Latin America lacks China's manufacturing scale and doesn't control a significant portion of the global renewable energy supply chain. However, it possesses another advantage that can compensate for some of this gap: solar, wind, and hydroelectric resources that allow it to achieve some of the highest capacity factors in the world.
The new report Renewable Power Generation Costs in 2025 from the International Renewable Energy Agency ( IRENA ) shows that this quality of the resource already translates into competitive costs.
Brazil stands out as the strongest case. In 2025, the levelized cost of photovoltaic electricity fell to USD 37/MWh , below the global average of USD 44/MWh and very close to the USD 36/MWh recorded in China. For onshore wind, the country reached USD 31/MWh , second only to the Chinese market among the major economies analyzed.
But the regional map also reveals a transition at different speeds. While Brazil is consolidating its scale, Chile is advancing in longer-duration storage, and Peru is taking advantage of exceptional wind resources, Central America, the Caribbean, and parts of South America still bear high costs associated with financing, infrastructure, and the smaller size of their markets.
Brazil turns solar resources into costs close to those of Asia.
Brazilian photovoltaics achieved one of the biggest leaps in competitiveness observed in 2025.
The total installed cost of large-scale solar projects fell by 10% year-on-year , to approximately USD 672/kW . Compared to 2015, the cumulative reduction reaches 74%.
This figure places Brazil close to the global average of USD 667/kW and well below other areas in the region. Projects in the rest of South America averaged around USD 867/kW , while Central America and the Caribbean reached USD 931/kW .
This reduction in investment was accompanied by an improvement in performance.
The capacity factor of Brazil's new photovoltaic capacity rose from 19.8% to 21.5% , driven by the entry of projects in sites with better solar irradiance. The combination of higher production, lower installed costs, and more favorable financing conditions reduced the levelized cost of energy (LCOE) by 25% in just one year , to USD 37/MWh.
The result places Brazil below the global average and practically at the level of the most competitive Asian markets. China recorded 36 USD/MWh and India 35 USD/MWh.
IRENA shows, however, that there is no single Latin American solar market.
The average LCOE for the rest of South America was 61 USD/MWh , while Central America and the Caribbean reached 95 USD/MWh , the highest regional figure in the report for photovoltaic projects put into operation during 2025.
The difference reveals the significant role of scale, access to credit, logistical costs, and network development. Solar radiation may be abundant across much of the region, but not all markets can convert it into cheap electricity.
Similar resources, different financial structures
Latin American divergence reproduces, on a smaller scale, one of IRENA's main global conclusions: competitiveness no longer depends exclusively on technology.
The modules used in Brazil, Chile, Colombia, or Central America may come from similar supply chains. However, the economic outcome varies depending on the cost of capital, regulatory stability, project size, and the time required to obtain permits and internet connection.
This difference is especially relevant in technologies that are intensive in initial investment.
A solar power plant doesn't need fuel during operation, but it must finance almost all of its infrastructure upfront. When interest rates are high or country risk demands higher returns, the savings achieved through cheaper modules can be lost to financing.
Brazil has advantages in terms of scale, a growing project pipeline, industrial experience, and a large electricity market. Other countries face smaller systems, less financial depth, and higher import costs.
The region thus demonstrates that having a world-class resource is a decisive, but not sufficient, condition.
Brazil and Peru are taking wind power to extraordinary capacity factors
Latin America's natural advantage is even more visible in onshore wind power.
Brazil achieved an average capacity factor of 50% in 2025, compared to the global average of 36%. This means that its power plants produce, on average, a considerably higher proportion of the energy they could generate operating continuously at nominal power.
Although the indicator declined slightly compared to the previous year, it remained among the highest of the main markets analyzed by IRENA.
This productivity allowed Brazil's onshore wind energy LCOE to reach USD 31/MWh , compared to the global average of USD 33/MWh. Only China, at USD 27/MWh, had a lower cost among the major markets.
The Brazilian installed cost was approximately USD 1,282/kW , 4% less than in 2024. Although it exceeds the global average, the performance of the parks compensates for much of that difference.
Peru also appears among the featured markets.
New wind projects achieved a capacity factor of 47% , following a seven percentage point improvement compared to 2024. The LCOE stood at approximately 34 USD/MWh , practically in line with the world average.
The Peruvian case demonstrates the importance of site quality. Even without Brazil's industrial scale, an exceptional resource allows investment costs to be spread over a larger volume of electricity generated.
Chile, for its part, recorded an installed cost of 1,192 USD/kW , after a year-on-year drop of 11%, and an LCOE of 46 USD/MWh.
Across the other South American markets, onshore wind averaged around USD 51/MWh, with capacity factors close to 37%.
