Energy transition in Latin America

An eco-lodge in Solomare del Diáblo, Uruguay. The South American country gets nearly 100% of its energy from renewables. Inhabitat. All rights reserved.

Thanks to
Chinese energy companies, Latin America is increasingly exploiting its
renewable energy potential as historic laggards like Argentina get on board with the region’s energy transition.
New wind and solar projects are under construction across the region as
partnerships with Chinese deliver affordable finance and materials to
local governments and businesses.

Along with Costa
Rica, Uruguay is now running on almost 100% renewable energy.  In 2015,
the country installed more than 316 MW, meaning its total installed capacity is
now 845 MW. Now several others are following in their footsteps. Chile
generates the most power from solar energy, while neighboring Argentina has
just completed the bidding process for 1,100 MW of renewable energy.

“China has begun
to broaden its interests globally,” says Carlos Saint James, managing director
of consulting firm Santiago & Sinclair and
former president of Argentina’s Renewable Energies Chamber (CADER). “Initially,
they secured the food sector, then natural resources and now they are going
after energy. Given their growing industry and current oversupply of products,
Latin America offers attractive markets”.

At the
conclusion of the first round of Argentina’s renewables promotion programme Renovar, the country offered 17 projects for electric power generation from
renewable sources accounting for 1,109 MW.  Of these, 12 are wind power
projects, four are solar photovoltaic and one is biogas. The total investment
required is estimated at US$1.8 billion.

At least half of
the winning wind energy projects and three quarters of solar energy bids are
linked to Chinese capital and technology, according to a survey conducted by
Saint James. US and European companies account for a much lower share as they
still consider Argentina to be a risky investment environment.

China’s company
Envision Energy was awarded the largest contract, securing four projects
totalling 185 MW of the 708 MW granted to other international and local
bidders, including some of the largest wind farms, located in the
southern provinces of Neuquén and Rio Negro. Other winners included Genneia,
Central Puerto, Pan American Energy and the EREN Group. Of the solar
energy projects, 75% stand to benefit from low-cost Chinese capital thanks to agreements with
Argentine provincial governments.

“China has
become a major player in the Argentine energy sector,” says Ernesto Fernández
Taboada, executive director of the Argentine-Chinese Chamber of Production, Industry and Commerce. “They provide bank financing at very reasonable rates and this is
always very attractive,”.

Andrés Napoli,
director of Argentine environmental NGO FARN welcomed the bidding programme
but pointed out that the government is simultaneously promoting fossil fuels.
“The country continues subsidizing the oil industry in all its facets and is
developing environmentally risky energy projects such as Vaca Muerta in Patagonia”.

By 2017,
Argentina aims to have 8% of its electric power generated from either wind,
solar or small hydroelectric plants, according to a law approved by Congress late last year. The legislation also
mandates that this figure increase to 20% by 2020.  Presently,
renewable energy accounts for only 1% of the energy matrix.

Regional
Developments

Chinese
investment in renewable energy in Latin America is viewed as a prime
opportunity to expand trade between the Asian country and Latin America.
Increased oil and gas production in the US is forcing China’s major renewables
players to seek alternative partners and export markets.

Brazil, Mexico,
Chile and Uruguay seem to be those investing most heavily in clean energy
generation, according to data from
the International Energy Agency (IEA).  China ranks highest as the country
with most installed solar energy capacity in these countries.

The pragmatic Uruguayan approach to stimulating development in renewable
energy, which does not offer subsidies but instead promotes strong
private sector involvement, has become a global benchmark. The country has
outstanding natural resources for developing renewables, such as predictable
and constant wind energy along with high levels of water flow discharge.

According to
Jorge Dosil Decaro, secretary general of the Uruguayan Wind Energy Association, Uruguay’s political stability and its reputation for having low
levels of corruption have been instrumental in the success of the partnership.
“All state entities are oriented towards promoting the development of
renewables.”

More than 80% of
the solar water heaters imported by Uruguay come from China, according to
official data from the Ministry of Energy.  In a recent visit to Beijing,
Uruguayan president Tabaré Vázquez underscored the importance of signing a free
trade agreement with the China, which would provide even greater stimulus for
Chinese investment in renewables.

Private sector
players were the main drivers of the development of renewables in Uruguay. Most
technology is imported from China since Uruguay’s own manufacturing sector is
unable to compete. The  low prices for Chinese products are a “major
factor” in this partnership, according to Andrés Eliseo Cabrera, President of
the Solar Chamber of Uruguay.

Similarly, Chile
plays a prominent role in Latin America’s development of renewable
energies.  The country’s goal is to derive 20% of its energy from
renewables by 2025.  It has developed specific policies for the sector,
such as tax exemption mechanisms for renewable energy projects. In 2015, the
sector attracted US$3.4 billion in investment, up 151% from 2014.

China is Chile’s
main trading partner, and this has increasingly been reflected in the wind and
solar energy sectors in recent years.

Such Chinese
companies as Goldwind Americas, Junko Solar and Sky Solar Holding are already
working on numerous projects in Chile. Of the total energy produced in the
country, 38% is supplied to the mining sector. Consequently, a large portion of
investment is carried out directly by mining companies and in many cases, using
Chinese capital.

“Chile has very
good conditions for the development of clean energy, particularly in the north,
where there is an abundance of wind and solar energy resources,” says Li
Baorong, China’s Ambassador to Chile. “Chile needs to develop such energy. As a
result, there is significant potential for China-Chile cooperation in the
energy sector,” he said recently.

This article was previously published by Diálogo Chino.

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