How Argentina is transforming into a viable renewable energy market

Summary: Argentina has begun an in-depth scrubbing to make itself attractive to outside investors.  It needs more than $5 billion in renewable energy investments in the next year. There are a number of developed projects seeking investors for this year’s tenders — and the pricing will cause serious temptation.

IMG_0600 croppedAbout the AuthorCarlos St. James is an advisor to energy investors and developers in emerging markets. He founded the Argentine Renewable Energies Chamber in 2005; has been a board member of the Latin American & Caribbean Council on Renewable Energy since 2010; founded the Middle East-Americas Energy Council in 2014; and publishes the Latin American Energy Review in his free time.

 PrintHe was recently named Summit Chairman of the upcoming LAC-CORE Finance Summit in Miami, Florida in September 2016.


Argentina is pulling out all the stops in its goal to attract more than $5 billion in renewable energy investment over the next year. The new administration of President Macri is dismantling currency controls, negotiating deals with bondholders – and rapidly addressing the new & improved renewables law #27191 of late 2015. It is addressing many of the issues outlined in earlier analyses on the country’s renewables sector, and is getting rid of energy subsidies, as explained here.

There was nothing fundamentally wrong with the previous renewables law (#26190) from 2006, which established the original goal of an 8% renewables mix over ten years — except that it wasn’t met and by a long shot: renewables make up only 1.5% of the energy mix today because the country could not attract investors over the last decade. The new law extends the deadline to meet the 8% target by one year, and establishes a new goalpost of 20% by 2020, so things are going to get busy.

It also places a ceiling price on all new renewable energy deals of $113 per megawatt-hour (MWh). How does this compare in the neighborhood?

  • Just a couple weeks ago Peru’s auctions resulted in wind deals getting 20-year power purchase agreements (PPAs) at under $38/MWh and solar at less than $49/MWh (an analysis of that auction can be found here);
  • Uruguay has gone from closing wind deals at $90/MWh in 2009 to $61/MWh in 2014;
  • Chile is a notoriously hard place to get a long term PPA, but you can actually aspire to get financing for projects that live off the spot price.

The regulations for the new law are expected to be announced very soon, followed by a first round of tenders to take place mid-year: Argentina needs to attract some 3000 MW of renewables to meet it, and pronto. This first tender will therefore favor those projects that are already developed from the failed 2009 GENREN tenders. These will get the better pricing and reward the developers’ patience; later tenders will undoubtedly have lower prices. But even the older projects still need equity investors.

The unsuccessful GENREN tenders

To understand future pricing it helps to know recent pricing trends. In the GENREN tenders the government awarded 754 MW of wind projects and 20 MW of solar PV (and another 121 MW of other technologies). The winners walked away with the possibility of 15-year PPAs in USD — if they could raise equity and financing.

But they couldn’t: the sovereign and counterparty risks were just too high. And it wasn’t because of pricing. Patagonian wind projects with capacity factors of between 40-46% were won at an average price of $127/MWh; solar projects in the country’s northwestern deserts were won at an average $572/MWh.

Today Argentina’s wind sector has a mere 150 MW of installed capacity — and only 77 MW of that came from the GENREN program; the rest comes from government-sponsored projects. There is another 8 MW of installed solar PV capacity, most of it from one GENREN project. (Like most countries in the region, Argentina has a preference for wind over solar, the reasons explained here.)

Resolution 108

In recent years the previous government came out with what was known as Resolution 108, allowing private sector projects to sign dollar-denominated 15-year PPAs on a case-by-case basis with the government. As with the GENREN tenders, the system was so perverse at that time that government officials openly told developers that their projects had to show returns to investors of no more than 10%. Developers could doctor their numbers all they wanted but had to show low returns in presentations to government. This allowed the then-government to boast that Argentina was a very competitive and low-risk market. An embarrassing state of affairs.

These deals were signed at $240/MWh for solar and $180/MWh for biomass (none for wind). They couldn’t get financing either. And now the new Macri government just placed all Resolution 108 deals on standby pending further review.

The upcoming tenders

So what next? Speed-dating to take a look at the large pool of developed wind, solar, mini-hydro, geothermal, biomass and waste-to-energy projects seeking capital, which would allow them to participate in the upcoming tenders — knowing you have a ceiling of $113/MWh, far less restrictive financial controls, the possibility of long term financing, and far more common sense in how business is done.

The new government is going to go to great lengths to show transparency; successful projects will win based on a weighted matrix comprised of price, overall technological prowess, access to grid connection nodes, and the caliber of the investor group behind each project. This last part will clearly favor groups with a track record and a proven ability to obtain financing – almost by definition, foreigners.

Even after resolving its problems with bondholders Argentina will still remain well below investment grade — but it has already been given a “positive outlook” by rating agencies. The fact is there will not be another market as large or as attractive as Argentina in the region for a long time until Venezuela gets re-organized, following its overdue and terribly painful meltdown this year.

There are over 3000 MW of wind deals on paper (over 4500 MW if you include the giant 1350 MW Gastre project) — plus some 300 MW of solar deals — all seeking capital, financing, technology and a way to come to life.

Perhaps the time has come to re-visit Argentina.


© Latin American Energy Review 2016

About the Author:

Carlos St. James is the co-founder of the Argentine Renewable Energies Chamber (CADER, by its initials in Spanish); board member and was elected the first President of the Latin American & Caribbean Council on Renewable Energy (LAC-CORE); founder and chairman of the Middle East-Americas Energy Council (MEAMEC); and founder and publisher of The Latin American Energy Review. His private sector background is focused primarily on finance and bringing together stakeholders so that deals get done. He advises governments on renewable energy policy, counsels private equity firms seeking to enter the region; and brings together stakeholders, including investors, for new energy projects.

He obtained his undergraduate degree in international economics from DePaul University and his masters in international relations from the Fletcher School at Tufts University.


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1 thought on “How Argentina is transforming into a viable renewable energy market”

  1. Muy buena nota la de Carlos.Estamos muy esperanzados en el desarrollo de las renovables en Argentina y además con el apoyo y clara decisión política del nuevo gobierno . Es bueno recordar el potencial eólico Onshore ARGENTINO es de 2000 Gigawatt Según datos del GWEC ,la potencia instada eólica mundial es del orden del orden del 25% de nuestro potencial mencionado y además recién en el 2030 la potencia instalada mundial alcanzaría los 2000 GWAtt Onshore argentinos Se supone que el potencial eólico Offshore ARGENTINO sería de un orden similar al Onshore. Vamos con VIENTO EN POPA y a toda vela !!

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