Latin America PV Playbook

Transcription

1 Latin America PV Playbook Q Market Update Executive Summary Manan Parikh Analyst, Solar February 2017

2 About the Author Manan Parikh, Analyst, Solar GTM Research Manan Parikh is a Solar Analyst for GTM Research covering the downstream Latin American markets. Prior to GTM, his work has been extensively research based, centering upon alternative fuels infrastructure development and Low Carbon Fuels Standard (LCFS) policy models for the Schatz Energy Research Center and UC Berkeley in Northern California. In California, he was also an ambassador to start-up teams within the Clean Tech Open accelerator as well as a consultant to DOE SunShot Catalyst Award winner, PVComplete. In Washington, DC he worked on biomass policy at the American Council On Renewable Energy. He is an alumnus of The University of Texas at Austin, where he graduated with a B.S. in Biochemistry. 1

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4 Glossary of Terms and Acronyms ACESOL: Chilean Solar Energy Association ANEEL: Brazilian National Electricity Agency BNDES: Brazilian National Bank for Economic and Social Development CAGR: Compounded Average Growth Rate CAMMESA: Wholesale Power Market Administrator, Argentina CapEx: Capital expenditures CCEE: Electric Energy Trading Chamber, Brazil CDEC: National Electric Coordinator, Chile CEL: Clean Energy Certificate, Mexico (1 CEL = 1MWh) CFE: Federal Electricity Commission, Mexico CENACE: National Center for Energy Regulation, Mexico CNE: National Energy Commission, Chile COD: Commercial Operation Date CREG: Energy Regulatory Commission and Gas C&I: Commercial and Industrial DAC: Large residential consumer tariff class, Mexico DC: Direct Current EMGESA: Second largest generator in Colombia EPE: Energy Research Company, Brazil FODER: Government-funded renewable energy fund, Argentina H-M: Industrial tariff class, Mexico ICMS: Tax Operations related to goods and interstate transport, Brazil IDB: Inter-American Development Bank IPP: Independent Power Producer IRENA: The International Renewable Energy Agency LCOE: Levelised cost of electricity NEM: Net Energy Metering OECD: Organization for Economic Co-operation and Development O-M: Industrial tariff class, Mexico PMGD: Small-to-medium DG projects, Chile PPA: Power purchase agreement RenovAR: Renewable Energy Plan, Argentina SADI: Argentina Electric Sector SENER: Energy Secretary, Mexico SIC: Central Interconnected System, Chile SIEPAC: Electric Interconnection System for Central American Countries SING: Northern Interconnected System, Chile UPME: Mining and Energy Planning Unit, Colombia 3

5 1. Executive Summary

6 MWdc Latin America Summary: Global share of PV demand increases by 4% in 2017 adding 4 GW Latin America PV Demand E 12,000 10,000 8,000 6,000 4,000 2,000 Cumulative Forecast = 41GW CAGR = 43% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% Latin America is expected to significantly increase continues to increase its share of PV demand. The region as a whole is expected to take over 6% of global PV demand in 2017 on the basis of strong growth in several major markets such as Mexico and Chile. Several key markets on the rise include Argentina and Colombia, with regional giant, Brazil, capable of becoming a force once again through economic recovery. Utility-scale solar leads all other segments of PV in across the region where solar is beating out prices for other technologies in auctions, and capturing much more of the market share for non-conventional renewables. In the second half of 2016, solar prices reached a low for not only Latin America, but briefly globally at $29/MWh during Chile s August national supply auction. Distributed generation is on the rise, in some markets such as Mexico and Brazil, where net metering and other incentives are in place. Investment in the sector is spurred through the introduction of tax reforms, partnerships with development banks and funds for renewable-specific projects. Due to low PV prices, however, financing for low rate of return projects is one of the most challenging endeavors for developers. Still, economic recovery and corresponding growth in power demand helps sustain regional renewable energy investment in % E 2018E 2020E Annual Installed PV Global Demand Share Source: GTM Research Global Solar Demand Monitor Q Causes for concern in several markets include currency depreciation (Mexico and Brazil) to ever-present political changes. Latin America electricity consumption per capita is still relatively low when compared with OECD countries. The IMF revised growth projections for Latin America and the Caribbean downwards to 1.2% in 2017, with weaker than expected GDP gains in the major markets of Brazil, Chile, Mexico and Argentina. 5

