For decades, Latin America's power grids have exploited the region's fresh water resources to produce cheap hydroelectricity. Dams still supply over half of the region's power, reaching as much as 80% of electricity generated in countries like Brazil and Colombia.

However, hydro's share of the regional power matrix has steadily declined over the last decade. Countries are increasingly investing in other sources of electricity, in response to strong demand growth, shifting climate patterns, high oil prices, and social and environmental concerns, among other factors.

These structural changes in the regional power market have helped propel the adoption of renewable technologies - for example, the ongoing wind power boom in Brazil. Within the thermoelectric sector, natural gas-fired plants have emerged as a compelling alternative.

Following global tendencies, the fuel's share in the Latin American generation mix has more than doubled over the last two decades, accounting for 22% of all electricity generated in 2011, according to the most recent World Bank figures. Natural gas is now the second-most prevalent source of power in the region, having displaced petroleum in the early 2000s.

Conditions in local markets do not align perfectly to foster a boom in natural gas-fired capacity, and the fuel's advantages and disadvantages as a power source vary from country to country. Nonetheless, natural gas is likely to continue expanding its presence throughout Latin America in the coming years.

Figure: Regional Electricity Sources


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