DER and EVs Benefit with Renewables Expected to Grow 276% in Latin America

Clean energy developments often focus on the large investment centers of Europe, the Gulf States, East Asia, and the US. However, the major inflections of the future largely play out elsewhere: in nations not part of the Organisation for Economic Co-operation and Development (OECD), energy demand is projected to grow over 40% in the next 20 years, far outstripping the projected growth of 7% or less in the OECD. Meeting this demand through clean energy investments and retrofitting efforts is crucial if the world is to keep global warming under the Paris Agreement’s critical threshold of 2°C above pre-industrial levels. Fortunately, these regions are fast developing robust markets for cleantech and for OECD exports in the sector. This blog examines Latin America’s emerging market in cleantech.

A Region with Massive Potential and Ambitious Goals in Clean Energy

As with other developing regions, Latin America is experiencing the kind of rapid energy demand growth seen in the OECD during initial electrification (from roughly 1880-1950). Total regional electricity demand is expected to double by 2050. The biggest regional economies are also projected to show brisk demand growth in millions of tonnes of oil equivalent (MToe), with Chile, Colombia, and Mexico all seeing growth above 100% by 2040. The region’s largest economy, Brazil, will also see 52.6% demand growth.

Latin American utilities have been using hydropower as a baseload source to diversify their portfolios with solar and wind power. By 2040, installed capacity in the region is expected to reach 182 GW (125 wind, 57 solar).

Projected Wind + Solar Installed Capacity in LatAm

Source: Latin American Energy Review 2019

This data anticipates Brazil to be the standout market for storage and distributed generation investment. There is also strong potential for regional battery production to be centered in Brazil, near access to the Bolivia-Argentina-Chile Lithium Triangle, containing 75% of the world’s supply of lithium.

This possibility is taking shape as the region aligns policy to foster growth in the EV market. Brazil, Colombia, and Argentina have lowered import taxes on EVs while Ecuador, Uruguay, and Costa Rica have eliminated them outright. Electricity importers, such as Chile and Mexico, have reduced tariffs on electricity used for EV charging and invested in infrastructure, notably through partnerships with companies like Tesla, Schneider Electric, and General Electric. Most EV growth has been in public sector fleets, primarily public transit EVs. Chile now has more electric buses than any nation besides China, and other regional jurisdictions are rapidly following suit.

Major Growth Opportunities 

These new investments in renewables and EV adoption require major improvements in infrastructure. Distributed resource technology and energy storage are needed to manage added load variability on the grid. The region is already pursuing investment in T&D infrastructure to lessen high regional transmission losses (around 16%, double the global average), to achieve universal access and to meet demand from the region’s growing middle class. With limited investment capital available, however, there is a large market for lower cost solutions, particularly microgrids and non-wires alternatives. Microgrids Overview, a report from Guidehouse Insights, projects Latin America as the world’s fastest growing microgrid market, with regional capacity growing from 194.9 MW in 2019 to 2,919.4 MW by 2028—a compound annual growth rate of 35.1%.

While these trends vary by country, Latin America now represents a large but still mostly untouted growth opportunity for global companies supporting DER, microgrids, and/or EV adoption.