The Macri Administration has made renewable energy a priority in its energy policy with a goal of having 20% of national energy consumption sourced from renewables by 2025. Since July 2016, when renewable sourced energy amounted only to 0,8 GW (1,8% of the energy matrix) the government has now launched three “rounds” of power auctions, Renovar 1, 1.5 and 2, which led to the award of 147 projects in solar, wind, biomass and other renewable sources representing 4.466,5 MW at an average of US$ per 51,49 MWh in the last round.
Still, only a few of these projects have been commissioned, while many others have experienced delays. Increased financing costs tied to Argentina’s macroeconomic problems and a severely constrained infrastructure (the high-tension 500KV transmission lines are at full capacity) have hampered the renewable energy sector. The government initially had planned a fourth round of the program but cancelled it due to grid constraints and difficult financing conditions raising prices in the bidding round. Instead, a mini renewable energy auction was held last November.
Despite these hardships, the race to achieve the 20% goal of renewable source energy by 2025 is still on. In early 2019, The World Bank provided a $250 million guarantee for utility-scaled renewable energy projects selected in the third round of the program. This will support private investment in Argentina’s Renewable Energy Fund which are expected to represent nine times the value ($2.25 billion) of the guarantee according to the World Bank.
Brushing Up on MINIREN
MINIREN calls for the tender of 400KW. While sharing the aim of encouraging renewable energy projects, MINIREN differs in a number of ways from the preceding RenovAr rounds:
- MINIREN projects will use available transmission capacity in nearby mid-tension grids of 13.2, 33 and 66 KV. This is a workaround to the saturated 500KV transmission network.
- MINIREN goes small. Each project is limited to a maximum output of 10 MW (and a minimum output of 0.5MW).
- Solar and wind combined. MINIREN will award competitive contracts by applying identical criteria to solar and wind projects. These two sources will compete as equals for a maximum of 350 KW. Additionally, solar and wind projects may not exceed 20MW per province, except in the Province of Buenos Aires, where projects may, in the aggregate, reach 60MW.
- 50 MW will be allocated to other renewable sources. MINIREN reserves these 50MW for the remaining renewable technologies and, among them, allocates 5MW for “PAH” (small hydro-electric), 25MW for biomass, 10 MW for biogas and 5 MW for biogas from landfills.
Successful project bidders enter into PPAs with CAMMESA (the quasi-government manager of the wholesale electricity market). The PPA obligations will benefit from the FODER trust created by the government to promote renewable energy. FODER coverage guarantees generators three months of power purchase payments. In addition, the projects are eligible for various tax benefits.
MINIREN reflects the government’s commitment to renewable energy and desire to learn from its mistakes. 1.7 GW of solar projects were approved under the first three rounds of the program. The government hopes the mini-round and World Bank guarantee will allow future projects to overcome the infrastructure constraints that hindered projects awarded under prior rounds.
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The foregoing article is based on publicly available information and given for informational purposes only. It is not intended as legal advice or as a comprehensive analysis of the matters referred to herein.