Several countries across Latin America have made ambitious climate pledges over the last few years, but can they deliver on their promises? The region is well known for its oil and gas production, as well as for its rapidly expanding critical mineral industry. Using experience from already strong energy sectors, can countries such as Brazil, Mexico and Chile become renewable energy powerhouses and support long-term regional energy security? 

Renewable energy currently contributes around 60 percent of Latin America’s electricity generation, mainly thanks to its well-established hydropower sector. Within the region, 16 countries are part of the Renewable Energy for Latin America and the Caribbean

(RELAC) initiative, established at the 2019 UN Climate Action Summit. Most countries in the Caribbean region have established renewable energy goals, and several have set quantitative targets, which are expected to contribute to a twofold increase in the region’s renewable energy capacity between 2022 and 2030. The figure falls to a 1.4 times capacity increase for the Latin America and Caribbean region overall. 

The International Energy Agency (IEA) recently reported that Latin America has the potential to achieve higher 2030 ambitions than it has announced, having installed an average of 26 GW between 2022 and 2023, which far exceeds the pace required to achieve its 2030 goals. Given the region’s untapped economically viable hydropower, solar PV, and wind potential, ambitions for 2030 installed capacity could be higher, according to the IEA. 

According to the report, the Latin American region aims to increase its total renewable energy capacity by 39 percent from the 2022 level, to reach 450 GW. Brazil, Chile, Argentina and Mexico account for almost 80 percent of this capacity growth target. Meanwhile, Brazil’s renewable energy aims contribute 50 percent of this share, while Chile hopes to expand its renewable energy capacity by an ambitious 2.5 times. 

At present, there are a reported 8,000 renewable energy projects or more in the early stages of development in the region, with a total investment of around $232.8 billion, as well as 700 projects worth $20.8 billion under construction. Fossil fuels continue to contribute around two-thirds of Latin America’s energy mix, although this is far less than the global average contribution of 80 percent. However, the average contribution of fossil fuels to the energy mix in Mexico, Argentina, Bolivia and Venezuela is around 85 percent, demonstrating the need for greater decarbonisation efforts in these countries to reduce the average regional reliance on oil, gas and coal. 

Latin America’s energy distribution sector will require around $431 billion in investment between now and 2040 to achieve an “effective transition” scenario, according to a recent publication from the distribution association Adelat. Research conducted by the consultancy Grupo Mercados Energéticos for Adelat analysed the distribution systems in Argentina, Brazil, Chile, Colombia, Ecuador, Guatemala and Peru. 

The effective transition scenario outlined in the report is based on a Deloitte study for European countries for 2030. The research also considers a “partial transition” scenario, where around half of the climate targets are achieved. Alessandra Amaral, the Executive Director of Adelat, explained, “The results show that, in the effective energy transition scenario, a total investment of $289 billion is required in addition to trend growth of $143 billion, making a total of $431 billion for the distributors in the seven countries analysed over a period of 17 years.” Amaral added, “In the partial energy transition scenario, the additional investments amount to $174 billion, which, when combined with the $133 billion in trend growth, totals $307 billion.”

While the publication estimates just how much financing will be required to achieve a green transition, it does not suggest who should provide this funding. In Chile, the previous administration trialled a smart metre initiative, aimed at charging billpayers based on their energy usage. However, this sparked opposition from consumers. 

In the report, the consultancy states that the countries assessed must “overcome challenges arising from financial limitations, regulatory uncertainty, resistance to change from certain stakeholders, and the need to develop technical and operational capacities in distribution system operators,” to support an effective transition. 

Brazil and Chile are making significant strides in boosting their renewable energy capacity, ranking second and fourth respectively in the 2024 Renewable Energy Tracker from Climate Action Network. Meanwhile, Argentina ranked 21st, Mexico 23rd, and Uruguay 27th, out of the 62 countries assessed. 

In Mexico, the previous administration halted energy transition policies in favour of redeveloping the country’s oil and gas assets and nationalising energy. However, there is hope that the newly-elected government, led by President Claudia Sheinbaum, will introduce policies aimed at developing Mexico’s renewable energy capacity to help contribute to regional efforts.  

There is significant potential for Latin America and the Caribbean to undergo a green transition by increasing their renewable energy capacity and reducing their dependence on fossil fuels. Several countries across the region have abundant green resources that could be exploited with greater funding and favourable climate policies. However, to achieve an effective transition, the region must invest heavily in the development of new capacity as well as in the modernisation of its distribution sector. 

By Felicity Bradstock for Oilprice.com 

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