We’re kicking off the week by sharing the IDB’s report detailing these countries. This is despite the major changes in the energy sector worldwide in recent months. Renewable technologies are seen as a technically and economically viable solution, especially in countries with limited fossil fuel resources.
Below, I summarize the most important developments in recent years—and particularly in 2015—for five Latin American countries that stand out due to specific circumstances:
1. Brazil.
The Giant of Latin America. Latin America’s largest economy will continue to be fertile ground for renewable energy, with auctions for wind, biomass, and hydroelectric power announced for the first half of 2015. The National Electric Energy Regulatory Agency (ANEEL), which is responsible for conducting auctions at the federal level, forecasts that at least 10 GW of wind power, 20.4 GW of hydroelectric power (both large- and small-scale), and nearly 2 GW of biomass power resulting from auctions already held.
In 2014, solar energy generated a great deal of excitement due to federal auctions in which photovoltaic and concentrated solar power (CSP) projects were eligible to submit bids. However, these technologies have not yet taken off in the country, as no projects were finalized through these auctions. In any case, Brazil has vast solar potential (especially in the Northeast) and efforts to promote solar energy are beginning at the state level.
2.- Chile: The Solar Superpower.
Installed renewable energy capacity in Chile exceeded 2 GW by the end of last year. To date, more than 1.2 GW is under construction, of which nearly 900 MW is accounted for by solar projects. In addition to promoting large-scale renewable energy projects, the government is advancing the distributed energy agenda through the 2014 approval of regulations for the installation of bidirectional meters (net billing) and the promotion of “solar cities.”.
2015 will be a year of consolidation for large-scale projects currently in the permitting, financial closing, and construction phases. There is a downward trend in electricity prices in the Chilean market, both in the Norte Grande Interconnected System (SING) and the Central Interconnected System (SIC), suggesting that renewables are helping to stabilize prices in these systems. There are numerous solar photovoltaic and wind projects under construction and in the permitting stage—so these projects are expected to continue gaining ground over other technologies such as biomass and small hydroelectric plants.
3.- Guatemala.
Promoting Auctions in Central America. In recent years, Guatemala, along with El Salvador and Panama, has been promoting auctions in an effort to stabilize electricity prices in their energy mixes, which rely heavily on fossil fuels. As the most populous country in Central America, Guatemala stands out, as its electricity consumption is expected to grow at an annual rate of 3% from 2015 to 2020. The country aims to install approximately 1,770 MW of new electricity generation capacity, primarily from renewable sources, between 2014 and 2028. As a result, the distribution companies, in coordination with the National Electric Energy Commission and the Ministry of Energy and Mines, held a bidding process in 2014, in which nearly 190 MW were awarded, primarily for hydroelectric and biomass-based projects. This tender was also open to other renewable technologies, such as solar and wind. Additionally, industry authorities plan to launch another tender (PEC-4) in 2015, possibly to contract up to 250 MW of geothermal energy, and PEC-5 is scheduled to be launched in the near future.
Guatemala also offers tax incentives for renewable energy, such as: 1) VAT and import tax exemptions for equipment and machinery used during the construction phase, and 2) a 10-year income tax exemption.
4.- Mexico.
Waiting for reforms to boost renewables. Mexico is expected to remain a major player in the renewable energy sector in Latin America in 2015. This will come from conventional players such as the Federal Electricity Commission (CFE), which plans to build approximately 2.3 GW of wind power across eight projects by 2019. However, the industry remains on hold, awaiting the potential implications of the recent energy reform on the renewable energy sector.
As part of this reform, greater autonomy will be granted to the system operator (the National Load Dispatch Center, CENACE). Having an impartial operator could, in theory, boost competitiveness in the generation market, although this will take some time. Also as part of the reforms, electricity generation is being excluded from the public service sector, and the authority to regulate and grant generation permits is being transferred to the Energy Regulatory Commission (CRE). This will allow for greater flexibility in bilateral power purchase agreements—which were previously limited under the self-supply model. Additionally, the reforms call for the creation of a Mexican Petroleum Fund (which may invest in renewable energy) and the enactment of a law to regulate the exploration and exploitation of geothermal energy. All these elements would contribute to boosting Mexico’s renewable energy sector in the medium term.
5.- Peru.
Kicking off the renewable energy market through auctions. As a result of the expansion of its mining sector, Peru has been growing rapidly in recent years. Despite having large reserves of fossil fuels and low electricity prices, the country has taken the initiative by holding several renewable energy auctions in recent years. Peru offers incentives such as accelerated depreciation for investments in renewables and priority dispatch for energy from sources such as solar and wind power.
