Latin America and Africa are areas of vast renewable energy potential, but to date, utilization of their wind and solar resources remains comparatively limited, especially in Africa. This has negative implications for countries’ economic development, national and global climate ambitions, and for energy firms that are unable to successfully develop projects. This briefing provides an overview of renewable energy development in the regions, reviews the principle constraining factors and examples of successful development, and provides recommendations for how governments and the private sector can seek to promote the sectors’ growth.
There are several factors that explain the relatively limited development of solar and wind energy across the two regions. While there is variation across countries, in both the levels of renewable success and inhibiting factors, broadly speaking there are four main constraints:
- Structural and financial factors limiting private sector opportunities, including limited grid capacity, currency and interest rate risks, and a relative lack of skilled labor.
- Policy regimes that create investment uncertainty, owing to limited financial incentives, unpredictable regulatory structures, and political doubt.
- Resistance to development from local communities and environmental groups who, weary of large-scale infrastructure projects, can slow or completely halt development.
- Failure from independent power producers (IPPs) to understand the local context leading to poor investment decisions, creating negative reputations and troubled stakeholder relations.
Despite these constraints, this report identifies several success factors which are enabling progress in the regions. These include the make-up of financial incentives deployed by governments, the clarity and stability of regulatory frameworks, the extent of international investment in grid infrastructure, the effectiveness of efforts to facilitate social acceptance by governments and project developers, and the extent to which IPPs are developing market entry strategies that are well-informed, adaptable, and patient.
