Latin America’s renewable energy investment shifts towards Sonoran sun and Patagonian wind

Summary: With Brazil’s economic and political woes continuing, investors are migrating to both ends of Latin America – towards Mexico in the north and to the southern cone countries of Chile and Argentina – for their next round of investments in solar and wind. Each of these markets represent different risks and rewards.

About the publisherCarlos St. James is a leading advisor to energy investors, bankers and developers in emerging markets at Wood Group. He is also a board member of the Latin American & Caribbean Council on Renewable Energy (LAC-CORE) and publishes the Latin American Energy Review to help generate debate on the industry’s issues.

The region’s single most important event is the upcoming LAC-CORE Clean Energy Finance Summit, held in Miami, Florida this coming June 13-15, where investors and bankers discuss the industry’s outlook. See you there!


Renewable energy investment trends within Latin American and the Caribbean are shifting. These shifts reflect new opportunities as well as an acknowledgement of pitfalls to avoid.

The Latin Icarus

Brazil has historically been the driver of investment into the region; a decade ago it even consistently attracted more that the rest of the region combined (see graph below, click on all graphics to enlarge). It became part of the so called BRIC nations (Brazil-Russia-India-China), attracting significant attention, investment and well deserved accolades.

Source: Bloomberg New Energy Finance (BNEF)

“BRIC” is no longer a term in vogue and Brazil is caught in a temporary downward spiral of political corruption and a serious economic recession. While last quarter its economy showed positive growth, it was followed by a new round of political corruption claims that have yet again put brakes on its recovery. The good news is that its institutions are holding up — unusually well for Latin America — and political corruption is being punished. Done properly, Brazil will find its way back into a regional leadership role. Meanwhile there are opportunities for those confident of an upswing in the region’s largest economy.

But for now investment is flowing everywhere else in the region. Latin America owes Brazil a debt of gratitude for paving the way for many other countries.

Faster growth than anywhere

In the period 2017 through 2020, global installed capacity of wind energy, for example, expected to grow by 48%. The U.S., a mature market, will grow 45%. Yet Latin American installed capacity of wind is expected to grow 76% during the same period. The difference is even more stark in solar.

Latin America and the Caribbean will install more than 26 gigawatts (GW) of wind and solar energy in the next three years – and this figure reflects a much-reduced level of investment going into Brazil.

Wind investment growth will remain strong, increasing 76% over the next three years (as mentioned above) to 31.5 GW total installed capacity by 2020. But solar will finally take off in the region and experience a 459% increase to 15.1 GW.

But where is this growth taking place? Is the shift taking investors to greener pastures or riskier markets? Growth will be impressive across Latin America and there are opportunities for investors to pick and choose those that best fit their own risk profile as long as you are well advised.

The following graphs showing wind and solar side-by-side reflect Brazil’s temporarily decreased role along with the rise of Mexico and southern cone countries (namely Chile and Argentina), since in both technologies these represent three-quarters of where new installed capacity will take place. (Note the red and green slices in the pie. Click to enlarge.)

Charts: New Installed capacity for wind (left) and solar (right) energy 2016-2020 by sub-region. Sources: composite of BNEF and author’s own data.

As Brazil’s star has faded, Mexico has taken the mantle of leadership in regional renewable energy investment and should install some 12.5 GW of solar and wind capacity in the next few years.

That is not to say that the rest of the region won’t also have growth: the combined Caribbean + Central America + Andean will see 3 GW of new wind and solar investment in the next few years.


Graph: New Installed capacity for wind energy 2017-2020 by sub-region. Sources: composite of BNEF and author’s own data.

Brazil appears in industry projections slated to add 8 GWs of wind capacity alone in the next three years. This is an unusually optimistic figure given its continued political and economic troubles, so we have ratcheted back the wind figure to a mere 2092 MW – and even this may be optimistic, as there are discussions of decommissioning existing installed wind capacity.

That means that in wind the hot markets are Mexico, Argentina and Chile, with a combined 9.2 GW being added in the coming years. Mexico’s auctions last year may have left a number of investors wondering how they’ll make adequate returns, but the efecto Trump seems to be dissipating and the economy remains viable. An analysis of which wind turbine manufacturers have been most successful in Mexico — and why — can be found here.

