Latin America's renewable energy innovators

Avant-garde contracting systems in Argentina, Chile and Mexico are helping Latin America's non-conventional renewable energy sector to flourish, despite obstacles that threaten to slow future growth, according to a new report.

The 102-page report by the International Renewable Energy Agency (IRENA) cites Brazil, Peru and Uruguay as the regional pioneers of auction models that incorporate wind, solar, small hydropower and biomass projects. 

"More recently, Argentina, Chile and Mexico have joined the trend of innovating with auction designs: Argentina regarding guarantees backing up contracts and mitigating risks; Chile and Mexico regarding system integration," said the report, entitled Renewable Energy Auctions: Status and Trends Beyond Price. 

BRAZIL

IRENA highlighted wind power in Brazil as a particularly robust performer in the shifting regional energy mix. 

More than two thirds of the 14.6GW of wind capacity awarded at Brazilian auctions from 2009 to 2017 had met their implementation deadline, it said. 

A strong deterrent to delays in the country is a rule that obliges developers to purchase firm energy certificates if projects are not connected to the grid on time, the report added. 

COLOMBIA

IRENA praised the success of Colombia's second auction for power purchase agreements from renewable sources last October, in which developers pledged wind and solar investments of more than US$2bn.  

The result came less than eight months after the first renewables auction was declared null and void because of competition rule breaches. 

"Colombia is the most recent adopter [of renewable energy tenders], driven by the success of auctions in neighbouring countries and a conducive market structure," the report said. 

MEXICO 

Optimism for renewables in Mexico – which peaked after the country's landmark 2013 energy reform – has largely evaporated under the current government. President Andrés Manuel López Obrador has scrapped plans for new auctions and promised to ramp-up investment in fossil fuel-fired plants since taking office in December 2018. 

In addition to uncertainty about opportunities for new projects, developers in Mexico are grappling with licensing bottlenecks, according to IRENA.

As of September 2019, eight projects representing 37% of total capacity awarded at the country's first renewables auction had yet to come online. Six of those projects were located in the state of Yucatan.

"These outcomes suggest that broader challenges beyond system integration must be considered when adopting an adjustment-based strategy in auction design," the report said. "Obtaining permits in Yucatan is difficult, given that it is a hurricane zone, has complex topography, and is home to many Mayan archaeological sites."