How Argentina is planning to support renewables

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Ilaria Valtimora
September 8, 2017
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How Argentina is planning to support renewables

Next month, Argentina is to hold an auction for support for 2.2GW of renewables projects. Is it time for wind firms to capitalise on the potential of the South American nation?

The nation has plenty of catching up to do. Argentina is only the fifth-largest country in the region by installed wind capacity, with 279MW, though developers could complete an extra 1.4GW by the end of 2019. And its wind potential is even greater than that.

Currently, the Argentinian power landscape is dominated by fossil fuels, which represent 87% of the total energy mix.

However, according to estimates by the Global Wind Energy Council, around 70% of the country is suitable for wind farms. The best wind sites are in the south, in central and southern Patagonia, and have not been exploited due to the high-risk economic and political environment, which has deterred investors.

Three years ago Argentina, under the leadership of then-president Cristina Fernandez, was hit by the default of its sovereign bonds for the second time in 13 years. This brought weak growth in 2015 and recession in 2016, with the economy contracting by 2.3% and inflation reaching 40%. She was replaced as president in late 2015 by Mauricio Macri, who has settled legal disputes with creditors and opened the country again to global debt markets.

In Macri’s plan to spark economic growth and attract investments, renewable energy plays an important role. His government wants the country to produce 8% of its electricity from renewables by the end of 2017, with this percentage rising to 20% by 2025.

The country though, is far away from its 2017 target, with just 2% of its electricity produced by renewables to date. And this despite government's support.

Indeed, Macri’s government has brought in laws to support renewables, including RenovAr renewable energy tendering programme, which kicked off last year. Argentina held its first RenovAr tender last October 2016 and a further tender, RenovAr 1.5, last November. The two auctions awarded financial support for 59 renewables projects totalling 2.4GW. Of this, 1.4GW is represented by wind, distributed among 22 projects.

The country is now looking to do more, with a RenovAr 2 auction announced last month and will be held in October, with a further 2.1GW of capacity to be auctioned, of which 550MW is set to be represented by wind.

The government is also looking to issue guidelines to enable renewable energy producers to reach private power purchase agreements with consumers. Currently, state-controlled electricity company Cammesa is the only customer of the wholesale electricity market in the country, but the new guidelines are set to allow large power users to negotiate PPAs directly with renewable energy generators.

According to energy minister Juan José Aranguren, this would enable up to $6bn of investments to flow in the country by 2020 and lead to the installation of renewables projects with total headline capacity of 4GW.

Finally, the government is also looking to extend an import tax exemption on all renewable generation equipment beyond the end of this year, to enable projects that are currently being built to reach their conclusion. This will give confidence to existing investors, and is a sign that Argentina is looking to gain the confidence of investors after its chequered past.

But is it enough? The country still faces some key challenges.

First, investments in transmission lines are needed to support the expansion of generation capacity. The existent transmission capacity is just enough to support the projects awarded in the two tenders last year, but will struggle with future rounds. In particular, grid links in areas with good wind resources are limited or – in some cases – inexistent.

Second, the high cost of debt in Argentina, as well as the low availability of foreign capital, make it difficult for project developers to secure the financial backing they need.

On the latter point, Macri’s policies are helping. Growth is projected to rebound this year and next: the OECD expects GDP to reach 2.5% this year and 3% in 2018 after these reforms, and inflation has fallen to around 20%, from last year’s 40%.

Finally, the government has initiated negotiations to improve the country’s credit rating and Argentina is for the first time really out of danger of default. It will be a long road to build the country’s international standing with investors, but the process is underway.

Next month, Argentina is to hold an auction for support for 2.2GW of renewables projects. Is it time for wind firms to capitalise on the potential of the South American nation?

The nation has plenty of catching up to do. Argentina is only the fifth-largest country in the region by installed wind capacity, with 279MW, though developers could complete an extra 1.4GW by the end of 2019. And its wind potential is even greater than that.

Currently, the Argentinian power landscape is dominated by fossil fuels, which represent 87% of the total energy mix.

However, according to estimates by the Global Wind Energy Council, around 70% of the country is suitable for wind farms. The best wind sites are in the south, in central and southern Patagonia, and have not been exploited due to the high-risk economic and political environment, which has deterred investors.

