Distributed generation in Argentina: Where it's at and where it's going

Bnamericas Published: Tuesday, October 11, 2022
Distributed generation in Argentina: Where it's at and where it's going

Argentina’s distributed generation segment is growing rapidly in absolute terms. 

Installed capacity has been expanding apace, driven by both residential users and business. 

User-generators that operate under law No. 27,424 are eligible for benefits, including tax credits. Nationally, the scheme had 959 user-generators for a combined 16.3MW as of August, compared with 614 and 6.92MW, respectively, in September of 2021. A further 7.3MW is in the pipeline.

Fourteen jurisdictions have signed up to the law and there is pressure in hydrocarbons province Neuquén’s legislature for it to join the pack by issuing the requisite secondary legislation, after having given an associated bill the green light. Some jurisdictions, such as population hub Buenos Aires province, have partly adhered to the federal scheme. Others, such as Santa Fe, have introduced their own regimes. 

Argentina’s distributed generation law was enacted in 2017 and associated secondary legislation was published the following year. A goal of law 27,424 is hitting distributed renewables capacity of 1,000MW by 2030, which would require a rapid acceleration in construction over the next eight years.

In terms of overall installed power generation capacity in Argentina, the country has 42.9GW, with wind accounting for 3.29GW and solar 1.08GW, according to August data from wholesale power market administrator Cammesa. 

To discuss the state of play and the outlook – and the impact of the government’s electricity customer segmentation scheme to trim subsidies – BNamericas conducted an email interview with Argentine mechanical engineer Héctor Natera, a consultant who specializes in renewable energy and energy efficiency.

BNamericas: As a consultant in the development of solar PV self-supply projects, have you observed a change in the demand for such solutions on account of the power consumer segmentation scheme?

Natera: The market for distributed generation with renewable energies in Argentina is relatively new. The law was only enacted in 2017 and the reality is that, against some forecasts, the market has been growing, at a triple-digit pace per year at a minimum, according to official figures.  

Growth has been spurred by factors related to the increase in the price of electricity resulting from rate segmentation and also by the difference between the [more favorable] exchange rate for the official dollar – with which most sector products are imported – and the unofficial [blue] dollar. 

The power rate segmentation and the increase in the price of services, mainly electricity, have piqued the interest of customers who seek to obtain economic benefits with the installation and be less affected by power rate changes.

Another segment of the sector that moves the market comprises clients seeking to cover technical needs associated with electrical backup in the event of power outages or poor service, which they manage to address via energy storage systems. This has been an important driver of the niche of solar PV self-supply that is not mapped by the federal energy department, since these clients are not user-generators.

BNamericas: Have you observed any trends regarding the sources of demand? For example, in which space is there more movement: residential or commercial?

Natera: According to the federal energy department, to date there is some 16,270kW of installed capacity with an approved bidirectional meter, with another 7,284kW of projects with approved reserved capacity. 

From September 2021 to date, the installed capacity of user-generators grew 135%, while the number of users climbed to 959 from 614, growing only 56%. This translates into an increase in the average power of projects to almost 17kW from 11kW. It is a clear indicator that the market is growing in the commercial/industrial sector, the sector that is most affected by segmentation and rate increases.

An interesting phenomenon that can be observed is that, although national law 27,424 is approved and regulated, some provinces have not yet adhered, and it is not possible to apply for bidirectional meters there; therefore, a user-generator certificate cannot be processed either. 

This is the case in Buenos Aires province [partly adhered and where only users served by Buenos Aires city-based distributors Edenor and Edesur can apply for bidirectional meters under law 27,424], which accounts for a significant percentage of electricity demand and distributed generation projects; therefore, there is a market that decides not to process bidirectional meters or that still cannot do so because the regulations are not in place.

BNamericas: In general, what are the prospects for the self-supply segment – and why?

Natera: The distributed generation and solar energy market for self-supply has been growing in Argentina despite the lack of accessible financing for this type of project and subsidies that lead to, in many cases, rates below US$0.02/kWh. With this sincerity regarding rates, it is expected that the segment will accelerate its pace of growth. 

And if we compare the market with Brazil, where the distributed generation segment alone is almost 600 times as large and with four times as many inhabitants, everything would indicate that the distributed generation market in Argentina will be increasingly interesting as long as a balanced equation is achieved between access to financing, price of electricity and availability of resources.

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