Latin America’s commodity dependance may finally come to an end thanks to its potential to become a renewable energy hub. With abundant renewable resources, the region can produce some of the world’s cheapest energy. This move could help Latin America to boost employment and diversify its economy.
Latin America has become a global leader in producing cheap natural resources and exporting them around the world. Yet there is a great deal of potential for it to monetise its clean energy potential. This is true for two reasons: Firstly, Latin America’s abundant natural resources provide plentiful bases from which to generate affordable renewable energy at a very low cost; Secondly, the region’s lack of manufacturing capacity has prompted many companies to look elsewhere for exports and relocation are on the rise.
Renewable energy is one such industry that could bring Latin America an economic boost. The sector boasts manufacturing that is competitive and export-driven, with overall tariffs well below prices in other industries. In addition, the region’s high reserves of renewable sources, such as wind and solar energy, can make it ever more affordable. The more the industry develops, the cheaper and cleaner its energy will become. This becomes even clearer when considering that Latin America is currently only responsible for less than 10% of global renewable energy production, a figure that is growing.
Despite this, the potential for growth in Latin America is huge and has been growing consistnently for the past decade. Moreover, this growth is expected to continue over the coming years. The International Renewable Energy Agency’s Renewables Global Status Report highlights that there are 1.3 million megawatts of renewable energy potential in Latin America. This figure could be as much as twice the size by 2030. With this growth comes increasingly important export opportunities, which is expected to expand 2-fold from around $15bn to $35bn per year by 2030.
This increase will be underpinned by increased joint research and development (R&D) between industry partners and the public sector to optimise energy generation and storage methods (for example, using wind power generated at night in order preserve its stability). These measures will further help to enhance the competitiveness of Latin America’s renewable energy sector, and make it more export-oriented.
This will boost growth in a variety of ways, from the expansion of related industries (for example, renewable energy storage) to increasing returns on R&D investments and the creation of new jobs. Generating clean energy from natural resources is an ideal opportunity for Latin America to diversify its economy while also boosting employment opportunities. It has the potential to combine economic development with social integration, as well as providing safety nets for domestic populations by lowering prices of basic goods and services.
However there are several barriers that stand in the way. Corruption and idiosyncratic policies may impede the region to fullfill its potential and limits the growth today. Legislation needs to change in order to regulate investments and provide certainty to investors and consumers as well as regional cooperation to further the region’s objectives as a block, this will not only provide a better negotiating stance, but will also give geopolitical precense to a region that lacks agenda on the international plane.