Even new-build natural gas-fired generation will remain profitable in Latin America as the fuel is key for the final push to rounding out the region's already significant renewable power.
Existing operators will have advantages, head of exploration, reservoir and low-carbon technologies at Eneva, Frederico Miranda, told Argus.
"If you already have existing infrastructure, that is key," Miranda said. "In that place you are already in a competitive position for the next capacity auction. If you can build a new plant near an existing infrastructure, that is also a go. If you are going to greenfield, slightly more challenging but still competitive."
Investors of new gas-fired plants in Latin America will see returns coming from these plants because the region will still need a source of energy that is quickly dispatchable, reliable and emits fewer emissions as it shuts down fuel oil-, diesel- and coal-fired plants, delegates heard at the CERAWeek by S&P Global conference in Houston, Texas, today.
"We see gas as the energy transition fuel in the region," said Francisco Morandi, chairman and vice president of portfolio management and global renewables at AES Brazil.
The share of renewable power in Latin America's power mix is 60pc, which twice the global average. The region has vast hydropower resources but had seen stark droughts in recent years that have put their electricity systems to the test. Grid operators tried to sustain supply-demand balance using more polluting power sources.
The continuous increase of intermittent renewable capacity in the region combined with the phase-out of oil, diesel and coal for generation leaves room for more gas in the power system while new technologies such as batteries reach a scalable level, delegates heard.
Brazil is debating whether to include battery energy systems (BESS) in its capacity auction this year. Energy and mines minister Alexandre Silveira said that the government is targeting the inclusion of the technology in the power tenders, but the technology was excluded from the draft proposal for the 30 August capacity auction.
"I think if it happens it is going to be a small share of the auction," Miranda said. "It will be more an experimentation than really labeling that the solution for the next years."
