The discussion on financing the energy transition in Latin America has shifted its focus. The main obstacle is no longer a lack of capital , but rather the capacity of projects to meet the conditions demanded by investors and financial institutions to disburse funds.
That was the main consensus reached by Marcelino Madrigal , head of the Energy Division of the Inter-American Development Bank (IDB) ; Lizette Hermida , Business Manager of the Investment Banking Area of Banco Popular Dominicano ; and Michael Mechlinski , coordinator for Latin America of GET.transform , during the panel "Vision of the Financial Ecosystem: opportunities and challenges to finance the energy transition in Latin America and the Caribbean."
"Our sectors are investing a third of what they should be investing," Madrigal warned, opening the debate on financing. However, far from attributing this gap to a lack of resources, the executive maintained that the challenge lies in creating the conditions for private capital to find projects capable of offering predictability, legal certainty, and clear returns.
"If there is the right institutional framework and the region remains attractive for investment, financing will flow where the conditions exist," he added.
Hermida, for his part, noted: “The most important thing here is to align technological, regulatory, and market risks with robust contractual mechanisms that give banks that security.”
The debate took place at a virtual event that served as a prelude to the FES Government & Investment forum , a dialogue space that the Future Energy Summit (FES) and the Latin American and Caribbean Energy Organization (OLACDE) will promote during the 11th Energy Week , scheduled for October 6-9, 2026, in Santo Domingo, Dominican Republic . The event will bring together government officials, international organizations, financial institutions, and leading companies in the sector to discuss regulation, investment, and technology.
Far from indicating a shortage of resources, specialists agreed that bankability became the main filter for accelerating private investment, in a context where energy infrastructure needs are growing at the same rate as the incorporation of renewables, storage and new electricity demands.
"A project may be technically excellent, but if there are still uncertainties about permits, risk allocation, revenue models or contractual conditions, it will be difficult to attract investment," said Mechlinski, coordinator for Latin America at GET.transform.
What do banks prioritize today when financing a renewable energy project?
While the availability of capital is no longer the main determining factor, banks have tightened the criteria for evaluating the bankability of projects, especially in a context where renewable penetration, grid restrictions and storage have modified traditional risk profiles.
In that context, Lizette Hermida explained that the evaluation is no longer limited to technology or the developer's capacity to execute a project. Today, financial institutions analyze in greater depth regulatory stability, the quality of power purchase agreements (PPAs), the financial strength of the off-taker , the guarantee structure, and the predictability of cash flows—variables that ultimately determine whether or not a project achieves financial closure.
"For a project to be bankable, stability and certainty about the cash flows it will generate are very important," said the Business Manager of the Investment Banking Area of Banco Popular Dominicano.
The executive noted that recent curtailment events in the Dominican Republic disrupted the financial projections of projects that had already secured financing, demonstrating that regulatory and operational changes within the system can significantly alter expected revenues. Therefore, she maintained that banks are seeking financial structures capable of absorbing these risks through robust contracts and mitigation mechanisms.
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"We pay close attention to the PPA, the financial strength of the off-taker , and having a solid guarantee structure, because the repayment of the debt depends on the off-taker 's payment to the debtor," Hermida explained.
"You have to have that institutional framework very well done, you have to have solid off-takers ," said the head of the IDB's Energy Division, who stressed that the existence of clear rules, agencies with well-defined functions, and financially reliable energy buyers is crucial to attracting private capital.
Along these lines, he explained that in much of Latin America , off-takers remain largely public companies , so strengthening their financial and operational stability will be key to reducing the risk perceived by investors and facilitating the financial closing of new projects. He also indicated that, once this institutional framework is consolidated, tools such as guarantees, policy-based loans, and trade finance can be deployed to accelerate investment.
In this regard, Madrigal emphasized: "Over the past six years, we have financed approximately $2 billion for these reform programs," explaining that the IDB promotes regulatory and institutional changes to attract private investment before financing specific projects. As examples, he mentioned the reforms implemented in Ecuador to reactivate private investment after 15 years, the work with Bolivia , and the support provided to Colombia to modernize its auctions. Once this framework is consolidated, he added, commercial banks can support the development of projects and even provide guarantees to mitigate risks.
"A project may be technically excellent, but if uncertainties still exist regarding permits, risk allocation, revenue models, or contractual conditions, it will be difficult to attract investment," warned the Latin America coordinator for GET.transform.
Batteries are changing the rules of renewable finance.
The incorporation of battery energy storage systems (BESS) has emerged as one of the clearest examples of how energy transition financing is evolving. In markets like the Dominican Republic, where regulations already require new renewable energy projects to include storage, banks have begun adapting their evaluation models to consider a technology that not only provides flexibility to the system but also new revenue streams.
"Capacity or availability contracts are needed that recognize the value of what the project offers in its entirety and ensure stable income, not only from the energy delivered, but also from auxiliary services," said the executive of Banco Popular Dominicano.
He also stressed that the development of this market will also require clear regulatory signals to define the remuneration of these services and establish specific criteria on the admissibility of batteries as collateral within financing structures.
From the Inter-American Development Bank, Marcelino Madrigal agreed that storage is going through a turning point driven by the sharp reduction in costs and by the growing limitations faced by transmission networks in different Latin American markets.
"There has been a tremendous development in storage because costs have come down so much," said Madrigal, who anticipated that more and more countries will move towards remuneration schemes that give batteries stable income, similar to that of transmission assets, thus facilitating their large-scale financing.
Beyond the various financial instruments analyzed during the panel, the consensus was clear: the next wave of renewable energy investments will depend less on securing new resources and much more on generating projects with clear rules, well-allocated risks, and business models capable of offering predictability to private capital. This will be one of the main topics of discussion that will continue during the 11th Energy Week in Santo Domingo.