Can renewable energy power Latin America’s recovery after Covid-19?

The Covid-19 pandemic is pushing the global economy into its first recession since 2009, and Latin America is feeling the strain. As governments bring in emergency measures and corporate leaders enact cost-cutting strategies, a return to normality is still some way off. However, the road to recovery could be paved by the opportunities presented by renewable energy, opening the way for a sustainable, more equitable future.

As the coronavirus outbreak continues to roil world markets, a fall in global economic activity is hurting Latin America’s goods and services exports, disrupting supply chains, and tightening financial conditions. In the markets we work in, companies are racing to cut costs, while governments are moving to mitigate the health, societal and economic impacts of the virus, with containment measures, emergency liquidity programs, and fiscal stimulus packages.

These short-term measures have served to address the immediate issues thrown up by the pandemic, but for sustainable, long-term resilience, we believe a solid energy strategy is going to be central to future plans – and renewables will provide the answer.

Company cost-cutting measures

In the Latin American markets where we operate, we’re seeing business leaders taking stock of their costs and trying to make accurate assessments about future revenue and draw up effective business plans. Research by global consulting firm Mercer backs this up: they found that almost two-thirds of Latin American companies are concerned about the economic impact of the crisis on their business, with 54% cutting immediate personnel and labor outlay.

These are quick fixes, but the indicators show that Covid-19 is going to need a long-term view. Latin American GDP is predicted to contract by around 5% this year, and domestic demand looks set to fall sharply as social distancing policies to curb the spread of the virus impact spending.

Depending on the industrial sector, energy accounts for anything from the first to the fourth largest operating cost, and we’re starting to see companies influence their cost structure by making choices about energy sourcing and consumption. 

Corporate power purchase agreements (PPAs) for renewable energy, whereby businesses purchase electricity directly from independent generators instead of from a utility, have risen in popularity in recent years, with 2019 seeing a threefold increase in deals in Latin America.

Structured as a contract between a corporate off-taker and a power producer, they serve as an agreement to buy electricity at a fixed price over an agreed period. For corporate buyers, this means visibility and certainty of future electricity costs as well as a hedge against energy price volatility –a key to thriving in the post-Covid-19 world.

Our team was the first to implement a solar private PPA in Chile some eight years ago, and we’ve since replicated this success in Brazil and Mexico. We’re seeing an increasing number of inquiries from companies across industries as they look to find an energy strategy that supports their balance sheet in these straitened times, and we believe this trend will only continue.

Governments look to renewables for a win

As in the rest of the world, people around Latin America have looked to their governments to provide solutions to the coronavirus crisis. Those perceived to have acted quickly have seen a groundswell of public support, but more far-reaching measures will be needed to set the economy in good stead for the coming months and years.

As governments now move from immediate firefighting to a longer-term view, a renewables-based energy transition can support a resilient and equitable recovery to the crisis that leaves nobody behind. We’ve seen this ourselves in our projects that bring clean, cheaper energy alternatives across the region. We’re not the only ones to believe in the power of renewables: In its Global Renewables Outlook, published in April this year, the International Renewable Energy Agency (IRENA) says that making the energy transition an integral part of the wider recovery will result in global GDP gains of almost US$100tn between now and 2050.

In this regard, Latin American countries are already ahead of the curve. They have set a collective target of 70% renewable energy use by 2030, more than double the European Union’s target, while 81% of the region’s nationally determined contributions (NDCs) to the Paris Agreement on climate change have quantified renewable power targets – versus 67% globally.

Rather than compounding the tragedy of Covid-19 by allowing it to hinder clean energy transitions, we believe Latin America’s governments have an unprecedented opportunity to help accelerate them by using the current situation to step up their climate ambitions and launch sustainable stimulus packages focused on clean energy.

With costs far below those of traditional power plants, many renewable technologies can be ramped up relatively quickly, helping to revive industries and create as many as 3.2 million[1] new jobs in the region, offsetting – at least partially – the social and economic impacts of the coronavirus outbreak.

As oil falls, renewables are a safe haven for energy investors

Covid-19 isn’t the only shock disrupting Latin America’s economies. The current collapse in crude prices to well below the marginal lifting cost per barrel in most oil plays in the region has put exploration and development projects on hold. Oversupply and falling demand have forced increasingly risk-averse investors to leave oil in their droves, with stocks and bonds in producers such as Ecopetrol, Petrobras, and Pemex falling significantly.

This heightened unpredictability of returns on hydrocarbon investments has further bolstered the business case for clean energy, which has been strengthening in recent years. Until very recently, fossil fuels still held a competitive advantage over renewable electricity generation. That is no longer the case. In fact, Latin America’s unsubsidized renewable energy is now often the most affordable power source for numerous locations and markets. We expect to see growing numbers of investors looking at solar and wind energy as a reliable, affordable, and scalable alternative, pumping funds into new projects which will support the region’s clean energy transition.