Three years ago Argentina, under the leadership of then-president Cristina Fernandez, was hit by the default of its sovereign bonds for the second time in 13 years. This brought weak growth in 2015 and recession in 2016, with the economy contracting by 2.3% and inflation reaching 40%. She was replaced as president in late 2015 by Mauricio Macri, who has settled legal disputes with creditors and opened the country again to global debt markets.

In Macri’s plan to spark economic growth and attract investments, renewable energy plays an important role. His government wants the country to produce 8% of its electricity from renewables by the end of 2017, with this percentage rising to 20% by 2025.

The country though, is far away from its 2017 target, with just 2% of its electricity produced by renewables to date. And this despite government's support.

Indeed, Macri’s government has brought in laws to support renewables, including RenovAr renewable energy tendering programme, which kicked off last year. Argentina held its first RenovAr tender last October 2016 and a further tender, RenovAr 1.5, last November. The two auctions awarded financial support for 59 renewables projects totalling 2.4GW. Of this, 1.4GW is represented by wind, distributed among 22 projects.

The country is now looking to do more, with a RenovAr 2 auction announced last month and will be held in October, with a further 2.1GW of capacity to be auctioned, of which 550MW is set to be represented by wind.

The government is also looking to issue guidelines to enable renewable energy producers to reach private power purchase agreements with consumers. Currently, state-controlled electricity company Cammesa is the only customer of the wholesale electricity market in the country, but the new guidelines are set to allow large power users to negotiate PPAs directly with renewable energy generators.

According to energy minister Juan José Aranguren, this would enable up to $6bn of investments to flow in the country by 2020 and lead to the installation of renewables projects with total headline capacity of 4GW.

Finally, the government is also looking to extend an import tax exemption on all renewable generation equipment beyond the end of this year, to enable projects that are currently being built to reach their conclusion. This will give confidence to existing investors, and is a sign that Argentina is looking to gain the confidence of investors after its chequered past.

But is it enough? The country still faces some key challenges.

First, investments in transmission lines are needed to support the expansion of generation capacity. The existent transmission capacity is just enough to support the projects awarded in the two tenders last year, but will struggle with future rounds. In particular, grid links in areas with good wind resources are limited or – in some cases – inexistent.

Second, the high cost of debt in Argentina, as well as the low availability of foreign capital, make it difficult for project developers to secure the financial backing they need.

On the latter point, Macri’s policies are helping. Growth is projected to rebound this year and next: the OECD expects GDP to reach 2.5% this year and 3% in 2018 after these reforms, and inflation has fallen to around 20%, from last year’s 40%.

Finally, the government has initiated negotiations to improve the country’s credit rating and Argentina is for the first time really out of danger of default. It will be a long road to build the country’s international standing with investors, but the process is underway.

Next month, Argentina is to hold an auction for support for 2.2GW of renewables projects. Is it time for wind firms to capitalise on the potential of the South American nation?

The nation has plenty of catching up to do. Argentina is only the fifth-largest country in the region by installed wind capacity, with 279MW, though developers could complete an extra 1.4GW by the end of 2019. And its wind potential is even greater than that.

Currently, the Argentinian power landscape is dominated by fossil fuels, which represent 87% of the total energy mix.

However, according to estimates by the Global Wind Energy Council, around 70% of the country is suitable for wind farms. The best wind sites are in the south, in central and southern Patagonia, and have not been exploited due to the high-risk economic and political environment, which has deterred investors.

Three years ago Argentina, under the leadership of then-president Cristina Fernandez, was hit by the default of its sovereign bonds for the second time in 13 years. This brought weak growth in 2015 and recession in 2016, with the economy contracting by 2.3% and inflation reaching 40%. She was replaced as president in late 2015 by Mauricio Macri, who has settled legal disputes with creditors and opened the country again to global debt markets.

In Macri’s plan to spark economic growth and attract investments, renewable energy plays an important role. His government wants the country to produce 8% of its electricity from renewables by the end of 2017, with this percentage rising to 20% by 2025.

The country though, is far away from its 2017 target, with just 2% of its electricity produced by renewables to date. And this despite government's support.

Indeed, Macri’s government has brought in laws to support renewables, including RenovAr renewable energy tendering programme, which kicked off last year. Argentina held its first RenovAr tender last October 2016 and a further tender, RenovAr 1.5, last November. The two auctions awarded financial support for 59 renewables projects totalling 2.4GW. Of this, 1.4GW is represented by wind, distributed among 22 projects.

