While countries like Germany, the US, and the UK have a long tradition of prosumers (consumers that produce their own electricity), South American countries are only now starting to show positive signals for on-grid distributed generation development. In brief, the lag can be explained by the lack of governmental will to subsidize expansion. The design of prices and tariffs, together with proper regulation, continue to be key not only in driving renewable energy adoption, but also in encouraging energy efficiency and investments in distributed generation.

Frost & Sullivan has prepared a ranking of the markets with biggest potential in the region for distributed generation systems, according to how advanced they are in the implementation of net metering schemes.

#1: Brazil

Last month Brazil’s Electricity Regulatory Agency (ANEEL, acronym in Portuguese) approved the revision of the country’s net metering scheme for small-scale renewable energy systems. Incorporating best-in-class measures, the new regulation turns the country into one of the most forward-thinking in this sector. From current 1,300 units installed, ANEEL predicts about 1.2 million units to be installed in Brazil by 2024, totaling 4,500 MW of installed capacity.

Net metering regulation dates back to 2012 with the promulgation of Resolution 482, but a series of gaps did not let small and micro-scale distributed power generation systems take off. With amendments in the set-up scope (now up to 5 MW in capacity and 3MW for hydropower), the possibility to abate consumption costs on another unit than the generation unit, simplified installation procedures  and extended valid period for surplus credits, the revised version was celebrated by the market.

Furthermore, the new regulation provides the opportunity to a group of clients to invest together in a single PV system and divide returns according to the initial investment that each made in the system.

To drive implementation further, several Brazilian states have introduced value-added tax exemption for net-metered solar photovoltaic (PV) systems.

#2 Uruguay

Uruguay occupies the second place in Frost & Sullivan’s ranking of net metering schemes development in the region. On-grid micro generation has been allowed since 2010 by Decree 173 for small wind power, solar, biomass and mini hydro systems. Uruguay’s state-owned utility, UTE, is mandated to buy at retail price all the excess electricity produced by consumers for 10 years. Despite being the pioneer in net metering regulation, the country’s dimension limits market size of grid-connected distributed generation. By the end of 2014, four years after its implementation, there were only 80 operating systems in Uruguay, with 738 KW of installed capacity.

#3 Chile

Apart from being one of the most attractive markets for large-scale PV, Chile also has had a net metering program in effect since October 2014. However, unlike Brazil, the regulation for small-scale, grid-connected PV has proved to be insufficient to draw investment from residential and commercial consumers. The main criticism focuses on unattractive tariff rates for surplus energy injected to the grid and very limited scope for systems (less than 100 KW only).

#4 Colombia

Colombia has also taken a step forward with the promulgation of Law 1715 in May of 2014. Aimed at diversifying the country’s power supply by exploiting its vast renewable energy resources, the law also enables consumers and companies to generate their own electricity to sell it to the grid or to other user-distributed generation units. Until now, the surplus had to go to waste. The law still needs to be regulated in detail to come into effect. Key issues that still need to be defined are equipment technical requirements and certification schemes, assessments on the impact over distribution systems, financing, and the development of a smart metering program to support the initiative.

#5 Argentina

On the subject of net metering and distributed generation, Argentina is one of the most laggard countries of the region. Although some provinces have moved forward in the regulation, the tariff scheme continues to be the main market barrier because of the subsidized prices that have prevailed for more than a decade. Because of the lack of promotion and proper regulation, existing PV distributed systems are pilot-test only. The announcement by the newly elected government of a reduction in electricity and gas bills subsidies gives hope to the small-scale renewable market, since it will help lay the groundwork to consider the introduction of power-distributed technologies and energy-efficiency initiatives at a national scale.

About Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.

Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.

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