A glimpse of the future

Renewable energy’s ability to support the post-Covid recovery isn’t just about economics. It’s about improving health conditions and quality of life in Latin America’s cities.

In recent months, we’ve seen what could be possible in a cleaner energy system. Research by Carbon Brief shows that the coronavirus crisis could trigger the largest ever annual fall in CO2 emissions this year. As the world’s most urbanized region, with 80% of its population living in cities, Latin America has borne witness to this already. Santiago de Chile, one of the region’s most air-polluted metropolises, has seen a 30% decline in smog, while citizens from Bogota to Belo Horizonte have filled social media with incredulous photos of clear skies.

We believe this new awareness of what the future could hold if the right energy choices are made will lead to growing pressure on governments and corporations alike from the region’s young, politically active population to curb the most critical instances of urban air pollution.

The pandemic will usher in long-lasting changes, and companies, governments, and investors have a once-in-a-lifetime opportunity to play a leading role in the new post-coronavirus reality. Those that are able to bake in sustainable consumption, production, and progress towards carbon reduction targets to their business strategy will be at the crest of the wave, and, in our opinion, renewable energy’s cost savings, environmental benefits, and job creation opportunities will set it in good stead to become the backbone of growth as the region charts a path to recovery.

Sources Compilation

[1] Source: pp 145 IRENA Global Renewables Outlook 2020

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Cómo la innovación financiera puede impulsar el crecimiento de energías renovables en Latinoamérica

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Al igual que la tecnología, las energías renovables se benefician de los avances sistémicos constantemente. Sin embargo, no todos los avances vienen en forma de paneles solares más eficientes, sino que también provienen de la construcción de innovaciones financieras.

El financiamiento es esencial para que la industria de energías renovables pueda progresar. En otras palabras, la industria no puede avanzar si no cuenta con un financiamiento capaz de proveer los fondos necesarios para el desarrollo de un proyecto. Los nuevos métodos de financiación han creado una serie de oportunidades para los inversionistas; al mismo tiempo contar con mejores estructuras financieras se traduce en precios de energía más bajos para los consumidores. Respaldar los proyectos de energía renovable a gran escala no sólo permite que los precios de energía sean más asequibles para los consumidores, sino que fomenta el crecimiento económico de la región y un mayor despliegue de este tipo de proyectos.

Atlas Renewable Energy Abre Nuevos Caminos

La expansión de Atlas Renewable Energy está enfocada en los mercados emergentes de Latinoamérica. Gracias a las continuas innovaciones financieras y tecnológicas, y a un historial profundo en materia de desarrollo, financiamiento y ejecución, hemos podido ofrecer 1.2 GW de proyectos contratados en la región y apuntamos a crecer 1.5 GW adicionales durante la próxima década. Creemos que construir modelos económicos  a la medida nos permite tener una estructura financiera personalizada que nos permite entender los posibles riesgos de forma más precisa, un avance que puede ser tan importante como las mejoras de tecnología solar y que se traduce en precios más bajos para los consumidores finales.

A través de diferentes estructuras de financiamiento hemos logrado desarrollar varias plantas solares en toda la región. Un ejemplo claro, fue la financiación o de los proyectos Litoral y Del Naranjal que se llevó a cabo en Uruguay, donde el cliente de la energía producida es la compañía estatal de energía eléctrica (UTE). Dicha compañía requirió un contrato de compra de energía (PPA por sus siglas en inglés; power purchase agreement) por una duración mayor a 25 años, lo que representó un desafío interesante porque la mayoría de los bancos que pueden financiar este tipo de proyectos manejan plazos de  10 o 15 años y algunos pocos 18 años. Para resolver esto utilizamos una nueva estructura de financiación en la que dos colocaciones privadas a largo plazo (ej. bonos) se emitieron en Estados Unidos, permitiendo a inversionistas de todo el mundo participar con diferentes asignaciones de riesgo. Cabe destacar que estos inversionistas de bonos suelen estar más acostumbrados a horizontes de tiempo más largos.

El acuerdo estaba compuesto por un bono senior calificado como grado de inversión (investment grade) de 103 millones de dólares. El resto provino de un bono de deuda subordinada por un total de $ 11.5 millones, de los cuales el fondo de inversiones del Banco Interamericano de Desarrollo (BID), una filial del Banco Mundial, asumió financiar una parte proporcional. DNB Markets Inc. actuó como coorganizador y agente de colocación de los bonos senior y subordinados, que tienen una duración de 24 años y 15 años, respectivamente. Pasados esos años, los inversionistas culminan sus inversiones y Atlas Renewable Energy continúa operando y abasteciendo los requisitos de energía por el resto del contrato de compra de energía.

