By Christie Hangey
Latin American Energy Analyst
Frost & Sullivan

Latin America’s increasing demand for clean, reliable and cheap energy has prompted the recent growth in the use of photovoltaic, wind and solar technology. And the demand growth is set to continue.

Latin America has quietly expanded its use of renewable technologies for power generation, and can now boast one of the highest percentages of renewable energy in use worldwide. Renewable energy technologies account for 35 per cent of the region’s overall energy balance. Hydropower has received much of the attention, but its continued use has fallen out of favour due to the huge environmental impact of large hydropower dams. Instead, both solar and wind power have stepped-up to power the region.

Rural electrification and photovoltaics

Approximately 75 million people in Latin America live without access to electricity. As part of their modernization efforts, many governments in the region have undertaken rural electrification projects to supply power to those regions in need. Given the inadequate transmission structure of many countries, renewable energy sources (principally photovoltaics) are being used in distributed generation schemes for these initiatives.

Photovoltaic technologies can be as much as six times more expensive than traditional power generation equipment when used in an on-grid location. However, off-grid these technologies are a cost conscious alternative to transmission grid extension, which can range between $1800 per km for a mono-phase line, to $3000 per km for a three-phase line.

In rural areas where the population is dispersed the load density can be as little as one customer per km of power line. Individual photovoltaic systems, in comparison, average $647 per installed household unit, of approximately 50 MW each.

Chile’s CNE (National Electricity Commission) has invested $112 million in an aggressive rural electrification programme which has been operating since 1992. Today, due to the success of these early programmes, many governments have pledged to significantly invest in formal rural electrification programmes.

Brazil established Prodeem in 2000 (National Program for Energy Development of States and Municipalities) to develop 20 000 MW of renewable energy capacity. The initial investment in Prodeeem is expected to be $25 billion.

As a component of Paepra (Project for Supplying Electricity to the Argentine Scattered Population), Argentina and the World Bank have implemented the Permer project (Project of Renewable Energy in the Rural Electricity Market) in eight participant provinces. Permer will supply electricity to roughly 70 000 rural households and 1100 provincial public service institutions utilizing renewable energy sources, at an estimated cost of $120.5 million. Similar programmes exist in other countries.

Solar industry growth

The telecommunications sector in Latin America was witness to an explosive expansion throughout the last half of the 1990s, and was estimated in total at $1 billion in 2000. The expansion has had profound effects on the region. As the market continues to grow, there has been an increasing need for infrastructure development, especially in remote areas where there is no existing transmission grid.

Although little noted, the growth of the telecommunications industry has helped to drive demand for photovoltaic technologies. The industry has favoured photovoltaics for remote power supplies due to the reliability shown by the technology in rural electrification schemes.

For example, the Mexican government, in partnership with Teléfonos de México, installed more than 12 000 solar-powered phone-repeating stations and hundreds of emergency roadside call boxes. Photovoltaic equipment is being used to power remote transmission stations, preferred due to the ease of transport through more difficult regions and their minimal maintenance requirements.

Throughout the region, the telecommunications sector has contributed between 55-65 per cent of revenues for the photovoltaic industry in each quarter of 2001, and the trend is expected to continue for fiscal year 2002.

Energy crisis opens the door to wind

Traditionally, Brazil has relied upon the use of its vast hydro resources to satisfy its power needs, resources that supply approximately 92 per cent of the country’s electricity.

However, recently those same hydroelectric plants have been a source of concern as a drought has left Brazil scrambling to meet its power needs. Rainfall in Brazil has been 40 to 50 per cent below average since December of 2000. In the southeast, an area that accounts for approximately 89 per cent of the country’s hydroelectric generation, the reservoirs were filled to only 35 per cent of capacity in March, and levels have fallen since.

The Brazilian government has instituted a rationing programme to help ease the strain on the generation sector, but has fallen below its goal of a 20 per cent cut in the past months. Under-investment in the energy sector has left Brazil scrambling to get additional capacity on-line, and forced the country to buy additional electricity from neighbouring Argentina.

As part of its long-term strategy to reduce dependency on hydropower, Brazil has embraced wind energy technology to expand generation capacity. At the end of 2000, Brazil had approximately 20 MW of installed wind generation capacity.

Wind power is increasing in popularity in Brazil and the government has pledged to invest in the industry.
Click here to enlarge image

Since the onslaught of the crisis, announcements made by the government have shown a renewed commitment to developing this energy source. At a recent climate change conference, President Fernando Henrique Cardoso addressed his country’s commitment to developing wind resources by pledging investment in wind generation projects.

The Brazilian government has also signed a contract with Wobben, a subsidiary of Enercom of Germany, to develop a 100 MW wind facility in the northeastern state of Ceará. Additional projects are being planned by private companies totalling over 1000 MW, and will help to place Brazil at the forefront of wind energy development in Latin America.

Future demand for renewables

Demand for energy in the Latin American region is projected to grow six to seven per cent annually. In countries such as Brazil and Costa Rica, a lack of sufficient hydrocarbon resources for power generation has hindered power plant construction.

Brazil is home to the largest coal reserves in Latin America. Yet this domestic coal has a high ash and sulphur content in addition to a low calorific value. To compensate, Brazil must import coal for its steel industry. However, cost prohibits the country from importing coal to fuel power plants. Costa Rica lacks hydrocarbon resources altogether.

To compensate, these countries are turning to renewable energy sources for power generation purposes. In Brazil, BP Solar announced three solar energy projects to be constructed in the north and northeast regions of Brazil. The projects are to be located in Pará, Amapa, and Ceará, with investments starting at $150 000. Petrobras, the Brazilian oil company, plans to invest $125 million in alternative energy generation projects which will be completed by 2005. Electricité de France (EDF), through its holding FIF, plans to invest at least $15 million to establish wind energy generation facilities in Arrailal do Cabo, in Brazil’s Rio de Janeiro state.

Even in countries such as Argentina and Mexico, which have abundant oil and natural gas reserves, plans are underway to expand the use of renewable technologies. The Argentine government has developed plans to provide seven per cent of Argentina’s energy total through the use of wind energy technology, equal to 3000 MW. The project is expected to last through 2010, leading to growth rate of over 100 per cent annually for the industry.

Recent technological advances are also creating new market opportunities for solar and wind. Developments in thin-film technology are allowing photovoltaic technology to be used in crowded urban areas, such as Mexico City. These thin-film panels, integrated directly into building designs, are allowing power generation in areas where space issues are a concern.

The potential for development of a sizable on-grid market exists, as these crowded urban areas have the highest demand for power, but siting concerns often limit the location of new power plants. And depending upon location, extension of the transmission grid may be prohibited by difficult terrain.

The wind energy industry is poised to benefit from developments in offshore wind generation technologies, as well as continual improvements in current turbine design.

In addition, as the region continues to expand its regional power interconnectivity, opportunities will increase for developers to sell electricity across borders. ABB recently announced plans to build a 1000 MW power transmission network between Argentina and Brazil. Colombia, Ecuador, and Peru have signed an energy accord to link their transmission systems, with the possibility of Venezuela joining at a later date.

Even with the current economic slowdown, the renewable energy industry shows no signs of slowed growth. International corporations are investigating proposed developments, and with legislative changes in the regulatory framework, such projects are more favourable than ever. For Latin America, the future looks greener than ever.