Renewable Energy Market in Latin America: Trends, Investments, and Outlook
- MJ Furey
- 14 hours ago
- 7 min read
Latin America leads globally in renewable energy, with over 60% of its electricity generated from renewables—twice the global average. Originally propelled by widespread hydropower, which still supplies about 45% of their energy, countries such as Costa Rica and Paraguay achieve nearly 100% renewable electricity. The region now harnesses this foundation to rapidly scale solar, wind, and bioenergy deployment, motivated by ambitious targets and net-zero commitments. This momentum drives new investment and secures Latin America’s place as a compelling market for renewable energy developers and investors.
Looking ahead, Latin America’s market performance and outlook are very positive. Building on this momentum, the International Energy Agency projects that renewable capacity in the region will expand by around 165 GW between 2023 and 2028, nearly doubling the current installed base. By 2030, Latin America is aiming to reach roughly 450 GW of total renewable capacity – a 39% increase over 2022 levels – which would raise renewables to about two-thirds of power generation in this decade. In fact, the region has been installing new renewable capacity faster than required to hit its 2030 targets, averaging 26 GW of additions in 2022-2023 alone. This growth trend, if sustained, puts Latin America on track to exceed its clean energy goals and even “over-deliver” on climate pledges. However, realizing this potential will depend on continued investment flows and the ability to overcome financing and structural challenges discussed later in this article.
Market Performance and Investment Trends
As Latin America’s renewable sector accelerates, Brazil, Mexico, Argentina, and Chile have led the region’s clean power expansion. The region already sources a high share of electricity from renewables (approximately 60–65%, versus approx. 30% globally), and from 2023 to 2028 the IEA projects about 165 GW of new capacity (mainly solar and wind) with approximately 90% in Brazil (108 GW), Chile (25 GW), Mexico (10 GW), and Argentina (4 GW). Brazil leads with 175 GW installed and an 85% renewables share. Wind and solar are expanding fastest; Brazilian wind ranks 4th globally (96 TWh in 2023) and solar 6th (52 TWh). Bioenergy, notably Brazil’s sugarcane ethanol and biodiesel, remains substantial.
Investment is accelerating, with clean‐energy investment reaching US$70 billion in 2025, a 25% gain since 2015. Renewables project financing is strong: IJGlobal reports $12.6 billion of deals closed in FY2024 (148 deals, a 50% jump from 2023), with Brazil accounting for 64%. Major transactions include Mexico’s $6.26 billion acquisition of Iberdrola assets. Overall, markets are maturing as clean energy builds peak.
Financing: Mainstream Banks, Alternative Funding, and Blended Finance
Financing Latin American renewables involves traditional bank lending, capital markets, and multilateral support. Commercial banks (international and domestic) are principal lenders, working alongside national development banks. For example, Mexico’s Iberdrola transaction was supported by development banks (Banobras, Nacional Financiera, Bancomext) as well as major banks (Barclays, BBVA, Santander, SMBC). Similarly, Brazil’s BNDES and IDB Invest frequently issue loans or guarantees for projects. Meanwhile, green and sustainability-linked loans and bonds are increasingly common: pension funds and ESG-focused investors in Chile, Colombia, and Peru now underwrite green project debt.
Expanding beyond mainstream channels, alternative finance options are becoming more prominent, with dedicated project bonds, credit facilities and infrastructure funds (often piggybacking corporate balance sheets) supplementing bank debt. Some projects tap local capital markets (ex: Mexican CKD/Certificados structures) or use innovative vehicles (yieldcos, equity funds). Performance-based contracts or milestone certificates (backed by governments) are used to de-risk PPPs. Yet many clean-energy projects in the $5–100M range still rely primarily on bank loans. High interest rates and currency risk are challenges: as the IEA notes, only about 5% of global private clean-energy investment flows to LAC, citing “high rates, lack of long-term finance and rising debt costs.”
Blended finance has proven a key enabler, where development institutions (IDB, IFC, CAF, etc.) contribute concessional capital and credit enhancements to mobilize private funding. For instance, IDB Invest manages around $800 million in donor funds to blend with commercial loans. Globally, multilateral development banks provided a record US$137B in climate finance in 2024 and mobilized US$134B of private investment. In Latin America, this means structured deals with partial guarantees, concessional tranches or co-lending that lower risk for commercial investors.
Opportunities in Funding Renewable Projects
Strong investment pipeline: Latin America possesses abundant wind and solar resources and ambitious clean-energy targets. Projections anticipate roughly 125 major projects (66 GW) valued at approximately $66 billion. Annual clean-energy investment must nearly double (approx. $150 billion/year by 2030) to meet net-zero objectives. Recent renewable financing reached historic peaks ($9.6 billion in 2019; $45 billion closed 2018–2023), underscoring growing market momentum.
Diverse financing sources: A mix of public and private funding is emerging. Development banks and DFIs are very active; Brazil’s BNDES offers low‑interest, 16‑year loans covering up to 80% of project costs. DFIs accounted for an estimated 30% of all regional deal volume in 2018–2023. Blended finance vehicles and green bond programs are also on the rise: donors and foundations are using catalytic capital to de‑risk projects and crowd in private investors.
Innovative structures and corporate demand: Corporate/off‑taker models and market innovations help mobilize capital. Large firms and industrial users increasingly enter self‑supply PPAs or equity deals (ex: a $243 million financing for Brazil’s Mendubim solar complex was arranged based on a dollar‑denominated PPA). Pooling off-take contracts has enabled small players to access financing (for example, seven municipalities jointly financed a 22.5 MW wind farm). These approaches reduce currency and off-take risks and attract foreign lenders.
