Renewable and Sustainable Energy Reviews 119 (2020) 109648

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Renewable and Sustainable Energy Reviews

journal homepage: http://www.elsevier.com/locate/rser

Examining the decreasing share of renewable energy amid growing thermal

capacity: The case of South America
S. Arango-Aramburo a, *, 1, J.P. Ríos-Ocampo a, b, 1, E.R. Larsen c, 1
a
Department of Computer Science and Decision, Faculty of Mines, National University of Colombia, Carrera 80 # 65–223, Medellín, Colombia
b
Department of Administrative Sciences, Faculty of Economic and Administrative Sciences, Instituto Tecnol�
ogico Metropolitano, ITM, Calle 54 A #30-01, Medellín,
Antioquia, Colombia
c
Department of Management, Aarhus University, Denmark, Fuglesangs All�e 4, 8210, Aarhus V., Denmark

A R T I C L E I N F O A B S T R A C T

Keywords: Concerns about climate change have required energy policy to be reconsidered around the world. The transition
South America from fossil fuels to renewable energy has the potential to contribute significantly to the goals of the Paris
Renewable energy sources Agreement (2015), particularly in the developing world. The recent evolution of total installed capacity of
Energy policy
electricity mix in eight South American countries and the current renewable energy policy is considered. In­
Greenhouse emission
Energy paradox
dications of an energy paradox are seen: the installed share of thermal capacity increases as energy demand
Thermal sources grows, decreasing the share of renewable energy despite the government’s stated policy and commitment to
increasing renewables in electricity generation through incentives and regulations. The share of installed hydro
compared to thermal generation declined from 2007 to 2017 in Chile, Peru, Brazil, Argentina and Bolivia.
Furthermore, South American countries are unlikely to reach the aforementioned share of renewables in the
energy matrix, with the exception of Uruguay. Thus, organic growth of renewables may not be enough in a region
with high potential and a long history of low emissions from electricity. It may be necessary for governments to
more actively prioritize, regulate, and support inclusive subsidies for both public and private investors in the
electricity sector to reduce the risk of climate change and achieve greenhouse gas reduction goals.

45% RE consumption by 2025, 55%–60% by 2035 and 80% by 2050 [4].

1. Introduction
Over the past decades, governments, regulators, and other organi­
sations have focused on increasing the share of renewables in electricity
generation in order to reduce greenhouse gas (GHG) emissions [1] and
contribute to the goals of several international agreements, the latest
being the Paris Agreement of keeping the global temperature increase
below 2 � C [2]. According to the Paris Agreement (2015), clear objec­
tives and targets should be set and achieved by the individual signatory
countries; these include targets for the use of renewable energy (RE),
energy efficiency, and emission reduction [2]. One of the signatory
members, the European Union (EU) has set a target to reduce emissions
by 40% compared to the 1990’s levels by 2030. The EU has also set the
objective of increasing RE consumption to at least 27% by 2030 [3]. The
EU’s targets are minimum targets and individual countries can set their
own more ambitious targets. For example, Germany’s target is 40%–
The United States and China, on another hand, have defined mutual
agreements about energy policy to potentiate the RE use and mitigate
climate change [5] and targets to reduce coal consumption and improve
energy efficiency [6].
Within the energy sector, electricity generation is a key area for
reducing GHG emissions. In 2016, 42% of the total emissions were from
the energy sector, almost twice as that of the transportation sector [6].
Despite policies for promoting renewables as the preferred technology
during the past decades, fossil fuels still accounted for 65.3% of the
worldwide electricity production in 2016, with renewable and wastes,
excluding hydropower, solar, and wind, accounting for 2.8%; nuclear
accounted for 10.4%; hydropower, 16.3%; solar 1.3%, and wind 3.8%
-with a share of only 5.2%- [7]. Electricity is a key sector for GHG
reduction, accounting for 42% of global emissions; the share generated
by fossil fuels has not changed significantly in the last forty years [6].
The evolution of the electricity matrix in South America, which has

* Corresponding author.
E-mail addresses: sarangoa@gmail.com, saarango@unal.edu.co (S. Arango-Aramburo), juanrios@itm.edu.co (J.P. Ríos-Ocampo), erik.larsen@mgmt.au.dk
(E.R. Larsen).
1
These authors contributed equally to this work.

