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May 15, 2015 | How Solar Can Support Latin America’s Power Market

In Central and South America, solar growth is on a trajectory never before seen anywhere in the world, which is particularly surprising because of the region’s previous dependency on coal, hydro and thermal electricity generation.

Solar power production is increasing at a rate throughout the region of 187% (with expected growth in Central America expected to be more than 100% for at least the next 24 months) — and that is happening, by and large, without any appreciable subsidies about which to speak.

Panama and Chile are the early leaders because of their easily bankable economies and reliable spot-energy markets, but other countries are quickly trying to catch up. Honduras is expected to add 200 MW this year. El Salvador will add 100 MW. Guatemala is growing at the same rate as Panama, and Costa Rica will add the region’s first functioning net-metering program.

Talk about a market on the verge of explosive growth.

Two markets are leading this growth: the utility-scale sector and the commercial sector. In most countries throughout the region, the utility sector has led the way. Central banks understand how the technology works on that scale, and governments, who have long controlled infrastructure development, are readily adding solar to countries’ state-run utilities.

The hidden gem in the region, however, is the commercial rooftop market. Governmental policies aren’t quite in place yet to support its explosive growth, but they are in the works.

How big is the market? Well, the Central American Investment Bank recently launched a financing module to fund such projects in Costa Rica. Within one week, the bank received more than 1,000 applications. As you can imagine, solar investors are looking at those numbers and salivating at the prospects for growth.

Effective net-metering policies will drive commercial rooftop solar, and the countries that have them in place are leaps and bounds ahead of those who don’t. Companies are starting to piece together 1 to 5 MW portfolios so the projects will be shovel-ready when the governmental policies catch up.

Most analysts expect the Latin American market to mirror the United States market pretty closely. What that means for investors is the utility market will lead the way until people become more comfortable with the technology. Then regulators and consumers will press for more solar on the grid — and the industry will continue its aggressive growth throughout the region.