How can SMEs participate in the renewable energy business?
Being part of the clean energy value chains is a great challenge, but it is possible. As this industry grows in Latin America and the Caribbean, SMEs should become suppliers.
The clean energy sector in Latin America implies a potential market of 349 billion dollars for small and medium-sized enterprises (SMEs) by 2025, according to a recent study conducted by the World Bank.
SMEs have several points in their favor when it comes to doing business in this sector:
- Knowledge of local markets
- Specialization needs
- Minor financial and technical obstacles
The study shows that SMEs can participate in the entire clean technologies value chain, especially in small equipment manufacturing activities, installation, civil works, retail and maintenance. In this regard according to the study, the best opportunities in our region can be found in the waste water treatment subsector (comprising half of the total market) and in bioenergy.
“It is a process that requires a lot of professionalism, patience, and in some cases investment or adapting to processes in order to obtain approvals,” says Juan Bosch, president of SAESA (renewable energy trading company). He recommends business owners to contact international technology suppliers through forums, seminars, chambers, clusters, cooperatives and universities, and to participate in outreach activities.
The World Bank study also emphasizes the capacity of clean energy technologies to promote job growth and stimulate innovation, which makes this sector especially relevant for developing countries. Compared to other sectors, it requires more preparation but offers in turn better salaries and more security.
Small and medium-size business owners also face some challenges: access to financing –when embarking on projects of a larger magnitude – and the risk of depending on ruling government policies, since the energy market is usually subject to heavy regulations. This happens with energy in general and with the large public works projects relating to water and waste management; in addition to the new clean transportation alternatives.
Bosch indicates that insofar renewable energies scale up, there will be more possibilities for SMEs. “ It is an input that runs through all modern-day life – and as never before – users will be able to choose what type of energy suits their interests best and who is going to supply it,” he adds.
The region’s energy potential
Today, only 7% of the electricity generated in the region comes from renewable energy. However, Latin America and the Caribbean have enough resources to cover more than 22 times the electricity demand projected for 2050, according to the study “Rethinking our Energy Future”, conducted by the Inter-American Development Bank (IDB).
Although investment in renewable energy has been modest up to now, the study shows that it has been accelerating in the region. Wind power has been the fastest growing renewable resource: Mexico is the fifth largest producer of geothermal power in the world; and Colombia, Panama and Ecuador are actively exploring this resource. Brazil, Mexico, Guatemala, Argentina and Chile are developing biomass, solar and wind projects.
In fact, 6 countries in Latin America ranked in the top 12 among the 55 most attractive emerging nations to invest in clean energy technologies, according to the Climatescope of the IDB’s Multilateral Investment Fund and Bloomberg New Energy Finance. Clean energy activities in 2014 essentially took place in developing countries, led by China, Brazil, Chile, South Africa, India, Kenya, Mexico, Uruguay, Uganda and Nepal.