation matrix.

It is critical to create a simple, clear and friendly framework for private companies. That framework would be the key to achieving – or not – the 120-GW goal by 2030 for the LAC region. Other factors that could contribute to the failure of this objective are: corruption, political crises, lack of access to capital, legal instability and currency fluctuations among others.

However, we must keep in mind: high risk is needed for high reward! 

Lead image: Solar farm. Credit: Shutterstock.

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