Argentina is ripe for massive investments in the renewable energy sector – a world-class resource and competitive pricing has aligned with support across the political spectrum.
The government’s ambitious target demands that 20 percent of all electricity consumed in the country comes from renewable sources by 2025. This is no mean feat given the current lowly contribution of only 2 percent. And good news for energy consumers, the economy and environment.
The country has a wealth of renewable resources, albeit found in areas far-flung from electricity consumers. The winds roaring through Patagonia are second to none for large wind farms, and the sun’s rays beating down on the north-west provinces are comparable with the best in the world for solar power.
The government’s flagship RenovAr programme is flying high. The first-round energy auction saw unprecedented interest from project developers. Winning projects offered a very competitive price – similar to much more developed markets in the region, and cheaper even than recently awarded gas generation. Consumers can be happy that renewables will provide them with relatively low-priced power and will help bring an end to summer power cuts.
Big industry is also being brought to the party as consumers. Government has mandated all large power users to source a proportion of their electricity from renewables, either from a provider or by self-generation. The same 20 percent by 2025 target applies, though the intermediate target of 8 percent by 2018 is likely to be harder to achieve.
There are already 2 million people employed in renewables in Latin America, and the RenovAr programme brings the promise of more jobs. A strong local industry is combining with international companies that bring leading project development expertise and technology.
GENNEIA owns the biggest wind farm in the country and is one of the leaders in the RenovAr programme. GENNEIA’s Alfredo Bernardi says “It is a new era for renewable energy in Argentina – an excellent opportunity in every sense. GENNEIA is currently developing five wind projects and we are very positive about the future.”
In upcoming RenovAr auctions, project developers will have to source more equipment from local suppliers in an effort to secure benefits for the national economy. Local industry is well placed to play a big role, though this obligation needs to be carefully managed to avoid stifling the market with expensive inputs. The dramatic fall in the price of solar panels has in part been enabled by the economies of scale attained by manufacturers in China that would be difficult to achieve in Argentina. Taking advantage of global efficiencies can provide low-cost energy that creates Argentine jobs in construction and operation, boosts industry and helps consumers.
The renewables sector in Argentina is dwarfed by its neighbours Brazil, Chile and Uruguay, and the country remains an embarrassing climate action laggard on the global stage. This counts for more than just diplomatic relations and canapés at climate summits. Climate change is a serious risk for the country – changing weather patterns threaten to wreak havoc on an economy underpinned by agricultural production.
Hitting the 20 percent renewables by 2025 target will require investment of US $15 – 20 billion, for which foreign capital will have to play a part. A World Bank backed guarantee scheme has been well designed to protect investors, though the omnipresent political uncertainty still weighs heavy. The perceived risk of a return to currency or capital controls inevitably raises the cost of finance.
It is significant to note that the new renewable policy framework was developed by the previous government and passed in the middle of a fierce presidential campaign just three weeks prior to the election date with extraordinary multi-party support. A rare meeting of minds across the political spectrum provides hope for long-term support to the sector.
The government needs to stay ahead of the game with rapid expansion of the transmission grid. To connect upcoming solar plants in the north-west provinces and wind farms in Patagonia to the distant demand centres emanating from Buenos Aires will cost some US $5 billion.
2017 is a crunch year for renewables with the first round of RenovAr projects chasing financial closure then tight construction timelines, and the opening of the second round of project auctions.
It’s high time for Argentina to align with the forces of nature – growing a green economy is too good an opportunity to miss.