Cost Reductions & Dynamic Polices Drive Renewable Energy Growth In Latin America
A combination of rapid technology cost reductions and the consolidation of renewable energy policies have served to help Latin America become home to some of the world’s most dynamic renewable energy markets, and resulted in “an unprecedented opportunity” for the region to accelerate the uptake of renewable energy across all sectors.
These are the key findings from a new report published earlier this month by the International Renewable Energy Agency (IRENA) entitled Renewable Energy Market Analysis: Latin America, which highlights the region’s emerging renewable energy trends, and explains that Latin America is now faced with an unparalleled opportunity to accelerate the growth of renewable energy across the region and all sectors.
“The proven business case of renewables, combined with the imperative to decarbonise the energy sector, provides a compelling rationale for Latin American countries to continue deploying more renewables, including solar and wind,” explained IRENA Director-General Adnan Z. Amin. “Policymakers also increasingly recognise renewables as a catalyst for job creation, GDP growth, development of local industries, and energy access. Add the environmental benefits – and the fact that nearly 2 million people are employed by renewables in the region – and the case for renewables is even more compelling.”
“Latin America has seen significant investment in renewables,” added Henning Wuester, Director of IRENA’s Knowledge, Policy, and Finance Centre. “With close to two million people employed regionally in the sector and increasing degrees of local manufacturing, the socio-economic benefits are being felt. Rapid cost reductions, maturing renewable energy technologies and the consolidation of renewable energy policies – in a region endowed with some of the world’s best renewable resources – have offered an unprecedented opportunity to accelerate the uptake of renewables across all sectors.”
Renewable energy investment in Latin America has skyrocketed of late, with $80 billion invested between 2010 and 2015 into technologies (excluding large-hydropower). Total renewable energy investment in 2015 alone was $16.4 billion, approximately 6% of the global total for investment in renewable energy. More specifically, between 2005 and 2009, Brazil accounted for 70% of all renewable energy investment in the region, but that leadership has since slipped since 2010, with the gap between the top investment market and the rest of the region slowly narrowing. In 2015, Brazil accounted for a little over 40% of all investment in the approximately $7.1 billion, followed by Mexico and Chile.
Investment in renewable energy, 2010-2015: by country
The trends for investment into specific technologies have similarly changed over the last 10 years, moving away from investment in liquid biofuels, and toward wind and solar. Over the past three years, investment in wind represented approximately two-thirds of renewable energy investment in the region (again excluding large-hydropower), powered by Brazil, Uruguay, and more recently Mexico. The region as a whole has seen a huge increase in investment to solar, especially in Chile, Brazil, and Mexico.
“Wind is growing fast — over 2.7 GW of wind power was commissioned in Brazil in 2015,” says Wuester. “That is three times more than in 2013. We have seen similar trends throughout the region, and Argentina is now poised to become a key market. Technologies like wind, solar and bioenergy, have important climate, technical and economic complementarities with large hydropower. If leveraged, these synergies can improve the economic performance and reliability of power systems, and provide market entry opportunities for new, smaller players.”
Investment in renewable energy, 2010-2015: by technology
As a result, the region’s renewable energy capacity currently looks like this:
More specifically, the region’s total primary energy supply in 2013 looked like this:
The report points out that while there are energy security benefits inherent in renewable energy that mitigate the adverse economic effects of price volatility and the risk of supply disruptions, the means of creating an enabling environment for the further growth of renewable energy means having the right mix of policies in place. Latin America currently has over 300 policies in place to support renewables. Countries with the highest level of investment in the region — such as Brazil, Chile, Mexico, and Uruguay — consistently receive high evaluations of their legal, institutional, and administrative frameworks.
“The good news is that the success achieved in Latin America, and the benefits realised, can be even further enhanced with the right policies being established,” added Mr. Amin. “Latin America’s advanced renewable energy policies and financing schemes also offer valuable insights for other energy markets around the world, especially as countries seek to scale up renewables to achieve emission reduction targets under the Paris climate agreement.”
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