The Chilean bottleneck accelerates longer-lasting batteries
Chile occupies a different place within the regional map.
Its leadership lies not only in the deployment of solar and wind power, but also in the need to manage large volumes of renewable production concentrated geographically and at certain times of the day.
The rapid expansion of photovoltaic installations in the north of the country has led to congestion, power outages, and very low prices during peak daylight hours. This situation makes energy storage crucial for transferring power to the afternoon and evening.
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According to IRENA, lithium iron phosphate batteries installed in Chile have an average lifespan of 4.3 hours , the highest value among the markets analyzed, shared with South Africa.
The indicator is relevant because it shows an evolution from batteries primarily focused on frequency services towards systems prepared to perform energy displacement on a larger scale.
The longer the duration, the more electricity can be transferred from periods of solar oversupply to periods of lower renewable production and higher demand.
Chile thus becomes a regional laboratory for the next stage of the transition: not only adding renewables, but redesigning the daily generation curve.
Storage enters into Brazilian planning
Brazil is also beginning to incorporate batteries into its conventional energy planning.
IRENA notes that the country already considers storage as one of the options available in its official expansion strategy through 2035.
This move represents a significant shift. Batteries are no longer seen solely as an emerging technology or linked to pilot projects, but are now competing with other flexibility alternatives within system planning.
The overall evolution of costs favors that entry.
In 2025, the installed cost of large-scale BESS systems fell by almost 30% , to $140/kWh , 95% less than in 2010. For turnkey four-hour systems, the year-on-year reduction was around 27%.
Although Latin American costs may still be affected by equipment imports, logistics, and financing, the drop in international prices expands the number of viable applications.
In Brazil, energy storage can complement hydropower, support the integration of solar and wind power, and alleviate local transmission constraints. In Chile, its role is more closely associated with arbitrage and the transfer of large solar energy surpluses.
The technology is the same, but the problem it solves changes depending on each system.
Colombia and Brazil open the door to offshore wind power
Offshore wind energy does not yet have a presence in Latin America comparable to that of Europe or Asia. However, IRENA identifies Brazil and Colombia among the emerging markets that have already begun to incorporate it into their regulatory frameworks and energy plans.
Both countries have considerable marine resources and extensive coastal areas, but they start from different conditions.
Brazil has an industrial chain linked to offshore oil and gas, port infrastructure, and a large-scale electricity market. Colombia, for its part, is making progress in defining areas, procedures, and awarding mechanisms to develop its first projects.
The challenge will be to transfer those resources at competitive costs.
Offshore wind energy requires significantly higher initial investments than solar or onshore wind energy. It also demands adapted ports, coastal networks, specialized vessels, and long-term contracts capable of mitigating financial risk.
In a region where the cost of capital continues to be one of the main obstacles, the regulation and design of future auctions will be as important as the quality of the wind.
Bioenergy sustains Brazilian leadership
Brazil also plays a central role in bioenergy.
Together with China and Japan, it accounted for 71% of new global adoptions of this technology in 2025.
Its position is based on the availability of agricultural waste, especially sugarcane bagasse, and on an industrial structure that allows the integration of electricity production with the sugar and biofuel sectors.
The average capacity factor of Brazilian bioenergy was around 63% .
The figure is conditioned by the seasonality of the harvest, but it maintains the technology as a manageable source capable of complementing the variability of solar and wind power.
IRENA shows that projects based on bagasse, agricultural waste, rice husks and landfill gas are among the lowest installed cost group of bioenergy, with average values close to 2,300 USD/kW.
Its value lies not only in producing electricity, but also in utilizing local waste and providing firm generation within an increasingly variable energy mix.
The hydroelectric plant showcases the two faces of the region
Hydropower remains one of the historical pillars of the Latin American electricity system, but the report exposes stark contrasts.
Brazil recorded an LCOE of approximately 41 USD/MWh for large power plants, one of the lowest values collected by IRENA.
Furthermore, the average installed cost of Brazilian hydroelectric projects analyzed between 2018 and 2025 was 1,463 USD/kW , below that of most regions.
In the rest of South America, the situation was radically different.
The new large-scale projects reached an average installed cost of 4,829 USD/kW , the highest value in the world in 2025.
The difference stems from the specific nature of each power plant. Hydroelectric projects depend on geography, accessibility, distance to the grid, geological conditions, and the environmental and social complexity of each site.
In remote basins, the costs of roads, transmission lines and civil works can far exceed the price of electromechanical equipment.
The contrast shows that abundant water resources do not guarantee cheap projects. Unlike solar power, hydroelectric power does not benefit from equivalent industrial standardization and remains a technology deeply dependent on its specific location.