“Energy Security and Energy Efficiency”

Fundación Bariloche

FINAL REPORT

(peer reviewed version November 2009)

Buenos Aires, October 2008

CONTENTS

EXECUTIVE SUMMARY ...... 1 I. Introduction ...... 5 1.1. Background of the study ...... 5 1.2. Objective of the study ...... 6 1.3. Scope and limitations ...... 6 1.4. Why energy security is a potential threat for Argentina? ...... 7 1.5. Report structure ...... 10 II. Methodology ...... 12 2.1. Introduction ...... 12 2.2. Description of the Methodology ...... 12 III. Socio-Economic and Energy Profiles ...... 14 3.1. Main socio-economic indicators ...... 14 3.1.1. Population growth ...... 14 3.1.2. Global domestic Product ...... 15 3.1.3. Poverty and Inequity ...... 16 3.2. Energy Situation ...... 19 3.3. Energy Scenario by 2030 ...... 23 3.3.1. Energy Demand Scenario ...... 23 3.4. Availability of resources ...... 24 3.4.1. Fossil Fuels Reserves...... 24 3.4.2. Availability ...... 25 3.4.3. Renewable resources ...... 25 3.5. Energy consumption patterns in the household sector (urban/rural and poor/non poor) ...... 26 3.6. Consumption and Efficiency of Energy Use in the Household Sector ...... 30 IV. Threats to Energy Security and Measures to enhance them and their impacts at the National Level ...... 32 i) Energy Import Dependency ...... 32 ii) Diversification of Energy Sources ...... 33 iii) Energy Path: relation between Energy per Unit of GDP and GDP per capita ...... 33 iv) Depletion of Energy Reserves of different Fossil Fuels and their Rate of Depletion ...... 35 v) Investment in New Power Plants ...... 35 vi) Investment in Oil and Natural Gas Exploration ...... 36 vii) Investment in Renewables ...... 36 viii) Economic implications of energy imports ...... 37 4.1. Context threats, general measures and main impacts ...... 37 4.2. Measures and their impacts to enhance Energy Security ...... 42 4.2.1. Energy efficiency ...... 43 4.2.1.1 Potential. Impacts on the energy mix ...... 43 4.2.1.2 Main barriers to energy Efficiency improvement ...... 44 4.2.1.3 Measures to improve energy efficiency to enhance energy security ...... 45 4.2.1.4 Impacts of the measures/policies on cost of energy (both in financial and non-financial terms) at the national level ...... 48 4.2.1.5 Environmental impacts of the government measures/policies at the national level ...... 49 4.2.2. Renewable Energy ...... 51 4.2.2.1 Renewable energy Potential. Impacts on the energy mix. Environmental Impacts ...... 51 4.2.2.2 Main barriers to promote renewable energy resources/Technologies ...... 53 4.2.2.3 Measures to promote renewable energy resources/Technologies to enhance energy security55 4.2.2.4 Impacts of the measures/policies on the mix and on the environmental at country level ...... 57 4.2.3. Other Measures and their impacts ...... 58 V. Threats to Energy Security. Measures to enhance energy security and their impacts at the Household Level ...... 60 i) Shares of Commercial Energy Consumption ...... 60 ii) Household Energy Expenditure ...... 64 iii) Access to Modern Fuels ...... 66 5.1. Threats to energy security ...... 67 5.1.1. Specific threats ...... 67 5.1.2. General and main threats ...... 75 5.2. Measures and their impacts to enhance energy security ...... 77

5.2.1. Enhancing energy efficiency ...... 77 5.2.1.1 Potential of energy savings and Impacts in the household sector in forecast scenario ...... 80 5.2.1.2 Other potential energy savings and Impacts in the household sector ...... 86 5.2.1.3 Cost of energy savings in household sector ...... 87 5.2.1.4 Enhancing Energy Security, Barriers to improving Efficiency ...... 88 5.2.2. Promoting Renewable Energy ...... 91 5.2.2.1 Measures and their impacts to enhance renewable energy ...... 91 5.2.2.2 Potential for renewable energy use in household sector ...... 94 5.2.2.3 Enhancing Energy Security, Barriers to promote renewable energy use in household sector .. 95 5.2.3. Other Measures ...... 96 VI. Summary, Conclusions and follow up ...... 99 6.1. Summary of threats, measures, impacts and stakeholders ...... 99 6.2. Follow up ...... 103 ANNEX I. Questionnaire ...... 104 ANNEX II. Estimates of Renewable Energy Use the final energy demand by usage ...... 105 BIBLIOGRAPHY ...... 107

List of Tables

Table III.1. Average annual rate of natural growth, births, mortality and net migration by five-year period (%) ...... 14 Table III.2.Trends in population and number of dwellings (%) ...... 14 Table III.3. GDP Future Trends (in billions of pesos of the year 2004) () ...... 16 Table III.4. Fuel consumption for conventional power generation ...... 20 Usual units and % ...... 20 Table III.5. General Indicators ...... 22 Table III.6. Energy demand Baseline scenario (in thousand tons of oil equivalents) ...... 23 Table III.7. Projection of electricity generation in GWh ...... 24 Table III.8: Summary of prospective results for total final energy demand (kTOE) ...... 24 Table III.9. Renewable resources ...... 25 Table III.10. Energy consumption structure and intensities by uses. Year 2004 ...... 29 Table III.11. Useful Energy consumption by fuel sources and uses [koe/household] Very Low Income Urban Families without distributed Natural Gas, Nov 2007 ...... 30 Table III.12. Structure of electricity consumption estimates for the household sector (%) ...... 31 Table IV.1. Net Energy Import Ratio (NEIR) ...... 32 Table IV.2. Shannon-Wienier and Herfindhal-Hirshman Index ...... 33 Table IV.3. Energy per Unit of GDP and GDP per capita ...... 34 Table IV.4. Reserve to production ratio (R/P ratio) Oil and Natural Gas (%) ...... 35 Table IV.5. Installed capacity (MW) and Reserve capacity (%) ...... 36 Table IV.6. Number of exploration wells per year ...... 36 Table IV.7. Energy Renewable as percentage of Primary Energy Supply ...... 37 Table IV.8. Different Economic indicators ...... 37 Table IV.9. Household, and Commercial and Public Sector (%) ...... 44 Table IV.10. Industrial, Agricultural and Petrochemical Sectors (%) ...... 44 Table IV.11. Final demand savings between both scenarios as compared to reserves ...... 48 Table IV.12. Impacts of socioeconomic or health-related ...... 50 Table IV.13. Renewable resources ...... 52 Table IV.14.Estimated renewable energies installed capacity. Alternative scenario (MW) ...... 53 Table IV.15. Install hydro stations ...... 57 Table IV.16. Implementation costs of renewable technologies ...... 58 Table V.1. Net or Final Energy Consumption by Sources Argentine Household Sector. Year 2004 (kToe) ...... 60 Table V.2. Energy Consumption structure and intensities by uses Year 2004 - Argentine Household Sector ...... 61 Table V.3. Structure of Fuels used for Main Heating or Thermal Uses by Household quintile, years 2003 and 2006 (in %) Urban areas of Argentina ...... 61 Table V.4. Structure of Fuels used for Main Heating or Thermal Uses by Household quintile, years 2003 and 2006 (in %) Urban areas Formosa ...... 62 Table V.5. Structure of Fuels for Cooking and Heating Merlo Case Study - Share of Total Homes - February 2004 ...... 63 Table V.6. Net or Final Energy consumption by fuel sources and uses [koe/household] Low Income Urban Families without distributed Natural Gas, Villa Fiorito and Budge case study November 2007 () ...... 63 Table V.7. Average energy expenditure in year 2004 (USD of 2004 1usd=3 Argentine $). Shares of household expenditure and income. Total Country ...... 64 Table V.8. Energy prices and consumer energy-purchasing power for different household fuels Year 2005, Patagonian City of Bariloche ...... 65 Table V.9. Average expenditure in Argentine pesos per month on all fuels. Merlo Case Study ...... 65 Table V.10. Estimation of annual expenditure on energy: Villa Fiorito and Budge case-study. November 2007 total survey (in AR$) ...... 66 Table V.11. Households’ structure and foreseen evolution ...... 67 Table V.12 a.Summary of threats Problem / Vulnerability on the household sector. High Oil dependence ...... 75 Table V.12 b.Summary of threats Problem / Vulnerability on the household sector. High Natural Gas dependence ...... 76

