Barcelona, Spain (May, 2010) - Led by Brazil, Latin America is expected to reach 46 GW of total installed wind capacity by 2025 with a 12.6% compound annual growth rate of yearly installations, according to a new market study, Latin America Wind Power Markets and Strategies: 2010-2025, from IHS Emerging Energy Research. Brazil will lead the region with 31.6 GW installed by 2025, trailed by Mexico with 6.6 GW. Chile will also add significant wind power, boosted by the country’s Renewable Portfolio Standard, according to the study.
Brazil, Mexico, and Chile have set the policy and industrial frameworks to sustain market growth. “Brazil’s market scale and proactive renewable energy policies are moving Latin America toward a key tipping point, from sporadic project activations to more steady wind power market growth,” says IHS analyst Vincent Gautier, one of the study’s authors. “Improving government incentives from tenders to financing conditions are encouraging local developers such as Dobreve Energia, Renova Energia, and CPFL to lead the market.”
Brazil’s market size, expected to represent 69% of the total installed capacity in 2025 in Latin America, positions the country as a leader in the region and a relevant supply hub. Demand and local content requirements are encouraging operation equipment manufacturers to invest primarily in Brazil-based manufacturing of turbines 1.5 MW and larger. According to the study, beyond turbine assembly, an even larger opportunity is opening up to develop Brazil’s wind turbine component supply chain, with annual demand for more than 300 turbine units expected by 2011. Total investment in Latin America wind turbine markets will scale from just under U.S.$1 billion in 2009 to more than U.S.$2.2 billion by 2015.
Exhibit: Latin America Base-Case Scenario, Megawatts Added by Country: 2010–2025
Source: IHS Emerging Energy Research, Latin America Wind Power Markets and Strategies: 2010-2025
Mexico has the potential to challenge Brazil’s market leadership, but reduced political support suggests the overall market will stagnate until 2020, according to the study. “Mexico’s tenders, requiring established development and operational track records from developers, as well as significant financial requirements, makes the market attractive to larger players,” says Gautier. Chile will peak at 280 MW installed in 2024, before dropping 55% due to the achievement of its 10% renewable portfolio standard target.
Peru, Argentina, Uruguay, and Costa Rica host diverse market drivers, including supply security concerns and wind resources, though policy execution is lacking. Once awarded, the realization of tendered projects will determine each country s credibility.
Exhibit: Latin America Market Maturity Curve
Source: IHS Emerging Energy Research, Latin America Wind Power Markets and Strategies: 2010-2025
“With Latin America’s large potential and limited installed capacity, developers are racing to secure market share in a single country, while those companies with more mature pipelines have initiated regional expansion. This trend is dominated by international players, while local firms presently find their home markets large enough,” says Gautier.
European wind players are poised to dominate wind power development and ownership in Latin America in the near term, leveraging their experience and financial resources. Iberdrola Renovables was the first player to develop a significant presence regionally, with operational projects in Brazil and Mexico. Other international developers such as Acciona Energia are now following suit. IMPSA Wind is currently the only Latin America developer with regional ambition, but local industrial players and independent power producers are moving to challenge these foreign entrants by the latter half of the decade, according to the study.
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