As energy markets recovered from the slump caused by the pandemic, Latin America’s wind and solar energy additions increased by 50% in 2021, according to a new report released by Bloomberg New Energy Finance (BNEF).
Furthermore, the trend is likely to continue as governments in the region prepare to organize new renewable project tenders to help them reach their clean energy targets.
The report, titled “Latin America Market Outlook”, examined the region’s renewable energy development and found that the region has added 17.5 GW of wind and solar photovoltaic (PV) energy capacity in 2021. The two renewable technologies contributed more than 10% of power generated in Argentina, Mexico, Brazil, and Chile.
Brazil was the key market responsible for the rise of renewables in Latin America, said Natalia Castilhos Rypl, the lead author of the report. “We saw a booming activity of small-scale PV, but utility-scale wind and PV projects also reached record additions.”
Brazil set new records in all three major clean energy technologies, including onshore wind (3.6 GW), utility-scale PV (1.7 GW), and small-scale PV (5 GW), adding a total of 10.3 GW.
Brazil accounted for 65% of all renewable investments in Latin America, remaining the most appealing country for clean energy investment, with a 27% increase over 2020, mostly driven by the small-scale solar sector.
While the renewable energy markets in Brazil and Chile flourished last year, Argentina and Mexico didn’t catch up with the pace. According to the report, wind and solar expansion in both countries, which rely largely on fossil fuels, were hampered by a combination of regulatory reforms and the economic crisis.
BNEF forecasts that Brazil will continue to lead the Latin American renewable energy development this year, with its solar sector accounting for the majority of net additions. The present tax breaks for distributed generation in the country will expire in 2023, incentivizing customers to enter the market this year.
However, the growth will also bring challenges to governments in the region, said the report. Electricity grids must keep up with renewables expansion, and Colombia, Chile, and Argentina, among others, are experiencing transmission constraints, necessitating significant infrastructure investment to allow the clean energy sector to expand.