https://doi.org/10.1016/j.rser.2019.109648
Received 22 March 2019; Received in revised form 8 November 2019; Accepted 2 December 2019
Available online 6 December 2019
1364-0321/© 2019 Elsevier Ltd. All rights reserved.
S. Arango-Aramburo et al. Renewable and Sustainable Energy Reviews 119 (2020) 109648

thermal and hydro energy necessary to supply the future electricity

Abbreviations
GHG Greenhouse gas
RE Renewable Energy
EU European Union
MW Megawatt
GW Gigawatt
KWh Kilowatt-hour
TWh Terawatt hours
GDP Gross Domestic Product
CO2 Carbon dioxide
t Tonne
Mt Million tonnes
Mt of CO2 Million tonnes of Carbon dioxide
toe Tonne of oil equivalent
USD United States dollar
TPES Total primary energy supply
IEA International Energy Agency
IPCC Intergovernmental Panel on Climate Change
ENSO El Nin
~ o–Southern Oscillation
IC RE Installed Capacity – Renewable Energy
historically had a relatively low contribution to GHG emissions from
electricity generation, is focused on. Governments have pledged to
promote the use of RE and to support this through policies, regulation,
and subsidies [7,8]. The evolution of total installed capacity of elec­
tricity mix in eight countries in South America –Argentina, Bolivia,
Brazil, Chile, Colombia, Ecuador, Peru and Uruguay– during the past
decades and the status of these countries’ RE policies are considered,
where an energy paradox is observed. The stated policy is to increase the
share of renewables and reduce GHG emissions in order to accomplish
the Paris Commitments, however, in reality, the share of renewables in
electricity generation is falling [9].
The paper is organized as follows. Section 2 presents the methodol­
ogy, section 3 describes the findings in the energy sector in South
America, as well as the evolution of the installed capacity, while section
4 discusses the results and section 5 provides conclusions.
2. Materials and method
The method used in this paper is comprised of three stages: i. liter­
ature review ii data collection, including installed generation capacity
and energy mix, in eight South America countries; iii. data analysis. The
first is used to analyze the electricity sector in South America according
to the evolution of hydro and thermal capacity, the installed capacity of
renewable sources as well as the stated energy policy. Initially, socio-
economic, environmental and energy indicators of the eight countries
–Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Peru, and
Uruguay-according to IEA [7] are evaluated. Thereafter, installed ca­
pacity of conventional sources –hydro and thermal-, and
non-conventional sources –wind and solar-are analyzed to check the
trend from the last decade, using primary sources published by the en­
ergy authority in each country: Argentina [10], Brazil [11], Bolivia [12],
Chile [13], Colombia [14], Ecuador [15], Peru [16], Uruguay [17].
Furthermore, the policies and targets for renewables are evaluated by
country: Ecuador and Bolivia [18], Argentina [19,20]; Brazil [21], Chile
[22,23], Colombia [24]; Peru [25], Uruguay [26].
Finally, the data is analyzed to explore the development and changes
in the mix of generation capacity in the eight countries. First, the trend
in installed types of generation capacity, i.e. conventional and non-
conventional sources, by country is discussed. Then, the current
installed capacity of wind and solar sources is compared with the
renewable target proposed by each country for upcoming years. The
demand is estimated based on current and target renewable share in
each electricity market.
3. Background and results
3.1. The electricity sector in South America
The transition to competitive markets in the electricity sector began
in South America in the Eighties. Chile liberalized its power system in
1986, the first country in the world to do so, and other countries fol­
lowed in the Nineties [28]. The deregulation led to different degrees of
vertical integration of generation, transmission, and distribution as well
as the establishment of national wholesale markets for electricity and
the possibility of private investments in generation [29]. One aspect that
makes the region’s generation capacity distinct is the large share of
hydropower [30], which explains the historically relatively low emis­
sions from generation.
The region has a growing demand for electricity, mainly due to
population and economic growth [31]. Total electricity consumption
was around 978 TWh in 2017, of which 76% is generated by hydro­
power, 20% by thermal sources, and the remaining by renewables such
as biomass, wind, and solar [7,32]. By contrast, hydropower generation
share in the United States is about 7% [33] and European Union – 28
countries is over 15% in 2017 [34,35]. Electricity consumption per
capita is higher in Argentina, Brazil, Chile, and Uruguay, i.e., the
countries with the highest GDP per capita of the region. However, in
Argentina and Chile (and even in Ecuador) the CO2 emission per capita
is higher than in countries with the highest electricity consumption in
South America due to the energy matrix. Nevertheless, the emissions per
capita of the region are lower than those of China and the United States;
total emissions are 1088 Mt of CO2, while China and the United States
emit 9087 Mt and 5176 Mt of CO2, respectively [7].
A positive relation between percentage change of electricity con­
sumption and GDP per capita over the past decade was found out
(Table 1) [36]. Countries such as Argentina, Ecuador, and Peru follow
the trend of electricity consumption growing as GDP increases.
Argentina, for instance, increased its electricity consumption 1.95 times
with respect to its change in GDP between 2006 and 2016; while
Ecuador, Peru and Uruguay’s relations were around 0.61 times,
respectively in the same period. By contrast, Brazil, Chile, and Colombia
had a relation of 0.20 and 0.30 times. These numbers indicate the
importance of the consumption of electricity with regard to GDP as well
as GDP’s impact on driving consumption. However, the feedback be­
tween these two variables is more accentuated in countries with a low
GDP.
The total primary energy supply (TPES) per capita shows the sum of
primary energy available to each person in a country. Chile, Brazil,
Argentina, and Uruguay have a higher TPES, which indicates their ca­
pacity to supply different economic and social processes (Table 1). De­
mographic and economic growth will continue to increase the demand
for electricity, which implies a challenge for policy-makers to ensure
both the necessary capacity and the environmental sustainability of new
plants. To be able to deliver on the second criteria, governments need to
commit to energy efficiency and promote renewable technologies that
are aligned to the Paris Agreement [6].
3.2. The evolution of hydro and thermal capacity in South America’s
energy matrix
Hydropower generation has the highest share of the generation ca­
pacity in the region; while thermal generation is the leading technology
in Argentina and Bolivia [10,27]. It has previously been noted that the
share of fossil fuel generation was increasing in most South American
countries [37].
Thermal energy plays an important role in South America’s