Table V.12 c.Summary of threats Problem / Vulnerability on the household sector. Electricity Supply Restrictions: Equipment and fuels ...... 77 Table V.13.Estimation of the electricity consumption structure in the household Sector. (%) ...... 81 Table V.14 Estimation the energy savings (monetary and non monetary) in household sector ...... 84 Table V.15.Balance of saving potential and edge reduction for household appliances ...... 86 Table V.16.Customer Analysis – R1(*) Category ...... 87 Table V.17.Customer Analysis – R2 Category ...... 87 Table V.18.Customer Analysis – R1 Category ...... 88 Table V.19.Customer Analysis – R2 Category ...... 88 Table V.20. Households’ solar photovoltaic ...... 95 Table VI.1.Summary of threats, impacts and stakeholders ...... 100

List of Figures

Figure III.1.GDP Trend in million of pesos (base year: 1993) ...... 15 Figure III.2.Poverty and unemployment trends in GBA from 1988 ...... 16 Figure III.3.Percentage of people below the poverty line ...... 17 Figure III.4.Gini index for income distribution (1993 – 2005) ...... 17 Figure III.5.a) Percentage of population with unmet basic needs ...... 18 Figure III.5.b) Percentage of population with unmet basic needs. By Provinces ...... 18 Figure III.6.Oil and Natural Gas participation in primary energy supply. 1970 – 2004...... 19 Figure III.7.Total supply of primary energy (2004) ...... 19 Figure III.8. Structure of Final Energy Consumption (2004) ...... 21 Figure III.9. Population with access to electricity by grid (%) ...... 21 Figure III.10. Percentage of population with access to grid-distributed gas ...... 22 Figure III.11. Per capita Evolution of household energy consumption and GDP. 1970 – 2004 (1970=100) ...... 26 Figure III.12. Share of grid-distributed gas in household energy consumption. 1970 – 2004 ...... 27 Figure III.13. Household electricity consumption ...... 27 Figure III.14. Structure of Net Consumption by Fuels Urban Households. Year 2004 ...... 28 Figure III.15. Structure of Net Consumption by Fuels. Rural Households. Year 2004 ...... 29 Figure IV.1. Energy Path, years 1990, 1997, 2000 and 2007 (PPP) ...... 34 Figure IV.2. Energy Path years 1990, 1997, 2000 and 2007 (USD constant value of 2000) ...... 35 Figure IV.3. Comparison of Emissions by Scenarios ...... 51 Figure V.1.Household tariff by bi-month consumption ($ per KWh) ...... 68 Figure V.2.Household electricity tariff by consumption. (Percentage of monthly expenditure) ...... 68 Figure V.3.Evolution of LPG consumption in the residential sector. Compared with exportations 1985- 2005...... 70 Figure V.4.Average energy expenditure in year 2004 ($ of 2004). Shares of household expenditure and income ...... 71 Figure V.5.Structure of Fuels used for Heating or Thermal Uses by Household quintile years 2003 and 2006 (in %). Representative urban areas with NG availability ...... 72 Figure V.6.Structure of Fuels used for Heating or Thermal Uses by Household quintile years 2003 and 2006 (in %). Representative Urban areas without or very restricted NG availability ...... 73 Figure V.7.Cumulative energy savings in the household Level (%) of kTOE by energy source...... 82 Figure V.8.Cumulative energy savings structure in the household Level in kTOE by energy use...... 83 Figure V.9.Energy savings in the Household Sector (%) by energy use...... 83 Figure V.10.Emissions evolution in the residential sector by use (Millions of Tons CO2 equivalent) ...... 84 Figure V.11.Emissions evolution in the residential sector by source (Millions of Tons CO2 equivalent) .. 85 Figure V.12. Emissions evolution (tons CO2 equivalent /hab/año) ...... 86

List of Acronyms and Abbreviations

ADELCO League of Action(Share) of the Consumer

ADT Added Value Tax

ALURE Program of energetic cooperation between the European Union and Latin America ARCO Attracting Resources to Cogeneration ARGURELEC Program of promotion of the rational use of the electricity in the Argentine one ASLP Argentina Street Lighting Programme BEN National Energy Balance BAU Business as Usual BID Interamerican Development Bank BTU British Thermal Unit CAMMESA Administrator of the wholesale electricity market CNG Compressed Natural Gas CDM Clean Development Mechanism CE / UE Comunidad Europea / European Union CFL Compact Fluorescent Lamps CIPURE Research Centre for Rational Use of Energy CONURE National Commission for Rational Use of Energy CRICYT Regional Centre of Scientific and Technical research – Mendoza Province DSM Demand Side Management EDENOR North Distribution Utility EDESUR South Distribution Utility ELI Efficient Lighting Initiative ENRE Electricity Regulating Agency ENARGAS Natural Gas Regulating Agency ENARSA Argentine Energy SA, state managed company EPEC Cordoba Province Energy Company EPEN Neuquén Province Energy Company EPRE Provincial Regulatory Body ESCO Energy Service Companies FADU Architecture, Design and Urbanization School FONINVEMEN Investment fund on the electrical market GBA Greater Buenos Aires GDP Gross Domestic Product GEF Global Environmental Facility GHG Green House Gases LPG Liquefied Petrol Gas I&D or R&D Investigation(Research) and Development IAPG Argentine Institute for Oil and Gas ICAEN Catalán Energy Institute

1 IEA International Energy Agency INDEC National Institute of Statistics and Census INTI National Industrial Technology Institute IPCC Intergovernmental Panel of Climate Change IRAM Materials´ standardization Institute JICA Japanese International Cooperation Agency LFC Fluorescent compact lamps MCE Machines of external combustion MCI Machines of internal combustion MDL Mechanism of clean development MEM Wholesale electricity market NGO Not governmental organization O&M Operation and Maintenance OPTIMELEC Program of optimization of electric power PAEEP / PAyEEP Program of saving in public buildings PIEEP Program of increase of the energetic and productive efficiency PPP Purchasing Power Parity PROCAHE Quality program of Electrical appliances of the home(fireplace) PROCEL National program of Conservation of Electrical Energy PRONUREE Plan for de Rational and Efficient Use of Energy PURE Program of rational use of the energy PUREE Program of rational use of the electric power PyME Small and medium company RES/T Renewable Energy Sources/Technologies RSU Solid urban residues SE Energy Secretariat SECyT Secretariat of Science, Technology and Productive Innovation SWH Solar Water Heaters UBN Unfulfilled Basic Needs UEE Efficient use of the energy URE Rational Use of Energy WEC Wind Energy Converters

2 EXECUTIVE SUMMARY

Most of the policies implemented in Argentina in the decade of the nineties, implied a structural change of the argentine economic system, framed within a relatively low oil prices international context and the consideration (national law) of crude oil as one more commodity, disregarding its national strategic good feature. These polices did not include any long term vision, aimed at incorporating the uncertainty – which now is easily observed worldwide - in the potential scenarios.

