Speaker 1: This is Dana Perkins and you're listening to Switched on
Speaker 1: the Bennif podcast. As with the rest of the world,
Speaker 1: over the last year, Latin America has been contending with
Speaker 1: inflationary pressures and high energy prices. But what has been
Speaker 1: the region's reaction to the global crisis and how of
Speaker 1: its nations gone about securing affordable domestic energy while also
Speaker 1: looking for new export opportunities. Earlier this month, BEANEF put
Speaker 1: out our region's clean energy policy, supply and installations under
Speaker 1: a microscope when we released the Latin America Market Outlook
Speaker 1: for the first half of twenty twenty three. In addition
Speaker 1: to the market outlook, BENEF also has been researching something
Speaker 1: that has the potential for a huge impact on the region,
Speaker 1: green hydrogen. To find out more, I sat down with
Speaker 1: beanef's head of Latin America Research, James Ellis, and a
Speaker 1: member of benef's team from the saal Pallo office, Associate
Speaker 1: Natalia Cassillos Rebel. Together we discussed a range of topics,
Speaker 1: including key findings from the Latin America Market Outlook, digging
Speaker 1: into the details, and assessing whether last year's record breaking
Speaker 1: solar and winds installations could be surpassed in the future.
Speaker 1: We went into the opportunity for green hydrogen and ammonia
Speaker 1: produced in South America and which countries are at the
Speaker 1: forefront of the potential boom. We also discussed Brazil's small
Speaker 1: scale photovoltaic revolution, Chile's continued clean energy drive, Columbia's renewables rise,
Speaker 1: and some of Mexico's recent failings in this space. If
Speaker 1: you like this podcast, make sure to subscribe to receive
Speaker 1: updates on future episodes and consider giving us a review.
Speaker 1: But right now, let's speak with James and Atalia about
Speaker 1: Latin America. Natalia, thank you for joining.
Speaker 2: Hi everyone, thank you so much.
Speaker 1: Denna and James, thank you for coming back to the show.
Speaker 3: Hey, Dana, it's a pleasure.
Speaker 1: So we're here to talk about Latin America. And we
Speaker 1: just recently put out one of our regular Latin American
Speaker 1: Market outlooks. It's certainly a story of growth right now,
Speaker 1: and James, can you give us some context around that,
Speaker 1: given that this report recently came out.
Speaker 3: Sure.
Speaker 4: Yeah.
Speaker 3: The Latin America Market Outlook is really our flagship publication
Speaker 3: in which we take stock capacity, generation, investment, energy transition
Speaker 3: policy and all the sort of key trends that have
Speaker 3: been happening in the region over the past six months.
Speaker 3: And if there's one thing I would just sort of
Speaker 3: pull out for you as a main finding, it's a
Speaker 3: story of wind and solar growth. As in much of
Speaker 3: the world, wind and solar really just continues to boom
Speaker 3: in Latin America in often spectacular fashion, and really when
Speaker 3: you look at it cumulatively as a region, it only grows.
Speaker 3: So individual markets and segments, of course fluctuate from year
Speaker 3: to year with policy or project development cycles or financial conditions,
Speaker 3: but annual editions of renewal energy and wind and solar
Speaker 3: specifically are getting bigger every year than the year before,
Speaker 3: including even in twenty twenty when the pandemic hit, and
Speaker 3: that of course means that every year is a record
Speaker 3: year basically in terms of growth and wind and solar,
Speaker 3: and last year was no different. Latin America commissioned twenty
Speaker 3: two gigabouts of new wind and solar capacity, which is
Speaker 3: about twenty percent more than the year before. And maybe
Speaker 3: spoiler alert here, we're on track for another record year
Speaker 3: in twenty twenty three, so we'und track.
Speaker 1: For a record year. But I would say a lot
Speaker 1: of what I hear regarding any sort of global trends
Speaker 1: pass to do with inflation. There's a lot of discussion
Speaker 1: around inflation, and then many countries that have responded in
Speaker 1: kind to cool inflation with high interest rates. Are we
Speaker 1: seeing the same issues in parts of Latin America or
Speaker 1: is this growth continued on despite inflationary pressure.
