South America's transition towards renewable energy has the potential to drive sustainable progress and open up new economic and social opportunities.
This is the main conclusion of the report “Regional Energy Transition Outlook: South America”, released this Monday (10) by the International Renewable Energy Agency (IRENA), at the United Nations Climate Change Conference, COP30, in Belém.
In a statement, IRENA warns that the region is currently unable to attract sufficient investment for this vital transition.
In 2024, South America received US$58 billion, representing only 2,5% of the total global investment of US$2,4 trillion.
For the region to achieve ambitious decarbonization goals, investment in projects and spending on goods for end-use applications must average US$500 billion per year by 2050.
Accelerating this decarbonization path would bring net social and economic benefits that would substantially outweigh the initial costs.
According to IRENAThe region could see an additional increase in Gross Domestic Product (GDP) growth of 1,1% per year between 2023 and 2050, compared to current plans. Furthermore, the transition would create over 12 million jobs in the energy sector.
Potential and challenges of South American electrification
The South American energy sector is already demonstrating a decisive shift towards renewable energy. The region has the potential to generate up to 98,5% of its electricity from renewable sources by 2050.
To reach this level in the Energy Decarbonization Scenario (DES), it will be necessary to add approximately 55 GW of renewable capacity each year, which is more than double the current rate of capacity addition. Solar and wind power are the leading sources in this expansion.
Francesco La Camera, Director-General of IRENA, highlighted that, by 2050, energy... renewable They could supply almost all of South America, but this will only be possible with stronger grid connections and large investments to electrify homes, transportation, and industries.
South America is currently one of the most cost-competitive regions in the world for renewable energy generation.
Between 2010 and 2024, the levelized cost of electricity (LCOE) for solar photovoltaics fell from US$0,417 per kWh to US$0,043/kWh, and for onshore wind it fell from US$0,113/kWh to US$0,034/kWh. In 2024, the region recorded average LCOEs of US$0,054/kWh for solar PV and US$0,036/kWh for onshore wind.
Key actions and transition goals
To leverage the continent's comparative advantages, IRENA proposes regional actions focused on energy, including: improving grid interconnection; integrating electricity markets; developing supply chain strategies for solar and wind energy; developing green hydrogen and sustainable biofuels in a coordinated manner; and accelerating strategies aimed at green industrialization and energy efficiency.
According to IRENA, South America's energy transition will benefit from a hybrid strategy, combining electrification and the use of biofuels in end-use sectors such as transport and industry.
The share of renewable energy in total final energy consumption (TFEC) would increase from about one-third today to 40% in 2030 and more than 80% in 2050.
In the transportation sector, it is predicted that by 2050, more than 75% of the total vehicle fleet will consist of battery electric vehicles (BEVs), with electricity accounting for 45% of the sector's final consumption. During the same period, the production of liquid biofuels is expected to more than double, reaching approximately 97 billion liters (L) by 2050.
Critical Infrastructure and Financing
To manage the variability of renewable energy sources and maintain system reliability, substantial investments in storage, reserve capacity, and new grid infrastructure will be necessary. Between 2025 and 2050, the estimated cumulative investment requirement for the system is US$4,2 trillion.
IRENA points out that coordinated planning, investment in cross-border interconnections, and regional markets for ancillary services can reduce pressure on domestic systems.
Isolated or decentralized strategies, on the other hand, increase costs, weaken efficiency, and raise the risk of prolonging the use of fossil fuels.
To urgently finance the transition (US$13 trillion needed from 2025-2050), the recommendation is to strengthen finance and governance.
The cost of capital is a barrier, and Weighted Average Cost of Capital (WACC) values for some South American countries in 2024 ranged from 8% to over 15%. Innovative regional financial mechanisms can help access lower-cost financing.
By strengthening local supply chains and the manufacturing of clean technologies, South America not only becomes a safe haven for green investments, but also positions itself for green industrialization, an essential step for growth and energy security, according to the IRENA report.
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