As part of the Mexico WindPower 2020, which took place on March 4, 2020, the Latin American Energy Organization (Olade) and the World Wind Energy Council (GWEC) published the report “Competitive processes for the financing of renewable energy projects: Situation in Latin America and the Caribbean ”. The report finds that more than 80% of the current renewable energy capacity in Latin America and the Caribbean has been driven by public tenders and auctions.
The report presents an overview and broad analysis of financing frameworks such as auctions and Power Purchase Agreements (PPAs) in the main markets of Latin America and the Caribbean. In addition, recommendations are proposed to continue accelerating the growth of renewable energies.
Permanent, regular and technology specific auctions, as well as long-term PPAs conducted in USD, are also considered to be the most effective in ensuring competitiveness and transparency in renewable energy prices and ensuring long-term sustainability of the industry.
Wind energy constitutes the majority of renewable energy capacity in Latin America with more than 29 GW installed since December 2019.
Olade’s Executive Secretary Alfonso Blanco commented: ’Renewable energy has grown exponentially in Latin America and the Caribbean in recent decades thanks to auctions. Although there is no single solution for all financing mechanisms, since they must be adapted to the local context, through this study we have found the key elements that can help ensure that the auction market or PPAs are successful. For example, creating auctions that are technology specific-driven, as well as long-term, PPAs conducted in USD, can help ensure a healthy competition, secure bidder interest, and create transparency and stability for investment levels and the size of the market. Creating the right funding frameworks for renewable energy is key to ensuring the socio-economic benefits and cost-effective decarbonization of our energy systems. We are confident that the conclusions of this report can provide a guide for countries throughout the region to achieve this. ”
GWEC CEO Ben Backwell said: “The transition from Feed-in-Tariffs to auctions has been a turning point in many markets to help reduce the levelized cost of energy (LCOE) for renewable energy through increased competition and price transparency. This has been clearly demonstrated in Latin America and the Caribbean, where we observe some of the lowest prices worldwide, both for wind energy and for solar energy. The average price of wind power has been declining by 46% across the region since 2016, at which time there was an increase in auctions. However, for auctions to function and maintain their long-term growth, there must be a certain level of security and regularity to preserve the confidence of the industry and investors in the market. ”
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