Mexico, Argentina, and Chile to boost wind power in Latin America

Usina Eólica de Vale dos Ventos (Brasil). Foto cortesía de GWEC / Vale dos Ventos wind farm (Brazil). Photo courtesy of GWEC

A recent study from consultancy MAKE on wind power in Latin America, forecasts a shift away from the Brazilian market during a period of political and economic turmoil that coincides with unprecedented auction activity in Mexico, Argentina and Chile. Overall, MAKE expects more than 47 GW of new wind power capacity will be commissioned in the region by 2026.

The region’s largest market, Brazil, connected more than 2.5 GW of wind power capacity in 2016, marking the third consecutive year that the market has commissioned a similar level of output. Yet the market appears to be facing an impending cliff in 2019 due to a prolonged period of economic contraction exacerbated by ongoing political turmoil. Developers signed no new wind power PPAs at auction in 2016 for the first time since the technology began competing in 2009.

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The Brazilian wind power market awaits an annual market for new installations in 2019 of less than half the size it experienced between 2014 and 2016. The market now faces an uncertain future after the last-minute cancellation of a highly anticipated reserve power auction in December 2016. The length of the apparent market slump will depend on the recovery of demand for electricity and the government’s willingness to support the technology at future auctions.

Meanwhile in Mexico, the implementation of long-term power auctions opened a new avenue for PPAs for wind power developers in 2016. The first two auctions awarded PPAs to more than 1.4GW of wind power capacity at pricing as low as 32 US$/MWh.

Chile and Argentina also hosted historic auctions in 2016 that awarded PPAs to nearly 3.5 GW of wind power capacity. Argentina organised the first two rounds of its RenovAr renewables program in 2016 to support compliance with its aggressive 20% RES goal. Chile conducted a massive, multi-technology auction in 2016 to cover long-term demand beginning in 2021. Aggressive bid pricing in Chile and a likely financing bottleneck in Argentina will likely lead to attrition in both markets.

New policy and political developments throughout the rest of region impact the market potential of several other Latin American countries. Both Colombia and Peru are considering market rules changes that could allow wind power to compete effectively.