Umair Gaines
South America, including Mexico and Central America, has some of the most dynamic renewable energy markets globally. In 2023, hydropower dominated electricity generation in the region, accounting for approximately 51% of the region's gross output. Brazil, the largest electricity producer in the region, generated 77% of its electricity from renewable sources in 2022. In 2024, Latin America and the Caribbean generated 65% of their electricity from clean sources, with hydro providing 41% of the region's clean power.
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What You'll Learn
Hydropower
However, climate change poses a challenge to Latin American hydropower, with rising temperatures, fluctuating rainfall patterns, melting glaciers, and increasing extreme weather events. These factors impact hydropower generation by increasing variability in streamflow, shifting seasonal flows, and augmenting evaporation losses from reservoirs. Southern South American countries, Chile and Argentina, are expected to experience notable reductions in hydropower generation by 2100.
To address these challenges, countries in the sub-region are working to enhance the resilience of their hydropower plants and adapt to changing climatic conditions. Mexico, for instance, has implemented a new national electricity program to increase hydropower generation capacity by modernizing and upgrading existing plants. Additionally, Latin America is pioneering hybrid systems that combine hydropower with other renewable sources, such as floating solar plants, to maximize sustainability and efficiency.
Despite these efforts, the overall rate of hydropower development in South America has plateaued, and regulatory reforms have not kept pace with industry needs. Nevertheless, hydropower is expected to remain the region's largest renewable energy source for years to come, supporting the achievement of Sustainable Development Goals and carbon emissions reduction.
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Nuclear energy
Despite the limited current use of nuclear energy in Latin America, there is a growing interest in the region in exploring nuclear power as an alternative to fossil fuels. El Salvador has approved a nuclear energy law and is working with the Argentinian government to cooperate on nuclear power. The country aims to replace fossil fuels, which currently provide half of its power capacity, with alternatives such as nuclear energy. SMRs (small modular reactors) are seen as a particularly attractive option for El Salvador and other countries in the region due to their smaller size and lower investment requirements.
Brazil, Mexico, and Argentina are providing technical advice to countries considering nuclear power, and Argentina has a 32MW SMR plant under construction. However, there are also efforts in Latin America to scale up clean power sources such as wind and solar, which could reduce the need for nuclear energy in the future. In 2024, Latin America and the Caribbean generated 65% of its electricity from clean sources, including wind, solar, and hydro, above the global average of 41%.
Nuclear non-proliferation has been a significant focus in Latin America, with the region establishing itself as a Nuclear Weapons Free Zone. Treaties such as the Treaty of Tlatelolco and the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) have been essential in ensuring that nuclear energy projects in the region are for peaceful purposes only. Brazil and Argentina, which once found themselves in a nuclear race, have now ratified the NPT and worked together to manage their nuclear affairs.
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Fossil fuels
Oil, a dominant component of fossil fuels, is the primary fuel used in the transport sector. However, Latin America and the Caribbean have also embraced biofuels in road transport, with their usage being twice the global average. Brazil, a significant player in South America's energy landscape, has taken the lead in expanding sustainable biofuel use. Additionally, countries like Chile and Mexico are actively increasing their electric vehicle fleets, further reducing their dependence on fossil fuels.
While the use of coal in the region is relatively small, there are coal power plants in Brazil, Colombia, Mexico, and the Dominican Republic. Argentina also has limited quantities of good-quality coal. However, the region has not developed a strong reliance on coal, unlike Asia. Instead, Latin America and the Caribbean have abundant hydropower resources, with hydropower accounting for 45% of the region's electricity supply.
Natural gas is another fossil fuel in the region's energy mix. Trinidad and Tobago are notable producers of natural gas, while countries like Mexico, Argentina, and Brazil are experiencing growing demand for natural gas in various sectors, including transport and industry.
To meet the growing demand for electricity, Latin America and the Caribbean are investing in renewable generation projects. This shift towards cleaner energy sources is crucial for reducing emissions and improving energy security and access for remote communities. With today's policy settings, electricity demand in the region is projected to increase significantly by 2050, and fulfilling pledges and targets could lead to a further decline in fossil fuel use, with consumption of each fossil fuel type projected to peak this decade and then steadily decline.
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Wind and solar
Latin America and the Caribbean have been generating about 65% of their electricity from clean sources, which is well above the global average of 41%. The region's combined wind and solar share is 17%, which is slightly above the global average of 15%. Chile and Uruguay have the highest shares of wind and solar energy in the region, with 34% and 31% respectively. In 2024, Brazil added 36 terawatt-hours (TWh) of wind and solar energy, accounting for 78% of the region's wind and solar growth and 7% of the global growth.
Brazil, Chile, Colombia, and Mexico make up almost 84% of the existing 69 GW of currently operating utility-scale solar and wind farms in the region. Brazil, Chile, and Colombia are at the forefront of the renewable energy transition in Latin America, with Brazil and Colombia creating large-scale solar and wind projects. However, Mexico is falling behind in this race.
Latin America has the potential to increase its utility-scale solar and wind power capacity by more than 460% by 2030 if all 319 gigawatts (GW) of prospective new projects in the region are realized. If Latin America implements all of its prospective larger-scale projects, it will be on track to meet, and possibly exceed, the International Energy Agency's (IEA) 2030 regional net-zero renewable energy goals.
To keep up with the growing demand for electricity, it is crucial for Latin America and the Caribbean to continue scaling up clean power sources, especially wind and solar. By investing in renewable generation projects, the region can increase energy access to remote communities, enhance energy security and independence, and create new green jobs.
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Geothermal
Latin America has abundant geothermal energy resources, but only a small fraction of its potential has been harnessed. Currently, Mexico, Costa Rica, and El Salvador collectively account for about 75% of the existing capacity in Latin America. Mexico stands out as the leader in Latin America's geothermal landscape, leveraging its rich reserves through initiatives led by the state-owned utility, Comisión Federal de Electricidad (CFE).
In 2024, Mexico generated 25% of its electricity from low-carbon sources, including geothermal energy. The country has several impressive installations, such as Cerro Prieto (Baja California) at 570 MW and Los Azufres (Michoacán) at 240 MW. These two installations alone contribute significantly to Mexico's total capacity of 1 GW.
Other countries in Central America, such as El Salvador, Nicaragua, and Costa Rica, also rely significantly on geothermal power to meet their electricity demand. In Costa Rica, the Japan International Cooperation Agency (JICA) is financing around 50% of the cost to develop two new geothermal power plants at Borinquen.
South America, on the other hand, has seen limited progress in geothermal electricity generation. Chile produces 48 MW, and there are small-scale pilot projects in Argentina and Colombia. However, there is potential for growth in South America as well. Peru, for example, has an estimated 2,860 MW of geothermal resources throughout its highlands, particularly in the south, where there are active volcanoes. While Peru currently produces 36% of its electricity from fossil fuels and 58% from hydropower, geothermal energy could provide a significant alternative source of energy.
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Frequently asked questions
In 2023, hydropower dominated the electricity generation in South America, accounting for approximately 51% of the region's gross output.
In 2024, fossil fuels provided 35% of the region's electricity, down from 47% in 2015.
Brazil was the largest electricity producer in the region in 2023.
Chile and Uruguay have the highest shares of wind and solar energy in South America, with Chile at 34% and Uruguay at 31%.
In 2024, 25% of Mexico's electricity was generated from low-carbon sources, below the global average of 41%.
