Global: Latin American wind power market faces uncertainty beyond 2018 after several years of strong growth

MAKE’s latest wind power outlook for Latin America 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.

The surprising oversize success of solar power at Mexico’s first long-term power auctions sounded alarm bells in the wind industry as just 396MW of wind power was contracted, a small fraction of industry expectations. Still, the rapid emergence of solar does not severely impact wind power’s share of the country's 35% 2024 clean energy target, and planned transmission improvements in Oaxaca, where quality wind resource drives down LCOE, will help wind bids in future auctions.

Argentina and Colombia, two markets with excellent wind resource and growing load demand, have taken major steps towards becoming new growth markets. 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.

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.