El acuerdo contó con el respaldo del Banco Interamericano de Desarrollo como prestamista oficial y fue organizado bajo una estructura de bonos A/B que incluía los tramos de notas principales y subordinadas. Esta colaboración fue un acuerdo novedoso en el contexto de los proyectos renovables en América Latina y permitió que Atlas Renewable Energy recibiera el premio otorgado por  Bonds & Loans Latin America Awards, en la categoría de Bonos Estructurados del Año. Lo más interesante del acuerdo es que demostró que los inversionistas internacionales pueden y quieren participar en el desarrollo energético de la región, que se pueden asegurar períodos a largo plazo con precios atractivos y que esta nueva estructura de financiamiento puede servir como modelo para resolver las necesidades de capital a largo plazo de la región. También es un testimonio a la estabilidad de las tecnologías renovables; que los inversionistas reconocen como de bajo riesgo y fiable a largo plazo.

Ceremonia de premiación en Bogotá, donde Carlos Barrera – CEO y Michael Shea – Head of Structured Finance recibieron el premio, el pasado 25 de abril.

Beneficios del Bono B

Financiar bajo la estructura de un Bono B permite la expansión de otras fuentes de  financiación, como los mercados de capital para inversionistas privados que actúa como marco multilateral y que proporciona una alternativa sólida y adecuada al financiamiento bancario o al financiamiento tradicional de los mercados de capital. Este tipo de financiamiento se resguarda en la política de riesgos del BID, que ejerce su rol como “prestamista titular”, lo que trae liquidez adicional y mayor valor potencial a las transacciones.

Innovación en el Mercado de Capitales para el Desarrollo de Energía Solar Fotovoltaica

Los parámetros requeridos para lograr que un bono cuente con una clasificación de grado de inversión en el desarrollo de proyectos solares (energía verde) siguen siendo bastante onerosos y conservadores. Desde la perspectiva de los flujos de efectivo, un bono con grado de inversión requerirá un porcentaje relativamente bajo de los ingresos de la planta solar para pagar la deuda asociada (en comparación con los préstamos bancarios a largo plazo, por ejemplo). Dado el historial de la tecnología fotovoltaica como una clase de activo, existe un amplio interés de los inversionistas por la exposición a flujos de efectivo adicionales a una tasa de rendimiento competitiva (hasta aproximadamente el 80% en el caso de los préstamos bancarios a largo plazo), especialmente cuando hay un componente mercantil limitado. Por esta razón, la incorporación de un tramo subordinado proporciona una solución interesante para lograr relaciones de apalancamiento más sólidas, lo que finalmente resulta en precios de energía más bajos para los consumidores finales. La innovación financiera puede desempeñar un papel clave en el crecimiento de las energías renovables en Latinoamérica. Si se hace correctamente, puede ofrecer nuevas posibilidades para los inversionistas, tasas de rendimiento atractivas y ahorros de energía para los consumidores. Estos logros, que tienen beneficios para todas las partes involucradas, subrayan el potencial y el enorme futuro que tienen las energías renovables en América Latina. Esa es una de las razones por las que somos tan optimistas sobre la industria y el potencial de la región y reafirmamos nuestro compromiso día a día para aportar nuestra experiencia y valor agregado al desarrollo de las energías renovables en América Latina.

Sources

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Por que grandes mineradoras estão utilizando energia solar?

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A utilização de energia solar na América Latina permite que mineradoras obtenham energia a preços mais competitivos.

Mineração Com Grande Uso de Energia na América Latina

Segundo estimativas, indústria global de mineração consome 400 terawatts/hora de energia anualmente, o equivalente à demanda energética de toda a França. Uma grande parcela desse consumo acontece na América Latina, que é rica em minérios. Lar dos maiores depósitos de cobre, prata, lítio e ouro, o setor de mineração no continente é uma indústria de bilhões de dólares, que está cada vez mais em busca de fontes renováveis de energia para suprir sua demanda.

Para obter o produto final da mineração e atender à crescente demanda mundial por esses elementos, o minério passa por diversos processos com alta utilização de energia. O custo financeiro da energia utilizada no setor corresponde a 1/3 do custo total de operação, com tendência de crescimento conforme os depósitos de minério mais acessíveis se extinguem, tornando necessária a utilização de processos mais complexos e com maior custo energético.

Incorporando Energia Renovável no Processo de Mineração

Para lidar com esses novos desafios, companhias de mineração estão cada vez mais utilizando fontes de energia solar e eólica para atender sua demanda por energia, reduzir a emissão de gás do efeito estufa e diminuir os custos de operação no setor.

