On the occasion of Mexico WindPower 2020, which took place on March 4, 2020, the Latin American Energy Organization (Olade) and the World Wind Energy Council (GWEC) published the report “Competitive processes for financing energy projects Renewables: Situation in Latin America and the Caribbean ”. The report finds that more than 80% of current renewable energy capacity in Latin America and the Caribbean has been driven by public tenders and auctions.
The report presents an overview and comprehensive analysis of financing frameworks such as auctions and Power Purchase Agreements (PPAs) in the main markets of Latin America and the Caribbean. In addition, recommendations are proposed to continue accelerating the growth of renewable energies.
Permanent, regular and technology-specific auctions, as well as long-term and USD-based PPAs, are also considered the most effective in ensuring competitiveness and transparency in renewable energy prices and ensuring long-term sustainability of the industry.
Wind energy constitutes the majority of renewable energy capacity in Latin America with more than 29 GW installed since December 2019.
Olade’s Executive Secretary, Alfonso Blanco, commented the following: ” Renewable energy has grown exponentially in Latin America and the Caribbean in recent decades thanks to auctions. Although there is no single solution for all financing mechanisms, since they must be adapted to the local context, through this study we have found the key elements that can help ensure that the auction or PPA market is successful. For example, creating auctions that are technology-specific, as well as long-term USD-based PPAs, can help ensure healthy competition, secure bidder interest, and create transparency and stability for investment levels and size of the market. Creating the right financing frameworks for renewables is key to ensuring socio-economic benefits and profitable decarbonisation of our energy systems. We are confident that the findings of this report can provide guidance for countries across the region to achieve this.”
Ben Backwell, CEO of GWEC, said: “The transition from feed-in-tariffs to auction has been a turning point in many markets to help reduce the levelized cost of energy (Levelized Cost of Energy or LCOE) of renewable energy through increased competition and price transparency. This has been clearly demonstrated in Latin America and the Caribbean, where we see some of the lowest prices in the world for both wind and solar energy. The average price of wind power has been declining by 46% across the region since 2016, at which point there was an increase in auctions. However, for auctions to function and sustain long-term growth, there must be a certain level of security and regularity to preserve the confidence of the industry and investors in the market. ”