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S. Arango-Aramburo et al. Renewable and Sustainable Energy Reviews 119 (2020) 109648

Table 1
Main macroeconomic indicators, energy consumption, and emissions per capita of South America for 2016.
Country GDP (Billion GDP per GDP per capita increase TPES per Electricity Consumption Electricity Consumption TWh CO2 emissions per
2010 USD) capita over the last decade (%) capita (toe/ per capita (KWh/capita) increase over the last decade capita (tCO2/capita)
capita) (%) *

Argentina 445.00 10.16 17% 1.97 3.11 33% 4.35

Bolivia 26.80 2.46 126% 0.81 0.75 81% 1.85
Brazil 2248.10 10.82 168% 1.37 2.50 33% 2.01
Chile 267.90 14.64 150% 2.07 4.17 45% 4.66
Colombia 366.20 7.52 225% 0.82 1.44 67% 1.76
Ecuador 85.40 5.21 221% 0.87 1.43 135% 2.13
Peru 193.50 6.08 138% 0.76 1.46 87% 1.61
Uruguay 48.30 14.21 103% 1.53 3.21 61% 1.85

Source: IEA [7]*. CO2 emissions from fuel combustion only. Emissions are calculated using the IEA’s energy balances and the Revised 2006 IPCC Guidelines.