Energia renovável de fontes não-convencionais está sendo cada vez mais utilizada como uma solução viável para problemas de demanda energética na América Latina. Por exemplo, nos últimos cinco anos a utilização de energia renovável no Chile foi de 5% do total para 18%. A energia gerada por painéis solares se torna cada vez mais competitiva quando comparada às fontes convencionais – especialmente na América Latina, uma região que se beneficia de altos níveis de irradiação solar – grande parte ainda não utilizada. A tecnologia de painéis fotovoltaicos também sofreu enorme redução de custos na última década, fator que, aliado ao aumento de eficiência, diminuiu o preço dessa fonte de energia para menos de 50% do custo de fontes convencionais (como carvão e gás natural). Além disso, painéis solares e, em alguns lugares, energia eólica, estão atingindo um custo de 50% do custo de energia hidrelétrica convencional em algumas localidades. Essas mudanças estão trazendo maiores investimentos em energia solar para substituir fontes convencionais.

A usina de energia solar ‘Javiera’ da Atlas Renewable Energy, localizada em Antofagasta, no norte do Chile, é um grande exemplo da nova tendência de investimento em energia solar por mineradoras. A usina de 69 MegaWatts de potência fornece energia solar para a mina de cobre Minera Los Pelambres, propriedade da Antofagasta Minerals, a maior companhia privada de mineração no Chile, e atende à 15% da demanda por energia da companhia.

A indústria de mineração no Brasil, Colômbia, México e Peru também podem adotar estratégias de incorporação de fontes não-convencionais de energia renovável na sua operação. Dessa maneira, além de cortar o custo da energia quase pela metade, também poderão contribuir com a construção da imagem de empresas verdes, podendo operar com parceiros que têm maiores exigências ambientais. Empresas de tecnologia, que dependem da mineração na América Latina para confeccionar seus produtos, estão ansiosas para diminuir a emissão de carbono na sua cadeia produtiva, demandando o mesmo de seus fornecedores.

Perspectiva Para O Futuro

Previsões do mercado indicam que fontes renováveis serão responsáveis por suprir 5-8% da demanda energética de mineradoras até 2022, com metas mais ambiciosas buscando atingir até 15% nesse mesmo período. Essa nova tendência resultará na triplicação da capacidade global do mercado até 2027. A incorporação de energia solar dá às mineradoras da América Latina uma oportunidade única de suprir sua demanda energética de maneira sustentável, confiável e com baixos custos. Energia solar não é apenas uma alternativa sustentável, mas também uma maneira de reduzir custos e continuar competitivo em uma indústria onde a redução de custos é essencial.

Sources

  1. Slavin, Andrew. “Mining Industry Starts to Dig Renewables.” Energy and Mines, 7 June 2016, www.energyandmines.com/2016/06/mining-industry-starts-to-dig-renewables/.
  2. Bhattar, Payal. “Latin American Mining: Switching to Renewables.” Latin American Mining Switching to Renewables, 25 July 2018, www.wartsila.com/twentyfour7/energy/latin-american-mining-switching-to-renewables.
  3. Sanderson, Henry. “Miners Turn to Green Power Options.” Financial Times, Financial Times, 3 Oct. 2018, www.ft.com/content/b3b7fe4a-a5fc-11e8-a1b6-f368d365bf0e.
  4. Dickerson, Kelly. “How Gold Is Destroying Peru’s Rainforests.” Business Insider, Business Insider, 1 Nov. 2013, www.businessinsider.com/gold-mining-destroying-peruvian-amazon-2013-10.
  5. Gleeson, Daniel. “Miners Moving towards the Renewable Energy Path, Says Fitch Solutions.” International Mining, 11 Sept. 2018, www.im-mining.com/2018/09/11/miners-moving-towards-renewable-energy-path-says-fitch-solutions.
  6. “The Role of Generators in Mining Chilean Copper.” New & Used Generators, Ends and Engines | Houston, TX | Worldwide Power Products, www.wpowerproducts.com/news/the-role-of-generators-in-mining-chilean-copper/.
  7. Plumber, Bran and Popovish, Nadja. “These Countries Have Prices on Carbon. Are They Working?” The New York Times, The New York Times, 2 April 2019, www.nytimes.com/interactive/2019/04/02/climate/pricing-carbon-emissions.html.
  8. Viscidi, Lisa, and Ariel Yépez. “The Energy Solution Latin America Needs.” The New York Times, The New York Times, 1 Feb. 2018, www.nytimes.com/2018/02/01/opinion/energy-grid-latin-america.html.
  9. “Solar Energy in Latin America: Four Key Impact Drivers.” Targray, 14 Feb. 2019, www.targray.com/articles/solar-energy-latin-america.
  10. Molina, Pilar Sánchez. “Colombia Issues Regulation for Distributed Solar Generation.” Pv Magazine International, 5 Mar. 2018, www.pv-magazine.com/2018/03/05/colombia-issues-regulation-for-solar-distributed-generation.
  11. Bellini, Emiliano. “Antofagasta Minerals Sells Stake in 69.5 MW PV Plant in Chile.” Pv Magazine International, 31 May 2017, www.pv-magazine.com/2017/05/31/antofagasta-minerals-sells-stake-in-69-5-mw-pv-plant-in-chile/
  12. Funicello-Paul, Lindsay. “Press Release | Renewable Energy in the Mining Industry.” Press Release | Renewable Energy in the Mining Industry, 27 Feb. 2019, www.navigantresearch.com/news-and-views/annual-revenue-for-renewables-and-energy-storage-in-the-mining-sector-is-expected-to-generate-roughl.
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¿Por qué las grandes compañías mineras están adoptando la energía solar?

