The risk of curtailment is currently the main obstacle for renewable energy investments in Latin America, according to Carlos Barrera, the CEO of Atlas Renewable Energy.
The problem is particularly acute in Brazil, where energy regulators have frequently ordered power companies to temporarily halt solar and wind generation to avoid destabilizing the electricity grid, Barrera told LatinFinance.
“It is causing many headaches, because a company has an investment case that says that it will produce a certain amount of electricity and then, because of how the grid is operated, it is not allowed to generate that much power,” he said in an interview.
“Curtailment levels are almost unpredictable. The way that operators are managing the grid is inconsistent, so it is very hard to figure out a brand-new investment right now. If Brazil wants to continue attracting data centers and other industries and investments, it really needs to address this,” he added.
Brazil is Miami-based Atlas’s biggest market and is home to 11 solar projects that were either built and commissioned by the company or are under construction. The firm sold five of the plants to Engie Brasil last year.
REGIONAL CHALLENGE
Barrera, who co-founded Atlas in 2017, noted that the problem is not exclusive to Latin America’s biggest economy. Other countries in the region are also struggling to integrate a proliferation of new sources of energy into the grid, though, some have already adopted measures that are likely to mitigate curtailment risks in the future.
“We are engaging with governments to find solutions for that early on, and I think Chile has addressed the issue in a way that we are comfortable with,” he said.
Chile, where Atlas operates three solar plants, has approved specific legislation to encourage the construction of battery storage projects, which help companies to control their access to the grid by storing part of the energy produced.
Atlas is currently building a standalone battery storage project, BESS del Desierto, according to its website.
INDUSTRY ‘PAIN‘
However, the situation in Brazil, is concerning for operators.
“There is a lot of pain across the industry because of this issue in Brazil and many conversations with the government and regulators to try to figure it out,” Barrera said.
He noted that short term solutions for curtailment issues have been successfully adopted by OECD economies and could serve as an inspiration for countries such as Brazil. Adding more transmission capacity in the short run would also help.
“There are transmission lines that were supposed to come online that have been delayed, but some are coming on in a year or two and will alleviate the situation,” Barrera pointed out.
He added that, over the medium term, Brazil should follow the example of Chile and try to boost energy storage in order to stabilize the system.
“It is really about batteries,” he said. “There is a huge investment opportunity there. Brazil needs to go through something similar [to Chile]. It requires adjustments to how the regulation works to adequate it for renewables and for the new era that we are in.”