The environmental paradox in generation: How South America is gradually becoming more dependent on thermal generation

There has been an increasing focus on global warming, emission of green house gases (GHG), and the problems this might create. In this article, we review the trend in sustainable and renewable electricity generation in South America, where the generation portfolio increasingly depends on thermal generation, in particular gas. South America is a region that has relatively low emissions, but the current development is not desirable in environmental terms. We analyze the underlying reasons for this development, which is related to security of supply, deregulation, and the cost of renewable energy. We review and discuss the policies to promote renewables in the region. We analyze the potential advantages and drawbacks of different types of market interventions, such as direct subsidies that create potentially strong market distortions, more sophisticated market interventions that might be less intrusive but not necessarily as effective as, e.g. firm energy markets. We also review market-based solutions such as the Clean Market Mechanism and its potential, and the use of renewable electricity in non-interconnected zones, which might be one of the most economically attractive applications of renewables. However, without a stronger and more aggressive intervention from the governments in the region it is unlikely that the increase in thermal generation can be stopped.