Latin America’s renewable energy market rebounds after pandemic slump

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Wind and solar capacity additions set new records in 2021, largely thanks to new projects in Brazil and Chile. The trend could persist, but fossil fuel development also continues apace

Latin America’s wind and solar energy additions rose by 50% in 2021, as energy markets came back to life after a pandemic-induced slump in 2020, a new report by Bloomberg New Energy Finance (NEF) has shown. The trend is expected to continue this year, as governments prepare to hold new renewable project tenders to help meet their respective clean energy targets.

“Latin America Market Outlook” reviewed developments in the region’s renewable energy market and found that a total of 17.5 GW of wind and solar photovoltaic (PV) energy capacity was added in 2021. Wind and solar together accounted for over 10% of power produced in each of Argentina, Mexico, Brazil and Chile, while US$18 billion in new capital for these energy sources was deployed across the region.

“Brazil was the main market responsible for the growth of renewables in Latin America last year. We saw a booming activity of small-scale PV, but utility-scale wind and PV projects also reached record additions,” said Natalia Castilhos Rypl, lead author of the report. “Chile had a great year too, as the country hit records for wind and solar net additions.”

Brazil notched record additions for all three main clean energy technologies: onshore wind (3.6 GW), utility-scale PV (1.7 GW) and small-scale PV (5 GW). These technologies added 10.3 GW in total, double their capacity in 2020.

Brazil remains the most attractive market for clean energy investment, which rose 27% compared to 2020 – again, largely thanks to the small-scale solar sector. Of all renewable investments in the Latin America region, 65% were concentrated in Brazil. Chile ended the year as the second most attractive market, but with a decline in investment compared to 2020.

Wind and solar additions hit record highs in Chile, with over 800 MW and 1.4 GW, respectively, built during the year, the report found. The growth allowed solar to become the second largest source in Chile’s electricity mix, accounting for 18% of power generated, second only to hydropower (21%). Still, Chile continues to rely on fossil fuels for much of its energy, especially coal.

“Chile has a fast-evolving and competitive renewable energy market that could adapt well to the conditions imposed by the pandemic,” said Dario Morales, research director at Chile’s renewable energy association (ACERA). “We are going through a deep transformation of our energy mix thanks to the phase-down of coal and the expansion of renewables.”

The laggards in the renewable market

While things moved fast in the renewable energy markets of Brazil and Chile, it was a different story for Argentina and Mexico last year, BloombergNEF’s report showed. A mix of regulatory changes and economic crisis presented barriers to further expansions of wind and solar in both countries, which heavily rely on fossil fuels.

In Mexico, wind and solar remained essentially at the same level as 2020. President Andrés Manuel López Obrador (AMLO) proposed to carry out an energy reform that would see greater state control over the country’s energy generation and supply, changing laws that had previously boosted renewables. The reform was recently rejected in the country’s congress, but has nonetheless generated continued uncertainty among energy investors.

“Mexico has been facing a lot of regulatory uncertainties in the energy sector. We don’t expect that to go away during AMLO’s government,” Castilhos Rypl said.

Fossil fuels continue to dominate in Mexico, accounting for 66% of the energy mix, while renewables (including hydropower) stand at 32% and biomass at 2%. Mexico had aimed to generate 35% of its energy using clean sources by 2024, but decided last year to push the target to 2030, in line with an updated climate pledge largely regarded as unambitious.

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