Challenges in Funding Renewable Projects
Renewable projects in Latin America encounter high capital costs and short loan tenors. These projects require long payback periods, often greater than 7 years, but loans typically last only 5–6 years. This mismatch leads to higher equity stakes of around 40%, pushing up financing costs. The average cost of capital, around 6.9%, is shaped by elevated country risk, making project investment more expensive.
Macroeconomic and fiscal volatility further complicates investment. Inflation and rising interest rates have shortened loan maturities and driven up costs, limiting the region to only about 5% of global private clean-energy investment. High borrowing costs, limited long-term finance, and large public debt burdens in countries like Brazil and Mexico restrict both public and private actors' ability to fund new renewable projects.
Policy, grid, and permitting challenges reduce investor confidence. Inconsistent regulations and infrastructure bottlenecks add to project risk. Delayed grid connections and curtailments, such as those seen in Brazil, extend project paybacks. Land-use conflicts and local opposition can stall projects for years, as happened in Oaxaca. Uncertainty around future support measures (like subsidies, auctions, and market rules) makes financial institutions more hesitant to lend.
Gaps within local financial sectors contribute to investment challenges. Few local banks offer tailored financing products for renewables, and long-term local-currency loans are rare. Without these, many projects depend on foreign capital — generally at higher cost and with currency risk. Most countries also lack on-budget subsidies or domestic support funds, so developers often face higher financing hurdles.
Despite significant obstacles, active solutions are underway. Policy reforms, infrastructure upgrades, and risk-mitigation tools are being deployed to address regulatory, financial, and market challenges. Most importantly, the region’s cost-competitive renewables and strong decarbonization imperative ensure a robust investment outlook, provided efforts remain focused and collaborative.
Strategic Considerations for Project Developers
Market Selection and Entry Strategy
Brazil offers a mature market and established financing channels but contends with competition and regulatory complexity in distributed generation. Chile has excellent renewable resources and auction processes, but needs storage solutions to address curtailment. Colombia presents high growth prospects and strong government support, although permitting and grid connection have longer lead times. Argentina’s updated investment regime creates opportunities for large projects, but requires prudent risk evaluation. Mexico’s large market and proximity to North America are advantages, though developers must manage state priorities and regulatory uncertainty. Developers should select markets aligning with their risk appetite, technical strengths, and financing network.
Technology and Revenue Optimization
Hybrid projects combining solar or wind with battery storage are crucial in markets with curtailment, allowing excess generation to be monetized during high prices. Diversifying revenue streams beyond PPAs (including spot market participation, capacity payments, ancillary services, and carbon credits) reduces volatility and enhances financial resilience. Corporate PPA strategies targeting high-credit off-takers in expanding sectors (data centres, green hydrogen, mining) provide revenue stability and potentially improve financing terms. Successful developers will model multiple revenue scenarios and structure financing that accommodates spot market exposure within prudent risk parameters.
Financing Structure and Partner Selection
Optimal financing structures typically combine 60-70% senior debt from commercial banks or development finance institutions with 30-40% equity from developers, sponsors, or infrastructure funds. Concessional capital from multilateral sources like the GCF, CTF, and CAF can improve project economics for new technologies or high-risk markets. Collaborating with local developers provides market knowledge, stakeholder relationships, and regulatory assistance, reducing development risk. Joint ventures with established utilities or industrial groups offer offtake agreements and creditworthiness, enhancing bankability. Professional financial advisors can help access appropriate capital sources and structure transactions that optimize risk allocation.
Risk Mitigation Frameworks
Multilateral agencies like MIGA and OPIC offer political risk insurance to protect against expropriation, currency issues, and contract breaches. Development banks and credit enhancement facilities provide guarantee structures to reduce financing costs by absorbing initial losses. Given the region’s vulnerability to climate events, comprehensive insurance programs covering construction, operations, and natural catastrophes are crucial. Currency hedging should balance protection costs with revenue volatility, possibly using natural hedges like dollar-denominated PPAs or export-oriented off-takers. Community benefit agreements and transparent stakeholder engagement minimize social license risks and promote long-term project sustainability.
Conclusion: Amimar International’s Role in Latin America’s Renewable Energy Future
Latin America’s renewable energy market offers compelling investment opportunities for project developers targeting USD 5-100 million transactions. With projected growth from 300.8 GW in 2024 to 449.6 GW by 2034, the market supports sustained growth in solar, wind, biomass, and emerging waste-to-energy sectors. The region’s 65-70% renewable electricity generation share and ambitious 70-80% targets by 2030 create a supportive policy environment. Transaction volumes reached USD 8 billion in 2024 and are projected to reach USD 24 billion in 2025, demonstrating robust market activity.
However, successful navigation requires understanding diverse financing mechanisms, regulatory environments, and infrastructure constraints and risk mitigation strategies. The region’s annual investment requirement of USD 200 billion necessitates mobilizing capital from multilateral development banks, blended finance facilities, commercial lenders, and private equity sources, each with distinct requirements and risk appetites.
Amimar International is a leading provider of renewable project finance advisory and risk assessment services, and has longstanding experience in Latin America’s dynamic market conditions. Our advisory services include feasibility assessment, lender engagement, market analysis, and documentation support, optimizing the efficient financial close of energy projects with optimal terms. Amimar International partners with renewable energy developers seeking to capitalize on Latin America’s growth, leveraging our specialized knowledge and industry relationships to transform project concepts into bankable realities. Contact us today to discuss how our expertise can support your Latin American development pipeline.