Brazil and Chile are leading the green energy revolution in Latin America

While Latin America and the Caribbean have seen the slowest growth in energy transition over the past decade, Brazil and Chile have fared extremely well, ranking in the top 20 global performers, according to the World Economic Forum. Report 2024 for the promotion of efficient energy transition. Both Latin American countries now have a diverse energy mix, with renewables contributing significantly to their energy demand. Further growth is expected in the coming years as both countries continue to develop their renewable energy capacity, with Brazil focusing on a phase-out from oil and gas production and Chile supporting the cleantech industry through lithium production.

Brazil and Chile have approached the energy transition differently but they have several overlapping achievements. Both sought to increase energy security by investing in a diverse mix of energy sources, increasing the share of renewable energy, introducing carbon pricing mechanisms and establishing regulatory environments to support an energy transition.

The report showed that Brazil has redoubled its commitment to hydropower and biofuels to increase its renewable energy capacity, as well as introduce new wind and solar power capacity. Renewable energy is contributing now almost half of Brazil’s energy demand. As the current chair of the G20, Brazil is also supporting efforts to decarbonize hard-to-mitigate sectors through The Deep Industrial Decarbonization Initiative. Meanwhile, Chile has significantly increased its renewable energy capacity in recent years, with solar and wind power now contributing about 35% of the country’s energy demand. Chile’s Clean Energy Agenda has helped promote projects that aim to achieve carbon neutrality by 2050.

Brazil’s transition support policy

In September, the Senate voted in favor of the fuel of the future (combustível do futuro), bill expected to help accelerate Brazil’s green transition. The bill establishes national green diesel, sustainable aviation fuel (SAF) and biomethane programs aimed at decarbonizing hard-to-mitigate industries. Estimates suggest the program could help increase annual demand for liquid biofuels by an additional 11.7 billion liquids and for biomethane by an additional 3.4 billion cubic meters, according to consulting firm Oliver Wyman. This could lead to an additional $10.4 billion in investment in the sector.

In March, the government also approved Paten Energy Transition Programwhich will provide funds from taxes and other credits owed to companies by the federal government. The program will include funding for companies investing in green energy and clean technology. One of the main priorities of the program will be to expand the production and transport of solar, wind, biomass, biogas, natural gas and hydropower plants up to 50 MW.

In August, the government voted in favor of a the new legal framework for low-carbon hydrogen in Brazil, establishing the national low-carbon hydrogen policy. There was also the launch of the Brazilian Hydrogen Certification System and the special incentive regime for low-carbon hydrogen production (Rehydro), a tax regime designed to encourage technological and industrial development. This is expected to support the installation of production facilities for low-carbon hydrogen, renewable hydrogen and green hydrogen.

Transition and Challenges in Chile

In Chile, the government has accelerated the energy transition by establishing a stable regulatory framework, promoting public-private partnerships and strong climate policies. In addition to conventional renewable energy sources, Chile is committed to developing non-traditional green energy sources.

Chile plans to develop its the longest electricity transmission line to further accelerate its transition to green. The line will transport up to 3,000 MW of electricity between the northern province of Antofagasta and the capital Santiago. Despite the rapid growth of its green energy capacity, Chile’s transportation infrastructure has lagged behind in recent years. The Kimal-Lo Aguirre Transmission Project will help connect more renewable energy projects to the grid.

Chile still faces challenges in establishing greater stability in its renewable energy mix, as it faces an uneven distribution of clean energy throughout the day. This forces Chile to continue to rely on fossil fuels during the hours when renewable energy is not produced. Ana Lía Rojas, Executive Director of the Chilean Renewable Energy and Storage Association (ACERA), explicitly“In Chile, we have a very high contribution of renewable energies during the ‘solar hours’ due to the large number of solar parks.” Rojas added: “The problem we have to address is how to distribute this high percentage of renewables penetration throughout the rest of the day.”

One way Chile will address energy reliability issues is by developing utility-scale battery storage capacity. In May, three utility-scale battery energy storage projects were announced, to be located together with the solar plants. Chile is now ready to become the second largest battery market in Americaafter the US In 2023, Chile opened 12 storage projects with a total capacity of 1.3 GW. It currently has 85 energy storage projects totaling 6.4 GW in various stages of development.

By Felicity Bradstock for Oilprice.com

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