Could this solution unlock stalled Argentine renewables projects?

Bnamericas Published: Wednesday, February 16, 2022
Could this solution unlock stalled Argentine renewables projects?

Argentine renewables chamber Cader proposed a solution to advance stalled power plant projects amid buoyant demand from the corporate sector for electricity from clean sources.

The proposal comes in a context where the country risks failing to meet 2025 renewables goals and needs to establish fresh targets for the following years, BNamericas was told. 

Various projects awarded in the RenovAr auctions – where developers signed power purchase agreements with wholesale electricity market administrator Cammesa – remain in limbo following the economic crisis that erupted in early 2018. 

The crisis and the associated issue of elevated country risk created financing problems for developers.

Against this backdrop, Cader has explored alternatives and presented these to the federal energy department. Cader has proposed, on a case-by-case base, that stalled RenovAr projects are transferred to the Mater term market regime. Under Mater, large users directly contract power supply from renewable energy generators, a mechanism used by big manufacturers.

Adding projects to the Mater pipeline would help meet growing demand for clean energy from both domestic companies and the local units of foreign firms, with ESG and carbon tax-related considerations key demand drivers. 

Additionally, the move would, among other functions, release the national treasury from long-term, dollar-denominated commitments resulting from the need to import gas and liquid fuels for electricity generation, and help create jobs. It would also avoid ongoing blockage of transport interconnection points stemming from international arbitration – lengthy and expensive and provided for within PPAs – and transfer generation costs to private players, easing the need for a rate review that ending subsidies, which are a key factor behind a federal budget deficit, would need.  

Some RenovAr projects, many of them small scale, have already been scrapped under a withdrawal option established in resolution 1260/2022. Large-scale wind and solar plants remain in the system, however, as regulatory tweaks are seen as not removing enough withdrawal obstacles, or dangling enough development carrots, for projects that had not achieved financial close on account of the country's macroeconomic challenges.  

Critically, these active projects have already been assigned transport capacity, which is in short supply in the country and is expected to remain so until requisite measures – such as freeing capacity – are implemented.

“At Cader we have different proposals that we’re discussing with the federal energy department,” Juan Manuel Alfonsín, executive director of Cader, told BNamericas.

A key objective is to help around 1GW of stalled RenovAr projects advance and not get mired in lengthy legal battles linked to supply contracts. 

Transferring RenovAr projects to a state-administered trust so they can be auctioned to new sponsors is an option being mulled.

Devising creative solutions that spur the sector along is necessary to help the country meet its renewable energy goals established in law 27,191, Alfonsín said. One federal target is having large power consumers obtaining 20% of their electricity from renewable sources by the end of 2025. Argentina has more than 800 large users.

Last year, renewables covered an average of 13% of overall demand in Argentina, up from 10% in 2020. A federal goal is hitting 20% by end-2025.

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Last year 3.43TWh in electricity was contracted through Mater, via 2,334 contracts, state news agency Télam reported. Large users, to hit targets, can also build their own renewables plants or purchase clean power via Cammesa. 

Total power demand from large users was around 16TWh in 2020, according to Cammesa data.

“The outlook for [Mater] is good in terms of the number of corporations present in Argentina which are increasingly demanding, for their productive processes, their offices, their services operations in the country, electricity from renewable sources,” Alfonsín said.  

Among Mater projects that are advancing are private developer Genneia’s 80MW Sierras de Ullum plant and state-owned YPF Luz’s 100MW Zonda, both solar PV.

Last year Cammesa granted dispatch priority to seven Mater projects.

Argentina contracted around 5GW in installed renewables capacity under RenovAr. Around 3GW have already come online and, according to local media outlet Desarrollo Energético, about 750MW could be scrapped under the government mechanism, freeing up some transport capacity. Some small Mater projects, chiefly solar PV, have also exited the pipeline.

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