The country is now looking to do more, with a RenovAr 2 auction announced last month and will be held in October, with a further 2.1GW of capacity to be auctioned, of which 550MW is set to be represented by wind.

The government is also looking to issue guidelines to enable renewable energy producers to reach private power purchase agreements with consumers. Currently, state-controlled electricity company Cammesa is the only customer of the wholesale electricity market in the country, but the new guidelines are set to allow large power users to negotiate PPAs directly with renewable energy generators.

According to energy minister Juan José Aranguren, this would enable up to $6bn of investments to flow in the country by 2020 and lead to the installation of renewables projects with total headline capacity of 4GW.

Finally, the government is also looking to extend an import tax exemption on all renewable generation equipment beyond the end of this year, to enable projects that are currently being built to reach their conclusion. This will give confidence to existing investors, and is a sign that Argentina is looking to gain the confidence of investors after its chequered past.

But is it enough? The country still faces some key challenges.

First, investments in transmission lines are needed to support the expansion of generation capacity. The existent transmission capacity is just enough to support the projects awarded in the two tenders last year, but will struggle with future rounds. In particular, grid links in areas with good wind resources are limited or – in some cases – inexistent.

Second, the high cost of debt in Argentina, as well as the low availability of foreign capital, make it difficult for project developers to secure the financial backing they need.

On the latter point, Macri’s policies are helping. Growth is projected to rebound this year and next: the OECD expects GDP to reach 2.5% this year and 3% in 2018 after these reforms, and inflation has fallen to around 20%, from last year’s 40%.

Finally, the government has initiated negotiations to improve the country’s credit rating and Argentina is for the first time really out of danger of default. It will be a long road to build the country’s international standing with investors, but the process is underway.

Next month, Argentina is to hold an auction for support for 2.2GW of renewables projects. Is it time for wind firms to capitalise on the potential of the South American nation?

The nation has plenty of catching up to do. Argentina is only the fifth-largest country in the region by installed wind capacity, with 279MW, though developers could complete an extra 1.4GW by the end of 2019. And its wind potential is even greater than that.

Currently, the Argentinian power landscape is dominated by fossil fuels, which represent 87% of the total energy mix.

However, according to estimates by the Global Wind Energy Council, around 70% of the country is suitable for wind farms. The best wind sites are in the south, in central and southern Patagonia, and have not been exploited due to the high-risk economic and political environment, which has deterred investors.

Three years ago Argentina, under the leadership of then-president Cristina Fernandez, was hit by the default of its sovereign bonds for the second time in 13 years. This brought weak growth in 2015 and recession in 2016, with the economy contracting by 2.3% and inflation reaching 40%. She was replaced as president in late 2015 by Mauricio Macri, who has settled legal disputes with creditors and opened the country again to global debt markets.

In Macri’s plan to spark economic growth and attract investments, renewable energy plays an important role. His government wants the country to produce 8% of its electricity from renewables by the end of 2017, with this percentage rising to 20% by 2025.

The country though, is far away from its 2017 target, with just 2% of its electricity produced by renewables to date. And this despite government's support.

Indeed, Macri’s government has brought in laws to support renewables, including RenovAr renewable energy tendering programme, which kicked off last year. Argentina held its first RenovAr tender last October 2016 and a further tender, RenovAr 1.5, last November. The two auctions awarded financial support for 59 renewables projects totalling 2.4GW. Of this, 1.4GW is represented by wind, distributed among 22 projects.

The country is now looking to do more, with a RenovAr 2 auction announced last month and will be held in October, with a further 2.1GW of capacity to be auctioned, of which 550MW is set to be represented by wind.

The government is also looking to issue guidelines to enable renewable energy producers to reach private power purchase agreements with consumers. Currently, state-controlled electricity company Cammesa is the only customer of the wholesale electricity market in the country, but the new guidelines are set to allow large power users to negotiate PPAs directly with renewable energy generators.

According to energy minister Juan José Aranguren, this would enable up to $6bn of investments to flow in the country by 2020 and lead to the installation of renewables projects with total headline capacity of 4GW.

Finally, the government is also looking to extend an import tax exemption on all renewable generation equipment beyond the end of this year, to enable projects that are currently being built to reach their conclusion. This will give confidence to existing investors, and is a sign that Argentina is looking to gain the confidence of investors after its chequered past.