The key issue of the Argentina case study is that the world oil market changes constitute nowadays the principal threat for a safety energy supply at reasonable prices. Thus, vulnerability did increase as result of the public policies implemented in the decade of the nineties. Domestic decisions gave birth to a set of conditions, triggering increased energy vulnerability of the country, framed by changes in the global context.

As result of what can be defined as short-term market-driven rationality, applied by the leading actors of the sector, the Argentine energy system went from a situation regarding own reserves - nearly 15 decades in case of the oil and more than 3 decades for natural gas, were guaranteed by self-supply - in to a situation of increasing dependence on imports for the near future. This picture is framed by a dependence of 90 % of fossil fuels, in terms of primary energy, a global market with increasing oil prices and increasing conflicts in the major oil regions.

Therefore, such structural changes of the energy policy implied both a growing internalization of international oil prices, and the lack of a sort of reference company that generate witness prices, reflecting the actual local production costs and not the crude oil international prices. This role was performed in the past by the National Oil Company YPF. The policy of free availability of energy exploitation earnings, implied an important export pace, together with a risky lack of investment in exploration (that should be considered as the preferable employment of oil rents, from the National point of view), which affected the reserve levels and poses serious doubts upon the feasibility to keep self-supply in the medium and long term. An energy system that depends on oil and natural gas importations in the medium term is the most probable scenario for Argentina today. This implies higher energy prices at the local level, together with the need of a delicate “energy diplomacy” guaranteeing long term agreements with neighboring and other countries to guarantee future supply.

From the end of the convertibility economic plan; devaluation and subsequent economic reactivation (and the consistent growth of the energy demand), the difficulties to generate adequate strategies in the framework of the current policies became evident. Thus, different threats to energy security were detected at the national level.

The current crisis has a structural character and demands core changes immediately just to satisfy short, medium and long term energy needs. The actions should be taken from both, the supply and the demand side, including energy matrix structure diversification, energy efficiency actions and policy oriented to the most vulnerable actors.

Projections of future energy demand indicate the continuity of a high dependence on oil and natural gas. This constitutes an alert for the safety of future supply, considering the limited available reserves. A preliminary analysis of the uses and consumptions indicates that there exist low and medium efficiencies not only in the appliances but also in the final energy behavior patterns, which might be improved. The existence of available renewable resources indicates the need of intensification in their use. Energy Efficiency and Renewable energy

1 encouragement, together with the continuity of the Nuclear Plan, could be considered as main tools to guarantee the future energy supply.

It must also be remarked that although relatively high energy consumption is found in the household sector, especially in urban areas, core geographical and social inequalities exist, thus the impact on income distribution (in broad sense) of any measure must be carefully considered before implementation.

Not only the current actions, but also the potential, and future ones indicate the feasibility of an Alternative Scenario; where vulnerability could be significantly reduced though adequate strategies. In the case of Oil, savings could be equivalent to 23% of the verified reserves; and 53% of the potential reserves. Furthermore, such accrued savings would be equivalent to almost three times the consumption registered in oil refineries in 2004. In turn, it implies extending the reserve/production ratio in 2 years. As regards Natural Gas, the potential energy efficiency actions imply an amount to 11% of the verified reserves plus 50% of the potential reserves. The accrued savings would imply extending the production/reserve relation in 1.3 years. Finally, the accrued savings in Electric Power demand would be equivalent to the generation of a 2,530 MW power station for 21 years, the construction of which might be avoided if the energy savings presented in a structural scenario are verified.

The main threats that the Residential sector faces, both in urban and rural areas, reflect the very structure of the sector. The employed energy sources are essentially three: Electricity, Natural Gas and LPG, while Kerosene and Biomass, play a minor role. Nevertheless, the sources structure is very different for the urban and rural homes.

The above mentioned threats link themselves, essentially, to two variables: availability to the source and the price of it. It is possible to affirm that while the vulnerability regarding availability is independent from the level of revenue, the vulnerability considering purchase power is suffered by those sectors of minor level of revenue.

The threats linked to the availability of energy sources, are triggered by the lack of investments in the productive chains of the Natural Gas and the Electricity. While there is a risk of temporary cuts, in order to employ the scarce energy to the productive activities of major priority. This sort of trade off between final consumption sectors for the scarce energy, is due to delays in energy infrastructure investments.

An increase in the prices might stimulate investments, but it should be followed by other regulatory instruments, in order to guarantee that such investments will take place. Tariff mechanisms should be orchestrated to avoid the impact on the poorest sectors.

Observations remain valid for Electricity and Natural Gas. In case of the LPG, the households are facing more than a threat, but a current restriction, as it is already a fact that the prices of this fuel have grown substantially striking on the distribution of the revenue or the level of satisfaction of the needs. This is because LPG is employed mainly by poor households, not connected to the cheaper Natural Gas service.

LPG situation – comparatively expensive and not always available – is aggravated by the existence of unmet basic energy needs, thus the urgency for policy action becomes unambiguous. Only a 10% of the first quintile of income would have access to natural gas, another 40% would use LPG and pay six times the price of natural gas – half of the poorest would consume no gas at all.

2 Provision of Kerosene and LPG reflects the market feature of oligopoly, and the lack of monitoring and control by the regulatory entity. Additionally the charcoal price, and commercial wood did increase constantly since 2002, drawing a delicate picture for the poor households’ energy access, as these sources are mainly used by poor families for home heating and cooking in absence of LPG. Thus, the strategy for providing energy to poorest homes should concentrate in better access and availability of LPG.

On the other hand a relevant space for energy efficiency actions and measures is found, as the patterns of consumption were not encouraged towards energy savings.

Additionally, some niches can be proposed for empowering the household sector with renewable energy, mainly in rural areas. Other measures would relay on modification of energy consumption habits or behaviors – which could be included as energy efficiency in a broad sense. The diversification of fuels depends on public policy (directly or by economic instruments) but most interesting cases (solar water heaters; biogas; wind energy converters) require important programs of public awareness and local diffusion.

Electricity infrastructure must be improved. While gas availability may relax the provision of electricity (in the case of electric power caloric uses) but, again, with unsatisfied needs and, in case of an income distribution improvement, there will be additional pressures on both infrastructures.

Estimations indicate that 19% savings could be achieved in the household sector through simple and coordinated energy efficiency measures. The economic convenience of many efficiency programs, such as the substitution of incandescent lamps and the renewal of household appliances, has been remarked.