Speaker 3: Well overall, it has very much continued on in spite
Speaker 3: of inflationary pressure. There was interesting news this week, particularly
Speaker 3: in Brazil and Mexico, and I believe Chile as well,
Speaker 3: that inflation is starting to come down and analysts across
Speaker 3: the region are starting to expect central bank to lower rates.
Speaker 3: In central banks largely across the region have kept rates high. Brazil,
Speaker 3: according to many analysts, has had one of the more
Speaker 3: aggressive central bank policies in the world. But this has
Speaker 3: really done nothing to slow the growth of when it's
Speaker 3: solar in the region, it's really just marched on.
Speaker 1: So another thing that we've pointed out in previous podcasts
Speaker 1: around supply chains had to do with the fact that
Speaker 1: Mexico really stands to benefit from changes to global supply
Speaker 1: chains and this near shoring trend that is starting. When
Speaker 1: we're thinking specifically regarding wind and solar. Have we seen
Speaker 1: those industries started to in some cases on shore in
Speaker 1: let m some of the production and have supply chains
Speaker 1: really changed And is that impacting these record breaking years
Speaker 1: that you're talking about. Is it tied together?
Speaker 3: The Mexican story is a really interesting story because there
Speaker 3: are a number of factors that are pushing in opposite directions.
Speaker 3: On the one hand, there's a narrative that the country
Speaker 3: stands to benefit disproportionately from changes in global trade and
Speaker 3: near shoring, and that is largely true, particularly in the
Speaker 3: automotive segment, or has been true. And the main data
Speaker 3: point that you could kind of point to would be
Speaker 3: the announcement of Tesla's new factory that is planned in Monterey,
Speaker 3: Mexico along the border, which will be its first in
Speaker 3: Latin America. But on the other hand, the current administration,
Speaker 3: which has been in power since twenty eighteen, has been
Speaker 3: tremendously hostile to private investment in the energy sector, and
Speaker 3: this is really stunted what had been previously one of
Speaker 3: the most exciting markets for wind at solar development in
Speaker 3: Latin America. So overall, net Mexico is actually not in
Speaker 3: a fantastic place in terms of in terms of energy
Speaker 3: transition investment because of these conflict conflicting factors.
Speaker 1: And really so in terms of the industries that we
Speaker 1: cover in some respects in this automotive and batteries of
Speaker 1: therefore storage space. But really we're not seeing the onshoring
Speaker 1: of wind and solar manufacturing, but we are seeing deployment.
Speaker 1: So let's go in into deployments part of things. What
Speaker 1: countries are really standouts. You mentioned that we're going to
Speaker 1: be entering the year where we're probably going to continue
Speaker 1: to break records. Where are you seeing the most activity.
Speaker 3: It's a story about Brazil now, and this is the
Speaker 3: drivers of growth of clean energy growth in Latin America
Speaker 3: have really changed from a couple of years ago. As
Speaker 3: recently as twenty twenty, clean energy in the region was
Speaker 3: a story for principal markets, all contributing pretty significantly, and
Speaker 3: those being Argentina, Brazil, in Mexico. But as I mentioned,
Speaker 3: what we see today as a market that is much
Speaker 3: much more concentrated, and that's really concentrated within Brazil, which
Speaker 3: contributed about three quarters of regional new build and specifically
Speaker 3: we're talking about growth in solar in the sub five
Speaker 3: megawat market that is the key driver of regional activity.
Speaker 3: I sort of hesitate to call that small scale or
Speaker 3: rooftop just because Brazil's net metering policy is quite generous
Speaker 3: and goes up to five megawats. So it's really growth
Speaker 3: in this five megawats solar market that's the key driver
Speaker 3: of regional activity. And just to kind of put some
Speaker 3: numbers around that that I think will give much much
Speaker 3: needed context, that segment added more capacity than total solar
Speaker 3: additions in the rest of Latin America combined, and that's
Speaker 3: including Brazil's own utility scale solar gains, and it provided
Speaker 3: about a half of overall regional wind and solar capacity growth.
Speaker 3: So we're talking about eleven gigawatts of solar that's all
Speaker 3: under five megawat systems, and that's just completely crazy growth
Speaker 3: because it also dwarfs Brazil's own utility scale solar editions,
Speaker 3: which were just about three and a half gigawatts. And
Speaker 3: the reason why that's sort of unusual is in most
Speaker 3: markets around the world, it's really the other way around.
