Current renewable energy capacity in Latin America and the Caribbean driven by public tenders and auctions total over 80%, according to a new report by Global Wind Energy Council (GWEC) on Wednesday.
A joint report by Latin American Energy Organization (OLADE) together with GWEC, entitled Competitive Processes for Financing Renewable Energy Projects provides an overview and analysis of financing frameworks, including auctions and Power Purchase Agreements (PPAs) in key Latin American markets and the Caribbean, and makes recommendations on accelerating renewable energy growth.
The report found that PPAs have played an increasingly important role in driving down prices and bringing in investors.
'Stable, regular and technology-specific auctions, as well as long-term USD-denominated PPA contracts, are found to be the most effective in ensuring competitiveness and transparency in prices for renewable energy and ensure long-term sustainability of the industry,' the report said.
-'70-gigawatts of wind capacity could be installed by 2030'
The GWEC explained that wind energy makes up the majority of renewable energy capacity in Latin America with over 29 gigawatts installed as of December 2019.
To build on this success and drive renewables further, Executive Secretary at OLADE Alfonso Blanco said there should not be a 'one-size-fits-all solution for financing mechanisms as they must be adapted to local context.'
Through the study, he said they found key elements to help ensure that auctions or PPAs markets are successful.
'Building auctions that are technology-specific as well as PPA contracts that are long-term and done in USD, can help ensure healthy competition, secure interest from bidders, and create transparency and stability for investment levels and market size,' he explained.
Ben Backwell, CEO at GWEC, stressed the transition from Feed-in Tariffs (FiTs) to auctioning has been a major turning point in many markets to help lower the levelized cost of energy of renewable energy through heightened competition and price transparency.
'This has been clearly demonstrated in Latin America and the Caribbean where we see some of the lowest prices globally for both wind and solar, with the average price for wind decreasing by 46% on average across the region since 2016 when we saw a surge in auctions,' Backwell said.
However, he warned that there must be a level of certainty and regularity to preserve industry and investor confidence in the market for auctions to work and sustain growth in the long term.
Similar to auctions, the PPA market will require a long-term vision to continue creating transparent and low prices, Backwell said.
'If we can get both these financing mechanisms right, we forecast that 70 gigawatts of wind energy capacity could be installed by 2030 in the region, representing 12% of total electricity capacity,” he projected.
By Ebru Sengul Cevrioglu