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Finding Latin America’s next big solar market is not easy for developers and investors looking for opportunities beyond Chile, Brazil, Central America and Colombia.
Two of the most promising new markets, Argentina and Ecuador, are both sending out positive signals even though significant challenges remain. Argentina has been a no-go zone for foreign investment for years, and that includes solar development.
Speaking before a general election held in October, a source from the solar industry told Solarplaza: “We have to wait and see if the government is willing to help foreign investment. So far almost nobody is willing to invest in Argentina.”
That was hardly surprising, since Argentina currently has the worst credit rating of any nation in the world and any money to be made is difficult to take out of the country, restricting opportunities to local developers only.
Now that the election has put the pro-business Mauricio Macri in office, the investment climate may well improve. But even before the recent elections, there were indications that Argentina might become a country to watch.
At the end of October, it was announced that a new renewable energy law could reactivate old projects that had been mothballed due to lack of investment. The government was planning a fund to support resurrected projects.
In addition, the country had said it was committed to 8% renewable energy by 2017 and 20% by 2025. Analysts believe it is too early to speculate what the recent elections will mean for either of these measures.
Despite the positives, Josefin Berg, senior analyst at the IHS, says she’s “still quite sceptical” about Argentina becoming an El Dorado for solar any time soon. Other insiders had different opinions, however.
One source consulted by Solarplaza went so far as to say that the Macri victory could soon open up a 25 GW renewables market, of which solar would take a significant slice.
Ecuador is another country provoking vigorous debate as to its viability as a future solar star. Back in 2013, the country became a pioneer in the region by offering a feed-in tariff to up to 200 MW of new installations.
To date, only 26 MW of solar has been built on the back of the deal. Berg has spoken to suppliers who told her there were “land rights and other issues” that had resulted in cancelled projects.
However, although disappointing compared to the amount originally promised, 26 MW still puts Ecuador in the premier league of Latin America solar.
In addition, the country is considering manufacturing its own PV modules and has said it would participate in a drive to improve grid interconnections with neighbouring nations in order to better distribute energy derived from renewables.
Furthermore, this December state energy company Petroecuador will publish a report analysing the viability of new wind and solar projects.
Two areas where renewables including solar have already proven their worth have been the Galapagos and the island of Loja. A greater adoption of renewables on the mainland could be brewing, too.
And paradoxically, one key driver could be plummeting oil prices. Like Argentina, Ecuador is a net hydrocarbon exporter. Falling prices means problems for its oil industry, such as having to slash investment in exploration and costly new projects.
The smart money might soon be looking for a less volatile energy market, such as solar.
Find out more about emerging market opportunities at Making Solar Bankable Emerging Markets, on February 18 and 19 in Amsterdam, Netherlands. Don’t miss the upcoming Solar PV Trade Mission Argentina & Uruguay, organized by Solarplaza in Buenos Aires and Montevideo next June.