Natural disasters struck at an alarming rate around the world in 2017, causing economic losses of approximately $330 billion globally. From the Caribbean to Central America, Latin America was unfortunately not spared from these extreme weather events.
In Cuba, for instance, the one-two punch of Hurricanes Irma and Maria devastated the island nation, with Irma alone displacing nearly 160,000 of the country’s residents. Meanwhile, in South America, flooding and landslides resulted in more than 350 deaths in Peru and Colombia, in addition to devastating damage to infrastructure.
Recognizing that most experts believe climate change will lead to an uptick in extreme weather, Latin American governments have increasingly looked to renewable energy as a way to limit these events in the future. The region’s bold actions, which include making significant investments and instituting new policies, have resulted in Latin America garnering recognition as a new global leader in renewable energy.
Of course, the presence of various internal factors means that not every Latin American nation has moved at the same rate toward adopting renewable energy. To help investors with developing a more detailed view of the region, here are overviews of the renewable energy markets in four key Latin American nations.
The largest economy in Latin America, Brazil has long driven investment in the region. As recently as a decade ago, in fact, the country regularly brought in more investment dollars than every other nation in Latin America combined.
Today, however, investors have largely turned away from Brazil as the country faces political corruption and an economic slowdown. Even still, in the period between 2017 and 2020, industry forecasts predict Brazil will expand its solar and wind energy capacity by 3 and 8 gigawatts (GW), respectively
That said, Carlos St. James, a leading energy adviser, has expressed his belief that these forecasts are far too generous and fail to take into account Brazil’s ongoing issues. He wrote in a May 2017 post on the Latin American Energy Review that he sees the country’s solar capacity growing by just 1,504 megawatts (MW) in the period from 2017 to 2020. In regard to wind capacity, he predicts only a 2,092-MW increase.
As Brazil has fallen out of favor as the main beneficiary of renewable energy investment in Latin America, Mexico has stepped in and assumed a regional leadership role. From approximately 2012 to 2017, the country expanded its renewable energy capacity by 11 times and now relies on renewable energy to account for 20 percent of its national electric grid.
Driven by a series of energy auctions in 2017, Mexico is expected to add an additional 7,074 MW of new solar capacity in the period from 2017 to 2020. In addition, unlike Brazil, which as of July 2017 had not held a long-term wind power auction in 20 months, Mexico has remained an attractive market that continues to offer investors the opportunity to buy into its wind power grid. Mr. St. James sees that grid growing by 5,407 MW between 2017 and 2020, as well.
Along with Mexico, energy investors have increasingly turned to countries in the Southern Cone region of South America. The Argentine government, for example, has pledged to cover 20 percent of the nation’s power needs with renewable energy by 2025.
Already, Argentina has made progress toward meeting this goal. In October and November 2016, the Argentine government auctioned off more than 1.1 GW of solar, wind, hydropower, and bioenergy projects as part of the country’s plan to offer 10 gigawatts’ worth of renewable energy capacity to investors by 2025.
Argentina has further demonstrated its commitment to its 20 percent goal by passing market-friendly reforms and building awareness about the benefits of clean, sustainable energy. As a result of these initiatives, along with falling energy prices, a 2017 report called Argentina the hottest renewable energy market in Latin America.
Like its Southern Cone neighbor, Chile intends to grow its renewable energy capacity to 20 percent of its overall power profile by 2025. This stands as an especially ambitious goal for the country, as Chile has largely relied on the burning of oil, gas, and coal to meet the majority of its electricity needs.
Thus far, Chile has expanded its wind capacity in the central portion of the country and, going forward, may look to install turbines in the windier Patagonia regions. The Chilean government has also allowed solar and wind companies to bid for the opportunity to produce energy at times when doing so is most efficient, such as on particularly sunny or windy days.
Chile’s efforts to attract investors recently paid off when multinational company Building Energy announced in July 2018 its decision to enter the country’s energy market. Investing for the first time anywhere in Latin America, Building Energy plans to open a roughly 30-MW renewable-energy pipeline in central Chile by early 2019.