Wood Mackenzie lifts forecast for Latin America grid storage

Solmar Insights

Wood Mackenzie has sharply increased its long-term forecast for energy storage deployment in Latin America, now projecting cumulative installed capacity to rise from 2.5 GW in 2025 to 34 GW by 2035. Driven by rising renewable penetration, grid congestion, major auctions, and shifting policy, the region is expected to see a 13.6-fold increase in storage capacity over a decade.

Forecast revision and drivers

The latest “Latin America Energy Storage Outlook 2026” marks a significant revision from Wood Mackenzie’s prior estimates. In September 2025, the consultancy forecast a 2034 total of 23 GW, but stronger auction activity, updated renewable curtailment data, and new supportive policy mechanisms have pushed expectations higher. The new trajectory implies a compound annual growth rate markedly faster than previously anticipated, suggesting growing regional commitment to flexibility and grid modernization.

Key drivers include frequent grid constraints as renewables expand, especially solar and wind, often resulting in curtailed generation. Energy storage is increasingly viewed as a remedy to absorb excess supply during peak renewable production and shift it to periods of higher demand. Public procurement mechanisms, particularly multi-year auctions, are beginning to incorporate battery assets more systematically, reinforcing investor confidence despite lingering regulatory and financing hurdles.

Leaders and emerging markets

Chile remains at the forefront of Latin American energy storage, deploying the region’s largest battery energy storage system (BESS) projects to date. High levels of renewable curtailment, notably in northern Chile, have motivated investments in longer-duration energy storage systems. However, Wood Mackenzie warns of a developing risk: as battery capacity increases, so too does price cannibalization, where growing quantities of stored energy depress revenue opportunities from energy arbitrage for operators in the most congested areas.

Mexico is approaching a pivotal moment influenced by national energy policy. Recent calls for strategic storage projects led by the Comisión Federal de Electricidad (CFE) provide an indicative target of 935 MW in standalone systems with three-hour durations, spread across multiple regions. Wood Mackenzie expects awards for more than 3 GW of new storage capacity through 2030 if policy direction holds. A critical specification is that Mexico’s Electricity Sector Development Plan now requires storage equivalent to 30 percent of incremental renewable project capacity, a regulatory mechanism set to direct further market expansion.

Scaling activity in Brazil and the region

Brazil is also moving toward scale, planning to hold its first two capacity reserve auctions specifically for large-scale battery assets on December 2 and 4, 2026. This national-level procurement, targeting both system adequacy and renewable integration, represents a shift from pilot programs toward mainstream grid capacity contracts. Participation in auctions is likely to set benchmarks for pricing, contract structuring, and investor expectations, as Brazil’s grid operators incorporate BESS as a system resource rather than solely as a project-specific investment.

Elsewhere, Argentina and the Dominican Republic are reported to be ramping up storage development as grid congestion and renewable ambitions intensify. Across the continent, the emergence of supportive auction frameworks and clear policy requirements appears essential for unlocking scale, but the lack of standardized revenue models and incomplete regulation remain persistent barriers for debt and equity investors. Financing constraints, alongside open questions about permitted use cases and cost recovery, are cited as key obstacles that could delay the robust buildout described in Wood Mackenzie’s new scenario.

Challenges and market risks

Despite rapid progress, Latin America’s storage pipeline faces unresolved challenges that could threaten the forecast. Unclear market structures, particularly in relation to grid remuneration, make pipeline conversion rates uncertain even in countries with ambitious capacity targets. In Chile, risks of price cannibalization suggest that future project economics may become more difficult, especially for shorter-duration storage assets that rely on simple arbitrage revenues. For developers, structuring of long-term offtake agreements and locating projects in the most constrained load pockets may become crucial for financial viability.

Regulatory gaps, such as the absence of cost-reflective tariffs, limitations on asset co-location with renewables, and slow permitting processes, continue to generate friction. The ability of policymakers to deliver timely auction rounds, transparent eligibility requirements, and stable revenue models will largely determine how much of the enormous project pipeline ultimately achieves financing and construction across the region. As the market matures, overcoming these hurdles will be fundamental for investors seeking grid-connected storage scale in Latin America.

Implications for project developers

For developers and institutional investors, the Wood Mackenzie report outlines a marked acceleration in storage opportunity, but also a complex environment requiring nuanced understanding of country-specific regulatory frameworks. Chile’s leadership and the scale of its BESS projects make it a bellwether for policy and pricing risks, especially related to congestion and curtailment. Mexico’s specific requirement for storage paired with 30 percent of all new renewables alters the investment calculus, increasing the likelihood that storage will become a default component for project qualification and grid interconnection.

Brazil’s upcoming centralized auctions for battery storage will serve as a test case for bankability and market pricing, pointing to future opportunities or risks for cross-border players. Argentina and other emerging markets may quickly attract attention should their regulatory regimes converge on rate-based or market-based storage compensation structures. For all developers, nimble adaptation to evolving tariff mechanisms, auction schedules, and hybrid project requirements will be essential for winning capacity and securing project finance in this rapidly scaling segment.

Reporting via the original publisher