Speaker 3: Utility scale is generally much more dominant in a much
Speaker 3: larger share of the solar market. There are some other
Speaker 3: exceptions like Australia, but in general, like in the inner market,
Speaker 3: like the US, utility scale is much bigger. So those
Speaker 3: eleven gigawottes of small scale let's call it PV in
Speaker 3: Brazil is much bigger than about the eight and a
Speaker 3: half that was installed in the US last year, and
Speaker 3: many many times greater than the two and a half
Speaker 3: gigawatts of a residential commercial solo that was installed in India.
Speaker 3: So we're talking at this point about a very very
Speaker 3: big market by global standards. Brazil installed the fourth most
Speaker 3: solar in the world in twenty twenty two.
Speaker 1: That you're hesitant to call it residential solar. These not
Speaker 1: residential projects.
Speaker 3: Well a lot of them are residential, a lot of
Speaker 3: them are commercial as well, and that's largely because, as
Speaker 3: I said, you know, maybe a typical household system, we're
Speaker 3: thinking of something in the high single digits or very
Speaker 3: low double digits in the kilowatts. And in Brazil the
Speaker 3: net metering benefit extends up to five megwats. So in
Speaker 3: some countries, as our head of Solar Jenny Chase says,
Speaker 3: in some countries that would be large scale solar, and
Speaker 3: it can also be claimed either like locally like local
Speaker 3: net metering i e. Located in the same location as
Speaker 3: the consumer, or remote net metering, that is, the plant
Speaker 3: can be located in a completely different location from the consumer.
Speaker 3: So this is sort of allowed consumers across Brazil, whether
Speaker 3: residential or commercial, install pretty large sized solar systems all
Speaker 3: over the country and benefit tremendously because power prices are
Speaker 3: pretty high in Brazil and the country has great sun,
Speaker 3: and those factors together have really helped kick off a
Speaker 3: boom that has had an impact on the solar market
Speaker 3: in the region. Who are financing these projects, well, you know,
Speaker 3: at this point the market's quite mature. So I mean,
Speaker 3: I couldn't I couldn't pinpoint just one sort of subsector.
Speaker 3: I mean, it's buy in large private banks, but.
Speaker 1: It's largely diverse, and it's largely coming from utilities kicking
Speaker 1: things off and then build or project developers kicking things off,
Speaker 1: even at this smaller scale, doing a number of small
Speaker 1: projects in a number of different locations, and then either
Speaker 1: operating them or selling them on.
Speaker 3: Yeah, it's house it's businesses seeking to lower their power bills.
Speaker 3: That there are developers involved, there's community solar arrangements. There
Speaker 3: really are a variety of different schemes. As I said,
Speaker 3: this was a market that was about Brazil. I think
Speaker 3: at twenty nineteen sold about two gigattes of small scale TV,
Speaker 3: and now it's eleven. So I think that point that
Speaker 3: a lot of markets around the world have reached where
Speaker 3: it's in headlong kind of solar growth. And I'll have
Speaker 3: to say it came in quite a bit higher than
Speaker 3: our forecast for this year, which originally were around nine
Speaker 3: or ten gigaotts for twenty twenty two. So there's so
Speaker 3: much solar being installed in Brazil in this segment that
Speaker 3: the regulator itself is having a hard time keeping track
Speaker 3: of all of them. So the historical numbers also keep
Speaker 3: going up, which makes it kind of difficult to keep
Speaker 3: track of things.
Speaker 1: So really fragmented, which is really exciting to see so
Speaker 1: many things happening all at once, and then looking at
Speaker 1: this and we're seeing essentially a number of different projects
Speaker 1: happening across the country. Really what it makes me think
Speaker 1: of is a number of different projects require a number
Speaker 1: of different permitting processes and a lot more paperwork because
Speaker 1: they're different projects. So surely there must be some very
Speaker 1: strong government incentive to bring these sorts of things up online.
Speaker 1: Why are things moving so quickly and so well in
Speaker 1: Brazil in particular.
Speaker 3: Well, for a brief period under the past government, when
Speaker 3: the debate over how to reform the net metering program
Speaker 3: was underway, there was a brief window in which the
Speaker 3: policy environment became quite contentious and the net metering program
Speaker 3: became controversial and a little bit politicized. There was a
Speaker 3: don't tax the sun A bit humorous, humorous to say that,
Speaker 3: but there.
