- Wood Mackenzie forecasts solar PV to become the most cost competitive power generating technology in Latam by 2023
- With technological improvements, cost reductions will enable solar PV to have the lowest cost of energy, $14 per MWh, until 2050
- Solar and standalone energy storage will generate attractive LCOE levels, at $21.4 per MWh for hybrid projects by 2050
Come 2023 and solar PV will become the most cost-competitive technology in Latin America and remain the lowest cost of energy among all other power generating technologies in the region until 2050, with $14 per MWh, according to a new Wood Mackenzie report.
Technological improvements are leading to these cost reductions for solar, including bifacial modules ‘becoming the norm across the region in the mid-term’. Average capital investment in solar will fall by 55% from 2022 to 2050, as per the report. Attractiveness of conventional sources of electricity generation will continue to go down as ESG mandates grow.
“With limited opportunity for innovation, prospects for significant cost reductions for hydro and thermal plants are null. Increasing regulatory and environmental barriers will also make such projects less financeable and therefore more expensive,” said Research Manager – Latin America Power & Renewables at Wood Mackenzie, Leila Garcia da Fonseca.
According to the analysts in Latin America levelized cost of electricity (LCOE) 2022 report, solar will displace onshore wind as the most attractive renewable energy source in Brazil by 2025. But it is Mexico that with its ‘exceptionally high-capacity factors’ that will report the lowest LCOE for solar among all other Latam nations, followed by Chile.
Mexico recently committed to investing up to $48 billion to install over 30 GW additional wind, solar, geothermal and hydroelectric capacity by 2030 (see Mexico Targets Over 40 GW Wind & Solar Capacity By 2030).
Alongside solar, it is standalone storage that will have the highest cost reduction rate among all technologies averaging 64% across the region. “The rapid cost reduction of solar and standalone energy storage will result in extremely attractive LCOE levels for hybrid projects in the region, with $21.4 per MWh anticipated by 2050,” added Fonseca.
In comparison, after 2033 onshore wind will become cheaper than gas in all countries until 2050. Offshore wind, as the report forecasts, will become the most competitive in Brazil with $79.7 per MWh and in Colombia with $57.3 per MWh by 2035. For offshore wind projects, off-grid green hydrogen production is the main driver at present.
The Wood Mackenzie report can be purchased from its website for $2,500.