As regards renewable energy contribution, while the urban sector is expected to almost duplicate the demand of renewable energies, their participation in the rural sector will be reduced in view of the penetration of LPG which, while not a renewable source, is of better quality for the energy services required by this sector. Additionally, the participation of these sources can be duplicated only by achieving the goals proposed by the new Legislation that regulates them. Yet, the role of renewable energies does not seem to generate an important tool as regards supply security, since they will only amount to 7% of the energy used by the sector by the year 2025.

Among the existing barriers the lack of policy stability and effective enforcement measures outstand. Long term political commitment and flexible incentives should be present for renewable energies technologies to be feasible and sustained in time.

In particular a promissory link is found between caloric uses - mainly water heating but also cooking, employing solar ovens – and the potential of renewable energy at the household level. Remarkably, strong public policy and measures are required, as the barriers to be overcome are multiple and would not be solved by current market trends.

From the energy security point of view, and considering both mentioned Natural Gas scarcity problems, and the potential fuel savings that could be achieved in urban areas, the promotion of measures for this source use should aimed at saving this fossil fuel for other sectors where it would be more difficult to substitute (e.g. industry). Once again this will not happened if market prices are leading the way. Strong government will, expressed in a long term solid program, encouraging the change of energy consumption patterns is needed.

3 The perspective of cheap natural gas has somewhat changed after the 2001-2002 socioeconomic crisis, when energy utilities started to put pressure on government in order to update fuels prices. Furthermore, in the particular case of natural gas the lack of adequate development in the exploration and infrastructure areas triggered alarm signs during last winters, forewarning about a growing scarcity problem contrasting with an increasing residential, industrial and power utilities demand of this fuel.

4 I. Introduction

1.1. Background of the study

Energy Security is a key energy policy objective in a framework of sustainable energy development. The dimensions of sustainability (economic, social and environmental, together with governance) should be identified as a context for energy security, especially from the macro point of view. Energy efficiency, Renewables, Energy Matrix diversification, among others, as essential component to contribute to supply security, have grown in significance over recent years and are now as important as the rest of the actions developed in relation to the supply issue.

Sustainable Energy Development implies several issues; nearly all of them are in convergence and synergy whit energy security, among them:

9 diversification of energy supply, 9 energy autarchy, 9 low degree of participation of energy import in energy supply, 9 energy rents capture, 9 low energy intensity, 9 efficient use of energy in productive uses, 9 efficient use of energy in the energy industry (low self consumption), 9 quality of energy supply, 9 adequate investment financing, 9 adequate costs of energy supply, 9 diversification of the energy matrix, 9 universal minimum level of access to modern energy, 9 basic energy needs satisfaction, 9 secure supply of social infrastructure (health, education, basic housing services e.g. water, sanitation), 9 sustainable biomass management, 9 sustainable fossil fuels management, 9 renewable participation, 9 …

Nevertheless, as remarked the Concept Note (AIT, 2007), Energy Security nature and its manifestation is specific to the country or region under analysis, although the threat could be exogenous to the country. There are several approaches and a lot of material on energy security, but developing countries reality is generally overlooked in the global approaches to energy security.

The majority of South American countries are abundant in energy resources, including fossil fuels. The security of supply is not only related with the dependence of imported energy or scarcity of national resources but from the adequate use of national resources and the implementation of adequate energy policies. With the exception of few countries (Chile, Uruguay, the Guyana’s and Surinam) all the rest have sufficient energy resources to satisfy the domestic energy needs of the socio-economic system with no major restrictions. The regional integration process could contribute positively to a greater security in countries like Chile and Uruguay. In consequence, in many cases, if there is an energy risk or insecurity of supply it is closely related to the energy policies context and not only on the availability of energy sources, specially the absence of long term planning and policies. In many countries, vulnerable populations, or those with higher energy supply risk, face such situation as the result of the lack of specific policies oriented to low-income sectors. Public policies of the nearly past, may be

5 considered as the main responsible for the supply risks that the countries are currently facing and will face in the short and medium term.

Such is the case of Argentina, which is facing short and medium-term supply risks and even long-term risks if adequate policies and strategies are not duly implemented. Therefore, it is a proper case to be analyzed, noting that a considerable amount of energy resources does not eliminate the supply risk if public policies fail to guarantee the adequate management thereof. Like other areas of the socioeconomic systems, upon the energy shortage possibility, it is highly probable that the lowest income level sectors will be the most affected due to several reasons: impossibility to access to more expensive substitutes, low adaptation capacity to new conditions created by energy shortage, dependence of specific sources without substitution possibilities, etc.

Some of the aspects highlighted in the AIT-Concept Note,(AIT, 2007) particularly those referred to the non-universal access to modern energy sources despite resource availability, and the strong consumption growth, are highly relevant for Argentina. The significance of non- commercial energy sources, as well as the substitution of Biomass for other sources, is less significant for the country.

1.2. Objective of the study

General objectives:

Present the nature of energy security issue specific to Argentina and main impacts of energy insecurity at national and household levels; analyze the responses of the main stakeholders to mitigate the impacts.

Specific objectives: a) At national level: 1) Analyze the threats (present and future) to energy security. 2) Analyze the different measures/strategies for energy security in the context of Argentina. 3) Study the impacts of the measures to improve energy security (past, existing, and potential). a) At the household level: 1) Analyze the threats (present and future) to energy security. 2) Analyze the measures (past, existing, and potential) to improve the energy security. 3) Analyze the impacts of the measures/strategies on energy security.

1.3. Scope and limitations

Information sources and expected results

It is worth noticing that the use of indicators as a methodology has limitations, especially on Developing Countries (1).

The following information will be obtained:

(1) Such limitations will be commented by the time the corresponding results are obtained.

• An assessment of implementation feasibility according to the in-country information. • Estimation of indicators according to the results arising from the different components of the Energy Security analysis. • Evaluation of vulnerabilities and threats in view of the results obtained by the application of the indicators and other qualitative analysis.

When the objectives are directed towards the measuring of impacts on certain sectors of the population that constitute a homogeneous nucleus by virtue of specific characteristics –income level, relevance as consumer sector, geographic localization, energy consumption characteristics, etc. – there is less secondary information available, and we need to resort to other approximate estimation mechanisms –if indicators are sought to be incorporated- or to conclusions, recommendations or analysis taken from other studies of the same sectors.

Therefore, the methodological approach takes into account the different situations related to the analysis at aggregate and disaggregate levels, and the possibilities to quantify key impacts.

The main information sources are:

9 Official statistics 9 The results of the existing investigation and technical assistance projects 9 The results of polls made to qualified informants.

Some of the data presented here – mainly the forecasts - relay on ongoing energy prospective works, made with the participation and interaction of public secretariats’ staff (2). The energy estimations are based on a socioeconomic scenario constructed on a sound basis, using available most reliable sources.

Energy consumption is not available by income strata and uses. Thus if the average urban consumption is compared with requirements, basic needs are obviously covered. But some assessment of poor population gives an idea of unsatisfied needs.

Facing the lack of aggregate information reflecting household patterns of energy consumption - especially poor vs. non poor – some individual studies with relevant details are presented.

