Administrative inertia and lack of know-how restricted the 15 regional wind markets to a paltry installed capacity of less than 700MW at the end of 2008, but the market rocketed by 86.7% in 2009 to reach nearly 1.7GW, according to the Global Wind Energy Council (GWEC). The 2GW mark was passed shortly after 2010 and GWEC now calculates new capacity with power purchase agreements (PPAs) at 10GW, all scheduled for completion by 2014.
The bulk of capacity online or on course is in the two top markets, Brazil and Mexico. According to Windpower Intelligence data, Brazil has 3.8GW in the pipeline with sites acquired - and that does not include the 11GW offshore project being proposed by Eolica Brazil's chief executive Marcello Storrer Prado Garcia.
"With Brazil and Mexico showing how to overcome obstacles, other markets are emerging," says Ramon Fiestas, president of GWEC's Latin American Committee. He cites Chile as leading the chasing pack, concurring with Windpower Intelligence data that puts it with over 3GW of projects in the pipeline with sites arranged, and Mexico with 2.3GW.
GWEC's conservative estimate for the region to 2020 is around 30GW of cumulative capacity. Energy consultants IHS Emerging Energy Research (IHS-EER) say trends suggest 46GW installed by 2025. That figure is less than 2% of the 2,673GW of technically viable wind resources identified by GWEC across the region.
Cheap and abundant
Electricity consumption is expected to double from 2010 to reach 2,300TWh by 2020. "Wind can meet much of that growth. Latin America has more than enough wind resource to power itself many times over," says Fiestas.
Recent power auctions in Mexico and Brazil have set power sales prices at $60-80/MWh, undercutting even natural gas-fired generation. "They are the most competitive wind prices in the world," says Fiestas. These resources and the sheer quantity of power produced at most wind sites makes these prices viable. Capacity factors - ratio of actual output to nameplate output - average at least 45-50%. In contrast, the typical capacity factor in Spain is less than 25%.
Big pickings then for developers. Yet market take-off across the region is held back by national governments' failure to go beyond piecemeal support for clean power. "Lip service is not enough. Vital finance will not come until solid regulation and mechanisms are in place to guarantee long-term returns," says Fiestas. "Only Brazil and Mexico have truly implemented these. Only Brazil and Mexico are taking off."
Indeed the 3.8GW pipeline projects recorded by Windpower Intelligence in Brazil is not just wishful thinking - much of it has turbine deals arranged. Turbine manufacturers are turning Brazil into the region's manufacturing hub. Gamesa and Alstom opened their first factories there in 2011.
They follow Wobben, a subsidiary of Enercon which became the region's first manufacturer in 1995. It opened its third facility in Brazil in 2011 to meet expected orders of 500MW yearly. Impsa also established a turbine facility in Brazil in 2008 and plans a second for 2012. Meanwhile, Siemens and Vestas both confirm they are researching supply chains in the country.
This healthy competition arises from the long-term investment guarantees established eight years ago by the government's renewables support programme Proinfa, later replaced by an auction system. The programme responded to the government's bid to meet electricity demand while cutting emissions and tackling the groundswell of environmental opposition to large new hydro power projects. Hydro covers some 80% of Brazil's total power consumption.
Proinfa assigned 1.43GW of new wind capacity in 2003, tied to an obligation on electricity distributors to subscribe to 20-year PPAs with those projects at a fixed price of $160/MWh. "In other words, a feed-in tariff," says Fiestas. The bid came coupled with soft loans for developers from the Brazilian Development Bank (BNDES) on up to 80% of total project investment.
"That's the kind of concerted effort that has brought about take-off", says Fiestas. Since the wind rush spurred by Proinfa, the government has made developers compete on power sales price through four competitive tenders. In the most recent auction, in August 2011, wind competed with conventional power, picking up the lion's share of contracts - 44 in all totalling 1.93GW, or 39% of the total generating capacity allocated. Moreover, the average wind contract was set at R99,58/MWh (US$62.91), compared with two combined cycle gas projects which sold at R103.26/MWh and one large hydro project at R102/MWh.
"The tender was considered a major test of the long-term viability of Brazilian wind power, and the test was passed brilliantly,"said Ricardo Sim0es, president of the Brazilian Wind Energy Association ABEEolica.
The government aims to increase electricity generation from non-hydro renewables to 10% by 2020. IHS-EER expects the Brazilian market to reach 31.65GW by 2025, which represents just 10% of the total wind resources identified by ABEEolica.
Mexico is experiencing a wind boom. Nevertheless, doubts hang over the future as policy support dwindles.
The greatest contribution to Mexican wind was the creation of a scheme called "open season". In 2008, the Federal Electricity Commission (CFE) - a state monopoly controlling most electricity generation - called for 2GW of wind power in the south-western state of Oaxaca. Before the scheme, some 664MW of projects had been planned. Now 1.9GW of wind projects are directly linked to it, according to the Mexican Wind Energy Association.
Spanish wind developers have landed in droves to exploit the vast wind potential across Oaxaca, including Iberdrola as well as fellow utility Union Fenosa, manufacturer Gamesa and independent power producers Preneal and Renovalia. But the pace will level off after 2014, while the government reviews its energy policy. CFE has said it will stop contracting new power once it has accumulated a total of 2.096GW, expected by 2016. After that, it will approve PPAs between developers and big corporate consumers. Those are set to rise from 1.06GW now to 3.16GW by 2020. CFE's outlook for the Mexican wind market by 2020 is therefore just 5.26GW.
But Fiestas is confident that Mexico, currently 77% dependent on fossil-fuel generation, will renew its implementation of specific wind-support policies and that the remaining big Latin American economies will usher in specific mechanisms, "which take time but will become unstoppable". In the interim, "developers outside Mexico and Brazil dig for finance from development banks and many big corporations are putting up their own money," he says.
According to Windpower Intelligence, Chile - which sources 65% of electricity from fossil fuels, mostly imported - has land lease agreements for 2.13GW of wind projects, more than any country in the region. It only has 1.9GW online, but it is working on mechanisms to meet its 20% renewables objective by 2020 and has PPAs for 500MW, matched by turbine agreements.
While installed capacity in Panama remains at zero,there are 651MW of projects in the permitting system. In November, grid operator Etesa approved 121MW in an auction where the lowest price was $90/MWh. Uruguay, with installed capacity of 40MW, also expects to complete three tenders in the coming months, totalling 1GW of wind power phased to 2015.
Argentina is the region's great disappointment. Despite being the windiest country in the world, it is crawling along, with just 79MW online. Although a further 794MW was allocated in 2011, the financing simply isn't there. "Trust in Argentina's beleaguered finances is lacking and the GenRen feed-in tariff is complex," says Fiestas. "Yet, potentially, the country's 2,200GW wind resource could alone power the entire region."
Apart from tackling its debts, Argentina needs to streamline its wind mechanisms, as do most of the region's countries. "Once that happens there will be no holding those markets back."