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La adopción de la energía solar en Latinoamérica permite que las compañías mineras adquieran energía a precios más competitivos.

El uso intensivo de energía en las empresas mineras de América Latina

La industria minera mundial consume alrededor de 400 teravatios-hora (TWh) de energía por año, el equivalente a la demanda anual de energía de Francia. Una gran porción de esa energía se consume en América Latina, una región rica en minerales, con los depósitos más grandes de cobre, plata, litio y oro del mundo. En esta región el sector minero es una industria multimillonaria que recurre cada vez más a las energías renovables para satisfacer sus demandas energéticas.

El producto minero final, que satisface la creciente demanda mundial, amerita un procesamiento que consume mucha energía. En la actualidad, la energía puede llegar a representar más del tercio del costo de una operación minera y esa proporción aumenta a medida que se culminan las tareas que no requieren mayor esfuerzo. Así, las técnicas de minería más complejas demandan más energía.

Incorporación de energías renovables en el proceso minero

Para aliviar estos problemas, las compañías mineras recurren con mayor frecuencia a energía solar fotovoltaica económica, así como a energía eólica, para satisfacer sus requisitos de energía, reducir las emisiones de gases de efecto invernadero y disminuir los costos operativos.

La energía renovable proveniente de fuentes no convencionales en América Latina comienza a ganar impulso, hasta el punto en que ha demostrado ser una solución viable de energía alternativa. Por ejemplo, Chile aumentó su cuota total de energías renovables de 5% a 18% en los últimos cinco años. La energía generada por plantas solares se convirtió en una fuente muy competitiva si se compara con las formas tradicionales de energía —especialmente en Latinoamérica, por ser una región que se beneficia de excelentes niveles de radiación solar desaprovechados—.

Los costos de la tecnología solar fotovoltaica se han reducido significativamente durante la última década. Ello, combinado con eficientes innovaciones, ha conducido a que los precios de la energía solar alcancen menos del 50% de los de la energía convencional (como carbón y gas). Asimismo, la energía solar fotovoltaica (y el viento en ciertas regiones) comienza a costar la mitad que la energía hidroeléctrica convencional. Estos cambios han estimulado la inversión en energía solar para desplazar a la energía convencional.

La planta solar Javiera, de Atlas Energías Renovables, ubicada en la región de Antofagasta, en el norte de Chile, es un buen ejemplo del uso de energías renovables en la minería. Se trata de una planta fotovoltaica de 69 megavatios (MW) que provee energía a Los Pelambres, mina de cobre perteneciente a Antofagasta Minerals, la compañía minera privada más grande de Chile. Este proyecto cubre casi el 15% de los requisitos de energía de la mina.

La industria minera en países como Brasil, Colombia, México y Perú también es candidata para incorporar la energía renovable no convencional en sus procesos. Al hacerlo no solo obtienen energía a mitad del costo de la energía convencional, sino mejoras en sus credenciales ambientales y la posibilidad de establecer negocios con organizaciones que valoran las huellas ambientalmente sostenibles. Las compañías de tecnología que confían en los minerales latinoamericanos para elaborar sus productos están ansiosas por alcanzar las metas de reducción de las emisiones de dióxido de carbono y cada vez más demandarán esto a sus proveedores.