Furthermore, the year 2004 is employed frequently as the most robust set of detailed and desegregated information. It is the “base year” from where estimations are made, it can be considered as well, as the “best picture of the current Argentine situation”.

1.4. Why energy security is a potential threat for Argentina?

During the nineties Argentina went trough a process of reform that left the coordination and sector decision of short, medium and long term, nearly at all, in the hands of the market following the objectives of efficiency improvement and attraction of new investments. The transfer of property rights and decision-making power led to the abandonment of long-term planning and prospective, and to a reduced use of instruments and control measures that could highly influence the system to guarantee the long-term supply. There was total confidence in

(2) Technical Assistance Project for the preparation of the “Strategic Energy Plan of the Argentine Republic” designed by IDEE/FB for the Energy Department, 2007.

7 the market wisdom and the signs generated by it, at the same time as the State capacity to generate and implement corrective policies started to decrease.

As a result of such structural changes, the government capacity was reduced; they have a limited information and control on primary energy resources, insufficient information of the different segments of the energy chain and a strong dependence of the decentralized decision making process of key actors in the energy industry. This situation implies a strong restriction for the development of long-term sustainable proposals in convergence with national objectives on the socioeconomic system, as a whole, and would require a significant change of approach, as a short term approach and ad hoc measures dominate the actions.

As mentioned, Energy Security is related to three axes which are growing in relevance: the relationship among energy and social (equity), environment and development issues, and the need to deal with all of them in an integrated way. This general awareness is related to the continuous rise of the fossil fuel prices (oil, natural gas, mineral coal); the debates as regards the “peak oil” date, growing energy interdependence among countries, oil reserves in conflict areas and the multiplication of extreme climate events.

For sure, all these elements will have an impact on the Argentine energy system, if not immediately or in its current situation, in the medium and long term; therefore, they must be considered when defining the methodological approach.

As regards the first and second aspect, the structural changes of the energy policy of the nineties imply the growing internalization of international oil prices and the impossibility to have companies that generate witness prices reflecting the actual local production costs instead of the crude oil international prices. The energy resource free availability policy implied an important export pace, together with a lack of investment in exploration, which affected the reserve levels and poses serious doubts upon the feasibility to keep self-supply in the medium and long term. An energy system that depends on oil and natural gas importations in the medium term is the most probable scenario for Argentina, as well as higher energy prices at the local level, together with the need of an “energy diplomacy” guaranteeing long term agreements with neighboring and other countries. Additionally, Climate Change threatens the availability of the major energy resource of Argentina (Hydropower) and has indirect effects, by virtue of a growing energy demand due to temperature changes, rainfalls and productivity that will generate an additional pressure on the energy infrastructure and the consequent investments needed.

Within this context, supply security is threatened and energy vulnerability is increasing, which in turn suggests the need to asses intervention actions through policies and strategies, as well as institutional changes, among other aspects (3).

Demand growth and Energy Intensity

From 1970 to 2004, the energy consumption growth to an accumulative rate of 2,5% yearly, higher than the population growth (1,4%) and the GDP (1,6%). At the same time that per capita GDP growth 6%, the energy consumption per inhabitant growth 40%. This means an important intensification of the energy use for the socioeconomic system. As a result E/GDP elasticity is always higher than one and energy intensity is in a continuous increasing process. As was mentioned, the consumption by sources reflects the dominant role of oil and natural gas.

(3) Further developed in sections 3 and 4.

8 Energy matrix

Nearly 92% of the total supply of primary energy is provided by fossil fuels (49% Natural Gas, 42% Oil and 1% Coal). Hydraulic energy, nuclear and biomass provide the rest. The high concentration in Oil and NG is a structural characteristic of the Argentine Energy matrix.

While this supply structure was possible in the past, its future viability is uncertain, in view of the fast growing demand and the pressure on the need to discover new reserves if self-supply is sought to be maintained. Although energy security could be solved using adequate public policies that guarantee the supply of main fuels (oil and natural gas) through imports, the impacts would be important and would imply both direct and indirect socioeconomic impacts on foreign currency requirements, price increases, international competitiveness reduction, recessive income distribution impacts and/or inflationary effects, just to mention the most important ones.

Among other actions, energy matrix diversification; energy efficiency measures or push the development of renewable energy, are key issues in the energy agenda.

Regional Integration

Energy security could not be seen just within a national isolated context, regional coordinated actions should be considered as part of a long term strategy. The globalization process and the development of international trade have triggered the necessity to build regional blocks as a valid instrument for complementing bilateral relations. In addition the energy challenges and increased globally uncertainty push the energy interconnection with neighbor’s countries, especially the electricity and natural gas chains. Argentina followed a continuous strengthening of regional energy integration.

Unfortunately, the political framework and the decision making process placed the country as an energy supplier to Brazil, Chile and Uruguay and the integration developed during the nineties had a short term view, based in the identification of business opportunities from a decentralized point of view. Such a process has a big responsibility in the current insecurity of energy supply.

As mentioned, the diversity of energy resources in the region is remarkable. Venezuela, Colombia, Argentina and Brazil have oil, Bolivia’s and Peru’s natural gas reserves are crucial for supplying natural gas to the South Cone. Hydro energy is very important, Brazil based its electricity supply 83% in hydro and Paraguay is a big exporter of hydroelectricity to Argentina and Brazil. There are important natural gas and electricity integration networks and key bi- national project in power generation. In South America the geopolitical relevance of the economic and energy integration processes, is essential in order to guarantee energy security.

In summary, integration with a long term view should be considered as a potential measures to guarantee energy security. The benefit of a regional market requires a political will, based in cooperation and not in competition for energy resources. Naturally a legal and regulatory framework is needed as well as strategic plans with regional scope and umbrella agreements with neighbor’s countries.

The relevance of energy security in the household sector

The challenges faced in relation to household sector energy security have several implications. The continuity of the energy supply is not guarantied, as a result of interruption of electricity provision and risk of lack of natural gas. Neither LPG, nor Kerosene are always available for the

9 most vulnerable population: rural and poor urban households. On the other hand access to energy is not even among the population, as some regions of the north east are not included in the national gas network, while some rural population do not have electricity.

A remarkable issue is the higher price paid and worse service received by poor families, in order to fulfill their energy needs. This situation is worse by the lack of programs to address the problem.

Final comments

The selection of Argentina as case study is related to the threats and challenges to secure energy supply in the short, medium and long term. The causes should be sought in the energy policies of the past decade and the change of the current international context, particularly as regards the price of oil and other related energy products.

They are reflected in:

9 Power capacity general shortage, due to lack of investments. 9 Shortage in electricity due to restrictions in fuels. 9 Lack of investment in natural gas production and transport. 9 Increasing vulnerability of poor population to have access to electricity and LPG. 9 Short term view in energy policy that reduces the capacity to guarantee long term energy supply. 9 Shortage in diesel supply due to lack of investment in refineries.

Finally, a broader framework should be address: “lack of protection, uncertainty and insecurity are the key features of the period at global level” (Bauman, Z, 2001). Is the global context similar to a drifting ship? Who is the captain?

Naturally, the global context should be considered as well, and the identification of potential World Agenda related with the issue of Energy Security as a “border condition” or any national analysis.

1.5. Report structure

Next section describes the methodology used to develop the analysis, in agreement to the asked detail.

