Wind & Solar in Latam and the Caribbean

1 Summary

In Latin America and the Caribbean, renewable energy (RE) offer great potential for reducing the adverse effects of the ever-increasing rates of carbon emissions associated with the move fronting more energy-intensive societal models.

Despite over  two decades of dialogue aimed at giving wind and solar energy resources more prominent positions in the energy policies of countries in the Americas, not enough progress has been achieved so far. The fact that these points have not been integrated into energy policies reflects, to a certain extent, a fiasco on the part of public policymaking and international cooperation to consolidate sustainable patterns of development.

One of the factors dominating this state of affairs has to do with the behaviour of society as a whole. This phenomenon has many facets: (i) individual versus collective behaviour; (ii) a shortfall of political will on the part of Governments, which is often coupled with a lack of knowledge, ideology, perceptions or insufficient public support and the supremacy of a liberal economic doctrine that entangles clean development in the energy sector; (iii) the market power and lobby wielded by electricity, gas and oil companies; and (iv) changes in the organisation of energy production chains, in conjunction with the addition of pricing and fiscal policies applying to both fuels and electrical power that have various implications for the market penetration of variable renewable energy sources.

2 The Caribbean

2.1 Trends in renewable energy adoption

The region has perfect conditions for a significant increase in RE development due to its location close to the equator (almost uninterrupted sunlight) and the impact of the northeasterly trade winds. The Caribbean Sea has wind power values above the average compared to the rest of the subtropical Atlantic Ocean, according to previous studies dealing with wind power density worldwide [1]. Most countries here lie between 10°N and 30°N and are influenced by the trade wind belt (between 5°N and 30°N). Moreover, most island countries depend on fossil fuel imports at high prices (only Trinidad and Tobago and Venezuela and have enough oil and gas reserves for national consumption and export).

Solar PV and wind technologies have rallied to the point that renewable generation costs less than the fuel cost of prevailing generation in most CARICOM (the Caribbean Community and Common Market) countries. Recent power purchase agreements (PPA) in Jamaica have reached the US$0.09 per kWh range for solar — as in the Paradise Park solar plant, which became operational in 2018 — and 12 cents per kWh range for wind — as in the Blue Mountain Renewables wind farm PPA; and falling prices are expected to continue [2].

Batteries can also ‘time-shift solar power from the daytime hours it is generated to serve load in the evening. For many CARICOM countries, solar power plus storage can provide reliable power for up to 14 hours a day at an average of US$0.17 per kWh. This is cheaper than conventional heavy fuel oil (HFO) or diesel power plants [3]. That said, battery costs have not yet fallen to the level that would make batteries viable for power supply throughout the night.

2.2 Policy implementation

In 2000, the islands had on average less than 0.5% RE as a fraction of the total installed capacity of renewable and non-renewable generating assets. The French island of Guadeloupe was an early lead with just under 10% of total installed capacity coming from wind and biomass sources. Curacao and Jamaica were the only other islands at this time with more than 1% RE penetration.

Between 2000 and 2018, total RE capacity in the 31 islands grew over 1,600%, from 82 MW to an estimated 1417 MW. As Fig. 2 demonstrates, strong growth in solar PV and onshore wind drove this dramatic increase, with solar and wind accounting for 54% and 38% of capacity growth, respectively. Modest growth in geothermal and bioenergy accounted for the remainder. The overall progress in the region is impressive considering that most islands had zero or negligible RE in 2000. By 2018, most islands had RE penetration on the order of 2–10%, with an average of 5.3% RE penetration. This regional figure compares unfavourably with global statistics, which the International Energy Agency estimated to be around 26% in early 2019.

In the solar-specific regression analyses, net-metering/net-billing was the only policy that was positively and significantly correlated with growth in solar installed capacity. For the wind-specific regressions, tax incentives, feed-in tariffs, and net-metering/net-billing programs were positively and significantly correlated with growth in wind installed capacity. Net-metering/net-billing had the strongest correlation, followed by feed-in tariffs and tax incentives. Wind was the energy only model in which tax incentives were significant. Investment incentives and allowing Independent Power Producers (IPPs) were not significant in any of the wind-specific regressions [4].

