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Market Status: Latin America

LATIN AMERICA: Wind installations in 2015 and prospects for 2016 in countries across Central and Latin America. Including our unique Feelgood Factor rating based on political support, investor confidence, structural readiness, and pipeline.

Brazil continues to attract investment despite an economic slowdown (pic: Iberdrola)
Brazil continues to attract investment despite an economic slowdown (pic: Iberdrola)

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BRAZIL: Wind booms as the economy slumps
MEXICO: Region's number two continues to emerge
CHILE: Wind regains ground after solar rush
ARGENTINA, URUGUAY & PERU: Region looks to Argentina and its ambitious targets 

 

BRAZIL: Wind booms as the economy slumps

Feelgood Factor: 3.5 (*)
Plus points: Growth and investment look healthy
Minus points: Shrinking economy, government in crisis

Brazil's economy is in freefall, and the government is in crisis following corruption charges, but the country's wind industry continues to grow at a healthy rate.

In 2015, new capacity of 3,201MW was installed and grid connected, well up on 2014's figure of 1,638MW. Cumulative connected capacity stood at 8.3GW at the end of last year, according to GWEC.

There is a great deal more to come, too. Brazil's federal power regulator ANEEL predicts that the 9GW of wind power contracted through auctions since 2014 will be in operation by the end of 2019, pushing the country's total wind capacity close to 18GW.

If achieved, that would probably make Brazil the world's sixth-largest wind market, behind China, US, Germany, Spain and India.

"The record-breaking amount of new facilities being built in the four large wind clusters has secured us again significant global positions, allowing Brazil to demonstrate its consolidation, sustainability and commitment to wind power," said Elbia Gannoum, president of wind power association Abeeolica.

According to Gannoum, more than BRL 15 billion a year ($4.1 billion) has been invested in wind-power generation in the past two years, leading to the creation of 40,000 jobs.

Gannoun predicts that Brazil will have 20GW of wind by the end of 2020, sufficient to provide 10% of the country's electricity. Wind currently provides about 6%, with hydropower still the biggest player at over 60%.

The next round of energy tenders, scheduled for 31 March, with delivery of energy starting in 2021, looks set to continue that growth. From a total of 1,055 projects with nearly 48GW of capacity, 864 are for wind, amounting to more than 21GW.

"The amount of registered products is a world and local record, making it the largest power auction ever," says Mauricio Tolmasquim, president of energy agency EPE. "There are no doubts that the auctions we organise in Brazil are attractive."

The financial crisis, which has seen the economy shrink by 8% in two years and caused two ratings agencies to downgrade Brazil's debt to junk status, has not impacted investment in wind.

The National Bank for Economic and Social Development (BNDES), the country's main source of funds for infrastructure projects, granted a record BRL 7.42 billion of funding for wind power in 2015, 12.7% up on the previous year.

Suppliers and generators also continue to show confidence in Brazil's wind sector. In January, Vestas opened a factory in Aquiraz in the wind-rich state of Ceara to produce hubs and nacelles for its V110-2.0MW turbines. According to Vestas, the investment in the plant amounts to BRL 100 million ($27 million).

One of Brazil's largest energy producers, Copel, said late last year it was investing BRL 2 billion ($500 million) to build 13 wind farms in Rio Grande do Norte. It has signed a BRL 1.4 billion deal with WEG for 149 turbines. (JS)

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MEXICO: Region's number two continues to emerge 

Feelgood Factor: 4
Plus points: Renewables friendly policy, investor confidence
Minus points: Regulatory framework still evolving

By the end of last year, Mexico had 1.2GW of new wind capacity under construction, according to the Global Wind Energy Association (GWEC).

Mexican wind energy association Amdee believes at least 800MW of that will enter operation in 2016, an improvement on the 692MW installed in 2015 that took Mexico's cumulative capacity to 3,073MW.

A further 1.2GW of wind development is lined-up with licences in place, says Ramon Fiestas, chair of GWEC's Latin-American committee. And another 5.6GW of projects are "officially registered in some way or another", he says.

"New build is cruising at around 700MW annually," says Fiestas, making Mexico "one of the world's most promising new wind markets".

Brian Gaylord, Make Consulting's Latin-American consultant, puts the "cruising speed" at up to 1GW a year, which suggests a total of 7-8GW by the end of 2018. However, both Fiestas and Gaylord consider Amdee's official outlook of 9.5GW online by the end of 2018 to be wishful thinking.

"The political backdrop is stable and renewables-friendly, and financers are confident," says Fiestas. Spanish wind giants such as Iberdrola, Gamesa, Acciona and Gas Natural are behind the lion's share of Mexico's online capacity, with a continued stake in the pipeline.

State utility CFE is rapidly growing its own involvement and claims 1.2GW of the wind pipeline. In October, Acciona, already with 557MW of wind power online in Mexico, signed a joint wind, solar and small hydro development agreement with CFE.

