Misconception Stands in the Way of Solar in Latin America

Many Latin American businesses don’t realize that solar is cheaper than grid power.
Published: Thu 19 Mar 2015

As electricity rates escalate in the Latin American region, finding a source of reliable, affordable energy has become a major focus for the commercial and industrial sector in the Latin American region. In response to this need, renewable energy solutions firm UGE and Panama-based OTEPI Renewables have entered into a strategic partnership. The aim of the partnership is to promote solar power which is already cheaper than utility grid power, specifically in Central America.

Solar-a “no-brainer”

Joshua Rogol, Director of Business Development at UGE, told Engerati in an exclusive interview that the biggest challenge of renewables development in Latin America is education. He explains: “Many businesses aren’t familiar with solar power, and often what they do know is outdated or based on misconceptions. For example, business owners think installing solar will be expensive but it’s already cheaper than grid power and solar costs are continuing to drop.”

He adds that UGE’s strategic partnership with OTEPI is about getting in front of those businesses that stand to benefit from a cheaper, more reliable source of energy, and making sure they have a full understanding of the industry and their unique capabilities. “Once they understand the economics, solar becomes a no-brainer.”

Off-grid may be the solution for some

While the economics for going completely off-grid is typically not particularly compelling for many Latin American companies, there are some that are running on 100% diesel due to there being no access to grid power. For these companies, solar generation and energy storage easily wins from an energy cost perspective, explains Rogol.

Energy storage is an important piece to the puzzle in offering increased energy security (during disruptions and extreme weather events), as well as reducing peak load charges. In some markets, there is additional value from having a battery in being able to shift your demand (e.g. charge the battery from cheap grid electricity at night and run it when electricity is most expensive during the day).

UGE has many customers who are utilizing energy storage for a variety of reasons. Rogol expands: “We recently signed another contract with a Fortune 500 restaurant chain to provide stored backup power for the solar system on their company headquarters. We develop microgrid projects that allow resorts, businesses, and remote telecoms sites to operate completely off the grid. We’re currently providing microgrids to power telecoms towers in Colombia and have several microgrid projects in the works around the region.”

Rogol adds that the sale of excess electricity to the utility remains an option in the region but this process tends to be driven by policy and whether the utility will pay a wholesale or retail rate.

Distributed renewable energy- a threat to some utilities

There are mixed feelings from Latin America’s utilities around the development of distributed renewable energy, says Rogol. For some, distributed renewable energy is viewed as disruptive to the traditional model that most utilities have operated under for decades but many understand that businesses need more reliable sources of power and solar energy is helping to fill that gap, reducing the demands of ageing infrastructure, and providing a more robust energy mix.

Globally, there are examples of utilities embracing distributed solar and capturing significant value from cost reductions in generation, transmission, and distribution. There are also cases of utilities fighting distributed solar tooth and nail, because they fear that their most profitable kilowatt-hours will churn from their network and cause a negative network phenomenon (e.g. less users per fixed network cost, leading to higher costs per user).

In many markets, utilities have been updating their policies to allow for solar interconnection and net metering, but many also limit the project size.