electricity generation. In some cases, thermal energy is critical when, for
example, there is less inflow to the reservoirs during an El Nin
~ o [38,39].
In Argentina and Bolivia, thermal energy has historically been the main
technology for electricity generation [10,40]. Hydro generation is the
dominating technology in the remaining South American countries
(Fig. 1) [27]. The aim of the Paris Agreement (2015) is to reduce this
dependency on thermal generation as discussed above. However, evi­
dence in South America of any movement towards lowering the share of
thermal generation has not been realized [37], even though renewable
generation has been the main installed generation technology since
2015 worldwide [9].
The geographical distribution between hydropower and thermal
installed capacity throughout South America was assessed (Fig. 1). In
2007, Brazil had a relation of 3.6 MW hydro for each 1 MW of thermal
generation, i.e. 3.6 times more hydro than thermal; a trend that has been
reduced to 2.28 MW hydro for each 1 MW of thermal capacity in 2017.
In Chile the same pattern was identified: the relation changed from 1.23
in 2007 to 0.53 in 2017. This illustrates an increase in the relative
installed thermal capacity in two of the most important countries in
South America, despite the current promotion of renewables [41]. On
the other hand, Ecuador reduced its thermal participation in the energy
matrix from 0.86 to 1.36 MW over the same ten-year period.
The evolution of hydropower and fossil fuel generation as percent­
ages of total installed capacity for selected countries was measured
(Fig. 2). For South America as a whole, the hydropower share of capacity
declined from 53% in 2007 to 43.5% in 2017, while thermal capacity
increased from 45.6% to 45.7% in the same period [27]. Peru main­
tained a constant share of thermal and hydropower from 2001 to 2005.
However, over the next decade, the share of hydropower fell by 13%–
38% and thermal capacity gained 9%, reaching 57% of capacity [16]. In
the same period, wind and solar achieved a share of 2% and 1%,
respectively.
Brazil, the largest economy in South America, has experienced an
average annual growth in hydropower of 3% over the last two decades
while the growth in thermal generation is 7%. In the last decade
(2007–2017) the share of hydropower in total installed capacity has
declined from 76.6% (76,869 MW) to 63.7% (100,319 MW), while that
of thermal has increased from 21.2% (21,229 MW) to 27.8% (43,871
MW); wind has increased to 7.6% (12,294 MW) of the installed capacity.
Bolivia has increased its thermal energy share by 6.5% over the same
period, while that of hydropower fell by 7%. In Uruguay, hydropower
declined by 30% and thermal energy experienced an 18% reduction
between 2007 and 2017. Thermal and hydropower generation repre­
sents 52% of the total generation in 2017, while renewable sources
accounted for 48% (wind 33%, solar 5%, and biomass 10%). The evo­
lution of Peru and Chile illustrate the trend discussed, in 2007 for 1 MW
installed hydropower there was 1.2 MW in Peru and 0,8 MW in Chile of
installed thermal; in 2017 this has changed to 1.5 MW in Peru and 1.9
MW in Chile for each MW hydro [13].
There are reasons why thermal may be the preferred generation
technology in some countries in South America (e.g., Colombia [42]).
One reason is the ENSO, or El Ni~ no, phenomenon, which creates water
shortages or flooding, for example, in Colombia [38,43]. Thermal ca­
pacity can ensure the security of supply in these periods, and most
electricity systems currently require a minimum level of thermal ca­
pacity to guarantee such security [44]. In the period of analysis, re­
newables have been a more expensive option compared to thermal and
construction time is considerably shorter compared to “big” hydropower

Fig. 1. Installed capacity relation between hydro and thermal by country in South America, 2007–2017. The colors indicate the mix of thermal and hydro
generation capacity; where dark blue is a high level of hydropower relative to thermal capacity and dark red is a high share of thermal relative to hydro installed
capacity. (For interpretation of the references to color in this figure legend, the reader is referred to the Web version of this article.)

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S. Arango-Aramburo et al. Renewable and Sustainable Energy Reviews 119 (2020) 109648

Fig. 2. Installed thermal and hydro capacity in selected countries in South America. This figure shows historical installed capacity in South America. The black
lines represent installed thermal capacity and the red represent hydropower. Sources: Argentina [10], Brazil [11], Bolivia [12], Chile [13], Colombia [14], Ecuador
[15], Peru [16], Uruguay [17]. (For interpretation of the references to color in this figure legend, the reader is referred to the Web version of this article.)

