Recent Renewable Energy Developments in Latin America
The renewable energy market1 in Latin America is booming, and the region's natural resources make it one of the most attractive areas in the world for investment. Latin American countries, including Brazil, Mexico and Chile, have been recognized as some of the top global renewable energy markets. Between 2010 and 2015, $80 billion was invested in green energy in Latin America, excluding large-scale hydropower.2 Further regulatory and policy developments, such as the deregulation of national energy markets and the desire to meet the goals of the Paris Climate Accord, have only increased this trend.3 Prior to the onset of the COVID-19 pandemic, 2020 had been a banner year for renewable energy development in Latin America. Experts predict that in 2020, Mexico will see 11 new wind farms begin operation, representing a $1.6 billion investment.4
In Brazil, approximately 3.2 GW of unsubsidized solar projects have been permitted and are currently in development.5 Not to be outdone, Colombia recently announced that there are 9.47 GW of solar projects currently underway.6 While the COVID-19 pandemic has upended the global economy—including the renewable energy market globally7 and in Latin America—the region's economic, political and geographic characteristics suggest that wind and other renewable power sources will have an increasingly important role to play in its energy mix.
However, this opportunity is not without risks. Continuing government involvement in project finance, partial government ownership of utilities, and the importance of major construction, mining and industrial companies as institutional consumers of renewable energy all pose potential Foreign Corrupt Practices Act (FCPA) compliance problems for foreign companies looking to invest in the region. These risks have been made all the more notable by the unique conditions posed by the ongoing pandemic.8
Renewable Energy and Foreign Investment Opportunities
Much of Latin America's renewable energy development relies on partnerships with foreign companies. For example, some of the larger solar plants in Colombia are being developed by foreign companies such as Chicago-based Invenergy, Spanish developer Diverxia, and an AngloColombian partnership between Cubico and Celsia.9 In Chile's Atacama desert—uniquely suitable for large-scale solar power as one of the most irradiated areas of the world—Miami-based Atlas Renewable Energy is investing $450 million in a massive 854 MW solar plant, and Spanish developer Ibereolica Renovables and Italian energy giant Enel are each developing solar projects that will generate approximately 500 MW. In 2018, foreign backers invested nearly $6.9 billion in renewable energy projects in Latin America.
Like much of the rest of the global economy, Latin America's renewable energy industry has been hard hit by COVID-19. Brazil and Mexico are expected to be particularly challenged, as the rapid depreciation in their respective currencies could lead to a sharp increase in the cost of projects already in development.10 Time will tell whether this slump will be short-lived, and Latin American governments are seeking to breathe life back into their economies. Governments across Latin America also remain committed to their ambitious decarbonization goals,11> and the clean skies in the region's cities—prompted by factory closures and reduced car traffic—are showing that a future with clean air is indeed possible.12
Footnotes
1 For the purposes of this note, "renewable energy" refers to wind, solar, geothermal and biofuels. While hydropower has historically been an important energy source in the region, the wind and solar development markets have been far more dynamic in recent years.
2 "Renewable Energy Market Analysis: Latin America," International Renewable Energy Agency (IRENA) (2016).
3 "Latin America and the Caribbean Announce Ambitious New Renewables Target, " IRENA (Dec. 10, 2020), https://www.irena.org/newsroom/articles/2019/Dec/Latin-America-and-the-Caribbean-AnnounceAmbitious-New-Renewables-Target.
4 "There Is Room to Raise Private Investment in Clean Energy," CE Noticias Financieras English (Mar. 28, 2020), https://www.newsdesk.lexisnexis.com/click/?p=aHR0cHM6Ly93d3cubmV3c2Rlc2subGV4aXNuZXhpcy5jb 20vYXJ0aWNsZS80MTc0NDg1MjczMS5odG1sP2hsaD01NmRiMTFjJmZpZD0xMTg0ODkxJmNpZD1N VEE0TWpJMCZ1aWQ9TVRZeU5EYzA&a=41744852731&f=UHJpbnQ&s=YWxlcnQ&u=cGF1bGEubW FoZXJAd2lsbWVyaGFsZS5jb20&cn=V2lsbWVySGFsZSBMTFA&ci=108224&i=335&si=209979&fmi=65 4520804&e=Q0UgTm90aWNpYXMgRmluYW5jaWVyYXMgRW5nbGlzaA&d=162474&t=3&h=1&mbc= Q1QzL2E9NDE3NDQ4NTI3MzEmcD0xNGUmdj0xJmhsaD01NmRiMTFjJmZpZD0xMTg0ODkxJng9anQ yUW9JRWNmMnM5YWE5ZklXa3NOUSZ1MT1ORCZ1Mj11cC11cm46dXNlcjpQQTE4NTY0MDUwM Q&fi=1184891&ai=211890&wa=1&ac=211890_1585497798000&ck=461818fc4fdeb48b78d38313f295669 8.
5 Pilar Sanchez Molina, "A 20-Year Power Supply Deal for 238 MW of Solar in Brazil," PV Magazine (Mar. 4, 2020), https://www.pv-magazine.com/2020/03/04/a-20-year-power-supply-deal-for-238-mw-of-solar-inbrazil.
6 Jose Rojo Martin, "Solar Aspires to Capture Colombia's Energy Future with 9.47GW Pipeline," PV Tech (Apr. 16, 2020), https://www.pv-tech.org/news/solar-aspires-to-capture-colombias-energy-future-with9.47gw-pipeline.
7 See, e.g., "With Much of the World's Economy Slowed Down, Green Energy Powers On," New York Times (June 30, 2020), https://www.nytimes.com/2020/06/30/business/renewableenergy.html?searchResultPosition=6.
8 See generally Natalie Kitroeff and Mitra Taj, "Latin America's Virus Villains: Corrupt Officials Collude With Price Gougers for Body Bags and Flimsy Masks," New York Times (June 20, 2020), https://www.nytimes.com/2020/06/20/world/americas/coronavirus-latin-america-corruption.html.
9 Id. 10 "Covid-19 to Wreck Economics of New Solar, Wind Projects," PV Magazine (Apr. 1, 2020), https://www.pv-magazine.com/2020/04/01/covid-19-to-wreck-economics-of-new-solar-wind-projects.
11 See Valerie Volcovici, "Latin America Pledges 70% Renewable Energy, Surpassing EU: Colombia Minister," Reuters (Sept. 25, 2019), https://www.reuters.com/article/us-climate-change-un-colombia/latinamerica-pledges-70-renewable-energy-surpassing-eu-colombia-minister-idUSKBN1WA26Y.
12 Luis Felipe López-Calva, "Back to Cleaner?: Covid-19, Lockdowns, and Pollution in LAC Cities," United Nations Development Programme (May 27, 2020), https://www.latinamerica.undp.org/content/rblac/en/home/presscenter/director-s-graph-for-thought/back-tocleaner---covid-19--lockdowns--and-pollution-in-lac-citi.html.
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Originally published 07 July, 2020
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