With interconnection, the sizable hydroelectric resources of South America would allow a highly stable supply of low-cost energy at the regional level, enhancing competitiveness.

The Road to Sustainable Energy in South America Could Lie in Electrical Grid Interconnection

Lelis Gonzalez | Vepica


One of the main factors that enhances the competitiveness of a region is the availability of low-cost energy and a stable electric grid that isn’t prone to blackouts or voltage fluctuations. South America offers exceptional conditions for the development of a regional interconnected grid with these characteristics. The region is characterized by widespread use of hydroelectric power, and ample potential yet to be developed. According to the International Renewable Energy Agency (IRENA), hydropower offers the lowest possible costs of energy among all power generation technologies, reaching installation costs as low as $450 per kilowatt and costs of energy as low as $0.02 per kilowatt-hour. If South America implemented a regional interconnected grid, the sizable hydroelectric resources would allow a stable supply of low-cost energy in much of the region.

The optimal production flexibility of hydropower would also set the stage for the development of other renewable sources that are subject to a higher output variability, such as solar and wind power, whose energy output is largely dependent on weather conditions. The fluctuating output of these sources could be offset by the flexibility of hydroelectric power plants, providing a stable and carbon-free energy supply. Hydroelectricity essentially becomes the anchor for the adoption of other renewable energy technologies.

Today, the percentage of hydroelectric generation in the region is higher than 60% of total generation. Due to its reliability and ability to generate electric power 24 hours a day, it’s the source for meeting the region’s base demand and not for addressing demand peaks.

Large volume energy sources like the hydroelectric systems found in South America provide greater stability and lower costs than smaller systems, and even greater savings when operated as interconnected systems. It is not possible to cover peaks in demand reliably with solar and wind farms alone, since those two technologies cannot guarantee 24-hour generation due to their nature. However, hydroelectric power plants can be used as energy buffers: wind and solar are used when their output is available, freeing up hydroelectric generation potential to be used when needed on demand. There are always exceptions of course, since climate events such as El Niño and La Niña could cause  serious problems for electrical  companies in case of  severe  droughts, like some have forecasted for 2016-17.

Although wind and solar power are outmatched by hydropower in terms of output flexibility, they also offer affordable and carbon-free energy:

  • Wind power is very promising in terms of cost, being close to hydropower in both installation costs and energy prices. Under favorable conditions, wind power projects have development costs of around $1,100 per installed kilowatt, providing energy at prices as low as $0.06 per kilowatt-hour.

  • South America is also home to favorable sites for solar photovoltaic technology, particularly in the region around the Chile-Peru-Bolivia border, where the Atacama Desert is located. The fact that the solar resource is not homogeneous in the region would be offset with the development of a regional grid. Solar photovoltaic power is expensive in the residential sector, but can reach prices of $2,000 per installed kilowatt in utility-scale projects. The cost of electricity is subject to a wide range of variation according to project conditions, but recent solar projects in the deserts of the Arabian Peninsula are reaching energy costs of $0.06 per kilowatt hour. The Atacama Desert and surrounding regions have the potential to replicate this, becoming the solar power hub of South America.

Of course, there are technical challenges to overcome before the successful implementation of a regional interconnected grid. South American countries are characterized by a wide variation in area and population, which influences the energy needs and transmission capacity of each country. For this reason, it may be necessary to tune up some of the lower capacity electric grids in the region, which represents a considerable investment. It is also important to note that electrical frequency is not homogeneous across South America, with some countries using 50 hertz while others use 60 hertz. This creates the need for frequency conversion stations and interconnection at electrical substations between dissimilar grids, even in cases when both systems have the same rated voltage. A final technical challenge is posed by geographic limitations: mountain ranges such as the Andes place a limit on the number of possible sites for grid interconnection.



Hydropower – The Leading Renewable Energy Source in South America

An important step towards regional interconnection has been taken in the Cuenca de Plata region. Paraguay, whose installed capacity is more than 99% hydroelectric, produces nearly five times the energy it needs, exporting the surplus to its larger neighbors Brazil, Argentina, and Bolivia. The second largest hydropower project in the world, the Itaipu Dam, is shared by Brazil and Paraguay and has a nameplate capacity of 14 gigawatts. This represents a considerable step towards interconnection, but there is still a very high hydropower potential to develop in the rivers of the Cuenca de Plata region.

Colombia also represents a potential hub for hydropower development in the region, with a generation potential estimated at 79 gigawatts. In addition, Colombia shares a border with Panama and offers the possibility of eventually developing an interconnected Central and South American Grid. Important steps have already been taken in Central America with the SIEPAC project, which consists of a 300-megawatt transmission line that connects Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, and Panama.

Bolivia, Peru, Colombia, and Ecuador, which compose the Andean Community, do not have an interconnected grid per-se, but the regulatory framework for energy trade has already been implemented and country-to-country trade is commonplace. Colombia could play a critical role in grid stability in the Andean region with further development of its hydroelectric potential.

Brazil, due to its sheer size and numerous rivers, has a total hydroelectric potential exceeding 180 gigawatts. At the moment, more than 73 gigawatts of hydropower capacity have been developed, supplying nearly 80% of the country’s energy needs.



The Road to Sustainability

Despite the widespread use of hydropower at the regional level, the degree of development and untapped potential of the technology is not distributed equally among all countries; some South American nations meet most of their energy needs with hydropower, while others turn to sources such as thermal power plants fired by fossil fuels. For example, Argentina, Peru, and Bolivia meet more than 60% of their energy needs with thermal power plants.

If it was possible to interconnect the region, the hydropower surplus of some countries would balance the limitations of others, and it would be feasible to meet the entire base load of South America without fossil fuels. In addition, fossil-fuel-dependent countries would be able to gain higher energy security by importing clean energy that isn’t affected by the volatility of the fossil fuel market. Finally, hydroelectric power is superior to all other energy sources, renewable and non-renewable, in two aspects: it offers the lowest cost and the highest flexibility. The end result is that electric interconnection would greatly enhance regional competitiveness: it is a business opportunity for countries with a renewable resource surplus, and a means of obtaining low-cost and carbon-free energy for countries with a limited renewable energy potential.



  1. IRENA – International Renewable Energy Agency. Renewable Power Generation Costs in 2014. January 2015.
  2. Pontificia Universidad Católica de Chile – Departamento de Ingeniería Eléctrica. Interconexión Eléctrica Regional. 2012.
  3. CVG EDELCA. Sistema Interconectado Nacional (Venezuela). 2015.

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