Wind and gas

Renewables in Argentina held back by inadequate infrastructure and cheap gas potential.

Renewable electricity generation has been growing steadily in Argentina for the last 10 years and across successive governments. The Argentinean government reported that during the second quarter of 2021, the country’s electricity system added 188 MW of renewable capacity, down from 380 MW added in the first quarter due to a second wave of COVID-19 infections delaying several developments.

The general manager of an energy consultancy in Argentina explained, “There have been many delays for a variety of reasons: problems with suppliers, logistics and even financing. Don’t forget, 90% of these renewables projects are leveraged with international financing, this was also affected by the pandemic. There are also internal problems unrelated to the pandemic: foreign exchange restrictions, import problems, creative municipal taxes and transmission infrastructure problems.”

“There have been many delays for a variety of reasons: problems with suppliers, logistics and even financing.”

General manager, energy consultancy, Argentina

On average, renewable generation accounts for around 10% of Argentina’s energy mix. At its peak this figure has been as high as 24% because renewable energy has priority so at times of low demand it represents a high proportion of the energy mix.

The Argentinean Government remains supportive of the delayed projects and passed a resolution in the first week of August which gave project developers an extra 360 days to commence operations. Although investors cannot avoid daily fines for every contracted megawatt not provided, penalties can be reduced by 70% under the new government agreement.

Despite the relief provided with the government resolution, some investors remain unconvinced about the lack of clear guidelines from the executive, which makes frequent changes in technical teams adversely affecting planning capacity. Furthermore, the precarious state of transmission infrastructure in the country aggravates the allocation of costs as the grid does not have enough capacity to transmit larger shares of renewable energy from North to South of the territory.

“Despite innumerable requests from the energy sector, the issue of energy transport is yet to be resolved. There is little interest from the government.”

General manager, energy consultancy, Argentina

A lawyer, specialising in renewable energy, explained, “On the transmission issues, there were a series of projects planned that never materialised and so there are now transmission bottlenecks around some urban centres. The authorities know this so I hope there is investment in upgrading existing networks and creating new ones. Many of the wind projects are in Patagonia and the infrastructure is limited to get the electricity out.” The energy consultant was less hopeful, “Despite innumerable requests from the energy sector, the issue of energy transport is yet to be resolved. There is little interest from the government in promoting new generation or solving the transport issue. There have been and will be announcements but nothing is actually getting done.”

These issues demonstrate that the government must do more to clarify its energy strategy. President Alberto Fernández has expressed a commitment to fighting climate change but he continues to see fossil fuels as an easy way out of the country’s economic crisis. Thus, his climate change discourse contrasts with his October 2020 announcement of USD 1.5 billion in subsidies to boost hydrocarbon production at Vaca Muerta’s shale deposit. The lawyer explained, “It [Vaca Muerta] is important for the country because of its availability and low cost, but if the market is flooded with electricity from cheap gas, it will be hard for renewables to take off.”

 

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