In 2015 global clean energy investment reached $329 billion, the largest sum ever. Likewise, in recent years the number of technology patents and venture capital investments in renewable technology has exploded.Latin America is at the forefront of this green energy transition with one of the cleanest energy matrixes in the world. Costa Rica, a regional standout, meets almost 100% of its electricity needs with renewable sources. Ambitious green energy projects span the region, such as in Chile, whose Atacama Desert will soon be home to one of the largest solar fields in South America, capable of delivering energy 24 hours a day. These nations make the inspiring case that sustainable development free from fossil fuels is achievable.
Latin America is a leader in green technology implementation; but what about innovation? Before technology is implemented, it must be developed, and as it turns out, Latin American firms develop very little renewable technology indigenously. To illustrate, in 2010, the number of international patent applications for technology involving energy generation from renewable, non-fossil fuel sources in Latin America numbered 39, while in North America (excluding Mexico), applications numbered 1,359.
Renewable technology innovation predominantly occurs in developed countries, then makes its way south to emerging economies. However, Latin American firms and governments have realized that this north/south route of technology transfer no longer need be the case—and for good reason. Renewable technology produced closer to its region of implementation is more suitable for situational climate realities, like local attitudes and capabilities, and has a greater chance of being adopted. In fact, a 2015 study published in Earthscan’s Climate Policy Journal coauthored by the Lead Energy Specialist at the World Bank suggests that green technology developed in emerging economies may be more appropriate for peer developing nations who confront similar circumstances. As a result, objections that Latin American nations lack the comparative advantage or human capacity to participate in renewable technology innovation misses a key component of what makes renewable technology effective.
Latin American firms do participate in green technology innovation, and successful technologies have originated from within the region. Brazil, Mexico, and Chile stand out as the region’s leaders in pioneering indigenous technology innovation. Together with Argentina, these four nations make up 90% of the region’s R&D (Research and Development) expenditure. Brazil, Mexico, and Chile are all participants of Mission Innovation, an initiative announced by Bill Gates at COP21 that strives to promote the development of innovative green technologies by requiring participant nations to double the amount of money they spend on research and development of renewable technology. This substantial commitment to recognize the urgency of climate change and the importance of innovation is an earnest step forward in improving the region’s innovation ecosystems.
Brazil is Latin America’s frontrunner when it comes to the number of patents filed by residents and amount of resources devoted to R&D. In addition to dynamic wind and hydroelectric sectors, Brazil is a global leader in biofuel innovation. Large Brazilian multinationals dominate the country’s green technology industry, sometimes crowding out smaller, bottom-up innovators. One such bottom up innovator, however, is Tecsis. Originally a one-man show, Tecsis manufactures custom wind turbine blades. The firm managed to scale-up effectively and commercialize globally, and now commands about 10% of global market share.
Semtive, a start-up success story from Argentina and prime example of horizontal technology transfer between emerging markets, produces micro vertical wind turbines that bring rural environments the ability to generate electricity. Semtive commercialized their product and exports to other countries in Latin America as well as India, Bangladesh, UAE, and Israel. The success of firms like Tecsis and Semtive prove that multinational corporations are not the only ones capable of innovating in Latin America, and serve as a reminder that the solutions of indigenous entrepreneurs should not go neglected.
Public universities and government organizations primarily head innovation efforts in Mexico and Chile. On the one hand, universities are fertile hubs of innovation research, but on the other, this research rarely bears commercial products due to weak industry-academia ties. However, both Mexico and Chile have recently taken steps to improve their innovation framework and incentivize the production of renewable technology, creating new agencies and refining legislative procedures. Already, Chile ranks 39th out of 141 countries in the global innovation index—the highest in Latin America. With new measures in place, indigenous R&D in Mexico and Chile is set to flourish.
The Road Ahead
A booming population, coupled with abundant and varied natural resources, makes a strong business case for renewable technology in Latin America. The region’s need for electricity will double by 2030 and triple by 2050—demand that renewable technology must meet. As a result, a growing market exists for renewable technology, and Latin American nations should strive to innovate and develop this technology indigenously. Yet, establishing a successful innovation network is a complicated, interdisciplinary process that requires the coordination of economic agents, academic institutions and energy policy.
Latin American nations need to shore up their policy framework and devote the resources necessary to create a system that encourages firms to take risks and innovate consistently. In addition, the conditions exist for Latin American firms to transition to higher value stages of renewable technology development, and the region’s governments should make it a top priority to capitalize on this opportunity.
Latin American firms are starting to overturn the paradigm that only highly developed nations can participate in green technology innovation, but they still have a ways to go. With the right steps, a promising future lies ahead for green technology in Latin America, not just in implementation—but in development as well.