Latin America already leads the world in clean energy. For almost seven months in 2016, Costa Rica was powered entirely by renewable power, and Uruguay came close to achieving that goal. In 2014, according to the International Energy Agency, Latin America produced 53 percent of its electricity from renewable sources compared with a world average of 22 percent. Hydro contributed the lion’s share of renewable generating capacity at 83 percent, with the rest derived from bioenergy, wind, solar and geothermal. This feature highlights the role of wind and solar power in Latin America’s renewable energy sector.
Latin America’s transition towards a low-carbon economy based on solar and wind is driven by a combination of demographic pressure, economic necessity and environmental considerations. Over 34 million people in Latin American and the Caribbean combined lack access to electricity. Population growth, without a commensurate increase in power generation, will only widen the gap between demand and supply. Many countries in Latin America still depend on fossil fuels for their power generation. However, Venezuela, Mexico, Colombia and Argentina have all seen oil output decline. This trend, combined with government budgets constrained by the cost of fuel subsidies, has encouraged private investment in energy generation in many of the region’s countries.
The growing demand for power, a shortage of fossil fuel resources and stricter environmental policies have created a surge in foreign investment in renewable energy deals. According to PWCs annual Power & Renewables Deals report, investments reached $7.6 billion in 2015, up from $2.7 billion in 2014. Weak local currencies and ongoing energy reforms have attracted Britain’s Richard Branson’s Virgin Group, Enel from Italy, Iberdrola from Spain and 1Malaysia Development Berhad as well as China Yangtze Power. “Between 1980 and today, the generation of renewable power in Latin America has nearly quadrupled,” says James K Alford Senior Counsel King & Spalding. This is just the start. According to the U.S. Energy Information Administration, Latin America and the Caribbean will need to invest a total of $700 billion by 2030 to double power generation and satisfy the needs of a rising population and industrialization. The power sector, enticed by cost reductions and rising efficiencies of green technologies, is turning to wind and solar as an economic way to boost megawatts. The International Finance Corporation estimates that Latin America and the Caribbean could support $1 trillion worth of clean energy investment by 2040, of which Brazil, Chile and Mexico could account for over half.