Argentina
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Snapshot: Argentina's multibillion-dollar transmission gap

Bnamericas Published: Thursday, January 19, 2023
Snapshot: Argentina's multibillion-dollar transmission gap

Transmission capacity or lack thereof

That is the chief headwind to continued growth of Argentina’s renewable energy industry, a sector association says.

Demand for non-conventional renewable energy (NCRE) exists among corporate players. They are keen not only to burnish their green credentials and avoid future carbon border taxes but also to ensure a secure power supply and increase control over electricity bills.

Plus, under a federal law, certain types of companies need to obtain at least 20% of their electricity from renewables by 2025. Local oil firm Petrolera Aconcagua Energía referred to this goal recently.  

At COP26, Argentina presented decarbonization goals that could imply, by 2030, 20% renewables penetration under a baseline scenario and 30% in a more demanding scenario.

To achieve a 30% renewables share by 2030, some 6.01GW of wind capacity and 1.40GW of solar would be needed, according to federal energy department estimates. Renewables are expected to account for 15% of generation this year, up from just 2% in 2015. Their share has peaked at over 31%.

Associated requisite transmission outlay under the 30% scenario would be US$5.75bn, corresponding to 6,000km of 500kV lines and new transformer stations. Officials are currently working on plans for new infrastructure of up to 220kV, using multilateral funding. 

In the Mater term market, where corporates contract power directly from renewables plants and spare available capacity is dampening current and future growth prospects, 913MW of wind and 988MW of solar are due to come online in 2023-24, using existing infrastructure.

Installed capacity in Argentina – whose government is betting heavily on spurring oil and gas investment – stands at 42.9GW, with thermoelectric accounting for 25.3GW, hydroelectric 10.8GW, renewables 5.03GW and nuclear 1.76GW, according to data from wholesale power market administrator Cammesa. Wind accounts for 3.31GW and solar PV 1.09GW, with mini-hydro and bioenergy the balance.

Echoing comments in a recent federal energy department planning document, Argentina’s wind power association CEA spelled out the state of play.

“The main limit to greater use of renewable generation today is the transmission capacity remaining in the electrical system,” reads the document.

Multiple analyses of the requisite investment have been carried out and different state entities have the scope to complete the work.

“Nevertheless, it has not been possible to articulate a scheme that allows the outlining of clear goals for the expansion of the system, and mechanisms to advance from studies to planning, and from there to tenders and the execution of projects,” the report states.

Mapping out potential ways to advance, CEA said collaboration between the federal energy department, Cammesa and the private sector was critical. CEA said visibility regarding future lines, certainty over construction schedules and state take-or-pay guarantees would enable wind power players to plan adequately and coordinate plant construction.

Argentina’s electricity industry players have been impacted by headwinds including rate freezes, soaring inflation and limited access to financing, narrowing the scope for investment. Last year officials started a rate segmentation program to trim subsidies.

The federal energy department says improving finances is the initial challenge facing the entire electricity sector.

MAJOR PROJECTS

The CEA report, meanwhile, highlights two key transmission projects, both still in the early development phase. The chief component of the first – known as AMBA I – is 500kV line Vivoratá-Plomer, which would support supply to Buenos Aires metropolitan area, or AMBA, by permitting the integration of 1,000MW of new wind power capacity in the Bahia Blanca-AMBA corridor. Last February, an associated MOU was signed with China, whose company State Grid would carry out the project. While work in the sphere of local regulatory authorization advanced in July 2022, financing has not been finalized yet.

The proposed line is part of a portfolio of 500kV projects in a national plan of the administrative committee of the federal trust fund for electricity transport. Around half of the lines have already been built.

The second is 500kV infrastructure needed to dispatch power from the 1.3GW Néstor Kirchner-Jorge Cepernic hydroelectric complex under construction in southern Santa Cruz province. Associated grid investment, to dispatch Patagonia and Cuyo region power to Buenos Aires, would also allow at least 700MW of additional wind and solar capacity.  

The report indicates much work is pending. “No framework has been defined for its realization, nor the route, nor works involved, nor financing; there are no scheduled bidding dates either, even in the context of a challenging schedule, considering the plants should be finished by 2028, and if there is no additional transport capacity, a lot of electricity would be curtailed,” it states.

Overall, CEA outlines five key transmission projects needed to improve supply to AMBA and facilitate the entrance of new nuclear capacity, three to support the incorporation of new wind capacity and output from the under-construction hydropower plant and five to support the incorporation of new solar PV capacity. 

Private sector players are willing to provide a transmission-financing role in the wind power space, BNamericas was told recently. Any investment decisions would partly hinge on further progress in the sphere of subsidy segmentation and on regulatory stability. 

Argentina has abundant wind resources in its central and southern regions. Work to boost dispatch to AMBA would involve a stretch of around 500km along an existing transmission corridor.  

Building new lines would support increased renewables capacity which, in turn, would not only help ease reliance on thermoelectric generation and liquid fuel imports but also free up more gas for export and capacity on pipelines, CEA says. A bigger role for renewables and an associated drop in dollar-denominated fuel imports, it adds, would also reduce demand for central bank foreign reserves.

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