Speaker 1: Was a don't tax side it was it works well,
Speaker 1: and it did work.
Speaker 3: The way that net metering was reformed was done in
Speaker 3: a way that I would argue was pretty generous to
Speaker 3: solar overall. It largely provided continuity to existing rules. So
Speaker 3: the market continues to boom on. Existing systems are kind
Speaker 3: of eligible for net metering through twenty forty five, and
Speaker 3: those that are installed in this year are starting to
Speaker 3: pay a very small, almost negligible part of the tariff
Speaker 3: for use of the grid, and they're sort of phased
Speaker 3: in over a six year period, and it's going up.
Speaker 3: I think the grid fees usually are about thirty percent
Speaker 3: of the total bill, and so customers who install solar
Speaker 3: are going to start paying fifteen percent of thirty percent
Speaker 3: of their bill, So overall, it's a very sort of
Speaker 3: soft rule and it remains a very attractive thing to do.
Speaker 3: So that is part of the reason why overall wind
Speaker 3: and solar growth in Latin America we're looking at another
Speaker 3: record year in twenty twenty three.
Speaker 1: So let's pivot to another country that is definitely also
Speaker 1: a solar powerhouse. Snowpun intended. What's happening in Chile.
Speaker 3: So Chile is very much it's important. I'm glad you
Speaker 3: brought up Chile. It's really important Mark can talk about.
Speaker 3: It's obviously a much smaller power market overall than Brazil.
Speaker 3: It's thirty two gigawatts total installed capacity versus one hundred
Speaker 3: and ninety three for Brazil, so much much smaller in
Speaker 3: terms of overall impact on the region. But as a market,
Speaker 3: it's really out in front in the region in terms
Speaker 3: of policy and even compared to the rest of the world.
Speaker 3: Chile also had record wind and solar editions last year.
Speaker 3: It has nothing to do with small scale though, it's
Speaker 3: almost completely utility scale winded solar editions that we're talking
Speaker 3: about in terms of scale that's about three gigawats. But
Speaker 3: more importantly, it's starting to hit some really cool milestones,
Speaker 3: and a couple of those are so lar actually became
Speaker 3: the largest power generation technology by capacity in the country
Speaker 3: last year with about twenty two percent of total capacity
Speaker 3: in Chile is now solar, so that just sort of
Speaker 3: edged out large hydro. And then the other thing that
Speaker 3: I think is very cool by regional and global standards
Speaker 3: is that wind and solar combined provided a whopping twenty
Speaker 3: eight percent of total generation in Chile last year, So
Speaker 3: that is really really high. And for context, in Brazil
Speaker 3: that is about fifteen percent fifteen percent of generation comes
Speaker 3: from wind and solar utility scale, and in Argentina and
Speaker 3: Mexico it's about eleven eleven twelve percent. So Chile is
Speaker 3: also in many ways very much a regional leader.
Speaker 1: Wow. And then speaking of regional leaders, Lynn the category
Speaker 1: of maybe biggest mover, where would you put Columbia.
Speaker 3: Colombia is fascinating as a market because, as I mentioned
Speaker 3: when we were talking about the top line winded solar
Speaker 3: growth in the region, there are some important fluctuations in
Speaker 3: other markets that have kind of lent Brazil outsize importance,
Speaker 3: And what I was alluding to really was the fact
Speaker 3: that Mexico and Argentina are both at a low for
Speaker 3: very different reasons, at a low in terms of clean
Speaker 3: energy deployment. And Colombia is a very interesting market to
Speaker 3: look at right now because it's sort of filling in
Speaker 3: the gap and it's really just starting to get going
Speaker 3: and about to kick off a multi year what we
Speaker 3: forecasted to be a multi year boom and wind and
Speaker 3: solar installation. But one important data point to look at
Speaker 3: here is that for the first time in twenty twenty two,
Speaker 3: Columbia end of the year among the top three destinations
Speaker 3: for new investment in the region for the very first time,
Speaker 3: it's mostly tied to utility scale solar at this point.
