Renewables Could Drive Recovery in Latin America

Countries in Latin America did not feel the effects of the COVID-19 pandemic until several weeks after Europe and the U.S., but the impacts of the coronavirus when it arrived were swift on the region’s economy. The United Nations in a policy brief in July said “COVID-19 will result in the worst recession in the region in a century, causing a 9.1% contraction in regional [gross domestic product] in 2020.” That contraction had analysts looking at what could drive the region’s recovery from the pandemic, and most agreed with what the U.N. said in that policy brief—that Latin American countries should begin “fostering sustainable industrial and technological policies, including measures to encourage a low-carbon growth path [and] promote the transition to renewable energy.” The brief said economic development should focus on “strengthening domestic technological capabilities, particularly in the digital and green energy sectors.”

Fiona Clouder, the UK COP26 (Conference of the Parties) regional ambassador for Latin America and the Caribbean, in a recent webcast said the region’s recovery needs to focus on clean and sustainable power, led by renewable energy. The webcast, co-hosted by the International Renewable Energy Agency and the Latin America Energy Organization, and titled “Accelerating Latin America’s Energy Transformation: RE and Economic Recovery,” discussed the importance of low-carbon energy policy to securing stable, long-term prosperity across regional economies.

“In our changing world, building a green recovery and a sustainable future is even more important,” Clouder said. “With vision, ambition, and natural resources, countries in Latin America are well-placed to transition to low-carbon economies, using renewable energy as part of that transformation.”

Several Latin American countries have developed renewable energy goals. Corporate power purchase agreements (PPAs) for renewable energy, with businesses buying electricity directly from independent generators instead of from a utility, have been popular. Such deals had a threefold increase in 2019, according to Atlas Renewable Energy, which recently announced it has signed a large-scale solar PPA in Brazil with multinational company Dow.

The need for more decentralized power generation, including renewable power, in Latin America has been highlighted in recent years. Many countries in the region share a central, hundreds-of-miles-long power grid. As a result, a disruption in one country can affect other countries within the region. In September of last year, the failure of a supply line in Honduras caused a full blackout in that country and in Nicaragua, and partial outages in El Salvador and Guatemala. Costa Rica experienced a nationwide power outage in 2017 as a result of a downed power transmission line in Panama.

Glenfarne Group, a New York-based industrial owner and operator dedicated to the development, construction, and operation of energy and infrastructure assets across the investment-grade Americas, has had a firsthand look at how the pandemic has played out for the energy sector in Latin America. Bryan Murphy, who runs the Latin America side of business for Glenfarne as president and CEO of its subsidiary, Prime Energia, told POWER that while “COVID has had an effect everywhere in the world, when we were shutting things down in the United States, it hadn’t yet reached Latin America.” Murphy said his company has “had to rethink how we operate, certainly with personnel, ensuring we keep employees happy, safe, and healthy.” Murphy said the company’s focus remains on “grid stability and renewables,” even with lower demand for electricity due to the pandemic.

“I don’t think renewables have a special place in the economic recovery in Latin America, but renewables are an important part of the recovery moving forward, the same as any other industry helping the economy recover,” Murphy said. “COVID has been an unfortunate circumstance, but our fundamental view of the grid and how we’re going to play a role in that has not changed. We’ve continued to push forward investments in the grid stability and renewables space, and we’re going to continue to grow in those areas.”

Dino Barajas, a partner with law firm DLA Piper who focuses on infrastructure projects in Latin America, told POWER that investors have looked at the region as an area ripe for putting money into renewable energy. Countries there have set a collective target of 70% renewable energy use by 2030, more than double what the European Union is planning, according to Maria Fernanda Suarez, Colombia’s energy minister, who outlined the region’s plan late last year.

“I think everyone has been affected in one way, shape, or form, in a number of ways,” said Barajas of the impacts of COVID-19. He said development of energy projects is “also going to be an opportunity for the power sector to recover in some jurisdictions. Renewable energy projects are the quickest to be executed, and can be done on a modular basis. Whereas a fossil fuel project will take the entire supply chain to be implemented, such as having natural gas available in the market, then supplied to a plant via a pipeline, and then just getting the construction done for any large-scale power plant. A solar project can be done quickly, with a minimal footprint, a smaller environmental footprint.”