3 Latin America

3.1 Wind and solar variability

The present section analyses the variability and complementarity between wind and solar energy resources in Latin America. The analysis focuses on understanding the seasonality of the resources, their variability and possible complementarity. To reach this objective, several steps are taken:

• Some state of the art review for variability indices and studies addressing complementarities between renewable sources have been performed.
• At the same time, the hourly resource data of solar irradiation and wind speed are transformed into electrical energy.

With this approach, it is possible to evaluate the data at the expected level of this article: energy integration.

Natural cycles in the context of solar energy have three dimensions: seasonal variation, daily variations (from dawn to dusk) and short-term fluctuations due to weather conditions. Wind power, on the other hand, can fluctuate at various time scales: it is subject to seasonal variations of peak electricity production in winter or summer depending on the region, as well as diurnal and hourly changes. There are also very short-term fluctuations in the intra-minute and inter-minute timeframe that are small relative to installed capacity, compared to hourly or daily variations. Furthermore, orography can also affect wind patterns since it plays an essential role in the screening, deflection and acceleration of the wind and can create turbulence.

Calculated hourly indices show a more considerable variability for wind power than for solar power generation. This can be explained as in solar power (different to the wind power case). The major variations occur in an intra-minute and inter-minute timeframe and by the larger sensitiveness of wind power to its natural resource (wind speed). Indeed, wind generation relates to the wind speed through a cubic function, while solar generation presents an almost linear relationship with solar irradiance [5].

An important fact to remark is how strong some regions are correlated with other areas: this is because hotspots present trends of high wind speeds at night: therefore, it is well correlated with many solar areas. In addition, when the monthly correlation was analysed, for correlations for all data series (done for wind and solar power) and for the correlation of typical years (including hydropower in the correlation analysis), Brazil plays a vital role regarding renewable energy integration in LA. It presents the strongest capacity to complement and be complemented by several LA countries.

Besides Brazil, Venezuela also presents strong correlations with countries like Paraguay, Brazil and Ecuador, mainly under a seasonal pattern. By evaluating the potential availability of resources and complementarity in hotspots in Latin America, it is possible to conclude that energy integration in Latin American countries is a suitable strategy to deal with variable renewable sources of electricity generation. Therefore, policymakers and energy planners should work to find ways to dismantle some of the barriers – such as regulatory and interconnection issues – for developing this potential.

3.2 The Chilean case

Over the last decade, Chile has experienced a boom of renewable energy technologies in the power sector, making it into one of the largest renewable energy markets in South America. The RE industry has entered the energy market because this technology has become increasingly financially competitive with conventional energy over the last few years. The main renewable energy technologies (i.e., solar PV, wind and hydroelectric) can generate between 5.3 and 7.7 times more jobs than natural gas plants, and between 3.6 and 5.3 more jobs than coal. This shows a clear comparative advantage of RE over the country’s most used fossil fuel sources [6].

Since Chile is undergoing a rapid energy transition, non-technical occupations such as legal advisers, sales professionals, inspectors, and economists have been recognised as crucial for RE development. Addressing the new labour demands coming from the integration of large-scale renewables into power networks, as well as providing additional job market incentives, remain significant difficulties in ensuring a smooth transition to the use of these technologies. In this context, it is crucial that public authorities and the private sector join forces and collaborate to generate robust policy and partnership mechanisms to address the issues of labour shortages and skill gaps in the renewable energy industry.

4 Constraints And Prospects

4.1 Potential benefits

Potential benefits of a sustainable energy transformation in Latin America and the Caribbean are now being quantified and mentioned more often in government plans, press releases, and business reports. For instance, recent developments in the sustainable energy market create opportunities that could yield US$16 billion in net economic benefits to Caribbean countries over the next 20 years. To realise these benefits, these countries will need to invest an estimated US$11 billion over the next decade. The required investment can be broken down by specific sustainable intervention type, as shown in Table 1.

Net-metering/net-billing policies have become increasingly popular price instruments in Latin America and the Caribbean. Feed-in tariffs had a significant and positive correlation with total RE capacity. Interestingly, the impact of feed-in tariffs on solar installed capacity was only found to be substantial in the FE specification, which overall yielded consistent but more optimistic results than the PCSE specification.

