Latin America’s innovation outlook

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The Inter-American Development Bank (IDB) LAC innovation index GAP analysis results reveal that disruptive trends such as decarbonisation, decentralisation and digitalisation are accelerating the transformation of the Latin American and Caribbean energy industry, write Gavin Rennie and Dafna Siegert.

In the last decade, the energy sector has undergone a transformation towards disruptive trends such as decarbonisation, decentralisation and digitalisation. These 3Ds will transform the LATAM Energy sector and innovation will be a key tool to prepare the region for a successful transition.

IDB published a study that sought to identify gaps and opportunities to fostering power sector innovation in LATAM. In this article the main findings and recommendations of the IDB “Gap Analysis and Opportunities for Innovation in the Energy Sector in Latin America and the Caribbean” study are presented.

Most countries in Latin America and the Caribbean (LAC) are developing countries, hence the importance of the study was to understand and analyze the innovation gap in the energy industry in LAC, taking developed countries in other regions as benchmarks.

Developing economies like LATAM sometimes lag behind more developed economies in adopting technology and innovation. This limits the development of local know-how, but it also presents an opportunity to leapfrog into adopting technologies leveraging lessons learned elsewhere.

We recognize that countries across the region have different regulatory approaches and grid conditions. Some may benefit from seeking a more centralized approach while others may see an opportunity in fostering a decentralized grid. Countries across the LAC region will reach a future state that will be somewhere in a spectrum between the centralized and decentralized scenario.

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Smart grid drivers in Latin America

Innovation levels of the power industry in LAC countries

The innovation in the power sector in each country was measured analyzing different technologies:

A set of quantitative KPIs were developed for technology adoption for all the innovation drivers except for the enabling technologies given the limited available data.

KPI’s and their respective dimensions. Source: EY Power and utilities innovation lab

Each country approaches differently the use of technologies in its energy matrix, however, it is clear that there are certainly general trends. It should be emphasised that the pace of change and the combination of energy solutions in each geographical area requires the creation of unique and stable political and economic frameworks and that have a long-term vision. Some of these general trends are:

  • Countries such as Brazil, Chile, Mexico, Peru and others, have already begun the shift towards a less energy-intensive economy, taking advantage of their abundant renewable resources and seeking to increase their economic efficiency while reducing their needs of investment in energy infrastructure.
  • There are strong trends in the implementation of enabling technologies, distributed generation systems and storage systems.
  • Significant development is expected in the e-mobility sector throughout LAC.

In the study an aggregated index was developed. The index was designed based on two types of variables, qualitative (for enabling technologies) and quantitative (KPI’s of physical technologies). The qualitative values are quantified through a maturity model that quantifies the degree of adaptation of the technology in the market. The composition of the aggregated index took the average of each normalized result and calculated the index on a scale from 0-1 making the score of 1 a very innovative country and the score near to 0 a poor innovative country.

Source: EY Power and utilities Innovation Lab

Each aggregated index represents the general position each country is towards the different enabling and disruptive technologies presented previously.

Even though some countries have a low aggregated index it is important to review each indicator to notice their strengths and weakness in the industry, understanding that some countries don’t have enough budget to invest in all the new technologies offered in the industry.

The aggregated index of each country is presented against the GDP/capita.

Enabling technology findings

The following chart shows the level of maturity identified in projects for the deployment of enabling technologies. Other technologies addressed in the study are not included.

Central America (CA) is the region with the lowest maturity level in the implementation of enabling technology (ET) projects, while the Southern Cone (SC) is the leading region in LAC, close to matching the benchmark countries in terms of maturity level.

The existing gaps between LAC countries evidence an opportunity to learn from those who lead the sector locally and globally.

Results in detail – physical technologies

Smart metering

Source: EY

The AMI deployment is growing at a small pace.

The United States in 2018 exceeded 74 million smart meters.

Barbados exceeding 55% counted more than 75,000 meters. Bolivia has just over 3,000 smart meters, equivalent to 0.12% of the total. Peru, with around 56,000 meters, is close to 1% of the total.

Non-hydro renewables

Source: EY

Uruguay in 2018 exceeded 2GW of installed capacity in non-hydro renewables with 5.9TWh of energy generated.

Germany reached a capacity of 16.4GW and a generation of 29.3TWh.

Paraguay has a matrix totally dependent on its water resources but Colombia has barely started its trajectory in this field.

Distributed solar PV

Source: EY

Australia in 2018 generated 2.5% of its electricity with solar PV, mostly from small-scale rooftops. In Germany less than 10% of all PV system operators use their system as prosumers.

As of 2018 Argentina, Bolivia, Colombia, Ecuador, Paraguay and Peru did not have distributed solar PV.

Large scale storage

Source: EY

Chile has higher storage than the US as a percentage of coverage of the peak demand. The country covers 15.4% of its peak demand with stored energy, equivalent to 1,627.4MW of total storage capacity.