[45–48]. However, the increase in the share of installed thermal ca­
pacity and very slow growth of renewables demonstrate that the energy
transition from thermal to renewable sources is generally not a reality in
South America.
3.3. Energy policy and renewables
Governments in the region have established targets for the share of
non-conventional generation technology, increasing energy efficiency,
and reducing GHG emissions in the medium and long-term [2,49,50]
(see Table 2). In South America, the objectives do not always distinguish
between hydropower and other non-conventional RE sources such as
solar and wind. However, the targets are solely focused on promoting
wind and photovoltaic generation. As previously discussed, the current
participation of renewables (excluding hydropower) is relatively low in
most South American countries, for example, in the case of Colombia,
where photovoltaic and wind generation are seen as pilot projects.
Moreover, as a region, South America does not have a coordinated en­
ergy policy compared, for example, to the EU. This makes it more
difficult to implement a direct regional policy to promote the transition
to renewable sources. This difficulty is seen in the projected dates to
achieve RE targets. While it is possible to find policies and targets with a
higher standard for transition e.g. Brazil or Uruguay, there are other
countries with relatively low targets such as Colombia or Peru (with
respect to RE).
Countries in South America have different options for introducing
photovoltaics and wind. For example, Argentina has the Pampas, which
has similarities with the Great Plains of Texas, which have been the base

