In recent years, a lack of financing alternatives, distorting subsidies, low power prices and counterparty risk have presented major hurdles to Argentina’s quest for investments in the clean energy sector. With Mauricio Macri’s election as president in December 2015, there is hope for a turnaround.
Law 27.191, published on 31 March 2016, is the main policy supporting Argentina’s development of renewables. It established the country’s renewables mandate and introduced a feed-in tariff scheme and two tax incentives – a VAT rebate and accelerated depreciation. Law 27.191 set an 8% target for renewable electricity consumption by 2017 and a 20% renewable energy target by 2025.
On biofuels, Argentina enforces a 12% biodiesel- and 12% ethanol-blending mandate for conventional diesel and gasoline, respectively. In 2015, the country generated 2.6TWh of renewable electricity, equivalent to 2% of the 134TWh generated. Argentina’s power matrix is dominated by fossil-based thermoelectric plants, which accounted for 64% of the total power produced in 2015. Large hydro provided 30% and nuclear contributed 5% of the electricity generated.
In 2009, Argentina contracted renewable capacity through its first and only federal level auction, GENREN. Energías Argentinas SA (ENARSA), a state-owned company active in the hydrocarbon and electricity segments, conducted the auction, and the Secretaria de Energía established regulations. ENARSA awarded 15-year contracts for 895MW of wind, small hydro and solar projects. As of May 2016, only 128MW of those contracted projects had been commissioned. On 18 May 2016, Argentina’s Ministry of Energy and Mines announced a new renewable power tender to supply the regulated market. It sought 600MW of wind power, more than tripling the 215MW in operation now, and 300MW of solar power, up from almost nothing, as well as 65MW of biomass, 20MW of small hydro power and 15MW of biogas.
Argentina exports most of its biodiesel production. In 2011, it exported 2bn litres out of 2.9bn litres produced, mostly to European Union (EU) countries. In August 2012, the EU initiated an anti-dumping investigation on Argentine and Indonesian biodiesel, which resulted in a 24.6% anti-dumping duty implemented in May 2013. In order to support local production, Argentina increased its biodiesel blending mandate, increased the mandated price and reduced the export tax.
Argentina scored 1.39 in Climatescope 2016, unchanged from the previous year. It dropped six places to rank 26th and its best performance was on Low-Carbon Business & Clean Energy Value Chains Parameter III.
On Enabling Framework Parameter I, the country’s score fell and it slid seventeen places to 37th. Policies such as the biofuel blending mandate offered a degree of support, but the score was weakened by the absence of any new renewable power generating capacity.
Argentina’s score on Clean Energy Investment and Climate Financing Parameter II rose slightly and it was placed 50th. This reflected the high average cost of debt (25%) in 2015 and the relatively small volume of new investment ($81m) compared with recent years.
On Parameter III, the country earned 14th place thanks chiefly to the large number of clean energy value chains present and the diversity of financial institutions serving the sector.
On Greenhouse Gas Management Activities Parameter IV, Argentina’s score rose and it took 11th position. It performed well in the Carbon Offsets and Carbon Policy categories, the latter benefiting from the presence of an emissions reduction target.
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