Chart: New installed wind capacity 2017-2020 by sub-region. Sources: composite of Bloomberg New Energy Finance and author’s own data.

Chile’s wind capacity has thus far been installed mostly in the central part of the country — in class II wind country — and future growth may appear increasingly in the southern and windier class I Patagonia regions (see recent analysis here). And prospects are enhanced as the country announced that in the coming months the two transmission grids will finally be connected.

Argentina’s Rounds 1 and 1.5 from last year awarded 1473 MW in fresh wind projects with 20 year PPAs at an average price of about $55 per megawatt-hour (MWh); despite grumblings about the lack of financing, 73% of all wind PPAs have been signed to date — a good sign. Pretty much all of the Round 1 + 1.5 wind will get built coupled with a number of private sector wind deals already signed plus the upcoming auctions later this year. But commercial operation dates (CODs) may get pushed back as bankers get more comfortable with the newly behaving Argentina. For a review of their auctions last year, see here.

For those willing to look further out into the future, the Andean region is strong and promises to become the next hot market just around the time Brazil should be coming back to life:

  • Colombia’s wind sector may finally be taking off, as promises to extend the grid into the very windy (and sunny) Guajira peninsula come to fruition (read analysis of Colombian sector here).
  • Ecuador will inevitably need to attract foreign investment to get its economy going (read up on Ecuador here) and pricing is likely to be very appealing to investors;
  • and before long Venezuela (not even included on the chart) will emerge from its own ashes.


Graph: New Installed capacity for solar energy 2017-2020 by sub-region. Sources: composite of BNEF and author’s own data.

Brazil appears in industry projections slated to add almost 3 GWs of solar capacity in the next three years. But given its continued political and economic troubles, we have cut the solar figure in half to 1504 MW.

Growth percentage figures are ridiculously high as the region finally embraces solar energy (see chart below with header in yellow). The reasons for Latin America’s longstanding preference for wind over solar is discussed here. The important issue to reflect upon is the actual installed capacity.

Mexico’s two auctions last year approved an unexpectedly high 3.6 GW of solar at an average price of $36/MWh in the second auction ($51/MWh in the first auction); the third one later this year will continue to add capacity in a rapidly evolving market but with the possibility of higher pricing: the offtaker is changing from the government utility (CFE) to a clearinghouse comprised of overall market risk (analyzed here). This is the country where there will be more activity than anywhere else in the region, as it begins to look increasingly like the U.S. power market and becomes integrated. An analysis of last year’s auctions can be found here.

Chart: New installed solar capacity 2017-2020 by sub-region. Sources: composite of Bloomberg New Energy Finance and author’s own data.

Argentina’s Rounds 1 and 1.5 last year proved especially successful for solar: the government sought 300 MW initially and ended up approving 916 MW. Two-thirds of all winning solar projects have signed PPAs.

In the Andean region, solar is beginning to take off but if you compare to the growth in wind (see above section) you can see that solar is still slower but gaining momentum. You can expect more aggressive solar growth in the 2020’s in the Andes. Peru is comparably successful in either technology and planning another auction early next year; an analysis of its last auction can be found here.

Within Central America, Honduras already has the most installed solar and will continue to lead by 2020 – except that its growth has matured and leveled off. El Salvador is the hottest growth market in the next few years, while every other country will continue to add solar, too.

And in the Caribbean, solar will establish its natural place as the leading technology with some 200 MW installed in the coming few years.

There is a lot more information behind this quick summary. Please do not hesitate to contact me if you need more details or guidance. I look forward to seeing you in Miami this June at the LAC-CORE Clean Energy Finance Summit to discuss further.


© Latin American Energy Review 2017

This report has been prepared by Carlos St. James for The Latin American Energy Review. The views expressed on this site are his own and do not reflect the views of Wood Group, its affiliates or business partners. This report has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. It is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The report is based on information obtained from sources believed to be reliable but is not guaranteed as being accurate, nor is it a complete statement or summary of the securities, markets or developments referred to in the report. The report should not be regarded by recipients as a substitute for the exercise of their own judgment. Any opinions expressed herewith are subject to change without notice and The Latin American Energy Review is not under any obligation to update or keep current the information contained herein. The Latin American Energy Review accepts no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this report. Additional information will be made available upon request.



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