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S. Arango-Aramburo et al.
Table 2
Targets for renewable sources in South America.
Country Policies and Targets for Renewables
Argentina 10,000 MW of (potential) renewable energy by 2025.
20% of national electricity consumption by 2025, supported by Law
27,191.
Bolivia 183 MW of renewable capacity by 2025.
Increase of 10% of the renewable energy in the mix in 5 years.
120 MW in geothermal.
Brazil 42.5% of the supply of primary energy by 2023.
86.1% of electricity generation with renewable sources by 2023. Wind
power expanding 20 GW.
Additional wind capacity of 3.3 GW and 34.5 GW of hydropower
capacity by 2030.
Chile 20% of the Electricity Generation from renewable sources by 2025 (not
considering hydropower larger than 20 MW).
45% of the new capacity by 2025.
At least 60% of the electricity generation from renewable sources by
2035 and 70% by 2050.
Colombia 6.5% of electricity by 2020, without big hydropower.
15% of the energy park based on non-conventional renewable energy by
2029.
Ecuador 4.2 GW in hydropower by 2022.
277 MW from sources other than hydropower by 2022.
Peru 5% of electricity generation by 2021 (excluding hydropower).
Greater than 60% of electricity generation by 2025 (including
hydropower).
Uruguay Policy 2005–2030. Promotion of non-conventional renewable sources.
Sources: Ecuador and Bolivia [18], Argentina [19,20]; Brazil [21], Chile
[22,23], Colombia [24]; Peru [25], Uruguay [26].
for large-scale wind generation [51]. Most countries have an extensive
coastline that could provide locations for offshore wind farms. Photo­
voltaics has large potential in many countries [52]. Studies on the po­
tential for adding run-of-the-river hydropower in different countries
have already been conducted [53]. Run-of-the-river generation has
significantly less environmental impact compared to “big” hydropower.
However, it does not have the same reliability as hydropower as such
systems do not include a reservoir.
The installed generation capacity of photovoltaic and wind in the
Fig. 3. Installed Wind (upper panel) and Solar (lower panel). Data for solar and wind installed capacity in MW by country. Sources: Argentina [10], Brazil [11],
Bolivia [12], Chile [13], Colombi [14] a, Ecuador [15], Peru [16], Uruguay [17], IRENA [27]. Note the different scale on the y-axis between figures.
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Renewable and Sustainable Energy Reviews 119 (2020) 109648
eight South American countries was assessed (Fig. 3). The top figure
represents the installed wind capacity; Brazil has the highest installed
wind capacity. The bottom figure shows installed solar capacity; Chile
has the highest level of installed solar capacity. Brazil has the largest
installed capacity of RE, which is more than that of all the other coun­
tries combined.
Brazilian wind capacity has increased over that last five years from
2202 MW in 2013 to 12,294 MW in 2017, which represents 7.8% (2% in
2013) of the installed capacity in Brazil [54]. Chile has 1421 MW of wind
capacity as of 2017, 6.0% (1.6% in 2013) of the total capacity [13].
Peru’s installed wind capacity increased from 1 MW in 2013 to 240 MW
in 2017, which is less than 2% (0.01% in 2013) of energy matrix in 2017.
Argentina has seen a small increase over the last five years, reaching
257 MW in 2017. The remaining countries in our sample have a very
small wind capacity and with minimal variation over the period.
Uruguay is the most progressive country with the highest growth rate in
installed wind capacity, moving from 59 MW in 2013 to 1504 MW in
2017, which is now about 33% (2% in 2013) of the energy matrix and it
is currently the country with the highest share of non-conventional
generation in the region. Thus, this is the desired path for the rest of
the countries. The share of total installed capacity of electricity mix for
the selected countries is 7.5% (2% in 2013).
Looking at installed photovoltaic capacity in the region, it is signif­
icantly lower than wind across the region, which may be surprising as
one could have expected the opposite given the potential for photovol­
taic generation. Chile is the leader with 2278 MW in installed capacity,
comparable with wind capacity. Brazil is second with 1097 MW in 2017.
Uruguay has 239 MW, Peru 96 MW, and Colombia has less than 10 MW
installed capacity.
Until now, it is clear that South America has relatively little installed
capacity of RE if one excludes hydropower. While hydropower has zero
emissions, it has other undesirable impacts, particular “big” hydropower
where dams have a significant environmental impact. “Small” hydro­
power has less environmental impact but is more vulnerable to climate
change given the variation in rainfall. The relatively slow rate of uptake
of photovoltaic and wind makes it difficult to reach the stated targets for
electricity generation (see Fig. 4).
S. Arango-Aramburo et al.
The installed capacity of non-conventional renewable capacity in
2017 are showed with the dark gray column, the target capacity defined
by the authorities in each country is illustrated with the light gray col­
umn, and the forecast of electricity demand for the target date is plotted
with the black column (see Fig. 4). The difference between the light gray
column and the black column represent the future demand that needs to
be covered using fossil fuel sources. In South America, only one country
has completed its target: Uruguay. Uruguay’s electricity matrix has
reached its RE target faster than other countries in the region (see in
Figs. 2 and 3). By contrast, Ecuador, Bolivia, and Colombia are far from
reaching their targets. Generally speaking, South American countries
need to reaffirm their commitment and adjust their regulation and in­
centives for RE, as well as accelerate the investments to be able to reach
their own RE targets [55].
4. Discussion
The 2015 Paris Agreement reflects global concern for the conse­
quences of climate change, and it proposes limiting emissions from
burning fossil fuels. The electricity generation sector is often the first
target for reduction of emissions, as well as other sectors such as
transport, where alternatives are not yet widely available and used. One
could argue that South America, with its high share of hydropower
generation, should not focus on electricity generation. However, even if
one accepts this argument, is it hard to explain and defend the increase
of the thermal generation share of the generation portfolio. In South
America, demographic and economic growth is likely to lead to an in­
crease in demand for electricity, something that will continue for the
