Despite the continuing effect of the pandemic on financing, investment and construction in many countries, the Americas continued to see substantial additions to renewable energy capacity in 2021. According to the International Renewable Energy Agency (IRENA), 2021 saw the addition of approximately 13 gigawatts (GW) of new capacity in South America, dominated by Brazil which alone had almost 10 GW of new renewable capacity. Chile, which has one of the best solar resources in the world in the northern Atacama Desert region, had another approximately 2 GW in new additions. The Central America and Caribbean region had about 550 megawatts (MW) of additions, spread over many countries. Mexico, whose recent regulatory developments are discussed in more detail below, had approximately 3 GW of new renewable capacity in 2021.1 Solar photovoltaic (PV) capacity made up most additions in many of the major countries in the region, including Brazil, Chile and Mexico.2 While these renewable capacity additions reflect substantial capital investment – much of it planned prior to the pandemic and recent developments in energy regulation in Mexico – future investment needs are much larger to meet regional climate target commitments. IRENA has estimated that the Latin America and Caribbean region needs US$118 billion per year in investment in renewable energy, transmission lines, energy efficiency and electrification to meet Paris Accord targets.3
On a global scale, Bloomberg New Energy Finance estimated global investment in the ‘energy transition’ of more than US$500 billion in 2020.4 The International Institute for Applied Systems Analysis has estimated that meeting a climate change target of restricting an increase to 1.5 degrees Celsius could require annual investment of approximately US$1 trillion in renewable power generation up to 2050, along with hundreds of billions more per year required in energy transmission, storage and distribution infrastructure.5 In a 2021 report on net-zero policies, the IEA called for annual clean energy investment of more than US$4 trillion per year to meet a global net-zero carbon pathway.6 A significant fraction of this amount would be needed in the renewable energy sector.
Much of this investment would need to come from the private sector and would involve large cross-border investment flows. The scope for international arbitration in the renewable energy sector is therefore likely to rise sharply in the coming years, as new investments create the potential for new commercial and investor–state disputes in the Americas and elsewhere.