Latin America sees surge in renewables investment, as UK policy curtails green incentives

Latin America was the backdrop to two notable investment deals in renewable energy this past week. The continent’s favourable wind and solar resources, combined with relatively high natural gas prices, make renewables an attractive option in these emerging markets.

Enel Green Power signed a 25-year electricity supply deal with Empresa Nacional de Electricidad for as much as $3.5bn, which will underpin the construction of a geothermal facility, wind farm and solar-power plant in Chile. The three clean-energy plants will have a combined capacity of 300MW.

On the other side of the continent, Sky Solar Holdings and Lafemir received a $55.7m loan from the Inter-American Development Bank to build six solar farms in Uruguay, which will have a total capacity of 69.9MW. The developers will receive additional funding from the China Co-Financing Fund and the Canadian Climate Fund, of $19.3m and $10m, respectively.

Bloomberg New Energy Finance forecasts significant further growth for the developing economies of South America as noted in its New Energy Outlook 2015: “In the emerging markets of Latin America, utility-scale PV looks particularly attractive. Some of the most competitive projects to date have been in countries where insolation rates are high and there are no duties on imported PV equipment. This includes Chile, Panama and Uruguay.”

However, the market for renewables is not looking so bright across the Atlantic, as the UK government announced last week that renewable energy would no longer be exempt from the Climate Change Levy, paid by retail suppliers. Shares of The Renewables Infrastructures Group (TRIG) dropped 3.1% on the day of the announcement as a result, and other firms in the sector also suffered a blow on the stock market. Owners of renewables projects like TRIG had previously been able to sell Levy Exemption Certificates to suppliers, but this revenue stream will be removed.

The UK government also dropped a series of residential energy efficiency measures and plans to require all new homes to be zero-carbon standard by 2016 or for non-domestic buildings to be zero carbon by 2019 – in a bid to reduce regulation some see as hampering construction.

Nevertheless, there were several positives for UK renewables last week. Renewable Energy Generation was granted permission to build an 8MW wind farm in Wales, and is in talks with the government about the project’s eligibility to receive subsidies before the support programme is axed next year. Meanwhile, Macquarie Group raised GBP 739m ($1.1bn) to invest in UK low-carbon power projects, through its inflation-linked Macquarie Infrastructure Debt Fund.

Moving further east, collaboration between a solar developer and oil producer made the headlines last week. Glasspoint Solar was commissioned by Petroleum Development Oman to build the world’s largest solar heat plant at 1GW, in Southern Oman. Parabolic mirrors will heat fluid, producing steam to then inject into oilfields to reduce the viscosity of heavy crude and bring more supplies to the surface. Glasspoint is in talks with other oil producers to enhance oil recovery and serve the industry’s increasing demand for energy.

In other news, China’s biggest wind turbine maker, Xinjiang Goldwind Science & Technology, is planning the country’s first sale of green bonds, reflective of the region’s increasing interest in sustainable investment. The bonds will only be available to professional investors and will be denominated in dollars.

Companies worldwide, particularly in the US, are showing increasing concern in sustainability, as many of the world’s largest corporations directly invest in renewables. Facebook announced a new goal last week to power 50% of its operations with renewable energy by the end of 2018, while Amazon hired Spanish electricity company Iberdrola to build and run a 208MW wind farm in North Carolina to power its data centres.

Indeed, a Bloomberg New Energy Finance Research Note on US corporate power purchase agreements (PPAs) states that: “The business case to sign a corporate PPA today is strong: system costs are decreasing; PPAs serve as a fixed-price long-term hedge against natural gas prices; and the window for low-cost contracts is closing as federal subsidies expire at end-2016.”

In other US news, SunEdison’s yieldco TerraForm Power agreed to buy 930MW of wind power capacity from Invenergy Wind for $2bn, which will help the yieldco increase its dividend target 26% next year. Meanwhile, the US Commerce Department imposed dumping tariffs just shy of 250% on Chinese solar product imports, in an effort to equalise the marketplace.

Last but not least, New Zealand committed to a significantly bigger target to reduce its greenhouse gas emissions, to be ratified in the international climate agreement this December. The new target is to reduce emissions to 30% below 2005 levels by 2030.

Japan solar capacity (AC) additions from 2013 – 2015 (MW)

Source: Bloomberg New Energy Finance. Reproduced with permission.