Chinese investment drives Latin America’s renewable energy expansion

From Oaxaca to Patagonia, Chinese companies have identified many solar and wind opportunities

China is investing massively in renewable energy in Latin America as it has taken stock of the region’s high potential for wind and solar generation. But Latin America’s abundant natural energy resources still represent a challenge to developing the sector, according to the International Renewable Energy Agency (IRENA). And yet more challenges exist in getting know Latin American markets as big disparities exist between countries in their stages of development, IRENA says.

A study by the Global Development and Environment Institute (GDAE) says China is now one of South America’s principal energy partners and highlights the partnership’s potential for diversification within the sector and moving beyond fossil fuels.

According to GDAE, China’s elevated stock of solar photovoltaic panels, has become available precisely at a time when Chile, for example, was in dire need of new energy sources. Argentina drastically reduced gas exports to Chile, but the opportunity presented by China led the former to announce huge solar projects in the Atacama desert.

Chinese investments in renewable energy in Latin America are seen as one of the biggest outlets for the twofold growth in trade within the next decade promised earlier this year by President Xi Jinping at the first China-CELAC Summit. Increasing oil and gas production by the United States has forced big Chinese renewable companies to seek new export markets.

A report by the International Energy Agency that forecasts medium-term energy expansion notes that more clean energy capacity was installed in 2014 than ever before. Falling costs and aggressive expansion in emerging countries were named as factors in the addition of a record 130GW, a 45 percent addition to global net capacity. The report named Brazil, Mexico, Uruguay and Chile among the most attractive countries for clean energy investment.

And despite its low percentage of renewables in the energy mix by regional standards, Argentina does not intend to be left out of this wave of investment, signing a memorandum of understanding with Chinese company Xinyuan Wind to develop the 200 MW “El Angelito” wind farm in the province of Chubut, Patagonia, earlier this year. Investment from Xinyuan is estimated to be around US$ 435million.

El Angelito is part of a larger energy cooperation agreement between Argentina and Chinese companies to install renewable, hydroelectric, and nuclear energy projects in the country. Argentine Patagonia is considered a region with huge wind energy potential.

And in Bolivia, a new 50MW solar power plant which will also feature a geothermal unit was announced for construction in the district of Potosí. Strong expressions of discontent stemming from President Evo Morales’ recent decision to allow conditional oil exploitation in supposedly protected conservation areas have encouraged the government to explore more fossil fuel alternatives.

Following national strategies

The amount of new opportunities is causing companies to expedite their investment decisions. In Argentina, Chinese manufacturers Sany and Goldwind will be vying for Argentinean company Impsa’s assets in Brazil, and are already eyeing a rapid expansion. Impsa is experiencing severe financial difficulties and wants to shed its Brazilian operations, which include a contract with Brazilian state-owned company Furnas to supply 1GW of wind energy.

Envision also recently announced the acquisition of a majority stake in Vive Energia, a Mexican company with more than 600MW of wind power in its international portfolio which is constructing the country’s first wind farm, scheduled to come online next year.

“This is China’s largest direct investment in Mexican renewable energies. It will take advantage of bilateral cooperation agreements and existing lines of credit,” said Envision’s Director for Latin America and the Caribbean, Rafael Valdez Mingramm.

Solar energy company Yingli Green Energy is another enterprise that intends to make strides in Latin America. Recently, the company that will power the Maracanã Stadium for the opening and closing ceremonies of the Olympic Games in Rio in 2016 announced it will supply solar panels equivalent to 40MW of installed capacity to American company Sybac Solar to construct two plants in Honduras.

The contract outlines the supply of panels capable of producing 25MW for the first phase of the 50MW Pacific Solar project. The other agreement is to supply 15 MW to the La Manzanilla y Las Lajas plant. “It is through strong relations with the leading proponents of solar energy in Central America that Yingli has become one of the most significant large-scale providers for projects in the region,” said Jeffrey Barnett, Yingli’s vice president for international sales.

Yingli signed an agreement in September to supply 240MW for two hybrid solar plants which Abengoa is building in northern Chile.

In Uruguay, another Chinese company, Sky Solar, announced the Inter-American Development Bank’s (IDB) approval of US$ 55.7million in financing for the installation, operation, and maintenance of six plants along with new transmission infrastructure. Along with the bank, the China Co-Financing Fund and the Canada Climate Fund committed to additional funding totaling US$ 29.3million.

“We are delighted to have secured this funding with the IDB and its associated funds for this great project in Uruguay, at the same time that we continue to expand our operations in Latin America,” said Weili Su, Sky Solar’s chairman and CEO.

Sky Solar has also presented a project for a 45MW solar farm in Arica, northern Chile, which wold be the largest in the region. In September, Sky Solar announced that it had received US$ 100million from Hudson, a private equity firm focused on investments in renewable energy. As part of the deal, Hudson will invest US$ 50 million in solar projects in Chile and Uruguay.