Chile powered ahead to become the leading Latin American country for foreign investment into renewable energy in 2020, as the nation’s firm commitment to the green transition entices investors.

Last year, the renewable energy sector accounted for the highest share (41.6%) of total foreign direct investment (FDI) projects in Chile on record, according to data from greenfield investment monitor fDi Markets. 

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The country ranked first in Latin America for renewable energy investment for the first time since 2015, with foreign investors announcing a total of 32 projects. It was followed by Brazil with 31 projects and Mexico with 10. 

Although Brazil very closely followed Chile in second place, it only held a 14% market share, with Mexico holding just 4%. In the same year, the sector held a 10.3% market share at the regional level and 4.5% globally.

Renewable energy projects into Chile peaked in 2019 and experienced a minimal decline of 5.9% in 2020, as the sector fared considerably well in the context of coronavirus and its decimation of global FDI projects, which declined by 33% across all sectors, according to fDi Markets.

Sources of investment

Between 2015 and 2020, Spain was the primary source market for renewable energy projects into Chile, followed by Italy and Ireland. The top investing company was Dublin-based Mainstream Renewable Power, which was behind all 14 projects from Ireland into the country in this period. 

In a recent fDi opinion piece on the future of renewable energy, Mainstream’s chief executive, Mary Quaney, identified Chile as an example of a market that embodies the framework of “the new electric society”. 

In 2020, Spain and Italy remained the top two source countries of renewable energy projects in Chile. Italy-based Enel took the lead as the top investor in the country by project numbers, followed by Spain-based OPDE. 

By capital investment, however, the lead was held by UK-based Solarcentury, which announced a $950m investment in three utility-scale solar projects into Chile’s Antofagasta and Tarapacá regions. Solar was the country’s top renewable sub-sector in 2020, accounting for 68.8% of total FDI projects in the country past year, followed by wind at 28%.

Energy transition

The global shift to green energy is becoming increasingly clear, with greenfield FDI in renewables outperforming fossil fuels for the first time on record last year. The energy transition is gaining support across the board as actors that have traditionally focused on fossil fuels react to the shifting power dynamics being brought about by the race for renewables.

One key reason for Chile’s success as a destination for renewable energy projects is political backing. The Climatescope 2020 report by Bloomberg New Energy Finance placed Chile at the top of its ranking of most attractive countries for renewable energy investment.

“Chile’s well-established clean energy policies, bold targets and overall commitment to greening its grid, as well as significant volumes of renewable energy investment have combined to make the country attractive to clean energy investors,” the report reads.

For its part, national investment promotion agency Invest Chile has identified energy as one of its key target sectors, with a specific focus on clean energy, for which it offers numerous incentives and support packages. Chile’s National Energy Commission will hold its next renewable energy auction in May 2021, where foreign developers can bid to supply up to 2.31TWh annually for a period of 15 years.

By 2024, Chile’s government plans to shut down 1.047GW of coal-fired power station capacity, and leads all Latin American countries with its goal to decommission all coal plants by 2040.