Delays on the development and licensing of transmission projects across Latin America is driving away investor interest, panelists at IJLatAm 2024 in Miami said.

Transmission bottlenecks have plagued the region and investment in the space is overdue to support renewable growth on the continent.

As renewable generation grows in the region, expanding the grid while also improving its reliability is critical. In many cases however, governments have not supported the development of transmission networks well enough.

“Governments and regulators have been more focused on the generation side, on increasing the renewable capacity of the country. But that capacity needs to be connected to the grid and transmitted to the consumption hubs,” said the chief investment officer of an international transmission company.

Oftentimes, renewable energy projects are located in remote regions and in different places than where fossil fuel plants are located.

Longer development times associated with transmission projects have also created a disconnect with renewables coming online much quicker. Renewable projects come with a development time of around 2-3 years on average while for transmission that number can be 5-8 years, sometimes more.

An uneven regulatory playing field is also an issue panellists highlighted as an issue in getting projects financed and built.

Brazil is seen as more consistent and slightly easier to deal with in the transmission sector. The country holds consistent transmission auctions throughout the year and the permitting process is faster than other countries. Later this month (March 2024), Brazilian electric energy agency ANEEL is set to award close to 6,500km of new transmission lines while the second transmission auction this year is scheduled for September.

Other countries make it more difficult, with panellists singling out Chile.

“Chile is concerned and promotes opportunities for addressing curtailment issues and connectivity for new projects. But there has been some difficulties in the developments because of the right of way. It's a market that requires a lot of caution,” said a senior vice president at a rating agency.

While deploying transmission is lengthy and transmission assets have different risks than renewable generation projects during their construction phase, once operational the projects are reliable. Revenue streams are predictable with concessions running for long-term or perpetual concessions making a sure bet for institutional investors.

“The asset class is one of the best. There is a lot of money available. Sometimes a little bit more expensive but the money is available. Transmission is so stable once operational, it’s like almost boring asset,” said the chief financial officer of a transmission company in Brazil.

The need for transmission investments is clear and nation's like Mexico have large opportunities, while countries like Peru and Colombia are trying to avoid some of the issues that Chile has encountered.

“There is a need for expanding transmission systems and we believe there is no viable conversation around net zero or decarbonisation targets that does not encompass a serious conversation about the ability to make those investments in transmission and make significant growth in the system,” said the senior VP at a rating agency.