7 Market Segmentation Argentina and Colombia are poised to cut into the Big Three s share of LatAm PV demand Latin American Markets Share of Annual Regional PV Demand E Highlights: 100% 90% 80% 70% 60% 50% 40% 30% 20% 3% 41% 4% 2% 8% 39% 5% 5% 3% 4% 3% 4% 9% 5% 4% 5% 7% 4% 8% 4% 3% 2% 2% 3% 2% 2% 3% 2% 11% 5% 14% 14% 14% 14% 1% 1% 22% 46% 42% 44% 39% 37% 37% 14% 11% 12% 15% 15% Argentina s auction clears the way for almost 1 GW of PV to contract through the RenovAR program a vehicle which establishes targets and ways for clean energy to flourish in the country out through 2025 when the country has an 20% target for renewables generation. RenovAR Ronda (Round) 2 will be unveiled as soon as March to start the process for more projects to be added on beyond Colombia is somewhat following the footsteps of several of its LatAm neighbors. Because Colombia only operates under private utilities, many PV projects are for self consumption only without proper incentives such as net metering. As of the most recent energy expansion roadmap, only 150 MW of solar was targeted by 2035, but that number should be surpassed by 2018 alone. Mexico will spend 2017 getting started on the massive 4.2 GW pipeline issued in Projects are being signed, sited, and seeking financing but the continuing decline of the Peso is hurting confidence in whether project returns will be high. System components are sourced in dollars but compensation will be in MXN. 10% 15% 20% 20% 17% 17% 17% 2% 0% E 2017E 2018E 2019E 2020E Brazil Chile Mexico 2021E Argentina Peru Central America The Caribbean The Rest of South America Chile continues to be the leader of cumulative PV installed in Latin America. Chile will experience a down year in 2017, and cede it s top standing. Projects wait to connect to an already congested grid, but Chile adds a few more > 50MW projects to the grid. Brazil may be largest economy in Latin America, but a recession and excess electricity supply clouds PV s future development past already contracted projects. 6

8 2016 in Review: Mexico and Argentina breakout onto the scene; Brazil cools off Mexico 2016 auctioned pipeline is a 1000% increase in the PV market 390MW 2016 was the year of utility-scale auction surprises: Both Mexico and Argentina s auctions surprised and exceeded expectations in 2016, signaling the first stage for promising build out. 4200MW Existing installed (MW) Contracted through 2016 auctions (MW) In Mexico s case, there was doubt whether the proposed energy transition would pan out to the benefit of solar especially for the utility scale. Before the first energy auction in March, there were many differing views as to whether PV would be able to compete with other energy sources like wind and natural gas. These reservations proved to be overblown as PV emerged as the overwhelming winner in both utility auctions totaling 4.2GW of capacity at prices as low as $33/MWh. Argentina 2016 auctioned pipeline is a 1300% increase in the PV market 70 MW Existing installed (MW) Argentina was an absolute wildcard factoring into the overall dynamics of regional PV. President Macri showed signs of reviving an aging and uncompetitive sector when he was elected in late 2015, but the swiftness of the changes to the sector were unexpected. In total, through 2 rounds of auctions, Argentina added close to 1 GW of utility scale PV. It was, however, the introduction to financing and renewable energy targets in 2016 which set solar up for success in the long term. 916 MW Contracted through 2016 auctions (MW) The largest economy in the region, Brazil, fell victim to several macroeconomic factors from political instability to drought. These factors decreased the overall electricity demand year over year by 0.7%, and was the main driver for the cancellation for both planned 2016 auctions for which solar was to be a part of. Almost 700MW of tendered projects from 2014 remain in flux after a potential cancellation plan was scrapped. 7

9 2017 Regional Trends: Expect solar s momentum from 2016 to carry over Latin America Major Markets PV Projections Brazil Chile Mexico Colombia & Cuba Outlook: Weak Brazil was unable to catch a break in almost every facet of the market in Expect 2017 to be a rebound year for PV as the economy grows incrementally. It is also expected that ANEEL has factored in the regular ebb and flow of hydro capacity when planning future supply auctions. Utility-scale solar s loss will be distributed generation s gain. Expect especially the C&I segments add another 50-80MW. Outlook: Neutral The most recent CNE supply auction, actually turned out to be a gain for PV. Developers shrewdly worked around the block bidding structure to secure generation in the 24 hour slots using other technologies as a front for a portion of the project to be solar. Expect the cat-and-mouse game to continue. Look for SIC-SING interconnection to spill progress into early to mid Outlook: Strong Recent auctions masked the expiration of permits from the old scheme. A flurry of end of 2016 will upward of 500MW additional permitted capacity. Auctioned projects are now in the financing stage, one that will not an easy hurdle to clear given the low rates of return calculated on some projects. Installers have capitalized on the DAC tariff clients, but rates in O-M and H-M industrial classes are increasing too. Look for most of the 2017 DG installations to take place in this class. Outlook: Rising Thawing of international relations has provided a spike in the interest of developing renewables on the island. The completion of a 50MW utility plant and 100MW auction will lead to more interest pouring into the country given its demand needs. Colombia can be pegged as the new Argentina, with a more stabilized government and need for cleaner and cheaper energy sources. Colombia, however, faces policy and incentive limitations. 8