foreseeable future (see Table 1). This implies that regulators and poli­
cymakers should focus on maintaining a minimum, if not increased,
share of renewables in the electricity sector. Around the world, it has
become increasingly difficult to build “big” hydropower due to socio-
environmental impacts and construction time, and thus, increasing the
share of renewables should be based on photovoltaic, wind, or run-of-
the-river hydropower. In over the last decade is observed that this has
not happened in most cases, as thermal capacity has been increasing.
As was presented above, countries in South America have more hy­
dropower than the global average, 7% in United States and 15% in
Fig. 4. Demand satisfied with the installed capacity (IC) of Renewable Energy (RE) target by country. Ecuador has a RE target for 2022, Brazil for 2023, and
Colombia for 2029. The rest of the countries have targets for 2025.
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Renewable and Sustainable Energy Reviews 119 (2020) 109648
European Union – 28; and have a unique opportunity to add value to the
hydropower system as well as lower emissions by focusing more on the
complementary resources of photovoltaics, wind, and micro-
hydropower. Countries in Europe are trying to balance thermal gener­
ation with renewables to solve the intermittency issues, mainly through
subsidies and the creation of regional markets. South America is in a
fortunate position in that some of the intermittency issues can partly be
solved by combining the high share of hydropower with photovoltaics
and wind. Thus, wind and photovoltaics can generate when possible,
and hydropower can produce the residual demand. This would have a
number of advantages, reserves would “last longer” as the other re­
newables would supplement them, production from thermal plants
could be limited and phased out over time. It could democratize at least
some of the electricity production, as it would require much fewer in­
vestments, allowing more people to participate, from small photovoltaic
panels on roofs to windmills.
There are reasons why renewables have not (yet) made a significant
impact in South America, among which, the most important has been
the cost relative to other sources of electricity. However, the cost has
decreased significantly in recent years and in many cases, it is now
comparable to thermal capacity [56]. Particularly, capital expenditure
of photovoltaics has been reduced and is now often competitive due to
economies of scale and technological improvements (depending on the
prices in the specific country). Recently, new offshore wind farms have
been constructed in Europe without subsidies, where the current pene­
tration of renewables has taken place due to massive subsidies [57].
Some countries in Europe have limited or are considering cutting the
subsidies to photovoltaic and wind or even changing subsidies for
already installed capacity [58].
For a number of years, South America has used capacity mechanisms
that favor certain technologies why not use such mechanisms to promote
renewables? Renewables will almost certainly require incentives to be
able to gain a higher share of the installed capacity. Policymakers and
regulators need to incentivize companies to begin to install appropriate
renewables; this will move the region along the learning curve allowing
for a gradual reduction in subsidies as experience accumulates. Expected
decreases in the costs of these technologies will further facilitate the
diffusion and help the process together with new market rules to exploit
S. Arango-Aramburo et al.
the complementarity of electricity sources.
Another issue is South America’s fossil fuel reserves, which are
tempting for countries to use domestically. For example, Argentina
exploited its gas reserves and maintained artificially low gas prices for
years [59]. Colombia could increase its coal-fired capacity with its large
reserves, Bolivia and Argentina have an abundance of natural gas re­
serves, and Ecuador, Venezuela, and Peru have large oil reserves. Poli­
cymakers should resist this temptation.
5. Conclusions
Concerns about climate change have driven a general reconsidera­
tion of energy policies around the world. In South America, countries
have developed different plans, strategies and energy/climate policies to
promote the transition from fossil fuels to renewable sources. Govern­
ments expect that their countries’ electricity matrices will be comprised
of higher shares renewable sources as the main source of electricity
generation in the middle and long-term. These projections are made
without considering hydropower. During the past years, installed ca­
pacity of RE increased in some countries in the region due to local (or
external) energy policies (mainly in Brazil, Chile, and Uruguay). How­
ever, as is showed in this paper, installed capacity of RE is still too low to
represent a significant component of countries’ electricity matrices in
terms of electricity markets (Uruguay is the only exception).
Therefore, the conclusion is that, there is an energy paradox in South
America: while on one hand governments are creating an environment
to promote RE diffusion, on the other hand the electricity matrix shows
another reality. This parallel reality is that South America has increased
the use of fossil fuel relative to hydropower and RE to guaranty their
electricity generation. There needs a be a new reality behind the rhet­
oric. As discussed, South America is moving from a relatively good po­
sition concerning emissions in the electricity sector to a gradually
worsening mix of generation technologies. The reality is a preference for
thermal generation although the official global, as well as South
American policy, is the opposite. It requires enough incentives to get
renewables off the ground. If this does not happen, there is a real danger
that South America will end up not contributing to the Paris Agreement
(2015). Further research could conduct similar analysis for other regions
to get a better understanding of the effect of regional climate/energy
policy.
Author contribution
S.A.A and E.R.L designed the research. J.P.R.O gathered the data and
produced the figures. All authors conducted the data analysis. J.P.R.O
drafted the manuscript and S.A.A and E.R..L contributed to the writing
process and discussion of the results.
Acknowledge
This paper has been partially supported by the project “Strategy for
the Colombian energy sector transformation in the horizon 2030”,
financed by Colciencias Scientific Ecosystem of the Colombia Científica
Program (Contract number FP44842-210-2018). We thank Jeffrey
Winchell for editorial support.
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