Panorama en un futuro

Se prevé que las fuentes renovables representen entre el 5% y el 8% del consumo de energía de las industrias mineras mundiales para 2022, con objetivos más ambiciosos que apuntan a una penetración de hasta el 15% en ese mismo período. La preferencia por las energías renovables triplicará la capacidad global en este mercado para 2027. La incorporación de energía solar es una oportunidad única para que empresas mineras de América Latina puedan satisfacer sus necesidades energéticas de manera sostenible, confiable y rentable. La energía solar ya no solo se trata de ser sostenible: es una manera de que las compañías mineras se mantengan competitivas en una industria en la que las reducciones de costos son variables críticas.

Sources

  1. Slavin, Andrew. “Mining Industry Starts to Dig Renewables.” Energy and Mines, 7 June 2016, www.energyandmines.com/2016/06/mining-industry-starts-to-dig-renewables/.
  2. Bhattar, Payal. “Latin American Mining: Switching to Renewables.” Latin American Mining Switching to Renewables, 25 July 2018, www.wartsila.com/twentyfour7/energy/latin-american-mining-switching-to-renewables.
  3. Sanderson, Henry. “Miners Turn to Green Power Options.” Financial Times, Financial Times, 3 Oct. 2018, www.ft.com/content/b3b7fe4a-a5fc-11e8-a1b6-f368d365bf0e.
  4. Dickerson, Kelly. “How Gold Is Destroying Peru’s Rainforests.” Business Insider, Business Insider, 1 Nov. 2013, www.businessinsider.com/gold-mining-destroying-peruvian-amazon-2013-10.
  5. Gleeson, Daniel. “Miners Moving towards the Renewable Energy Path, Says Fitch Solutions.” International Mining, 11 Sept. 2018, www.im-mining.com/2018/09/11/miners-moving-towards-renewable-energy-path-says-fitch-solutions.
  6. “The Role of Generators in Mining Chilean Copper.” New & Used Generators, Ends and Engines | Houston, TX | Worldwide Power Products, www.wpowerproducts.com/news/the-role-of-generators-in-mining-chilean-copper/.
  7. Plumber, Bran and Popovish, Nadja. “These Countries Have Prices on Carbon. Are They Working?” The New York Times, The New York Times, 2 April 2019, www.nytimes.com/interactive/2019/04/02/climate/pricing-carbon-emissions.html.
  8. Viscidi, Lisa, and Ariel Yépez. “The Energy Solution Latin America Needs.” The New York Times, The New York Times, 1 Feb. 2018, www.nytimes.com/2018/02/01/opinion/energy-grid-latin-america.html.
  9. “Solar Energy in Latin America: Four Key Impact Drivers.” Targray, 14 Feb. 2019, www.targray.com/articles/solar-energy-latin-america.
  10. Molina, Pilar Sánchez. “Colombia Issues Regulation for Distributed Solar Generation.” Pv Magazine International, 5 Mar. 2018, www.pv-magazine.com/2018/03/05/colombia-issues-regulation-for-solar-distributed-generation.
  11. Bellini, Emiliano. “Antofagasta Minerals Sells Stake in 69.5 MW PV Plant in Chile.” Pv Magazine International, 31 May 2017, www.pv-magazine.com/2017/05/31/antofagasta-minerals-sells-stake-in-69-5-mw-pv-plant-in-chile/
  12. Funicello-Paul, Lindsay. “Press Release | Renewable Energy in the Mining Industry.” Press Release | Renewable Energy in the Mining Industry, 27 Feb. 2019, www.navigantresearch.com/news-and-views/annual-revenue-for-renewables-and-energy-storage-in-the-mining-sector-is-expected-to-generate-roughl.
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Why are large mining companies embracing Solar Energy?

Latin America’s embrace of solar energy is enabling mining companies to procure more cost-competitive energy.

Energy Intensive Mining in Latin America

It is estimated that the global mining industry consumes 400 terawatt-hours of energy per year1, the equivalent of France’s yearly energy demand. A large portion of that energy is consumed in Latin America, home to the world’s largest deposits of copper, silver, lithium, and gold. The mining sector in this part of the world is a multi-billion-dollar industry and has increasingly been turning to renewable energy2 to help meet its energy demand3.

The final consumer mining product requires high energy intensive processes4 to meet the world’s growing demand. Currently, energy use from mining products accounts for over a third of mining operational costs5. However, as the easily accessible ore deposits become exhausted, operational costs are likely to increase and lead to more complex mining techniques, which in turn require greater energy.

Incorporating Renewable Energy into the Mining Process

To alleviate these issues, mining companies are increasingly turning to cheaper solar PV and wind power to meet requirements, reduce greenhouse gas emissions, and lower operating costs. Renewable energy from non-conventional sources in Latin America has been gaining momentum and proving to be a viable alternative energy solution. For example, over the last five years, Chile has increased renewable energy shares from 5% to 18% of total usage. Power generated by solar plants has become increasingly competitive compared to traditional forms of power – especially in Latin America, a region that benefits from excellent levels of untapped solar irradiation. Solar PV technology has seen dramatic cost reductions over the past decade, which combined with efficiency innovations, has led to pricing levels lower than 50% of conventional power costs (e.g. coal and gas). Also, solar PV and wind generation are reaching cost levels at half the cost of conventional hydro power. These changes lead to increased solar energy investment and displace conventional power.

