- The Latin American Energy Organization (OLADE) and the Global Wind Energy Council (GWEC) have published a joint report Competitive Processes for Financing Renewable Energy Projects.
- The report provides a comprehensive overview and analysis of financing frameworks such as auctions and Power Purchase Agreements (PPAs) in key markets in Latin America and the Caribbean and recommendations to continue accelerating renewable energy growth.
- The report finds that 80 per cent of the current renewable capacity in Latin America and the Caribbean has been driven by public tenders and auctions, with PPAs playing an increasingly important role in driving down price and bringing in investors.
- Stable, regular and technology specific auctions, as well as long-term USD-denominated PPA contracts are found to be the most effective in ensuring competitiveness and transparency in prices for renewable energy and ensure long-term sustainability of the industry.
ENERGIA LIMPIA XXI. 4 March 2020, Mexico City – Today, on the occasion of Mexico WindPower 2020, the Latin American Energy Organization (OLADE) and the Global Wind Energy Council (GWEC) have published a joint report Competitive Processes for Financing Renewable Energy Projects which found that over 80% of current renewable energy capacity in Latin America and the Caribbean has been driven by public tenders and auctions. A press report carried by Energía Limpia XXI states that wind energy makes up the majority of renewable energy capacity in Latin America with over 29GW installed as of December 2019.
Alfonso Blanco, Executive Secretary at OLADE commented: “Renewable energy has been growing exponentially in Latin America and the Caribbean over the past decades thanks to auctions. While there is no one-size-fits-all solution for financing mechanisms as they must be adapted to local context, through this study we have found key elements that can help ensure that and auction or PPA market is successful. For example, building auctions that are technology specific as well as PPA contracts that are long-term and done in USD can help ensure healthy competition, secure interest from bidders, and create transparency and stability for investment levels and market size. Creating the right financing frameworks for renewables is key to ensure socioeconomic benefits and a cost-effective decarbonisation of our energy systems, and we are confident that the findings in this report can provide a roadmap for countries across the region to accomplish this.”
Ben Backwell, CEO at GWEC, said: “The transition from Feed in Tariffs (FiTs) to auctioning has been a major turning point in many markets to help lower the levelised cost of energy (LCOE) of renewable energy through heightened competition and price transparency. This has been clearly demonstrated in Latin America and the Caribbean where we see some of the lowest prices globally for both wind and solar, with the average price for wind decreasing by 46 per cent in average across the region since 2016 when we saw a surge in auctions. However, in order for auctions to work and sustain growth long-term, there must be a level of certainty and regularity to preserve industry and investor confidence in the market”.
“We also see PPAs playing an increasingly important role in driving renewable energy growth in Latin America and the Caribbean, but similar to auctions, the PPA market will require a long-term vision in order to continue to create transparent and low prices for renewable energy projects and attract investors. If we can get both these financing mechanisms right, we forecast that 70GW of wind energy capacity could be installed by 2030 in the region, representing 12 per cent of total electricity capacity”, he added.
The report explores the financing mechanisms in place in Argentina, Brazil, Chile, Colombia, Costa Rica, El Salvador, Guatemala, Jamaica, Mexico, Panama, Peru, and Uruguay.
GWEC is a member-based organization that represents the entire wind energy sector. The members of GWEC represent over 1,500 companies, organizations and institutions in more than 80 countries, including manufacturers, developers, component suppliers, research institutes, national wind and renewables associations, electricity providers, finance and insurance companies. See more: https://gwec.net/
OLADE is an intergovernmental public entity, established on November 2, 1973, by signing of the Lima Agreement. The Organization is a cooperation, coordination and consultation entity with legal personality, whose fundamental purpose is the integration, protection, conservation, rational utilization, marketing and protection of energy resources in the Region.
OLADE was born in the context of finding a new – fairer – economic relationship between developed and developing countries in the early seventies, whose scope was analyzed by the Latin American and the Caribbean countries. Thus, the authorities in the energy sector, aiming at the joint commitment to the defense of the natural resources of the Region and technical cooperation on sustainable and comprehensive development policies on measures to address the crisis in oil prices, began a intense process of political mobilization that ended on November 2, 1973 with the signing of the Lima Agreement. It is the constituting instrument of the Organization, which has been ratified by 27 countries of Latin America and the Caribbean.