Speaker 3: There have been some really significant delays tied to wind
Speaker 3: just because the wind resource, as in most markets, it's
Speaker 3: very geographically concentrated in a particular part of Columbia where
Speaker 3: there have been significant delays tied to transmission interconnectivity. But yeah,
Speaker 3: I don't know, Natalia, do you want to come in there? Yeah?
Speaker 2: Sure, Well, as you mentioned, there has been some of
Speaker 2: the delays in terms of transmission connection in this region,
Speaker 2: which is going to be the area where all the
Speaker 2: wind farms are concentrated called Labajira, a region with very
Speaker 2: poor infrastructure over.
Speaker 5: And also projects.
Speaker 2: Both the wind developers and also transmission developers are facing
Speaker 2: challenges in terms of negotiating with local communities to get
Speaker 2: the permits that they need in order to build their
Speaker 2: assets in that region. And just to give some stats
Speaker 2: on that, the company that is developing the transmission line
Speaker 2: had to negotiate with more than two hundred local communities
Speaker 2: and that is a process that took much much longer
Speaker 2: than it was actually predicted, and it's causing delays of
Speaker 2: this transmission line. And because of that, a lot of
Speaker 2: the wind farms that are planned for their region are
Speaker 2: also going to be delayed. So that is a downsign
Speaker 2: for Columbia as all of the wind farms is concentrated
Speaker 2: in this region. But for the solar side, the good
Speaker 2: news is that the resourcers are more spread out us
Speaker 2: the country, so the developer zone face the same challenge
Speaker 2: and we are seeing more deployment of solar projects. Year
Speaker 2: by year, we're seeing growth on that.
Speaker 1: So, Natalia, let's go into a space that you've spent
Speaker 1: some time looking at very recently, which is hydrogen, and
Speaker 1: this is intrinsically linked to this clean energy that we
Speaker 1: are seeing installed. So with this wind and solar capacity
Speaker 1: comes the potential for green hydrogen and hydrogen made from
Speaker 1: renewable sources. Can you talk a little bit about some
Speaker 1: of the countries that have been the leaders in this
Speaker 1: space in terms of really looking at green hydrogen is
Speaker 1: a really big market opportunity.
Speaker 5: Sure.
Speaker 2: I'd like to start saying why green hydrogen is so
Speaker 2: relevant for the region, and that is because we have
Speaker 2: the best renewable resources in the world in many countries.
Speaker 5: So in Brazil we have.
Speaker 2: The best capacity factors for wind farms and in Chile
Speaker 2: we have the best capacity factors for sol. So that
Speaker 2: means these two countries they can produce very cheap renewable
Speaker 2: power and that is a key element to produce cheap
Speaker 2: hydrogen as well. So according to our projections, we see
Speaker 2: Brazil and Chile having the lowest l COH the levelized
Speaker 2: costs of hydrogen in the world today and in twenty
Speaker 2: thirty and in twenty and fifty, and that is basically
Speaker 2: because of the great renewable resources that we have in
Speaker 2: these two countries.
Speaker 1: So We've got a lot being installed and it's incredibly efficient.
Speaker 1: So countries and companies are looking at ways to better
Speaker 1: use these high capacity factors for their wind and solar,
Speaker 1: which I'm sure is driving part of it. But then
Speaker 1: with hydrogen itself, so are the conditions right to store use.
Speaker 1: What's the domestic circumstances both physically and from a demand
Speaker 1: standpoint for this.
Speaker 5: That's a very important question.
Speaker 2: So for now we are seeing most of the projects
Speaker 2: being developed in the region mainly focused on exports, so
Speaker 2: the domestic demand signs are not here yet. So basically
Speaker 2: Europe and Asia are giving the first concrete signs of demand,
Speaker 2: and the company is developing green hydrogen projects both in
Speaker 2: Brazil and Chile are mainly focusing on exporting for these
Speaker 2: two areas of the world. But that actually imposes a
Speaker 2: risk because it's actually a little bit uncertain how much
Speaker 2: is going to be the.
Speaker 5: International demand for green hydrogen. So in my.
Speaker 2: Opinion Blomberg's opinion, we think that these two countries Brazil
Speaker 2: and Chile, or whatever country that is actually planning to
Speaker 2: produce green hydrogen, they need to start thinking about policystems
Speaker 2: centervized local demand as well and there are some sectors
Speaker 2: in the region in Brazil and Chile mainly that could
Speaker 2: be a potential domestic demand, big potential demand, which.