But is it enough? The country still faces some key challenges.

First, investments in transmission lines are needed to support the expansion of generation capacity. The existent transmission capacity is just enough to support the projects awarded in the two tenders last year, but will struggle with future rounds. In particular, grid links in areas with good wind resources are limited or – in some cases – inexistent.

Second, the high cost of debt in Argentina, as well as the low availability of foreign capital, make it difficult for project developers to secure the financial backing they need.

On the latter point, Macri’s policies are helping. Growth is projected to rebound this year and next: the OECD expects GDP to reach 2.5% this year and 3% in 2018 after these reforms, and inflation has fallen to around 20%, from last year’s 40%.

Finally, the government has initiated negotiations to improve the country’s credit rating and Argentina is for the first time really out of danger of default. It will be a long road to build the country’s international standing with investors, but the process is underway.

Next month, Argentina is to hold an auction for support for 2.2GW of renewables projects. Is it time for wind firms to capitalise on the potential of the South American nation?

The nation has plenty of catching up to do. Argentina is only the fifth-largest country in the region by installed wind capacity, with 279MW, though developers could complete an extra 1.4GW by the end of 2019. And its wind potential is even greater than that.

Currently, the Argentinian power landscape is dominated by fossil fuels, which represent 87% of the total energy mix.

However, according to estimates by the Global Wind Energy Council, around 70% of the country is suitable for wind farms. The best wind sites are in the south, in central and southern Patagonia, and have not been exploited due to the high-risk economic and political environment, which has deterred investors.

Three years ago Argentina, under the leadership of then-president Cristina Fernandez, was hit by the default of its sovereign bonds for the second time in 13 years. This brought weak growth in 2015 and recession in 2016, with the economy contracting by 2.3% and inflation reaching 40%. She was replaced as president in late 2015 by Mauricio Macri, who has settled legal disputes with creditors and opened the country again to global debt markets.

In Macri’s plan to spark economic growth and attract investments, renewable energy plays an important role. His government wants the country to produce 8% of its electricity from renewables by the end of 2017, with this percentage rising to 20% by 2025.

The country though, is far away from its 2017 target, with just 2% of its electricity produced by renewables to date. And this despite government's support.

Indeed, Macri’s government has brought in laws to support renewables, including RenovAr renewable energy tendering programme, which kicked off last year. Argentina held its first RenovAr tender last October 2016 and a further tender, RenovAr 1.5, last November. The two auctions awarded financial support for 59 renewables projects totalling 2.4GW. Of this, 1.4GW is represented by wind, distributed among 22 projects.

The country is now looking to do more, with a RenovAr 2 auction announced last month and will be held in October, with a further 2.1GW of capacity to be auctioned, of which 550MW is set to be represented by wind.

The government is also looking to issue guidelines to enable renewable energy producers to reach private power purchase agreements with consumers. Currently, state-controlled electricity company Cammesa is the only customer of the wholesale electricity market in the country, but the new guidelines are set to allow large power users to negotiate PPAs directly with renewable energy generators.

According to energy minister Juan José Aranguren, this would enable up to $6bn of investments to flow in the country by 2020 and lead to the installation of renewables projects with total headline capacity of 4GW.

Finally, the government is also looking to extend an import tax exemption on all renewable generation equipment beyond the end of this year, to enable projects that are currently being built to reach their conclusion. This will give confidence to existing investors, and is a sign that Argentina is looking to gain the confidence of investors after its chequered past.

But is it enough? The country still faces some key challenges.

First, investments in transmission lines are needed to support the expansion of generation capacity. The existent transmission capacity is just enough to support the projects awarded in the two tenders last year, but will struggle with future rounds. In particular, grid links in areas with good wind resources are limited or – in some cases – inexistent.

Second, the high cost of debt in Argentina, as well as the low availability of foreign capital, make it difficult for project developers to secure the financial backing they need.

On the latter point, Macri’s policies are helping. Growth is projected to rebound this year and next: the OECD expects GDP to reach 2.5% this year and 3% in 2018 after these reforms, and inflation has fallen to around 20%, from last year’s 40%.

Finally, the government has initiated negotiations to improve the country’s credit rating and Argentina is for the first time really out of danger of default. It will be a long road to build the country’s international standing with investors, but the process is underway.

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Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.