Latin America

Latin America is the world’s greenest region for power generation, with the world's lowest carbon footprint, due mainly to extensive use of hydropower: hydro accounts for 40% of utility generation across the region and in Brazil, which is the largest producer of electricity in the region, the figure is 75%.  

Although boosting Latin America’s renewable credentials, hydropower also brings a high degree of vulnerability into the power generation mix:  droughts or prolonged periods of reduced rainfall can severely impact supply and cost of electricity and mean that during dry spells, power generation must compete with other industries, for example agriculture, for scarce water supplies.  

Humidity is common in many countries, particularly in Central America and the Amazon Basin.  This can be a real challenge for grid transmission and distribution, especially for power transformers, and can lead to shorter asset life and risk of outages.   Across the region, vegetation causes challenges for power transmission lines and is often the cause of outages.

Across the region, the average consumer sees a couple of power outages of up to four hours every month, but this masks substantially longer and more regular outages in rural areas. 

Major Markets

Out of 44 territories in Latin America, including islands, the following top five markets account for just over 60% of the 2023 market opportunity for diesel generator sets:

• Mexico

• Brazil

• Chile

• Argentina

• Colombia

Top 10 markets account for 82% of the overall regional market and thereafter the opportunity quickly fragments among very many smaller markets.

Key Market Sectors

In Latin America, the telecoms sector is a major operator of diesel generator sets which are commonly used in remote regions where there is no grid connection or where there are significant power outages.  When it’s time for replacement, many operators are now actively considering  more efficient hybrid generator sets, lithium batteries and renewables.  However, there are still a significant number of active generator sets, operating mainly for prime or high hours standby. 

There is a small but active data center sector, mostly consisting of colocation operators. Brazil is the most significant host country. 

Latin America is a major producer of raw materials.  Mining is a very significant sector, attracting up to 20% of investment into the region, and is poised for substantial growth:  Chile possesses 60% of the world’s known lithium reserves, a critical component of EV batteries.  Mexico, Peru, Brazil and Argentina also have significant mining industries.  

Mines are major users of electricity and because they are usually located in remote regions, a connection to the grid is often not feasible.  Diesel generator sets usually provide most of the power, around 70%, at Chile’s mining sites,  diesel being preferred over natural gas because it is less volatile, more easily stored and more accessible.  

Agriculture is a significant commercial sector and often heavily reliant on generator sets, based mostly in remote rural regions where electricity supply is vulnerable to outages.  

The Future

At face value, Latin America is a promising market for diesel generator sets.  Although there is significant utility-generated renewable energy, with plenty of resources to grow this much further, the grid is vulnerable too.  Hydropower is often exposed to regular and persistent drought and grids must navigate and withstand challenging terrain and environmental conditions.  

There is also political volatility in some countries, which impacts on electric utilities and in others, grids are often under extreme pressure to meet growing demand.  

A Strong Push for Renewable Energy

Given the region's tilt towards renewable generation at utility level and its abundant solar and wind generation potential, expect Latin America to embrace forms of renewable power generation more quickly than most other regions.  

Increasingly the region's large mining sector is looking away from generator sets and towards renewables / storage. Mining companies are taking much greater interest in their environmental footprint and the costs of power generation.  Many are looking more closely at renewable energy, often as part of microgrids.  Expect this change to accelerate rapidly in the next 5 – 10 years, driven as much by economics as by sustainability credentials.  

Alongside Diesel Generator Sets

There remains a growing need for reliable electric power across the region and the likelihood is that all forms of power generation will be in the mix for the foreseeable future.  

More widely across the region, expect usage of renewable power generation to grow alongside diesel generator sets. In the commercial and agricultural sectors, especially in more remote regions, diesel generator sets will continue to have a viable role to play, at least through the 2020s and well into the 2030s.  

Although relatively small, the data center sector will continue to grow.  For the foreseeable future, data center operators in Latin America will have an interest in generator sets, but this is not likely to offset a continuing overall regional decline in the market for larger diesel generator sets.