Speaker 5: Are still and fertilizers.
Speaker 2: So Brazil is a huge market for the agriculture sector
Speaker 2: right and because of that, it consumes a lot of fertilizers,
Speaker 2: but seventy six percent of the nitrogen fertilizers are important today,
Speaker 2: so there's a huge opportunity therefore Brazil start to producing
Speaker 2: their own fertilizer and producing in a green way. So
Speaker 2: and especially if we see this green fertilizer market to
Speaker 2: flourish in the future, Brazil could even start producing locally
Speaker 2: and exporting to other markets.
Speaker 1: Are the conditions right geologically speaking to store hydrogen?
Speaker 5: No?
Speaker 2: Not, Actually, we are not talking so much about storage
Speaker 2: of hydrogen.
Speaker 5: Mainly, all the.
Speaker 2: Green hydrogen projects being developed they have some sort of
Speaker 2: facility to transform convert the hydrogen into something else, a derivative.
Speaker 2: That could be ammonia, that could be methanol, and these
Speaker 2: two materials that could be further use for other uses. Ammonia,
Speaker 2: for instance, would be applied mainly in the fertilizer markets,
Speaker 2: but it could also.
Speaker 5: Be used as a fuel methanol.
Speaker 2: It could be used as a fuel or as a
Speaker 2: raw material for other processes as well. So there's a
Speaker 2: very interesting project in Chile, for instance, that they actually
Speaker 2: already commission that they are producing methanol from green hydrogen
Speaker 2: and capturing CO two from the atmosphere, producing methanol and
Speaker 2: then transforming the methanol into synthetic gasoline, and that synthetic
Speaker 2: gasoline is going to be exported to Europe. That's one
Speaker 2: example of how the international demand is going to play out.
Speaker 1: For use cases like aviation for example.
Speaker 2: Aviation as well, Yeah, and ship transportation. Both methanol and
Speaker 2: ammonia could be applied.
Speaker 1: So it's either user or ship it, which then brings
Speaker 1: us all the way back to supply chains again and
Speaker 1: seemingly a very hot topic this year. And my question
Speaker 1: is when it's being shipped, is it being shipped as methanol?
Speaker 1: Is it being shipped as ammonia? Are we actually shipping
Speaker 1: tankers of hydrogen.
Speaker 2: Now we're shipping as ammonia or methanol. It depends on
Speaker 2: what the off taker is planning to do with the derivative.
Speaker 2: So this first case in Chile, they're shipping as a
Speaker 2: synthetic gasoline already, so the product is already finalized and ready.
Speaker 5: To be used in Europe.
Speaker 2: The many projects are aiming to ship as ammonia and
Speaker 2: then in Europe first they would transform the pemonia into
Speaker 2: other fertilizers and methanol the same case.
Speaker 1: So what are the policies in place that are really
Speaker 1: spurring hydrogen on in the region, and perhaps pick the
Speaker 1: countries where you see the most favorable environments.
Speaker 2: So for now, we see very little concrete policy in
Speaker 2: the region. We see hydrogen strategies, which are not actually policies.
Speaker 2: They are they are a plan that the country put
Speaker 2: out to give signs for the private sector and also for.
Speaker 5: Development banks for instance.
Speaker 2: But I see Chile as the more mature market in
Speaker 2: the region, as they put the first green hydrogen strategy
Speaker 2: in Latin America in twenty twenty, and.
Speaker 5: It was a very well structured strategy.
Speaker 2: They have very well defined goals for electoralizer capacity and
Speaker 2: very ambitions goes.
Speaker 5: It's actually the most ambitions goals if.
Speaker 2: We compare other strategies in the world. They aim to
Speaker 2: have twenty five giga OTTs of electoralizers by thirty for instance,
Speaker 2: and they also have other very well defined goals such
Speaker 2: as the levelized costs of hydrogen at one point five
Speaker 2: dollars per kilogram of hydrogen which occur into our projections
Speaker 2: is realistic. And they also put up plans of what
Speaker 2: the demand would be if it would be more focused
Speaker 2: on domestic market or international market. According to their strategy,
Speaker 2: they would first focus on domestic demand and then in
Speaker 2: the midtime they would become a large exporter. But in reality,
Speaker 2: what we are seeing is that projects are they are
Speaker 2: planning more to be exported first, as a domestic demand
Speaker 2: signs are not here yet.