It is estimated the global mining industry consumes 400 terawatt-hours of energy per year1, the equivalent of the yearly energy demand of France. A large portion of that energy is consumed in the mineral-rich Latin America.  Home to the world’s largest deposits of copper, silver, lithium, and gold, the mining sector in this part of the world is a multi-billion-dollar industry and has increasingly been turning to renewable energy2 to help meet its energy demand3.

The mining end product required to meet the world’s growing need of these elements consists of highly energy intensive processes4. Currently this energy use can account for over one third of the cost5 of a mining operation and is likely to increase as the low-hanging-fruit ore deposits become exhausted, leading to more complex mining techniques that have greater energy requirements.

Incorporating Renewable Energy into the Mining Process

In order to alleviate these issues, mining companies are increasingly turning to ever cheaper solar PV and wind power to meet their power requirements, reduce their greenhouse gas emissions, and lower their operating costs.

Renewable energy from non-conventional sources in Latin America has been gaining momentum and proving to be a viable alternative energy solution. For example, over the last five years alone, Chile has increased their renewable energy share from 5% to 18% of their total usage. Power generated by solar plants has become very competitive compared to traditional forms of power – especially in Latin America, a region that benefits from excellent levels of untapped solar irradiation. Solar PV technology has seen dramatic cost reductions over the past decade combined with efficiency innovations, leading to pricing levels that have reached even less than 50% of conventional power costs (e.g. coal and gas). Furthermore, solar PV (and Wind in certain regions) is also reaching cost levels that are half the cost of conventional hydro power.  These changes are leading to increasing investment in solar energy to displace conventional power.

Atlas Renewable Energy’s ‘Javiera’ solar plant  in the Antofagasta region of northern Chile reflects a prime example of this trend towards renewable energy in mining. The 69 MW PV plant powers the Minera Los Pelambres copper mine, owned by Antofagasta Minerals, the largest private mining company in Chile. This project serves nearly 15% of the mine’s power requirements6.

Mining industries in Brazil, Colombia, Mexico, and Peru are also adopting a strategy of incorporating non-conventional renewable energy into their processes. By doing so, they source power at half the cost of conventional power, enhance their environmental credentials and enable business opportunities with organizations that value environmentally sustainable footprints. For example, technology companies relying on the region’s minerals, are increasingly demanding the implementation of carbon reduction measures2 from suppliers.

Future Outlook

By 2022, renewable sources will account for 5% to 8% of the global mining industries’ power consumption, with more ambitious targets aimed at 15%1. This drive towards renewable sources will lead to triple the global capacity by 20277.

Incorporating solar energy offers a unique opportunity for Latin American mining companies to meet their energy needs in a sustainable, reliable, and cost-effective way. Solar is no longer just about being sustainable, it’s a way for mining companies to stay competitive in an industry where cost reductions are critical.

Sources

  1. Slavin, Andrew. “Mining Industry Starts to Dig Renewables.” Energy and Mines, 7 June 2016, www.energyandmines.com/2016/06/mining-industry-starts-to-dig-renewables/.
  2. Bhattar, Payal. “Latin American Mining: Switching to Renewables.” Latin American Mining Switching to Renewables, 25 July 2018, www.wartsila.com/twentyfour7/energy/latin-american-mining-switching-to-renewables.
  3. Sanderson, Henry. “Miners Turn to Green Power Options.” Financial Times, Financial Times, 3 Oct. 2018, www.ft.com/content/b3b7fe4a-a5fc-11e8-a1b6-f368d365bf0e.
  4. Dickerson, Kelly. “How Gold Is Destroying Peru’s Rainforests.” Business Insider, Business Insider, 1 Nov. 2013, www.businessinsider.com/gold-mining-destroying-peruvian-amazon-2013-10.
  5. Gleeson, Daniel. “Miners Moving towards the Renewable Energy Path, Says Fitch Solutions.” International Mining, 11 Sept. 2018, www.im-mining.com/2018/09/11/miners-moving-towards-renewable-energy-path-says-fitch-solutions.
  6. Bellini, Emiliano. “Antofagasta Minerals Sells Stake in 69.5 MW PV Plant in Chile.” Pv Magazine International, 31 May 2017, www.pv-magazine.com/2017/05/31/antofagasta-minerals-sells-stake-in-69-5-mw-pv-plant-in-chile/
  7. Funicello-Paul, Lindsay. “Press Release | Renewable Energy in the Mining Industry.” Press Release | Renewable Energy in the Mining Industry, 27 Feb. 2019, www.navigantresearch.com/news-and-views/annual-revenue-for-renewables-and-energy-storage-in-the-mining-sector-is-expected-to-generate-roughl.
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How financial innovation can drive the growth of renewables in Latam

Like technology, renewables continuously benefit from systemic advances. Even so, not all breakthroughs arrive in the form of more efficient solar panels. Some come from breaking ground in financial innovation.