In Section 3 the Socio-economic and Energy Profiles of Argentina are presented as well as the expected scenario following existing trends (Business as Usual). This is the relevant scenario in terms of threats to energy supply and energy security, showing clearly the vulnerabilities of the Country.

In Section 4 a description of the threats to energy security, and the principal measures (past, present, and future) to enhance energy security and their impacts at the national level are presented. These actions are present within a desired scenario - featured by the general implementation of energy efficiency measures and rational use of energy in all the sectors of final consumption. If compared with the BAU scenario, it includes some slight differences regarding hydrocarbons discoveries (and associated investments), energy prices and modern energy sources penetration.

10 Section 5 presents a description of the threats to energy security and the principal measures (past, present, and future) to enhance energy security and their impacts at the household level. These actions - in the same way as those at the national level - are present in a desired scenario, which involves basically increased measures of energy efficiency and rational use of energy in household consumption.

Section 6 summarizes the main aspects of the document, presenting some conclusions and suggestions for guidance purposes.

11 II. Methodology

2.1. Introduction

The Supply Security studies, analyzed at the global or macro level, are based on the analysis of different indicators to provide a summary of the energy system vulnerabilities as regards its capacity to guarantee the energy supply in due time and manner, in the short, medium and long term. In general, the available information and databases of most of the countries allow for the estimation of such indicators based on secondary information. Regarding potential measures to increase energy security, like Energy Efficiency, Renewable or others, the use of indicators depends on the statistical availability.

Likewise, taking into account the national circumstances and the system peculiarities, the energy efficiency level for the most important sectors can be estimated based on additional or sector indicators, according to the secondary information available. The role that New and Renewable Sources can play as regards their contribution to increase supply security and energy efficiency could be measured by using the information available in the official statistics.

2.2. Description of the Methodology

Analysis at National Level

The security of supply -and consequent vulnerability- of the Argentine Energy System is analyzed in the framework of the global context and the current situation and the future potential evolution, based on energy scenarios. Specific policy measures of the recent past and current actions are going to be a key issue to assess.

The study relies mainly on secondary data, specific reports or studies, interviews with key stakeholders, projects documents, as main sources. In addition, a survey among energy experts and representative from different groups of interest was implemented following the Delphi Methodology (4).

The chosen indicators are aimed at monitoring the implementation of policies, approaching issues like:

9 Energy integration in socioeconomic programs 9 Combination of renewable energy availability, energy efficiency and technological development to meet energy consumption. 9 Increasing the participation of options based on renewable sources. 9 Reducing the pressure on non-renewable sources. 9 Establishing efficient use of energy programs. 9 Facilitating the access to energy 9 Others

Therefore, the indicators considered describe these aspects and are presented along the study, following the proposed outline and the available information.

(4) The questionnaire used for the survey is attached to this report as an exhibit.

12 It is worth noticing that the use of indicators as methodology has limitations, regarding their application on Developing Countries (5).

(5) Such limitations are commented when the corresponding results are presented.

13 III. Socio-Economic and Energy Profiles

A general overview of Argentine energy profile and main features is presented, as well as its available resources and energy consumption patterns of the household sector.

3.1. Main socio-economic indicators

3.1.1. Population growth

The population growth rate has shown a persistently declining tendency, interrupted only by an upturn recorded in the 1975-1980 period. For 2010-2015, the trend is 16.8 per thousand. This trend is accompanied by other indicators such as births, mortality and net migration. This last indicator, historically positive with the exception of the 1975-1980 period, reached very low – but positive – levels during the 1980s. However, over the 1995-2000’ period reached slightly negative levels, thus reflecting the incidence of the emigration process taking place at the time, a tendency which is supposed to revert in future.

Table III.1. Average annual rate of natural growth, births, mortality and net migration by five-year period (%)

Natural growth Births Mortality Net migration Period (1) (2) (3) (4) 1950-1955 16.2 25.4 9.2 3.4 1955-1960 15.6 24.3 8.7 1.4 1960-1965 14.4 23.2 8.8 1.2 1965-1970 13.4 22.6 9.1 1.1 1970-1975 14.4 23.4 9.0 2.3 1975-1980 16.7 25.7 8.9 -1.6 1980-1985 14.6 23.1 8.5 0.6 1985-1990 13.7 22.2 8.5 0.8 1990-1995 13.1 21.3 8.2 0.0 1995-2000 11.8 19.7 7.9 -0.6

(1) Quotient between the balance of births and deaths recorded in a place in a certain period and the average population in that period. (2) Average population increase per year, every 1,000 inhabitants. (3) Average population decrease – dead – per year, every 1,000 inhabitants. (4) Quotient between the annual net migration over a certain period and the average population in the same period. Source: Estimated based on results of the 2001 National Population, Home and Dwelling Census.

A preliminary estimate of future trends related to population and number of dwellings, carried out on the basis of data by the INDEC, shows that rates continue to decline in the direction of the historical tendency of the last periods.

Table III.2.Trends in population and number of dwellings (%)

2004 2010 2015 2020 2025 2030 2004-2030

Population (millon) 37.4 40.1 42.1 44.1 46.3 48.7 11.3 Rate between cut-off years (%) 1.17 0.81 0.78 1.04 1.01 1.02 Homes (millon) 10.4 11.1 11.7 12.3 12.9 13.6 1.9

Source: Estimated based on results of the 2001 National Population, Home and Dwelling Census.

14 3.1.2. Global domestic Product

The past two and a half decades have shown significant structural changes in the socioeconomic system. Whereas the 1980s, despite the persistent crisis, were influenced by the dynamics of energy-intensive industries, growth over the 1990s was mainly based on service activities and less energy-intensive industry branches such as metal-mechanical activities. Towards the end of that decade, after several years of rapid growth over the period of the privatization process, Argentine economy showed it was extremely fragile in the face of foreign financial clashes; it kept a strong dependence regarding short-term funds and its foreign debt increased significantly.

In this context, the country reached a deep crisis in the year 2001/2. As from then on, and due to currency devaluation and the advantageous international situation, the national economy took a different turn, which enabled a reactivation of the industrial activity. This led to a higher final energy consumption level per inhabitant and larger GDP energy intensity.

Figure III.1.GDP Trend in million of pesos (base year: 1993)

Source: www.mecon.gov.ar/secpro/dir_cn/default1.html

It should be remarked that the results of the country’s economic activity in the year 2006 brought about an increase in GDP by 8.5%. This came about in the context of a considerable rise in consumption levels, strong investments in durable production equipment, a noticeable larger productive capacity, especially in the manufacturing sector, and a reduction in the unemployment rate. A significant increase in export value was also recorded.

The world economy has been projected to grow by 3.2% p.a. approximately in the 2002-2030 period (IEA, 2004). It is estimated that, in such context, Argentina will increase its trade relations with China, India, and the rest of the world, and will stabilize it with the USA, the EU and other OECD countries. Also, it will grow at a more dynamic pace than the rest of the region until 2015, and then it will go on at the same pace as the region, which, in turn, will progressively converge on the world rate towards 2030.

