The Latin-American power
By Mauricio Zuluaga
The Latin-America renewable energy sector will grow significantly over the next 10 years, driven by ambitious targets focused on diversifying the power sources matrix and adapt it to the climate change challenges. Chile, Brazil, Mexico, Argentina, and Colombia have the most ambitious plans to attract private sector participation in the industry. Some governments have established tax benefits to those companies investing in projects oriented to generate clean electricity through renewable sources.
Most of the energy generated in South America is produced by hydropower, which is considered one of the cleanest sources. However, the countries in the region are switching to other renewables - such as wind power - due to climate change effects on hydrology. Impacts of El Niño, a climate pattern that describes the unusual warming of surface waters in the eastern tropical Pacific Ocean, have become more constant. As a result, less rain may fall over the eastern Pacific, with far-reaching consequences for the power sector.
The most ambitious plan to generate electricity from renewable sources is led by Chile. By 2028 this country expects the renewables share rises to 38%, compared to 19% in Brazil, and 13% in Mexico and Argentina. At the same time, Colombia has taken steps to boost the renewables capacity procurement, and the government has created benefits, such as a 50% tax deduction over five years to those companies using renewable energy sources. These tax incentives, and the technological improvements made by the industry, have reduced the cost of wind and solar power projects, making them more competitive.
The plan of connecting the South-American electricity system to Central America is another opportunity for investors interested in the power sector. At the end of 2019, the interconnection line between Colombia and Panama received a boost with the approval of funds for design, technical and environmental studies. The project plans to cover a 500km distance, which includes a 130km marine stretch and is expected to be operating by 2024.
This link would pave the way to energy exports from South America, especially from Colombia to Central America, where the supply energy demand exists due to the power service irregularity. The interconnection line is considered one of the biggest infrastructure projects in the region and may attract corporations from different parts of the world with interest in participating in its construction.
The electricity market in Latin-America has been garnering remarkable momentum in recent years, catching the Canadian and European companies’ interest in South America to take part in this business opportunity. According to different research, the Artificial Intelligence (AI) will play a key role in the utilization of energy resources, and it could potentially create a value of up to $5.8 trillion annually in 19 different energy industries. This momentum represents the Latin-American power.