Suppose Caribbean countries invest optimally in renewable electricity generation. In that case, they could save billions in generation costs from today to 2040, increasing the share of renewable generation by a factor of almost four while reducing electricity costs, oil imports, and CO2 emissions. To develop sustainable pathways for electricity generation, the least-cost generation matrices for each country need to be estimated by assessing the full range of energy sources, including renewables,  battery storage, natural gas, and conventional HFO and diesel generation based.

At the same time, climate change is increasing the risk of hurricanes and other severe weather events in the Caribbean and elsewhere, making sector-wide resilience planning essential. Options to increase resilience include: using distributed generation and batteries in microgrids that can supply energy during power outages on the main grid, strengthening generation plants to withstand extreme weather, and undergrounding critical parts of electricity networks (where flooding is not a risk).

4.2 Energy resilience

Latin America has the largest share of renewable energy for power generation globally. However, it has historically relied on hydropower, which is vulnerable to long-term phenomena like the El Nino-Southern Oscillation (ENSO). The region is currently experiencing a steady increase in non-hydro renewables such as wind and solar. Many academics and government agencies are investigating to what extent improved deployment of wind turbines and solar PV cells, aimed at complementing existing hydropower, could mitigate the impacts of ENSO in Latin America.

Energy resilience refers to energy infrastructure’s ability to withstand and recover quickly from an extreme disruption. In the Caribbean,  hurricanes, floods, and earthquakes are among the greatest disruption risks. Measures to improve a system’s ability to withstand and recover from a natural disaster include: improving system architecture, burying distribution lines (where flooding is not a risk), and strengthening solar installations by using vibration-resistant modules and incorporating lateral racking supports.

The devastation caused by hurricanes in recent years, and global climate trends,  have increased the urgency in the region to invest in energy resilience. The U.S. National Oceanic and Atmospheric Administration (NOAA) predicts that hurricanes’ destructive potential is likely to increase due to: rising sea levels, which cause larger storm surges, more rainfall during hurricanes, increasing an average of 10–15 per cent, and more frequent category 4 and category 5 hurricanes [7].

Hurricanes damage generation, transmission, and distribution infrastructure, all of which is expensive to rebuild. Damage to energy infrastructure causes power outages for customers and lost revenue for utilities. In  2017,  Hurricanes  Maria and Irma devastated islands across the  Caribbean.  When Hurricane Maria hit Dominica, it caused damage equivalent to two times its GDP. Damage to the electricity infrastructure was costed at  US$33  million, with the utility losing  US$34 million in revenue while electricity services were down. In Puerto Rico, Hurricane Maria wiped out 90 per cent of the island’s electricity grid and caused damage costing more than US$90 billion [8].

5 References

[1] Costoya, X., DeCastro, M., Santos, F., Sousa, M. C., & Gómez-Gesteira, M. (2019). Projections of wind energy resources in the Caribbean for the 21st century. Energy, 178, 356-367.

[2] https://publications.iadb.org/publications/english/document/Sustainable_Energy_Paths_for_the_Caribbean.pdf

[3] “Lazard ’s Levelized Cost of Energy Analysis—Version 11.0.” Lazard. Accessed October 25, 2021. https://www.lazard.com/media/450337/lazard-levelized-cost-of-energy-version-110.pdf.

[4] Kersey, J., Blechinger, P., & Shirley, R. (2021). A panel data analysis of policy effectiveness for renewable energy expansion on Caribbean islands. Energy Policy, 155, 112340.

[5] Nascimento, G., Huback, V., Schaeffer, R., Lima, L., Ludovique, C., Paredes, J. R., … & Amendola, F. (2017). Contribution of Variable Renewable Energy to Increase Energy Security in Latin America.

[6] Nasirov, S., Girard, A., Peña, C., Salazar, F., & Simon, F. (2021). Expansion of renewable energy in Chile: Analysis of the effects on employment. Energy, 226, 120410.

[7] NOAA. 2020. “Global Warming and Hurricanes.” Geophysical Fluid Dynamics Laboratory. Accessed October 2021. https://www.gfdl.noaa.gov/global-warming-and-hurricanes/

[8] Uria, Daniel. 2018. “Hurricane Maria caused $90B of damage in Puerto Rico.” UPI. April 9. Accessed February 2019. https://www.upi.com/Top_News/US/2018/04/09/Hurricane-Maria-cau-sed-90B-of-damage-in-Puerto-Rico/6421523309427/?ur3=1