Published on March 17th, 2016 | by Guest Contributor2
The Untapped Clean Energy Potential Of Latin America
March 17th, 2016 by Guest Contributor
By James Larsen, Director of Business Development with The Advanced Energy Centre at MaRS Discovery District in Toronto, Canada
Canada has a thriving cleantech industry, particularly with respect to energy. Clean Energy Canada reported that investment in new clean-power generation approached CAD $10.9 billion in 2014 — an 88% bump over 2013. Yet, Canadians tend to limit the scope of their export ambitions, and in doing so, we’re overlooking significant market opportunities.
Inevitably, we wonder what technology and expertise Canada can export, and to where. Business leaders are often quick to point to China and India because their economies are “big” and “growing.” But Canada’s potential energy export markets are not just about Asia. Central and South America are neglected markets that are hungry for clean energy solutions, and Canadian firms are well positioned to serve these regions.
The potential in Latin America is huge. The World Bank predicts that electricity consumption in Latin America will more than double between 2010 and 2030, and that $430 billion in investment will be needed to meet that demand. Additionally, South America is expected to become a key smart grid investment location over the next decade, reaching $38.1 billion by 2025.
Several Latin American countries exhibit healthy business climates, favourable trade agreements, and energy markets that are open and reformed (or undergoing reform). Having recently completed business trips to Chile, Colombia, and Mexico, I observed significant opportunities in these markets. Innovative technologies are required to deliver against these countries’ ambitious energy targets, and there are willing intermediaries who can help Canadian firms find partners to work with in the region.
According to the World Intellectual Property Organization, countries like Chile and Colombia filed only around 3,000 and 2,000 patents in 2013, respectively, as compared to Canada’s 35,000. They need foreign innovation to serve their demand for cleantech energy technologies, and there is every reason for Canadian firms to participate in this growth.
Fernando Soto has the same message. Soto is Head of International Affairs for Club de Innovación in Chile, an organization with a mission of attracting investment and new technology to the country.
Chile’s economy has similarities to Canada’s, says Soto. It, too, is a big commodity exporter, and its key products – copper and other metals – have suffered price swoons similar to oil.
There’s nothing that Chilean companies can do about metal prices, so they are closely examining ways to cut costs, says Soto. Electricity is a huge expense for miners, and consequently an area for potential cost-cutting, he says. Chilean utilities have been slow to help, however; Soto likens them to big ocean liners that can’t easily alter course.
Rising costs have prompted Chilean miners, as well as other big power users like manufacturers and commercial real estate firms, to seek methods of bypassing the utility monopoly. They increasingly look to supply their own energy, independent of the major utility companies: a signal of significant opportunities for cleantech energy solutions.
Renewable energy sources are a natural fit for these firms. The north of Chile (and some of Peru, Bolivia, and Argentina) is home to the Atacama Desert, the highest solar radiation area in the world, which also happens to be home to the majority of Chile’s mining operations. And as a coastal nation, stretched along the Pacific Ocean, Chile also presents abundant potential for wind farms and marine energy technologies.
To date, these resources have not been fully exploited. What Chile lacks, according to Soto, is the technology and expertise to develop them. Canadian clean energy firms have a natural entry point to do just that, he says, and they can easily look beyond Chile:
“[Canadian companies] should use us as a pilot. Chile is the entry point for all of South America; it has always been a testing field for cell phone companies, as well as other technology companies. What works in Chile is copied quickly by Argentina, Colombia, Ecuador, and Peru.”
It’s not just Club de Innovación and Chile that are supportive of foreign innovation in Latin America. In Colombia, there are groups like ACI, with a mandate to promote and support foreign investment in their market, working in parallel with groups like Ruta N, an innovation hub, to help foreign companies land on firm footing. In Mexico, groups like INADEM and ProMexico are likewise looking to support foreign entrants.
Roger Morrison agrees wholeheartedly that there are big opportunities in Latin America. He is the founder and chief executive of dTechs, an 8-year-old firm whose technology gives utilities tools to monitor their grid performance, and pinpointing power leakages in the system due to theft or faulty equipment.
Canadian utilities, including Oakville Hydro, use dTechs technology, however Morrison says the leakage problems are much larger for Latin American utilities. Additionally, these utilities are now coming under pressure from regulators to tighten up their systems.
dTechs has found strong demand for its technology in Latin America — it is now earning 80% of its revenue in the region, a figure that Morrison expects to increase. Success like dTechs’ doesn’t happen overnight. Resources like the Advanced Energy Centre’s Going Global reports on the Chilean and Colombian energy markets are a good start. Roger relied on invaluable help from MaRS, Export Development Canada, and Global Affairs Canada to guide him toward making initial contacts in the region. However, learning the business culture was also an important aspect.
In Roger’s experience, holding face-to-face meetings and forming personal relationships was crucial – much more so than in North America, where most business is conducted by phone and email. Finding local partners was also important, Morrison says.
dTechs has formed a partnership with a Colombian firm that has also opened doors in Chile and Ecuador. Roger’s company is now working with three giant utilities with a total of 18 million customers. By comparison, Canada’s utilities collectively serve a customer base of about 9 million.
Moreover, one of the Latin American utilities dTechs works with is foreign-owned, with 11 million additional customers in its own country. That may present further opportunities for dTechs.
The scale of opportunity in Latin America exceeds that of Canada. While Canadian companies entering Latin America have to adapt to different languages and cultures, the differences are less pronounced and the similarities more abundant than in Asian markets.
Asia will remain an important region for Canadian export, but the potential for clean energy solutions in Latin America simply can’t be ignored.
James Larsen is the Director of Business Development at The Advanced Energy Centre (part of MaRS Discovery District), a public-private partnership with a mission to foster the adoption of innovative clean energy technologies in Canada, and to leverage those successes and experiences into international markets.
Prior to joining The Advanced Energy Centre, James was a Management Consultant with Bain & Company, developing strategic solutions for market-leading companies. James also spent many years as an engineer working in the renewable energy industry with a variety of technologies, including hydrogen fuel cells, micro-hydro and geothermal generation.
James has dedicated significant personal time towards his passion for sustainability, founding the 2011 Ivey Business School sustainability conference and ecological footprint reduction challenge. James also volunteers as an Advisor with MaRS Cleantech’s Venture Services group, providing business advisory to young cleantech companies, to help them grow into successful sector leaders.