Advancing Latin America%27s Power System Transformation 2025

2 Barriers The power sector in the LAC region faces a combination of regulatory and policy challenges that hinder the development and modernization of grid infrastructure. A key barrier is the misalignment between national energy policy goals and grid planning, often resulting in transmission bottlenecks, delays and underutilized renewable energy resources. Planning focuses largely on expanding generation, but pays limited attention to grid development. This is tied to unrealistic timelines and a lack of integration with projected demand and generation patterns. Frequent policy shifts and limited transparency create uncertainty, making it difficult for developers and investors to assess risks and returns. This deters long-term investment and slows grid expansion. Although many countries have national energy plans, translating them into projects remains difficult. The absence of mechanisms – such as competitive auctions or bankable power purchase agreements (PPAs) – stalls investment and leaves deployment targets unmet. Tariff structures often fail to recover utility costs, limiting funds for operations and maintenance, while utilities struggle to secure capital for large-scale upgrades. Sustainable tariffs and effective financial mechanisms are essential to ensure steady funding and attract investment. Regulatory frameworks frequently lack provisions for innovation and integration of emerging technologies. Distributed energy resources, storage and advanced grid management systems are often not addressed in regulations, leaving licensees without incentives to adopt them. This slows the deployment of technologies essential for a flexible, reliable, modern grid. Finally, administrative and permitting processes add complexity. Lengthy approvals and burdensome requirements raise costs and cause delays – particularly for cross-border infrastructure and projects involving newer technologies.2.1 Policy and regulationStrengthening national power systems Policy, finance and technology solutions could strengthen national power systems in LAC. Policy message 1 Improve coordination and holistic, long-term planning The following measures could help enhance policy planning and coordination: –Establish integrated, long-term planning frameworks that foster coordination among government agencies, regulators, utilities and private stakeholders; align grid development with broader energy, climate, environmental and national development strategies and expected demand for cohesive decision-making. –Establish transparent, long-term T&D plans aligned with renewables integration, decarbonization and resilience objectives – including clear project pipelines and investment timelines to guide stakeholders. –Advance regional interconnection strategies to enhance grid flexibility and optimize resource sharing across countries – complementing national-level efforts to strengthen system resilience. Advancing Latin America’s Power System Transformation 7