Speaker 1: So Natalia with these stated goals, that's great, but how
Speaker 1: do they actually get translated into action in the region
Speaker 1: without clearly defined policies.
Speaker 5: Yeah, it's a good question.
Speaker 2: What we see so far is that the strategy that
Speaker 2: was established in Chilea was important to give concrete signs
Speaker 2: for both the private markets and for development banks to
Speaker 2: support these projects. And when we compare the capacity to
Speaker 2: plan in Latin America overall, across all countries, we see
Speaker 2: the largest pipeline is in Chile, and I believe that
Speaker 2: it's clearly linked with the fact that Chile positioned themselves
Speaker 2: in twenty twenty with well defined goals, and with that
Speaker 2: we also saw multilateral development banks coming to support these
Speaker 2: projects as well. So initially we saw a very symbolic
Speaker 2: support with only fifty million dollars to support these projects,
Speaker 2: which is actually nothing. But now we are seeing more
Speaker 2: deals being revealed. IDB and the World Bank are going
Speaker 2: to follow up with more significant support for these projects.
Speaker 1: So really development banks are providing a lot of the financing.
Speaker 1: But then at the same time you're really seeing well,
Speaker 1: essentially the countries making perhaps an easier permitting process and
Speaker 1: moving things along. Is that fair to say, Yes and no.
Speaker 2: Chile they plan to have two main hubs of hydrogen,
Speaker 2: one in the north and one in the south. The
Speaker 2: north would be mainly powered by solar and in the
Speaker 2: south it would be powered by wind, which could reach
Speaker 2: up to seventy percent capacity factor, which would be the
Speaker 2: highest in the world.
Speaker 5: However, we haven't.
Speaker 2: Seen like concrete wind farms actually being operating in the
Speaker 2: area right now, and that is in Patagonia, so there
Speaker 2: is a big debate right now if projects in the
Speaker 2: area they're actually going to be able to acquire environmental
Speaker 2: permit because it's a really protected area. There's no so
Speaker 2: much infrastructure in the region, and the government wants to
Speaker 2: both protect the area but also allow this industry to
Speaker 2: flourish in the market. So it's a really a big
Speaker 2: challenge for the current administration, and we still need to
Speaker 2: see how it's going to be developed.
Speaker 1: So there are goals without necessarily policy incentives. So my
Speaker 1: question really is do you think, given that the goals
Speaker 1: are considered fairly ambitious, that they're going to reach them
Speaker 1: or are they really more of a stated objective and
Speaker 1: a direction of travel for some of these countries.
Speaker 5: Yeah, the latter, definitely.
Speaker 2: We don't believe that Chile is going to achieve the
Speaker 2: twenty five gigawatts target because it's too ambitious.
Speaker 5: And even if all the support was put in.
Speaker 2: Place, they don't have right now the planned capacity to
Speaker 2: reach that goal. And they also don't have all the
Speaker 2: environmental permit policies that they need, concrete signs and port infrastructure.
Speaker 5: And many many aspects are missaying.
Speaker 3: Still, can I just bring in what I think is
Speaker 3: a relevant point just to kind of add to what
Speaker 3: Natalia is saying, which is that Chile's hydrogen strategy was amazing.
Speaker 3: It came early on, it was very ambitious. The electrilizer
Speaker 3: target was like similar in scale to the EUS, so
Speaker 3: it was ambitious and it came out in December twenty twenty. Brazil,
Speaker 3: for example, still doesn't have a fully elaborated national hydrogen strategy,
Speaker 3: although one is coming soon. But one thing I wanted
Speaker 3: to point out that I think is very optimistic and
Speaker 3: positive for the region, which is that Chile's hydrogen strategy
Speaker 3: came out under the past administration, which was of a
Speaker 3: very different political orientation than the current one than Borich
Speaker 3: who's currently president, you know, very kind of famous and
Speaker 3: kind of rock starish president of Chile, guys in his thirties.
