Inter-American Development Bank Study Points At Latin America As The Future Of Renewable Energy

Renewable energy has been the subject of never-ending debate: Is it profitable? Is it better? Where is it headed. There may be no answers yet for those questions, but a report by the Inter-American Development Bank points out where the future of the energy may be: in Latin America.

The region concentrated 6 percent in 2012 of the world’s investment in green energy, or $16 billion out of a total of $268 billion. Analysts from the IADB point at Latin America and the Caribbean as the “new frontier” for investment. “The lowering of prices and the better climate for investment makes Latin America an interesting and affordable market,” said Greg Watson, project specialist at the Inter-American Development Bank.

According to the report, the political climate is also improving, as 110 green energy policies are identified, including tax incentives, feed-in tariffs, and other policies. “Policy frameworks are expanding and strengthening in Latin America and the Caribbean,” said Nancy Lee, general manager of the bank's Multilateral Investment Fund. “The rapidly falling costs of clean technologies such as solar and wind power combined with an improved investment climate means that clean energy generation in the region is now truly affordable.”

The favorable political climate has helped production capacity grow enormously. In 2007, the region had 1.5 gigawatts of renewable capacity, which has grown 296 percent since, reaching 26.6GW in 2012.

Most of the investment went to Brazil, which received around $9.2 billion, although the percentage is lower than in previous years: It used to get close to 80 percent of the investment, and in 2012 that rate dropped to 55 percent. The reasons, as pointed out by the study, are that Brazil reduced its budget for clean energy 36 percent. Chile, on the other hand, multiplied its green energy budget by four, from $500 million in 2011 to $2.1 billion in 2012, making it the most-invested country in the region.

Other countries that increased their investment in green energy are the Dominican Republic, which raised the investment from $47 million in 2011 to $248 million in 2012, and Uruguay, which raised it from $28 million to $118 million in the same time.

The study singles out a geopolitical factor that explains the region’s interest in developing renewable energies. “Many Latin American countries want to stop importing oil, coal and natural gas, so they do not depend as much on other countries,” said Ethan Zindler, head of policy analysis at Bloomberg New Energy Finance, a provider of data, research and news on the clean and low-carbon energy sector. “That makes them want to invest more in energies they can produce themselves.”