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Latin America’s geothermal potential to be released with over $1bn investment in 2027
17/4/2024
Latin America boasts abundant geothermal energy resources, but despite favourable conditions, only a fraction of its potential has been harnessed, a new report from Rystad Energy has found.
A mere 2 GW is currently utilised out of a total potential of 33 GW, with the bulk of this utilisation coming from Mexico, Costa Rica and El Salvador. These countries collectively account for about 75% of the existing capacity, according to the report.
Geothermal investments in Latin America are set to spike in the coming years, rising from about $570mn this year to $1.3bn in 2027, the report notes. This growth is a result of an expected increase in operational capacity from about 950 MW to over 1.4 GW. This rapid expansion is fuelled by announced projects and government targets.
Despite this short-term optimism, the project pipeline in the longer term remains constrained due to conditions relating to geothermal sites, with locations often being hard-to-reach, making infrastructure development difficult. Furthermore, even if a good site is found, it may be far from power lines, requiring expensive new construction to connect it to the grid, Rystad says.
The report finds that Latin America’s geothermal capacity growth by 2030 is almost solely driven by government targets, with existing projects fulfilling nearly two-thirds (67%) of these collective goals. The remaining third (33%) will require new, yet-to-be-announced projects. However, beyond 2030, growth is expected to slow as government roadmaps currently lack strong prioritisation for geothermal energy, says Rystad.
Mexico stands out as the leader in Latin America’s geothermal landscape, leveraging its rich reserves through initiatives led by the state-owned utility, Comisión Federal de Electricidad (CFE). CFE has spearheaded geothermal development, overseeing impressive installations like Cerro Prieto (Baja California) at 570 MW and Los Azufres (Michoacán) at 240 MW. Collectively, they contribute massively to Mexico’s total capacity of 1 GW.
Costa Rica follows distantly, with a collective 320 MW. Here, Grupo ICE plays a key role in advancing geothermal projects like Las Pailas (Guanacaste) at 90 MW and Miravalles (Guanacaste) at 185 MW. El Salvador takes the third spot, with LaGeo-operated projects like Berlin and Ahuachapan making significant contributions by adding up to 211 MW.
Nicaragua, Guatemala, Chile, Honduras, Argentina, Bolivia and Colombia follow with progressively lower installed capacities compared to Mexico. However, pilot projects like Sol de Mañana (San Pablo de Lipez, Bolivia), Las Maracas (Casanare, Colombia) and the Caldas project (also Colombia; a collaboration between Ecopetrol, Baker Hughes and Grupo EPM), demonstrate ongoing exploration and potential for further development in these regions. El Salvador falls behind the top two countries in the region, with a collective 230 MW in installed capacity.
Geothermal developments could hold additional promise beyond their traditional power generation uses. The report details how the technology could help revolutionise lithium production, particularly in regions with abundant reserves. The Atacama, Salta and Salar de Uyuni regions (in Chile, Argentina and Bolivia, respectively) are teeming with lithium deposits – yet current extraction methods pose environmental concerns. Geothermal brine extraction offers a cleaner alternative, potentially mitigating land use, water consumption and emissions issues.
Key geothermal projects like Cerro Pabellon (Chile), Laguna Colorada (Bolivia) and Tuzgle-Tocomar (Argentina) are strategically located near these lithium-rich areas. This proximity not only grants access to geothermal brines but also facilitates the development of direct lithium extraction (DLE) projects. By tapping into geothermal brines for lithium extraction, these nations can maximise their natural resources, strengthening their positions in the global lithium market.
This dual approach to renewable energy and lithium production could propel economic growth while advancing global sustainability goals. The so-called ‘lithium triangle’, where Chile, Argentina and Bolivia intersect, could emerge as a key player in the green energy transition. However, realising these benefits hinges on technological advancements, regulatory frameworks and market dynamics, the report concludes.