Speaker 3: And similarly, there have been very significant sort of political
Speaker 3: swings in much of the region. But the positive and
Speaker 3: what I think is a key point here is that
Speaker 3: although you know, this has been called a pink tide
Speaker 3: in Latin America where the political pendulum has swung to
Speaker 3: the left, basically the energy transition policies and plans that
Speaker 3: have been put in place under past administrations have seen continuity.
Speaker 3: There hasn't been like an abandonment of goals that were
Speaker 3: put in place by by governments of different directions. Mexico
Speaker 3: being an exception. So I just think that's sort of
Speaker 3: like an important macro point about the region, and it's
Speaker 3: relevant for hydrogen and Chile, as it is for wind
Speaker 3: and solar in Brazil.
Speaker 1: And as much as I'd like to see domestic energy
Speaker 1: production coming from some of these sources not being politicized,
Speaker 1: certainly they do tend to fall on this left leaning
Speaker 1: government space. So for those who are not familiar, can
Speaker 1: you just expand a little bit on what is the
Speaker 1: pink tide?
Speaker 3: Sure you could argue that it began a couple of
Speaker 3: years ago with the elections in Mexico, in Argentina of
Speaker 3: Amblo and Fernandez respectively, certainly sort of left leaning administrations
Speaker 3: in those countries, and then more recently the election of
Speaker 3: Petro in Colombia, Borich and Chile, and then Lula most
Speaker 3: recently in Brazil. So pink tide is I think a
Speaker 3: funny way of putting it, but referring to leftists or
Speaker 3: censor leftist governments across the major markets or major economies
Speaker 3: of the region. And there are a number of other examples.
Speaker 3: Those are just the big ones.
Speaker 1: So I'm actually going to lead us to a last
Speaker 1: section where I'm going to ask you a couple questions
Speaker 1: on whether or not we should keep watching something or
Speaker 1: it's kind of something that we shay ignore because we
Speaker 1: be and ef we keep our eye on a number
Speaker 1: of different things across different regions around the world, and
Speaker 1: that can come from business all the way through to policy.
Speaker 1: And so in the watch or ignore category, should we
Speaker 1: be watching or ignoring? Voluntary carbon offsets.
Speaker 3: One hundred percent watching and one hundred percent watching in Brazil.
Speaker 3: So Brazil accounted for just a few I think. I
Speaker 3: think as recently as two years ago was like a
Speaker 3: couple percentage share of the global voluntary carbon market. I
Speaker 3: think last year was twelve or thirteen percent. It has
Speaker 3: some of the largest potential globally to produce offsets, tied
Speaker 3: to obviously being home to the largest rainforest in the world.
Speaker 1: Also, in watching and ignore, any changes to the auction space.
Speaker 2: Watching definitely, well, we're going to see auction auctions is
Speaker 2: a very important thing for the region overall. I would
Speaker 2: say Chill is going to be holding a very big
Speaker 2: auction this year that we haven't seen since should tell
Speaker 2: than fifteen And with that came as some important modifications
Speaker 2: which is going to increase the competitiveness of renewables and starch.
Speaker 2: So for now we have a touch on this. But
Speaker 2: Chile has a big problem in terms of transmission bottlenecks,
Speaker 2: and advancing transmission lines and allowing more storage projects are
Speaker 2: solutions to increase grit flexibility. So that is why these
Speaker 2: next auctions in Chile are going to be very much
Speaker 2: focused on that.
Speaker 1: Okay, and so this last one something that we've been
Speaker 1: globally watching that given what's rolling out in Latin America,
Speaker 1: watch or ignore? Should the region Maybe not US, because
Speaker 1: we certainly are looking at this, but is Latin America
Speaker 1: closely watching or ignoring natural gas prices?
Speaker 3: So it's difficult to generalize, but in Mexico natural gas
Speaker 3: is very cheap and abundant thanks to proximity to the US.
Speaker 3: In the case of Brazil, it's very important in years
Speaker 3: of low rainfall when hydrogeneration is down and then it
Speaker 3: has a huge impact on the market. So right now
Speaker 3: probably ignoring, but next year possibly watching, particularly in the
Speaker 3: case of Brazil.
Speaker 1: Okay, Natalia and James, thank you so much for joining
Speaker 1: us today.
Speaker 5: Thank you so much.
Speaker 4: Thank you. Dana Bloomberg.
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