By Fitch Solutions
- Offshore wind development will continue to lag growth compared to the onshore segment, with the first projects expected to enter operations toward the end of the decade.
- Colombia and Brazil have emerged as key markets in the region as they have established regulatory frameworks and existing project pipelines.
- Uruguay is a key market to watch as the government aims to develop offshore wind capacity to support the growth of its green hydrogen industry.
Offshore wind development will continue to lag growth compared to the onshore segment, with the first projects expected to enter operations toward the end of the decade. Wind power is expected to be a main driver of non-hydro renewables growth in the Latin American region over the next decade. The segment is forecast to add 34.7GW of capacity by 2031, growing at an average annual rate of 7.1% over the 10-year forecast period. Generation from wind power will increase from 135.1TWh in 2022 to 249.5TWh in 2031 and account for a majority of the region’s renewables generation mix by the end of the decade. However, the added capacity is expected to be nearly entirely from onshore projects as we expect only 850MW of offshore capacity to come online during the forecast period. Prohibitive project costs and the lack of a regional supply chain has led to the offshore wind segment to remain underdeveloped in Latin America. We expect this change in the coming years as project costs continue to decline and the segment begins to see government action in support of renewables and broader economic development strategies. Additionally, we highlight the region’s substantial technical potential as an upside risk to offshore wind growth forecasts. A 2020 World Bank analysis found that Latin America has the potential to support 7.7GW of offshore capacity, including 2.4GW from fixed projects and 5.3GW from floating projects.
Vast Technical Potential Creates Upside Risk For Offshore Wind Development In Latin America.
Select Countries – Offshore Wind Technical Potential, GW
Source: World Bank and Fitch Solutions
Colombia and Brazil have emerged as key markets in the region as they have established regulatory frameworks to support existing project pipelines. These markets currently account for the all of the offshore wind capacity in our Key Projects Database in the region.
Colombia: In May 2022, the government released a roadmap which outlined a path to develop 1GW of offshore wind capacity by 2030, 3GW by 2040 and 9GW by 2050. The roadmap was followed by a resolution published by the Ministry of Mining and Energy (Minminas) which established regulations for awarding concessions to developers and opened the first round of the competitive process. The permit process will be overseen by the government’s Maritime Directorate (DIMAR) with the first tender expected to be completed in the second half of 2023. Supportive government action and the creation of a clear, defined permitting process has driven private sector investment in the market’s offshore wind segment. Colombia is expected to have the first operational offshore wind facility in the region with the completion of the 350MW Copenhagen Offshore Wind project developed by Copenhagen Infrastructure Partners in 2026. Further, Spain-based BlueFloat Energy announced that it plans to develop seven projects in the country totalling 5.2GW in capacity. This includes the 500MW Vientos Alisios project which the company states has received pre-feasibility status from DIMAR and has secured grid interconnection
Brazil: The Brazilian government has acted to develop a regulatory framework to support the development of its offshore wind sector. In January 2022, the government issued a decree which enabled the Ministry of Mines and Energy to conduct necessary environmental studies, select offshore development zones and organise auctions. Additionally, in August 2022, the Senate passed legislation which set the legal guidelines for companies to explore offshore wind development. The market has seen significant interest from private developers, with a reported 55 projects totalling over 130GW of capacity currently under environmental review by the Brazilian Institute of Environment and Renewable Natural Resources (Ibama). State-owned oil producer Petrobras announced plans to partner with Equinor ASA on the development of 4GW project off the coast of Rio de Janeiro as part of an MoU previously signed in 2018. Shell Plc has proposed six offshore wind farms totalling 17GW in the country and has applied for environmental permits for the projects with Ibama. In June 2022, ENGIE and EDP Renewables launched its 50-50 joint venture OW Brasil and submitted applications to Ibama for five projects with a combined capacity of 15.2GW. While there exists a substantial project pipeline in the market, we note that all proposed projects are in the early stages of licensing review with federal regulators. As such, we currently are not forecasting any offshore wind capacity to come online in Brazil before the end of the decade.
Brazil hosts all of the top ten largest projects in the region’s offshore pipeline
Uruguay is a key market to watch as the government aims to develop offshore wind capacity to support the growth of its green hydrogen industry. While we currently do not forecast any capacity to come online within the next decade, we believe the market provides the most favourable conditions in the region for further expansion of the segment. The Uruguayan government has taken key actions to set a foundation for the industry and drive future investment. In June 2022, the government launched its green hydrogen strategy known as the H2U Offshore Programme in partnership with state-owned oil and gas firm ANCAP. The plan aims to install 10GW of electrolysers by 2040 with 20GW of non-hydro renewables capacity to support green hydrogen production. Uruguay seeks heavy involvement from the private sector and outlines a framework which puts private firms in charge of project development. Firms would be granted 25-year concession contracts for offshore blocks to develop necessary infrastructure including offshore energy generation and hydrogen production facilities. ANCAP has designated 10 areas for project development for the first bidding round and according to the latest schedule expects contracts to be awarded in October 2023. Additionally, as part of the strategy’s first phase the government plans develop and implement regulations for the sector to provide clarity and further attract investment.
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