MAKE’s latest wind power outlook for Latin America indicates that the wind power market increased to 4.2GW in 2015, representing a slight 2% gain compared to the previous year. MAKE expects modest expansion of 8% in terms of new commissioned capacity in 2016.
The outlook forecasts steady regional growth driven by historically strong Brazil and an up-and-coming Mexico with its recently restructured electricity markets. Those two markets, however, may be cooling as concerns mount about wind’s prospects at the auctions that have driven existing capacity growth thus far.
The series of severe political and economic crises in Brazil have caused utilities to repeatedly cut forecasts of electricity demand, eroding demand at that country’s A3 and A5 capacity auctions. While the local wind power industry expects continued support from planning authorities in reserve auctions, any action to the contrary would lead to a cliff in the Brazilian wind power market as early as 2019, according to MAKE’s findings.
The surprising success of solar power at Mexico’s first long-term power auctions caused concern in the wind industry as just 396MW of wind power was contracted. But MAKE do not see the rapid emergence of solar as greatly impacting wind power’s share of the country's 35% 2024 clean energy target. The company believes planned transmission improvements in Oaxaca, where quality wind resource drives down levelised cost of electricity (LCOE), will help wind bids in future auctions.
Argentina and Colombia have taken major steps towards becoming new growth markets, according to MAKE. The newly elected Macri government in Argentina has focused efforts on a 1GW renewable tender and hopes to attract investment in new renewable capacity as soon as the 2017-18 timeframe. Colombian government planners meanwhile plan to develop transmission to unlock the country’s world-class wind resource on the Guajira peninsula.
Competitive auctions, long employed in Brazil, Chile and Peru, have spread into other major Latin American markets and are proving a major driver for wind power development. The reduction of wind’s LCOE is critical to maintaining competitiveness at these auctions as most have neither fiscal incentives nor renewable targets that would favor wind, and solar power is increasingly cost competitive while directly taking market share from wind.
The findings indicate that political risk continues to undermine foreign investment and wind power development in markets throughout the region, such as Venezuela and Ecuador; the future performance of the Argentinian market could prove the impact of business-friendly policies on wind power development in the region.