15 Table III.3. GDP Future Trends (in billions of pesos of the year 2004) (6)

(Billion $ 04) 2004 2010 2015 2020 2025 2030 2004-2030 GDP 417.9 617.8 735.8 845.1 953.2 1067.8 427 Rate between cutoff years 6.73 2.96 2.34 2.44 2.3 3.7

Source: own estimation from INDEC data.

3.1.3. Poverty and Inequity

The evolution of poverty levels (7) has been determined by the economic processes described above. The following figure illustrates the evolution of population below the poverty line and the unemployment rate in Greater Buenos Aires. The highest levels of this indicator were recorded between May 2002 and the first three-term period of 2003.Finally, in the first six-term period of 2006, 31.4% of people had incomes below the poverty line (8).

Figure III.2.Poverty and unemployment trends in GBA from 1988

People below the poverty line Unemployment rate 60

% 30

date of the survey

Source: INDEC.

(6) The rate of exchange of argentine’s pesos to dollars can be stated slightly above 3 $ per US$. (7) The poverty line indicates the proportion of people living in households whose incomes are not enough to fulfill a number of basic food and service needs, determined as from a family basket of goods and services. (8) The most recent values are not included in the figure.

16 Figure III.3.Percentage of people below the poverty line

40 13.8 13.3 12.2 4.6 11.2 30 4.1 9.9 8.9 3.3 3.1 2.5 20 18. 3 2.4 16.9 15.3 15.1 13.3 Percentage 12.7 10 11.3 9.9 9.3 9 8.5 7.4 0 2nd six- month 1st six- month 2nd six-month 1st six-month 2nd six-month 1st six- month term 2003 term 2004 term 2004 term 2005 term 2005 term 2006 Period

Less than 10 years old Pensioners Unemployed Employed

Source: INDEC, Permanent Home Survey.

These data show the high incidence of poverty on unemployed population and children. Likewise, employed people have a strong share in this group, which indicates that, in many cases, income levels of those who have a job are not enough to fulfill basic needs.

The Gini Index, in turn, reveals that the income gap was reduced, on average, over the last four years.

Figure III.4.Gini index for income distribution (1993 – 2005)

0.56

0.54 0.54 0.52 0.52 0.52 0.5 0.515 0.49 0.51 0.50 0.49 0.495 0.5 0.48 0.48 0.47 0.46 0.45 0.44

0.42

0.40

93 94 97 98 99 01 02 03 05 19 19 1995 1996 19 19 19 2000 20 20 20 2004 20

Source: Subsecretaría de Programación Técnica y Estudios Laborales. Ministerio de Trabajo, Empleo y Seguridad Social (Undersecretariat of Technical Programming and Labor Studies, Ministry of Labor, Employment and Social Security), based on data from the Permanent Home Survey by INDEC.

The rate of Unfulfilled Basic Needs showed a slight decrease between 1980-2001.

17 Figure III.5.a) Percentage of population with unmet basic needs

15 24,4 10 19,3 Percentage 17,7 5

0 1980 1991 2001 years

Source: INDEC National Population Census

As next figure shows, in spite of the general improvement in Unmet Basic Needs index, additional inequities in the regional dimension exist, which have not been adjusted in the last years.

Figure III.5.b) Percentage of population with unmet basic needs. By Provinces

Source: INDEC National Population Census

18 3.2. Energy Situation

The situation of the energy sector by the year 2004 is outlined in this section. Comments on more recent years are included in as much as updated data are available. On the other hand, and considering the availability of a Net Energy Balance (NEB), the year 2004 has been taken as the base year for the year 2030 projections.

As mentioned, nearly 90% of the total supply of primary energy comes from fossil fuels. The remaining is provided by hydraulic energy, nuclear power, firewood and Bagasse and other primary resources. However, within the hydrocarbon set of fuels, significant changes were recorded over the years, linked to the progressive substitution of oil by natural gas.

Figure III.6.Oil and Natural Gas participation in primary energy supply. 1970 – 2004

100.0%

95.0%

90.0%

85.0%

80.0%

75.0%

70.0%

65.0%

60.0%

55.0%

50.0% 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Source: Energy Secretariat, Series BEN National Energy Balance.

Figure III.7.Total supply of primary energy (2004)

1% 1% 5% 3%

38%

50%

Hydraulic Energy Nuclear Natural Gas Oil

Coal Firewood Bagasse Other primary resources

Source: Energy Secretariat, Series BEN National Energy Balance.

19 Regarding the electricity system, the installed power of the public interconnected service reached in 2004 more than 24.800 MW. Mainly thermal plants (56 %) (almost a half not prepared to burn an alternative fuel than gas); 4 % is nuclear power, while 40 % is covered by hydraulic capacity. The new and renewable sources participate with a marginal place, outstanding the wind power with almost 28 MW of installed power. Finally, within the isolated systems thermal generation prevails. Further on, 26 % of the installed capacity corresponds to combined cycles, generally units of last generation built during the last ten years.

The steam plants, that represent 19 % of the total power – are old machines whose useful life has almost expired. Moreover, they have already suffered a rebumping process. Nevertheless, they are in working conditions and their availability indexes have been raised, especially before the crisis of gas availability, due to their feature of multiple fuels burning.

Natural gas explains almost 60% of the whole energy sources for electricity production and among 85-95% of the total fuel burned in conventional thermal generation. This dependence constitutes a critical variable for the sector.

Table III.4. Fuel consumption for conventional power generation Usual units and %

2002 2003 2004 2005 ∆ 05/02 Natural Gas (GCM) 6.15 8.17 9.61 10.04 63% Fuel Oil (Mill Ton) 39.4 85.4 828.4 1130.8 2770% Diesel (Mill Ton) 14.9 14.2 91.9 51.8 248% Coal (Ton) 61.5 91.4 351.6 626.7 919% Natural Gas 98,4% 97,9% 88,4% 85,3% Fuel Oil 0,7% 1,1% 8,5% 10,7% Diesel 0,3% 0,2% 1,0% 0,5% Coal 0,7% 0,7% 2,2% 3,6%

Source: Energy Secretariat, Series BEN National Energy Balance.

In the structure of final energy consumption (which includes sector consumption + own-use energy) the main shares comprise: oil products (37%), gas (43%) and electricity (16%).

On the other hand if it is analyzed the structure of electrical generation, almost 31% of this is generated from renewable resources (more than 95% big hydro plants).

20 Figure III.8. Structure of Final Energy Consumption (2004)

23% 41%

8% 16%

Grid distributed gas Electricity Others Total gasoline Liquefied gas Refinery gas Diesel Oil + Diesel

Source: Energy Secretariat, Series BEN National Energy Balance.

Whereas natural gas production remained unchanged, crude oil extraction decreased for the fifth consecutive year. Given the sustained increase in the demand of gas, its provision was guaranteed through larger imports from Bolivia and the restriction of Chilean exports. Oil product imports also grew substantially so as to substitute gas in thermal generation and for the transport of agricultural products. Thus, supply and investment trends regarding hydrocarbons and energy kept attracting public attention. By mid 2007, gas and electricity supply underwent restrictions, especially to large industrial consumers, and outages were also recorded in several residential areas of the southern Greater Buenos Aires and in some provinces, such as Santa Fe and Cordoba.

On the other hand, the regional situation regarding access to modern fuels – electricity and natural gas – shows important differences.

