How Small and Large Renewable Energy Projects are Funded in Argentina
Today we publish the final part of Picking Alpha interview with Mr. Pablo Castagnino, Secretary, Embassy of Argentina in Brussels, Head of the Economic Section. Our conversation concentrated on his insights in analysis of the fastest growing sectors of renewable energy in the country, finance sources in this sector and live examples of the Argentina’s companies operating in the renewable energy sector.
Q.: What are the fastest growing energy sectors in Argentina right now?
A.: The RenovAR Programme started its first round auction in May 2016 to add 1,000MW of renewable energy to the grid, comprising 600MW of wind, 300MW of solar, 65MW of biomass, 20MW from small dams and 15MW from biogas. Each project needs to be built in no more than 24 months after the execution of the PPA. Having completed the economic evaluation, on October 10 the Government announced the final results of the tender awarding over 1,100MW of wind, solar and biogas. Only 1.2MW of biogas was awarded, with wind and solar projects taking most of the quota for this first tender. Given the strong interest received for this auction, the government decided to raise the amount of solar and wind by allowing the auction to award 1,100MW instead of the initial 1,000 MW envisaged. The PPAs to be awarded under the first round of RenovAr will have duration of up to 20 years and will have CAMMESA (Company of the Wholesale Electric Market – Compañía Administradora del Mercado Mayorista Eléctrico) as the off taker. Payments will be in Argentine pesos, but calculated at day ahead US dollar rates. The FODER will provide guarantees in respect of certain PPA payments: it will support PPA energy payments of up to 12 months and also termination payments under the PPA. These termination payments are, in the first instance, to be supported by Treasury Notes from the Argentine State, and in turn these are to be backed by a World Bank guarantee. The government announced that it will carry out at least one of these auctions each year for the next 10 years, in line with its goal of installing 10GW of renewable energy by 2025.
Q.: Who finances innovation in renewable sector: government or private sector?
Historically, innovation in Argentina –as in most Latin American countries– is funded by the public sector. However, this trend is slowly changing, including the development of innovative solutions in the energy sector. As an example, last September Argentina has inaugurated its first energy innovation center, allowing the development of solutions for the public and private sectors in the areas of monitoring, early warning and problem solving in electricity generation, transportation, distribution and use. This is an initiative of the company Cisco in agreement with the Universidad Argentina de la Empresa (UADE). This is the first center of its kind in which the company is involved together with an academic institution. The National Plan for Renewable Energies (RenovAr), which the national government announced, will provide a first stage of 1,000 megawatts of installed power to the country’s energy supply, with expected investments of around US$2 billion. This Plan is also expected to create 8,000 new jobs, and save $ 300 million in fuel imports. Based on this new situation, Cisco saw there was a need for an innovation center, where technology is placed at the service of the energy industry, both for private companies and government agencies. The Innovation Center will develop new solutions, especially regarding the use of sensors in cameras, ducts, terminals, stations, generators, transformers, which provide instant information on the energy flows, and allow a diagnosis of what is happening in each place, and even make repairs, without a person having to go to the place. This is only one of the many new initiatives that have arisen as a result of the new investment climate in our country.
Q.: Can you bring us any examples of companies in renewable sector and their growth?
A.: As we are based on Belgium, I think it might be appropriate to mention Greenwind’s joint venture with Pampa Energía. In what was announced as one of the greatest wind projects of the first round auction of the RenovAR Programme, Greenwind & Pampa Energía confirmed the construction of two wind farms to produce 200 MW, involving an initial investment of US$ 100 million. The farms will be constructed in the vicinity of the city of Bahía Blanca. The location of the park is explained by studies on the wind potential of the region, and its proximity to the Petrochemical complex of Bahía Blanca, which represents a potential high demand for renewable energy, and to the thermal power station Luis Piedra Buena, also owned by Pampa Energía. The projected complex of Greenwind & Pampa Energía is not the only wind initiative in the area. There are 12 others under analysis, many of which have already completed their technical reports. For example, Vientos Reta is willing to assemble 50 wind turbine XEMC Wind Power with a total power of 100 MW in the locality of Reta. The firm Parques Eólicos Pampeanos, also wants to install 50 additional –Vestas– units able, which will be able to produce 50 MW in Villarino, in the area of Mayor Buratovich, where the electric cooperative of the same name also is willing to install two small An-Bonus mills. It should be added that Enarsa intends to install two parks in the locality of Tres Picos (Tornquist), which will have 38 and 35 wind turbines, respectively, and will produce approximately 57 and 52.5 MW. Also, a third park is projected in the area of Garcia del Rio that will have five mills and will generate 10 MW. In Médanos, the company Ceasa is willing to build a farm with 30 wind turbines, producing 60 MW of power. In Dorrego, Brisas del Paraíso plans to install 51 Vestas mills, producing 153 MW; and in General Lamadrid, Sowitec plans to install another 35 units, to produce 150 MW. Finally, there are also wind projects in Coronel Rosales, Pehuen Co and Darregueira, among other areas.
Let these serve as an example of the interest that Argentina has arisen in private investors, in particular those engaged in the renewable energy sector. It should be mentioned that the examples above relate only to wind projects in a very specific area of our country (the Pampas region, near the city of Bahía Blanca). However, there are many other areas in which renewable energy projects were approved and new ones are under analysis. As previously mentioned, solar and biomass also have great a potential in Argentina.
In the end Mr. Pablo Castagnino summarized that “The first round auctions convened by the national government to produce renewable energies proved to be very successful, thanks to the introduction of this new legislation and the re-opening of our economy to the world markets”.