However, this abundance of renewables also brings structural vulnerabilities. The region’s strong reliance on hydropower – while providing low-cost, clean electricity – makes power systems increasingly susceptible to climate-related disruptions such as droughts and shifting rainfall patterns. Addressing these risks requires not only the physical expansion and modernization of grid infrastructure, but also the development of enabling regulations and market designs to integrate a more diverse energy mix. Regional cooperation – through cross-border interconnections and coordinated planning – will be critical to integrate variable renewable energy while also enhancing system flexibility and resilience. Yet, this transformation is hindered by persistent structural and institutional challenges. Despite its structural advantages, LAC is still experiencing high system losses, limited transmission capacity, outdated grid assets and institutional fragmentation. In 2024 alone, the region lost an estimated 53,000 gigawatt-hour (GWh) of renewables generation due to curtailment. This is equivalent to the annual electricity consumption of over 10 million households based on average usage. This was primarily due to grid congestion, lack of system flexibility and weak demand-side integration.5 Beyond curtailment, total electricity losses across the region average 16-17% – nearly triple the Organisation for Economic Co- operation and Development (OECD) benchmark of 6% – reflecting persistent inefficiencies and underinvestment, as well as a variable share of non-technical losses such as electricity theft, which remains significant in several countries.6 These challenges are reflected in the region’s overall energy transition performance as measured in the World Economic Forum’s Energy Transition Index benchmarking 118 countries’ energy transition progress. While Latin America ranks third globally, its average score of 54.3 out of 100 remains below the global average, revealing persistent barriers including underinvestment in clean energy technologies, lagging innovation and limited political alignment.7 To fully unlock its renewables potential and achieve a clean, reliable and inclusive power system, the region must now increase its focus on grid expansion, modernization and system integration. This means scaling up investment in transmission and distribution (T&D) networks, enhancing operational flexibility, strengthening resilience by deploying digital grid technologies and accelerating regional interconnection efforts. These are not secondary enablers, but essentials for sustained renewables growth and long-term decarbonization. Unlocking the clean energy potential of the region will require a significant and sustained increase in investment – particularly in grids, which represent the backbone for enabling greater renewables integration, system reliability and long-term growth. As renewable energy generation grows and demand for electricity accelerates, the grid must be modernized and expanded to manage variability, reduce losses and connect new sources of supply and demand (e.g. data centres). It is also important to note that strengthening the grid can be combined with solutions such as increased utility-scale energy storage capacity and demand, with flexibility to further enhance efficiency, sustainability and resilience. The region is already making notable strides, with clean energy investment projected to reach approximately $70 billion in 2025, a 25% increase since 2015. This amount, however, still only represents 5% of global private clean energy financing, revealing a major gap relative to the region’s potential. To meet energy and climate targets, total annual clean energy investment must rise to $150 billion by 2030 and continue to increase steadily through 2050.8 Within this, grid infrastructure alone will require around $30 billion per year until 2035. Of this amount, nearly two- thirds is expected to come from private capital.9Mobilizing such volumes of private investment remains challenging in much of the region. High interest rates and short debt maturities contribute to a high risk-perception among investors and continues to constrain large-scale financing – particularly in grid infrastructure. Yet, countries like Brazil, Peru and Chile are demonstrating what is possible. Brazil’s 2024 transmission auction successfully mobilized nearly $4 billion to build over 10,500 kilometres of new lines – offering a replicable model for other countries in the region.10 The country’s auction system speaks to an overall successful model in terms of attracting clean energy finance. Alongside grid-focused investments, the region is seeing rapid growth in green and sustainable finance. Since 2014, more than $250 billion in green, social and sustainability bonds have been issued in LAC, including $20 billion in 2024 alone.11 While this momentum is encouraging, the scale of transformation ahead demands more targeted tools. At the same time, technological modernization – including advanced grid management systems, smart meters and local manufacturing of key components – will be essential to reduce losses, improve system reliability and optimize operations.1.2 Financing a grid-centric transition of investment into grid infrastructure will come from private capital66% Advancing Latin America’s Power System Transformation 6

Advancing Latin America%27s Power System Transformation 2025