Financial support key for renewables success in Latin America

By the Potencia correspondent

29 June 2012 - An ongoing discussion in the Unites States is whether or not to continue to pay public subsidies to companies in the renewables sector, in particular in developing wind and solar power generation sources. In the Latin America region, there is no such discussion - public subsidies and/or private investment for renewable energy projects are key to this sector’s future success here.

The United States Trade and Development Agency (USTDA) is investing in several Latin American countries. The USTDA is backing the development of new energy sources in the region, and, according to Informe 21, recently approved $2m in funding for several projects in Mexico, Brazil and Colombia.

The USTDA will finance wind farm feasibility studies in Mexico. In the same country, it will also explore the options of energy from waste to generate electricity.

In Brazil, the USTDA will finance a similar project, which involves taking utilising the waste gas from landfill sites in Santo Andre, Sao Paulo state, one of the most inhabited parts of the country.

And finally in Colombia, the USTDA has confirmed it will invest in a wind farm and a solar power plant, both located close to the Caribbean Sea.

Mexico is proving to be one of the most attractive markets for renewable energy investments in Latin America. Felipe Calderon's government is ‘betting big’ on renewable energy, as a way to reduce the country’s dependence on hydrocarbons.

In June, Caldron signed a law introducing binding targets on climate change. The law sets targets on reducing greenhouse gas emissions and increasing the use of renewable energy. The Mexican government wants to increase renewable energy’s contribution to overall electric generation to 35 per cent by 2025.

Interestingly, this legislation makes Mexico the "first developing country with integral legislation against climate change" says Caldron.

The Spanish Institute for Foreign Trade (ICEX) also believes Mexico is one of the best places to invest in renewable energy. Francisco Garzon Morales, advisor to the Economic and Trade Office of the Spanish Embassy, stressed that in Mexico there are “plenty of hours of sunshine” and the wind "blows hard," and these facts will “guarantee a profit” for the companies interested in investing in renewable energy here.

Currently in Mexico, 76.6 per cent of the renewable energy projects in operation are based on wind power.

The Electric Research Institute and Energy Secretary pointed out that the overall Mexican capacity to generate electric power could reach 71 000 MW. The expected production by the end of 2012 is approximately 2200 MW.

Tehuantepec isthmus in Mexico’s Oaxaca state, along with Tamaulipas, Lower California, Veracruz, Sinaloa and Yucatan are all regions that enjoy good wind resources, says the Mexican Wind Power Association.

Spain’s Iberdrola and Gamesa are two of the best-positioned companies in the renewable energy market in Mexico.

In Brazil, the authorities are also showing their support for renewables, especially wind farms. Energías Renovables reported recently that the National Bank for Economic and Social Development (BNDES) and the Bank of Brazil will invest EUR300m in ten projects in the states of Bahia and Rio Grande do Norte.

The wind farms will be managed by Forca Eolica do Brasil, a company owned by Iberdrola and Neoenergía. The overall production of all those farms will reach 288 MW. Construction of these wind farms has already started.

Clearly renewable energy development is at the top of the political agenda in many Latin American nations, but support - either public subsidies or private investment or both - is fundamental to this industry’s success.

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