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Energy Update: Solar Power in Latin America

Chile solar farm

A solar farm in Chile. (Image: Codelco)

March 22, 2013

In a region with ample sunlight, solar power presents an opportunity for Latin America to address pressing concerns such as high electricity prices and growing energy demand. This type of power generation still accounts for a small portion of the region’s electricity capacity in comparison to hydropower and fossil fuels. Currently, solar makes up less than 4 percent of the region’s overall energy matrix. However, the potential is significant in countries such as Brazil, Chile, and Ecuador, as well as Central America. By 2017, Chile will account for 51 percent of solar demand in the region, with Brazil making up 37 percent of demand. While they do not make up a significant percentage of solar demand in the region, Ecuador and Nicaragua represent up-and-coming solar producers with interesting new projects.

With electricity costs rising and significant price decreases for solar photovoltaic (PV) equipment, there has been a boom in solar investments throughout Latin America. Photovoltaic cells convert light into electricity by absorbing the sun’s radiation, and the equipment’s power is measured in watts, ranging from kilowatt (KW) to megawatt (MW) to gigawatt (GW). A large residential or commercial building might consume several MW, while one GW is the equivalent of 1000 MW. At the beginning of this year, approximately 10 GW of solar projects were planned for the region, though only 90 MW are currently operational. GTM Research, a consulting company with a focus on green industries, forecasts that the region will actually see the installation of some 450 MW in 2013, nearly 400 percent more than in 2012. In a new report, GTM forecasts that the cumulative solar capacity will rise to 13 GW over the next five years. However, government energy policies could prove important to growing Latin America’s solar industry.

Chile: Channeling Solar in the Atacama

As a country with a unique geography and limited natural resources, energy integration poses a challenge for Chile. In order to meet its electricity needs, Chile must increase its generation capacity by 6 percent per year. Furthermore, Chile has the highest electricity consumption per capita in Latin America, and prices are the second highest in the region behind Uruguay. In order to meet demand, the Chilean government has called for 10 percent of electricity to be generated by renewable energy sources by 2024. To reach “developed country” levels, Chile must double its current electricity generating capacity by 2025.

Fortunately, Chile has been blessed with one of the driest regions in the world—the Atacama Desert. The Atacama is 600 miles long and is believed to offer the world’s biggest solar potential. Despite the promise of solar power generation, the country’s rugged geography makes transmission difficult. How to connect the solar plants to urban centers remains a concern.

While tax incentives for solar are currently being debated, foreign investment has shown to be effective. For example, the U.S. company First Solar just developed a 1.5 GW deal that “highlights the tremendous potential that solar PV energy has to change the demography and the economy of northern Chile, opening it up to new opportunities beyond mining and fishing,” says President of Fundación Chile Alvaro Fischer in an interview with The Santiago Times.

Chile is also home to “Project CSP,” the first Concentrated Solar Power (CSP) plant in Latin America. This cutting-edge technology generates and provides electricity on a consistent basis, without being tied to the flow of solar energy. Through the Production Development Corporation, the Chilean government is providing a $20 million subsidy, as well as financial support from the European Union, the Inter-American Development Bank, and the German Development Bank. Currently, there is 2.5 GW of CSP capacity worldwide, with another 3.4 GW in development. 

Nevertheless, whatever generation technologies Chile pursues, transmission lines present a major challenge. Proposed legislation known as the Electric Highway Law intends to connect the whole country with one electrical grid. This would streamline the environmental process and support the construction of transmission lines. While the law is controversial—transmission lines would pass through indigenous lands—a more interconnected grid and efficient electricity distribution could attract foreign investment.

Brazil: Scaling up Commercial Solar Projects

Harnessing solar energy alone, Brazil could supply up to 10 percent of its current electricity demand, according to a November 2012 report from numerous environmental non-profits. But a lack of policies to promote technological innovation and large-scale energy production have hindered the growth of solar power, researchers say.

At present, Brazil has only two solar parks. The first commercial solar park in the country, located in Ceara state, began operating in August 2011 and can supply electricity for 1,500 residences. Last year, the park’s operators applied for permits to expand its capacity to supply 75,000 households. São Paulo state is home to the second park, which began operating in November and can supply electricity for nearly 660 families.

Given Brazil’s solar potential, steps to expand this type of power generation are underway. Approved last year, a resolution from Brazil’s national electricity agency aims to promote small-scale solar energy projects. The agency also accepted 18 proposals worth $200 million to make solar energy economically viable. Starting this year, consumers who use solar energy can receive discounts on their electricity bills.

In addition, numerous projects to build new solar facilities are planned for this year. In Ceara state, construction begins on the country’s third major solar park in June. The $30 million investment aims to build a facility to provide electricity for a city of 100,000 residents. A $13 million project is planned in Manaus, the capital of Amazonas state, to build one of the largest solar parks in Latin America. The park would generate enough energy to supply 3,000 homes. Even Brazil’s biggest city will see the construction of a solar park. Approved in November, a $6.7 million research project in São Paulo will create a mini-plant connected to the municipality’s electrical system.

Nicaragua and Ecuador: First-Ever Solar Farms

In Nicaragua, solar projects tend to be smaller and represent the initiative of local communities. In a typical Nicaraguan solar project, the generation capacity is around 40 watts of fluorescent lights, enough to light a couple of classrooms or a community center.

However, in February 2013, Nicaragua launched a solar farm that will benefit some 1,100 homes. The farm is located approximately 40 miles south of Managua in Carazo province. The state-owned National Company of Electricity Transmission, or Enatrel, says the farm contains almost 6,000 solar panels. In conjunction with the government of Japan, which donated $11 million for the project, the Nicaraguan government invested $500,000. The farm will generate enough energy to supply homes that consume an average of 150 KW hours per month. Furthermore, the farm will supply some 2,000 MW of capacity to the national electrical grid and displace 1,100 tons of carbon dioxide, which is the equivalent of planting one square mile of forest.

Similarly, Ecuador began installing large-scale solar plants, with the country’s first solar facility inaugurated in February. Located in the Imbabura province, the plant contains over 4,100 solar panels with a capacity of 998 KW. Power generated will connect to the country’s electrical grid, saving an estimated $2.5 million a day that would otherwise be spent on fuel and energy imported from Colombia and Peru. This year, Ecuador will see construction of a second solar plant, one of the largest in South America. The $100 million project will create a farm 6 miles from the country’s capital. The plant will generate up to 54 MW, enough to supply 84,000 families and eliminate 49,000 tons of carbon dioxide a year.