South America could emerge as a market for offshore wind between 2030 and 2040, according to Aegir Insights’ latest market report, which investigates the continent’s potential for offshore wind development.
Offshore wind resources around South America are exceptional, with wind speeds above 11 m/s being the norm around the southern tip and many areas with winds averaging at least 8 m/s further north. As economic development expectedly sweeps the continent once the Covid-19 crisis ends, living standards and energy demand will rise. IEA forecasts an annual increase of 2% for electricity demand in all Latin America until 2040.
Rising demand in South America must be met with renewable energy
The increasing demand for electricity must be met with renewable sources, if the South American countries are to further their green energy transition and meet international climate goals.
Colombia, Peru, Chile and Ecuador along with a group of Central American countries have set a collective target of using 70% renewable energy by 2030, Brazil targets 17% wind power in its national electricity generation by 2029 as well as 195 GW non-hydro renewable energy by 2050, Argentina targets 35% renewable energy by 2035, and all South American countries are part of the Paris Agreement.
Wind to supplement hydro power
The South America of today is largely powered by hydro. In many countries, large hydro power plants supply the lion's share of all domestically generated electricity — for instance in Brazil, Peru and Colombia.
But hydro alone will not be able to support South America’s growing need for renewable electricity. This is due to local opposition, environmental concerns, instability of supply due to droughts and in some cases the distance from viable new hydro power plant sites to demand centers.
As recently as June 2021, parts of South America were hit by droughts, causing for instance Brazil to import large amounts of LNG and ask its industrial sectors to save electricity. Electricity rationing has been used several times over the years in South American countries to manage power consumption during droughts. This inherent instability of hydro power will likely be a main driver for other renewables.
An early-stage example of a market pushing for other renewables as a direct response to problems with hydro power is Colombia. El Niño-induced droughts forced Colombia to ration power in 2016. Subsequently the government in 2017 decided to host auctions for non-hydro renewables.
South America offshore wind market selling points: Large capacities and available close to demand centers
In the short to medium term, governments’ initiatives for supply diversification will primarily drive build-out of substantial solar and onshore wind power across the region. But in the longer term, offshore wind will become attractive due to it being a particularly large-capacity renewable source and therefore better able to strengthen energy security while the continent transitions to a greener energy supply and less hydro power dependency.
Further selling points for the offshore wind market in South America include the very impressive wind speeds available to several South American countries. And the fact that many of these strong offshore wind resources are located close to large coastal cities.