2017 Latin America Wind Power Outlook

More than 47GW of new wind power capacity is expected to be commissioned in Latin America from 2017 to 2026. Over the past year, wind power developers commissioned more than 4.3GW in the region. The unstable political and economic climate in the region’s largest market, Brazil, will trigger a slowdown of new wind power commissioning in the that country beginning in 2019. Mexico, Argentina and Chile on the other hand will help offset the decline of the Brazilian market by boosting wind power construction as a result of unprecedented auction activity.

While 2016 was again a strong year for Brazil, as it connected more than 2.5GW of wind power capacity, MAKE predicts an impending cliff from 2019 due to slumping demand for electricity. The Brazilian wind power market has previously exceeded 2.4GW of commissioned sites for three years in a row through 2016. But for the first time since the technology began competing in at auction in 2009, developers did not manage to sign new wind power purchase agreements at auction in 2016. On top of this, the highly anticipated reserve power auction planned for December 2016 was cancelled only days before its scheduled date. Brazil’s wind power market will decline in consequence, with new installations of less than half the size than what they have been between 2014 and 2016. The government’s willingness to support the domestic wind power supply chain until demand for electricity recovers will determine the market’s fortune.

Things appear more optimistic for other markets in Latin America. Mexico has managed to implement long-term power auctions which will support the country’s 35% clean energy standard. This supported wind power developers in signing new power purchase agreements in 2016 at two long-term auctions that awarded more than 1.4GW of wind power capacity at pricing that reached as low as 32 USD/MWh. The only setback to these positive developments for the Mexican wind power market is the fact that solar has undersold wind power at auction, with PV scoring record-low bid pricing at both rounds. In the end, solar power developers managed to sign power purchase agreements for 68% more electricity than their wind power competitors. 

Joining Mexico in hosting historic auctions over the past year were Chile and Argentina, awarding power purchase agreements to almost 3.5GW of wind power capacity. Argentina is driven by an ambitious 20% renewable energy standard target and, to support compliance with it, organised the first two rounds of its RenovAr renewables program in 2016. Chile, on the other hand, connected a record 498MW in 2016 and conducted a major multi-technology auction to cover its long-term demand from 2021. The aggressive bid pricing at this auction and the shortage of financing in Argentina are expected to cause probable project viability problems in each market.

Policy changes and political developments could boost smaller markets in the region such as Colombia and Peru. Both countries are considering adjusting their market rules to allow wind power to compete effectively.

MAKE’s Latin America Wind Power Outlook 2017 is an 80+ page report containing 90+ charts, tables and graphs, providing in-depth analysis of wind power markets in South and Central America as well as the Caribbean. The report studies the key drivers and barriers for new wind power installations in Latin America. The analysis focuses on macro-economic trends, political landscapes and auction dynamics, which support the 10-year market outlook. Three forecast scenarios (bull, base and bear) are included for the region’s two largest markets, Brazil and Mexico. Market models are illustrated, demonstrating the critical forces that are shaping demand for new wind power generation assets.