Gamesa, which claims to have supplied 1.7GW of Mexico's online wind capacity, signed an agreement with CFE in December to promote wind technology and the local supply chain in the country's import dependent sector.

The 2013 energy liberalisation reform, marking a 35% renewable-electricity target to 2025, came into force last year liberalising the energy sector and ending CFE's monopoly on generation.

Mexico will close its first national power auction at end March for around 500MW of new capacity. Sener, Mexico's energy secretariat, confirms a number of wind players have registered to compete for the 15-year power purchase agreements. (MM)

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CHILE: Wind regains ground after solar rush

Feelgood Factor: 4
Plus points: High power prices and attractive tender rules
Minus points: Transmission bottlenecks awaiting grid upgrade

After expanding installed capacity by almost 60% in 2014 to over 800MW, developers added just 97MW last year for a cumulative capacity of 933MW as they focused instead on the country's massive potential for solar energy. Photovoltaic solar left wind behind as Chile's leading alternative renewable energy as installed capacity topped 1GW. And there is another 2GW already under construction and set for connection during 2016.

However, wind energy made a significant comeback last year when new wind farms won almost two thirds of the contracts on offer at a major tender to supply regulated clients from 2017.

Aela Energia, a joint venture between Ireland's Mainstream Renewable Power and investment fund Actis, won contracts for 768GWh annually and now plans to build two wind farms with a combined capacity of 265MW. It was a sweet victory after the company lost out in a previous tender over a clerical error.

The other winner was Spain's Ibereolica, which is building the 170MW Cabo Leones project.

To win the contracts, the two companies had to beat bids from 36 others, including solar developers and traditional generators. That competition drove prices down below $80/MWh, a 40% drop from tenders held just two years earlier.

With this boost, the volume of wind capacity under construction jumped to more than 400MW in early 2016 from just 168MW in late 2014.

Developers see more opportunities for wind projects at this year's even-larger tender to supply regulated clients from 2021. Aela has plans to invest $1.4 billion in Chile, largely in wind farms. The union of the northern and central grids from 2018 is another opportunity: Chile is a long but thin strip of land, and with many new energy projects far from consuming centres, transmission bottlenecks can affect their power prices.

Wind, which is strongest at night in many areas, could also play a key role in balancing Chile's rapidly growing solar energy sector. Wind provided 3% of the country's electricity generation last year. (TA)

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ARGENTINA, URUGUAY & PERU: Region looks to Argentina and its ambitious targets

The region broke through the 10GW mark at the beginning of 2015 and finished with more than 14GW of installed wind capacity - an impressive rate of growth of over 40%.

Ambitious renewable-energy targets set by the new government in Argentina should ensure growth in the region continues despite the knock-on effects of Brazil's economic and political troubles.

Argentina - Feelgood Factor: 4.5

The election of President Mauricio Macri has the potential to unlock Argentina's huge potential for wind energy after a disappointing decade for developers.

The new regime has already stripped out paralysing import restrictions and reduced subsidies to the energy market, raising hope of encouraging times ahead.

A critical step will be the regulations to implement the legislation passed last year by congress to source 8% of the country's electricity from renewables by 2017, and 20% by 2020.

Given that the figure is just 1% currently, it is a very ambitious target, but the new rules should give clarity to investors on how the market will develop in the future.

Only 8MW of new wind capacity was installed in 2015, taking the country's total to 279MW. (TA)

Uruguay - Feelgood Factor: 4

Uruguay is reaping the benefits of its rapid drive to develop its wind potential. Wind accounted for up to 95% of the country's electricity supplies on some days last year, with 381MW of new capacity taking the total to 845MW.

This year the country expects to add another 400MW, lifting installed capacity to top 1.3GW.

However, investment is expected to slow from 2017 onwards as the market approaches saturation, while the financial and political crisis in neighbouring Brazil dampens economic activity in Uruguay. (TA)

Peru - Feelgood Factor: 4

This year will see a significant expansion of Peru's wind-energy sector following the conclusion of the country's fourth tender for renewable electricity.

The winning projects included three wind farms with a capacity totalling 162MW, among them Enel Green Power's 126MW Nazca project.

The investment will be a major boost to Peru's nascent wind industry, which has been growing rapidly over the past two years, despite strong competition from plentiful hydropower and cheap domestic gas reserves.

The country currently has 148MW. The next project to come online will be Cobra Group of Spain's 97MW Tres Hermanas project. (TA)

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Written by: Julio Santos (Brazil), Michael McGovern (Mexico), Tom Azzopardi (Chile, Argentina, Uruguay, Peru)

* Feelgood Factor rating: Based on political support, investor confidence, structural preparedness and projects in the pipeline. Created in association with Dentons global law firm.

 

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