Germany covers 7.9% of its peak demand with stored energy, equivalent to 6,337 MW of total storage capacity.

With the exception of Chile, other LAC countries lack energy storage capacity.

Electric vehicles

Source: EY

Electric vehicle penetration is low in LAC countries.

UK has 54 EVs per 10,000 vehicles. In 2018, EV sales increased by 70% over the previous year. Germany has 39.2 EVs per 10,000 vehicles.

Bolivia, Argentina and Peru do not have electric vehicles in their vehicle fleets.

EV infrastructure

Source: EY

Uruguay has 2.2 EV charging stations for each EV, UTE has connected different charging stations that allowed the opening of the first electric route in Latin America.

South Africa has 2.1 EV charging stations per EV.

Argentina, Bolivia, Peru and Panama do not have EV charging stations.

Results in detail – enabling technologies

Advanced analytics

Source: EY

Most of the countries are working towards projects with advanced analytics. The PTI (Parque Tecnológico Itaipu) in Paraguay and Brazil has implemented the automation and control innovation area, a technical-scientific space, equipped with adequate facilities, hardware, software and specialized professionals.

In Chile, Suncast is implementing a generation prediction project, developing a high-precision model to predict solar photovoltaic power generation, with models based on machine learning and artificial intelligence techniques.

Blockchain

Source: EY

In Brazil, Petrobras has launched instant credit card payment machines, as well as a free app offering off-banking payment methods, smart management and blockchain solution.

In Colombia EcoRegistry is a blockchain project for the issue, monitoring and retirement of carbon credits, contributing to climate change mitigation.

Peer-to-peer network

Source: EY

Barbados through funding from the United Arab Emirates is expanding technical expertise in the design, implementation and management of renewable energy projects and to facilitate faster and lower-cost implementation in the future.

Australia is implementing the distributed energy integration programme with the objective of maximising the value of customers’ distributed energy resources.

Internet of Things

Source: EY

Claro Colombia presented solutions based on its NB-IoT (Narrowband Internet of Things) network, which focuses on smart lighting solutions, aqueducts and smart cities among others.

In September 2018, a distribution solution was launched in Chile leveraging different digital technologies such as IdC, which allows companies to connect, collect, act efficiently and create improvements in safety and service efficiency.

Macrodata

Source: EY

In Brazil, Petrobras is working on technological improvements in turbines and solar panels, which are expected to promote digital technologies that allow the use of real-time data and large gains in maintenance. These technologies take into account big data.

In Ecuador, CNEL is creating the SINEE (National Energy Efficiency Indicators System) and is preparing a technological tool that allows them to enter, store and process data and prepare reports. CNEL seeks to consolidate a database to simulate future demand scenarios.

Cloud services

Source: EY

Peru has high cloud service adoption compared to the benchmark countries.

In Mexico, MVM Software Engineers have created the energy suite solution, offering resources for the compilation and analysis of large volumes of information with machine learning.

In Peru, Enel Distribution carried out digitisation of the power grid with LIDAR (Light Imaging, Detection, and Ranging). With this tool, updated and georeferenced data of the grid elements were collected.

Drones

Source: EY

CFE has implemented drones that monitor the various power generation facilities throughout Mexico.

CGE Chile uses drones to inspect network and poles for trees that need to be trimmed to avoid emergency events.

ETESA incorporates drones for electrical inspection and design with automatic flight planning and advanced data and image processing software.

Cybersecurity

Source: EY

In Ecuador, a renewal process of the Firewall-Checkpoint license was implemented, as security equipment for the Las Casas data centre, providing better access control to the company’s systems.

In 2018 Edenor intensified the execution of cybersecurity projects, obtaining a network segmentation design based on market best practices (ISA-99).

Robotic process automation

Source: EY

Robotic process automation usage is becoming a trend in the energy industry.

The virtual chat, launched in Edenor’s websites, has a new service channel available 24/7. It is a customer service through an artificial intelligence tool to solve queries.

Augmented reality

Source: EY

In Brazil, Petrobras held a workshop and exhibition on Innovation in Digital Transformation to discuss the potential of advances in digital technologies, such as virtual and augmented reality.

Skylight is a US software platform for augmented reality devices that gives your field technicians hands-free access to real-time data and processes that will optimize your performance and reduce operating costs.

Opportunities

The adoption of innovation is a tool to make electric power cleaner, less expensive and more reliable in the region.

Government entities and electric utilities play a central role in adopting innovation practices. But they must also rely on an ecosystem of entrepreneurs and community stakeholders.

Each country may adopt a different model for its generation matrix, its grid management and its use of distributed resources. But in any case, technology and innovation will play a central role for the sector.

About the authors

Gavin Rennie is EY Global Energy Emerging Markets Leader supporting clients in the world’s emerging markets to successfully transform for a decarbonised, digitised and decentralised energy world.

Dafna Siegert is Energy Segment Leader, EY Colombia with more than 20 years of experience in the Latin American energy industry.