South American Renewable Energy Markets

Currently, government policies and renewable energy legislation play a vital role in the development of renewable energy sources. Countries in the South American region are aware of this and have enacted favourable policies to encourage investment in non-conventional energy sources such as wind, solar and biomass. Of the top five countries discussed in this report, Argentina, Brazil, Chile and Colombia have formulated legislation to promote renewable energy development. Such Latin-American countries as Argentina and Chile have set Renewable Portfolio Standards (RPS) targets for the implementation of renewable energy sources. In addition to this, a number of governments also provide indirect subsidies and tax credits to promote renewable energy. These policies and support will help the South American countries to achieve rapid growth in renewable energy, as the existing programs and legislations bring significant installed capacity to the market.

According to the Economic Commission for Latin America and the Caribbean (ECLAC), countries in this region would require a huge investment in the electricity sector between 2007 and 2030 to meet the energy demand. According to the United Nations Framework for Climate Change (UNFCC), more than 85% of the energy investment in this region will come from the private sector.

International banks including the Inter-American Development Bank (IDB) are financing various power generation projects in this region. Since 2000, the IDB has financed a big sum in renewable energy projects in the Latin America`s region, including hydro, wind and geothermal projects. The focus is to develop sustainable energy for the longer term through renewable energy sources. The banks also provide financial support for technical assistance programs for sustainable energy and energy efficiency systems.

The Clean Development Mechanism (CDM) is an arrangement under the Kyoto Protocol allowing developed countries to invest in projects that reduce greenhouse gas emissions in developing countries. The mechanism, which became operational in 2006, has been one of the key reasons for renewable energy investment in the South American region in terms of both consumption and conservation. Of the total 2,127 projects that were registered up to April 2010, 461 of them were registered for development in the Latin American region. More than 60% of the total projects relate to the energy segment, especially renewable energy sources. A combination of small hydro, solar, wind and biomass contributes to the majority of this investment. These projects are expected to increase the renewable energy investment in the region.