CleanSpark, a Utah-based microgrid software developer, continues to be active in the region. The company in early September announced the successful deployment of the company’s mPulse software on its latest microgrid project in Costa Rica, at an industrial equipment retail facility in San Jose. The microgrid consists of a 222-kW photovoltaic solar system, and a Tesla 111-kW/223-kWh Powerpack, one of the first Tesla battery systems deployed in the country. The system is integrated with standby diesel generation for use in the event of a sustained power disruption.

1. Eduardo Kopper, president of Sunshine Energy Corp., discusses the company’s deal with CleanSpark to use CleanSpark’s software in its energy development projects. Courtesy: Sunshine Energy Corp.

“Over the last four years, Costa Rica has generated more than 95% of its domestic electricity from renewable energy,” said Matt Schultz, CleanSpark’s chairman. “In 2018, nearly 75% of all national renewables came from hydropower. Recent drought conditions have threatened the consistency of that supply, and the country has been more reliant on wind production. This CleanSpark-powered system utilizes proprietary forecasting, driven, not only by the end-user’s energy consumption behaviors and utility rates, but a multitude of other factors, including forecasted weather patterns.” CleanSpark in August announced a strategic alliance with Costa Rica’s Sunshine Energy Corp. (Figure 1), where the Costa Rican company will have the exclusive use of the Microgrid Value Stream Optimizer license, a software for energy models.

Barajas cited Costa Rica as one of the “countries that are poised to bounce back the quickest” from the pandemic, because it has “a long-term policy promoting renewable energy development,” and has a goal to produce 100% of its power from renewable resources. “The positive thing is, with a large part of your generation portfolio being renewable, you are energy independent, and at the end of the day it is critical for these economies that are driven by manufacturing,” he said. Barajas said the manufacturing sector needs more certainty in energy costs than that provided by a reliance on fossil fuels for power generation.

Barajas also highlighted Chile, which for years relied on imports of coal to support the country’s coal-fired power plants. But the country last year reached a deal with energy companies to retire its entire 5,000 MW of coal-fired generation by 2040, including 1,000 MW by year-end 2024, and said it would support more generation from renewable resources. Chilean officials cited community pressure and environmental concerns for the transition; the government’s energy minister, Juan Carlos Jobet, late last year told an international climate conference in Madrid, Spain, that almost 3,500 MW of renewable energy projects are being developed in Chile.

“Chile is a case in point,” Barajas said, citing the country’s need to import coal, which increases costs. He said transport costs highlight the issue of, “If you can’t get the resource to where you actually need to utilize it for power generation. It’s like the box you can’t open with the treasure inside. With renewable energy, you can site it closer to where the demand is, it’s highly flexible from the development point of view, especially solar.”

Zach Bradford, CEO of CleanSpark, said the Costa Rica project “represents the second project and first large-scale deployment of our mPulse software and controls in Costa Rica. As part of our plans to expand internationally we have identified significant opportunities in Latin America. Costa Rica and Mexico are the first countries we are targeting, with plans to expand to the Brazilian and Panama market in 2021.”

Barajas said those types of projects—“C&I [commercial and industrial] development, even large-scale utility projects”—will drive the investment in power generation across the region, even during the period of lower energy demand due to the pandemic. “You can build to suit the existing demand today, and then as demand grows, add on to the existing facility. Grow into your power supply,” he said.

“I think it will provide an opportunity for governments to jump-start their economies. As the pandemic has lessened the demand for power in some jurisdictions it also has given a pause for those areas. With the downturn in the economy, it allowed for greater reserve margins throughout the country. It lowered the need for new power generation projects to be brought online to meet existing demand. When activity comes roaring back, we’ll be right back there at the margin, certainly in Mexico and other jurisdictions I’m sure, that will need immediate investment in the power sector. I think it will lead to increased economic activity in Latin America, and we will see the power sector in Latin America ramp right back up to pre-COVID activity levels,” said Barajas.

Darrell Proctor is associate editor for POWER.

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