Study on the Development of the Renewable Energy Market in Latin America and the Caribbean

Study on the Development of the Renewable Energy Market in Latin America and the

Christopher Flavin, Milena Gonzalez, Ana Maria Majano, Alexander Ochs, Maria Gabriela da Rocha Oliveira, Philipp Tagwerker | November 2014

The region of Latin America and the Caribbean is already a global low-carbon leader in terms of power generation from hydrological and biomass resources, and it recently has made great strides in developing its other renewable energy sources. Declining costs, maturing technologies, and vast untapped potentials for renewables offer an unprecedented opportunity for further development of the renewable energy market in the region. Continuing to invest in renewables will provide Latin America and the Caribbean with the opportunity to address key economic, social, and environmental challenges in the energy sector. 

Renewables are increasingly the most economic option for new generation capacity, especially for countries that depend on fuel oil for power generation, such as many in Central America and the Caribbean. Resource advantages give the region the potential to match or even undercut the lowest costs achieved in other parts of the world. Low-cost financing and the scaling up of local industries are important keys to realizing that potential.

Effective policies and measures can greatly improve the investment environment for domestic and international, as well as public and private, actors—particularly given a market that is distorted due to both direct and indirect subsidies for fossil fuels. Considering the longevity of current investments in power system infrastructure, it is imperative that policymakers carry out integrated resource plans that seek to lower overall electricity system costs in the long term by taking advantage of synergies among different renewable sources, energy efficiency, and smart grid technologies.

This report begins with an overview of the status of renewable energy technologies for power generation and their global markets (Chapter 1). It then provides an overview of the power sector in Latin America and the Caribbean and of regional renewable energy development to date (Chapter 2). This is followed by an assessment of the current barriers to the continued development of renewable energy in the region, along with best practices for addressing them (Chapter 3). The report then analyzes the impacts of climate change in the region and suggests adaptation strategies for the power sector (Chapter 4). Finally, the report ends with recommendations to any Multilateral Development Bank, including the Inter-American Development Bank, on how they can best position and strengthen their role as a driving force behind the development of a future energy system powered by a large share of renewables in Latin America and the Caribbean . 

This publication is also available from the Inter-American Development Bank (IDB).