At the beginning of April, I attended a summit called The Future of Energy organized by Bloomberg New Energy Finance (BNEF) in New York City. Different countries’ private and public representatives attended the summit. Debates and analyses were comprehensive, summarized by US Secretary of State John Kerry’s phrase: “The future of energy is the future of everything.”
The prominent issue discussed, undoubtedly, was renewable energy. The Paris Agreement in December 2015 reflected the commitment of almost 200 countries on the subject. At the same time, leading companies such as Google, Facebook, Walmart and others, have expressed their growing commitment to renewable energy. Nowadays more employees, clients and consumers prefer renewable energy and are willing to reward or punish those companies that show some sort of commitment to the environment by choosing to bring them their business, or not.
The costs of installing photovoltaic solar energy has been reduced 150 times per Kv since 1975. This efficiency showing stunning cost reductions between the years 2008 and 2015, according to the experts, has not stopped yet. We are going to see even cheaper technologies.
This is a strong reason for renewable energies to lead the investment scenario and keep a relevant portion of investments in new generation technologies at a worldwide level.
In our region, Uruguay, Brazil and Chile have taken qualitative leaps increasing access to renewable energies while significantly reducing their costs.
Argentina, on the other hand, until September 2015 remained behind in terms of renewable energy. But in September 2015, even while opposing political parties carried out fierce electoral campaigns, a vast majority of Congress agreed to pass Law 27.191 imposing the mandatory incorporation of renewable energy resources through incentives including rewards and punishments.
The law fixes minimum progressive percentages of renewable energy consumption per user. It fixes the percentage of renewable energy with respect to total energy consumption for 2018 at 8 percent and 20 percent for 2025. Moreover, it creates an Official Fund for AR $12 billion for incentives, tax reductions and other benefits.
All signs indicate that Argentina will finally hop on the renewable energy bandwagon. Enacted and passed by two opposite political sectors, the new law has a strong backup of the political establishment and involves better conditions for industrial development, employment sources and provides for higher competition. Thus, companies will start to align their operations with the dispositions of the law. This will promote a growth of 6 percent of renewable energies with respect to the national energy matrix in less than two years, a huge growth considering that today, renewable energies do not reach 2 percent of the matrix.
Argentina’s current government has committed to giving a strong boost to this new energy challenge: it created the Undersecretary of Renewable Energies, led by the man who drafted the law, Sebastián Kind, a highly regarded engineer in the energy sector. Regulations pursuant to the law have been recently passed in record time. At the same time, mechanisms favoring more accessible financing options for installing new technologies are under study. Forecasts are highly encouraging. All variables converge towards a synergy of renewable, energy friendly changes.
More Than 8000 Companies Are Likely To Encourage Renewable Energy
The new legal framework states that energy consumers in Argentina must replace a percentage of their traditional consumption for an increasing percentage of renewable energy, which is stated at 8 percent for 2018 and set to grow to 20 percent in 2025.
This purchase will be mandatory. The Government will buy renewable energy (and will transfer this cost to final users) for all those users who do not buy renewable energy themselves. Companies with large energy consumption, called big energy consumers, may choose to buy energy by themselves or leave the purchase to the Government.
To comply with the law, Argentine consumers have the unusual opportunity to purchase their own renewable energy. They can do so by self-generation or by buying renewable energy from a producer or trader. Why would a consumer not like to manage his or her own energy purchase rather than delegate it to the Government? The advantages of being proactive are important.
To Obtain Competitive Prices
Due to legal regulations, the Government will choose to develop lower-priced renewable energy — wind and solar — as well as other energy sources to diversify the industry and to promote development. This situation will encourage projects in different areas along the country that may not be financially attractive but that will promote regional economies with a federal political criteria.
Thus, average prices obtained by the government and transferred to those who did not manage their own purchase of renewable energy will be higher than prices a consumer can obtain from direct purchase.
Flexible And Personalized Service Terms & Conditions
Whereas agreements subscribed and transferred by the Government will have fixed terms and conditions and a 20-year term, in the private sector, consumers will be able to obtain flexible terms and conditions for their specific needs from traders or producers suited to their specific requirements of volume, flow, frequency, etc. Thus, in this scenario it will likely be possible to obtain lower prices if Argentina recovers its credit quality and technology keeps developing.
To Be An Active Player In The Solution
It’s hard to believe that private industry will delegate to the Government the purchase of a key input like renewable energy. The opportunity to manage economically competitive purchases, with flexible terms and conditions, and commitment to sustainability is very attractive to many companies currently working in this area.
Convergence between all political forces towards a change in the energy matrix calls for all players in the energy market, from big consumers (industries, companies, etc) to traders and distributors, to define which role they will play in the new scenario. Argentina has today a long overdue modern energy act. This is the opportunity the energy industry has been waiting for. It is the future, the opportunity for “our” sun and wind.