London, 6th November 2013 — The success of international wind and solar energy developers, manufacturers and the wider supply chain within Latin America is as much dependent on a sustained programme of domestic investment, as it is on local government energy subsidies and incentives.
That is according to GCube, the leading underwriter for renewable energy initiatives. Currently the firm safeguards and protects 3,000MW of wind and solar projects throughout the region and expects this to grow by between 15 and 20% over the next twelve to twenty-four months.
While many have recognised the clear potential that the Latin American market presents, the steady introduction of rules that require overseas firms to commit to a percentage of locally produced content, risks diluting further foreign ambition.
In Brazil, two of the biggest global manufacturers by market volume failed to qualify and risk losing market share because they can no longer offer developers access to competitive state-backed financial incentives.
In the near term, that market shortfall can be recovered by targeting other Latin American territories, but the anticipated introduction of further local market content requirements, rules and regulations will threaten long-term sustained market growth.
Despite this potential industry hiatus, GCube believes that an increased domestic commitment from overseas manufacturers and developers will help increase future project viability and decrease impending market risk.
“Over the past twelve months, Latin America has experienced a significant uptick in the development of renewable energy initiatives, as developers capitalise on lucrative early-stage government incentives and support,” said GCube’s Colombian-born, Executive Vice President New Business, Natalia Valencia.
“As the large-scale energy, infrastructure and construction markets heat up, gaps have begun to emerge in the way in which aspiring overseas firms can safely manage and deliver against their growing project pipeline and database.”
“Local construction markets frequently struggling with a shortage of available equipment and with a replacement parts supply chain that often entails international freight and shipping, projects frequently face delay.”
“In addition to the natural catastrophe risks, such as earthquakes and windstorms, two of the most common examples of Force Majeure in these geographies; the resupply of long lead time equipment becomes vital to ensure that Latin American renewable energy projects remain bankable.”
“This has clear cost implications that could in reality be offset by an increased local market investment and commitment.”
With offices in London, New York and Newport Beach, California, GCube offers over twenty-five years of international renewable energy underwriting experience. In November, GCube will travel to Guatemala, to attend and participate in the FIDES 2013, an annual conference that explores and assesses Latin American insurance and re-insurance opportunities.