The financing of projects in the renewables sector performs the essential role of enabling the industry to progress. In other words, without viable financing providing funding for projects, the industry comes to a halt. New and improved methods of funding create novel opportunities for investors and, with better financial structuring come lower energy prices for consumers. Further, backing large-scale renewables projects in this way that reduces the cost of energy prices, enables further deployment of clean energy and economic growth in the region.

Atlas Renewable Energy Breaks Ground

Atlas Renewable Energy’s expansion is focused on Latin America’s emerging market economies. With ongoing technological and financial innovations, we have been able to offer clean energy in the region leveraging a deep track record in development, financing and execution. We believe tailored financial structuring can enable more accurate risk allocations resulting in lower prices to end consumers. This can be advancement that can be as consequential as solar technology enhancements.

Throughout the region we have developed several solar plants with different financing structures. One such project  is located in Uruguay, where our client for the energy produced is a state-owned company, UTE, that required a power purchase agreement (PPA) that lasted over 25 years. This posed an interesting challenge and opportunity because most banks that can fund these types of projects can only provide funding for 10 to 15 years, and a very additional few can provide up to some 18 years. We solved this by pioneering a new financing structure where two long-term private placements (i.e. bonds) were issued in the United States that allowed multiple investors around the world to participate in differing risk allocations – these bond investors are accustomed to longer tenor horizons.

The deal was specifically composed of an investment-grade senior bond totaling $103 million and the remainder came via a subordinated debt bond totaling $11.5 million, of which IDB-Invest funded a proportional share. (DNB Markets Inc. acted as co-arranger and placement agent of the senior and sub B tranches.)

The senior and subordinated bonds have a duration of 24 years and 15 years, respectively, after which the investors exit their investments and Atlas Renewable Energy continues to operate and supply the energy requirements for the remainder of the PPA. The deal was backed by IDB-Invest as the lender of record (of the Inter-American Development Bank Group, an affiliate of the World Bank) and was arranged as an A/B Bond structure that included both senior and subordinated note tranches. This collaboration was a completely novel arrangement in the context of Renewable projects in Latin America and allowed Atlas Renewable Energy to be presented with the Structured Bond Deal of the Year by Bonds & Loans Latin America Awards.

Award Ceremony in Bogotá, Carlos Barrera – CEO of Atlas Renewable Energy & Michael Shea – Head of Structured Finance receive the award.

What was particularly interesting about the deal is that it shows that international investors can and want to participate in the region’s energy development, that long-term tenors at very good rates can be secured and that this new financing structure can serve as a new model to help solve the long-term capital needs of the region. This is also testament to the proven-nature and stability of Renewable technologies; which investors are recognizing as low-risk and reliable over a truly long-term horizon.

Benefits of the B-Bond

Financing with the structure of B bonds allows for the expansion of substitute funding sources through capital markets for private investors under a multi-lateral umbrella, providing a strong and suitable alternative to bank funding or traditional capital markets funding. This type of financing aids in bringing additional liquidity and potential value to a given transaction, under the implicit political risk insurance structure from the IDB through its role as ‘lender of record’.

Capital Markets Innovation for Solar PV

The parameters required to achieve an investment-grade rating for a solar PV green bond remain quite onerous and conservative in nature. From a cash flows perspective, an investment-grade bond will require a relatively low percentage of the plant’s revenues to repay the associated debt (as compared to long-term bank loans, for example). Given the track-record of the PV technology as an asset class, there is ample investor appetite for risk exposure to additional cash flows at a competitive rate-of-return (up to 80% in the case of long-term bank loans); especially when there is a limited merchant component. For this reason, the incorporation of a subordinated or “mezzanine” tranche provides an interesting solution to achieve more robust leverage ratios, ultimately resulting in lower power prices for end consumers. Financial innovation can play a key role in the growth of renewables in Latam. When done right it can offer new possibilities for investors, attractive rates of return and energy savings for consumers. These strong wins for all parties involved, underscore the potential and bright future renewables have in Latin America and is one of the reasons for optimism in this industry.

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