10 Executive Summary: Chile races past 1GW; Mexico now has the largest contracted pipeline Regional Project Pipelines (MW dc ) Central America & Caribbean Mexico Operational 7%, 390 MW Under Construction 12%, 658 MW Contracted 38%, 580 MW Operational 37%, 554 MW Under Construction 25%, 373 MW Contracted 81%, 4256 MW Brazil Operational 12%, 339 MW Contracted 35%, 2680MW Chile Operational 23%, 1807 MW Under Construction 42%, 3250 MW Contracted 59%, 324 MW Rest of South America Operational 23%, 129 MW Under Construction 18%, Contracted 65%, 1894 MW Contracted 94%, 916 MW Argentina Under Construction 23%, 661 MW Operational 6%, 60 MW Source: GTM Research Latin America PV Project Tracker 9

11 Average PPA Price (USD/MWh) Latin America s Auction History Shows Declining Price Trend Over the Past 4 Years Chile, 205MW El Salvador, 144MW Guatemala, 110MW Chile, 253MW Panama, 88MW Brazil, 890MW Brazil, 834MW Chile, 118 Peru, 108MW Brazil, 929MW Jamaica, 37MW Guatemala, 130MW Mexico, 1871MW Argentina, 400MW Mexico, 2400MW Argentina, 516MW El Salvador, 120MW 20 Chile, 125MW 0 Oct-12 May-13 Nov-13 Jun-14 Dec-14 Jul-15 Jan-16 Aug-16 Mar-17 Sep-17 Auction Month & Year 10

12 About the Report

13 Contents from Full Report 1. Executive Summary 7 2. Brazil Chile Mexico Argentina Colombia Central America 57 12

14 List of Figures from Full Report Executive Summary Chile Latin America PV Demand E Latin American Markets Share of Regional Demand E Mexico and Argentina Auction PV percentages Latin America Markets PV Outlook Regional Project Pipelines (MWdc) Historical Latin America PV prices Brazil Brazil Overall PV Demand E Brazil Market Segmentation E Brazil Residential (<20 kw) PV Demand Scenarios 2016E-2021E Brazil Commercial (20 kw-1 MW) PV Demand Scenarios 2016E- 2021E Brazil Industrial (1-5 MW) PV Demand Scenarios 2016E-2021E Brazil Utility-Scale (>5 MW) PV Demand Scenarios 2016E-2021E Brazil Utility Scale (projects >5 MW) PV Demand E Brazil contracted projects as part of 7GW goal Pernambuco State Auction analysis Investments required for BRIC countries to meet renewables targets BRICS total RE targets and corresponding investments Brazil Distributed Generation (<20 kw-5 MW) PV Demand E Brazil Distributed Generation by state Brazil Overall PV Demand Scenarios 2016E-2021E Chile Overall PV Demand E Chile Market Segmentation E Chile Residential PV Demand Scenarios 2016E-2021E Chile Commercial (20 kw-1 MW) PV Demand Scenarios 2016E- 2021E Chile Industrial (1-5 MW) PV Demand Scenarios 2016E-2021E Chile Utility-Scale (>5 MW) PV Demand Scenarios 2016E-2021E Chile Utility Scale (projects >5 MW) PV Demand E Sistema Interconectado del Norte Grande (SING) Grid PV Highlights Sistema Interconectado Central (SIC) Grid PV Highlights Chile Utility-scale Developer Rankings Q Chilean mining sector electricity demand projections Chilean PV PPA prices vs other technologies in auctions Chile Overall PV Demand Scenarios 2016E-2021E Mexico Mexico Overall PV Demand E Mexico Market Segmentation E Mexico Residential (<20 kw) PV Demand Scenarios 2016E-2021E Mexico Commercial (20 kw-1 MW) PV Demand Scenarios 2016E-2021E Mexico Industrial (1-5 MW) PV Demand Scenarios 2016E-2021E Mexico Utility-Scale (>5 MW) PV Demand Scenarios 2016E- 2021E Mexico Utility Scale (>5 MW) PV Demand E State analysis into new auction awards Mexico Distributed Generation (<20 kw-5 MW) PV Demand E State Distributed Generation installed capacity ( ) State percentage of installed Distributed Generation through 2015 Distributed Generation installations by segment through 2015 Nodal prices across Mexico in relation to the next auction Mexico Overall PV Demand Scenarios 2016E-2021E Argentina Argentina Overall PV Demand E RenovAR 1 and RenovAR 1.5 projects relative to country Global Horizontal Irradiance (GHI) and location Latin America auction prices with regression fit (2012-present) Argentina Distributed Generation (<20kW-5MW) PV Demand E Rest of South America Rest of South America Overall PV Demand E Central America Central America Overall PV Demand E 13

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