Figure III.9. Population with access to electricity by grid (%)

98%

96%

94%

92%

90%

88%

86%

84%

82% Cuyo Noroeste Pampeana Country Metro Noreste Patagonia

Source: Energy Secretariat

Inequity is even more noticeable in the case of natural gas, which implies additional pressures on supply and potential threats to its security.

Figure III.10. Percentage of population with access to grid-distributed gas

Country 61

Patagonia 89.9

Pampa region 58.9

Northeast 42.3

Northwest 0.24

Metropolitan 83.1

Cuyo 65.5

0 10 20 30 40 50 60 70 80 90 100

Source: Energy Secretariat

Some key indicator could be summarized for an historical period or the base year.

Table III.5. General Indicators Indicator 2004 Share of residential energy 24% consumption/total energy use Total imported energy 3687 KOE Total Exported energy 23 815 KOE Autarchy (Energy imports-Energy -0,28 (Net Exports) exports)/primary energy supply Intensity 150 KOE/1000 US$ (yr. 2000) Total Average 1220 KOE/inhabitant Power Average 2273 Kwh/inhabitant Efficiency Energy Use Indicators Indicator 2004 Energy efficiency in Supply 64% Fossil Fuel Electricity 58% of total generation Electricity demand 14400 MW Renewable Indicators Indicator 2004 Renewable energies use 7,6% Per capita renewability index 144 KOE/inhabitant Hydro energy dependency 61% Firewood dependency index 14% Share of Renewable in power generation 31% Environmental Indicators Indicator 2004 GHG emissions 45% of total emissions (2000) GHG intensity 975 Kg CO2 equiv./1000 USD GHG per capita 3900 Kg CO2 equiv./inhab. Cleanliness 3193 Kg CO2 equiv./TOE Polluting electricity 1050 Kg CO2 equiv/Mwh

Source: Energy Secretariat, Series BEN National Energy Balance and other.

22 3.3. Energy Scenario by 2030

As mentioned a BAU scenario has been considered. It includes technological innovations as part of the development process, as well as improvements in productive efficiencies or substitution processes, which would take place even in the absence of explicit additional policies.

The projections comprise fuel penetrations, proposals for the rational use of energy and relative structures of energy product prices which will enable substitution goals and rational use, considering in all cases the different socio-economic consumption sectors. A relative price and tariff structure by sectors has been taken into account, which will reinforce the historical trend in the shares of the different energy products (9).

3.3.1. Energy Demand Scenario

The Final Energy Demand prospective for the 2004-2030 period maintains the historical trend, with an important penetration of renewable fuels, according to public policy goals.

The results of the final energy demand prospective by sectors, including own-use and non- energy products, is as follows:

Table III.6. Energy demand Baseline scenario (in thousand tons of oil equivalents)

2004-2030 Sectors 2004 2008 2013 2018 2025 2030 Rate of growth Household 9.890 13.503 15.746 17.879 20.854 23.365 2,9% Commercial and Public 3.391 4.689 5.831 6.893 8.198 9.185 3,5% Industry 11.033 15.367 19.796 24.435 29.938 33.542 3,9% Transport 12.727 14.804 17.170 19.620 22.921 25.681 2,3% Agricultural 4.663 6.477 7.864 9.157 10.342 11.588 3,1% Non Energy 3.698 5.239 6.633 8.130 9.823 11.005 3,8% Own-use 6.000 6.500 7.000 7.500 8.000 8.963 1,1% Total 51.402 66.579 80.041 93.614 110.075 123.329 3,0%

Source: own elaboration.

The table shows that a considerable growth is expected, especially in the industrial and commercial and public sectors. The largest consumption levels are related to natural gas, diesel oil and electricity. In order to meet the projected electricity demand, possible energy exchanges with neighboring countries have been estimated.

As a result of those estimates, the thermal generation still has a major share, though with an important increase in nuclear generation, according to National Government plans.

(9) Relative price and tariff structures were estimated on the basis of oil price trends. The largest growth has been considered at U$ 80 per barrel of the year 2006, which is within the values estimated by the International Energy Agency.

23 Table III.7. Projection of electricity generation in GWh and %

GWh 2004 2010 2015 2020 2004-2030 2025 2030 rate p.a. (%) Hydroelectric Power Plants 30,555 36,867 44,799 59,867 64,167 72,599 3.4 Conventional Thermal 61,779 100,355 120,844 132,995 152,742 172,814 4.0 Power Plants Wind 72 2,092 5,052 7,812 9,018 10,203 21.0 PV 0 23 54 78 91 103 86.1 Geothermal 0 75 219 237 273 309 94.1 Nuclear 7,870 10,212 17,346 26,164 38,045 43,044 6.8 Total 100,276 149,624 188,314 227,153 264,336 299,072 4.3 Hydroelectric Power 17,7% 14,9% 9,7% 11,0% 10,2% 10,2% Plants Conventional Thermal 35,9% 40,5% 26,2% 24,5% 24,3% 24,3% Power Plants Wind 41,8% 0,8% 1,1% 1,4% 1,4% 1,4% PV 0,0% 9,3% 11,7% 14,4% 14,5% 14,5% Geothermal 0,0% 30,3% 47,5% 43,7% 43,5% 43,5% Nuclear 4,6% 4,1% 3,8% 4,8% 6,1% 6,1%

Source: own elaboration.

The following table includes the evolution of the total final energy demand, taking into account final sector consumption (Final), intermediate energy consumption and own-use (OU) for the main fuels.

Table III.8: Summary of prospective results for total final energy demand (kTOE and %)

2004 2030 Oil NG Electr. DO Total Oil NG Electr. DO Total Final + OU 8 19856 7593 10941 38398 13 53543 24176 24201 101933 Intermediate 27183 16452 1328 147 45110 54995 38331 3044 2972 99342 Consumption Total Final 27191 36308 8921 11088 83508 55008 91875 27220 27173 201276 Final + OU 0,0% 51,7% 19,8% 28,5% 100% 0,0% 52,5% 23,7% 23,7% 100% Intermediate 60,3% 36,5% 2,9% 0,3% 100% 55,4% 38,6% 3,1% 3,0% 100% Consumption Total Final 32,6% 43,5% 10,7% 13,3% 100% 27,3% 45,6% 13,5% 13,5% 100%

Source: own elaboration.

Final energy demand prospective rate between 2025 and 2030 is 2.85%. The structure of consumption in 2030 is similar to 2025. The strong dependence on liquid and gas hydrocarbons is foreseen to prevail.

3.4. Availability of resources

3.4.1. Fossil Fuels Reserves

24 Total Proven Reserves of Oil in the country evolved from 392 billion m3 in 1980 to 349 Billion m3 in 2005, having reached a top of 488 Bm3 in 1999 (10). The deterioration of the Reserves/Production ratio has been permanent, falling from 13.4 years in 1980 to 9 years in 2005 (11).

Total Proven Reserves of Natural Gas in the country evolved from 641 thousand billion cubic meters in 1980 dropped to 439 in 2005, having reached a top of 777 in 1988 (12). The deterioration of the Reserves/Production ratio has been permanent, falling from 48 years in 1980 to 8.5 years in 2005.

Measured Reserves of Coal reached 477.9 million tones in 2005 (13).The Rio Turbio present production, the only reservoir, reached 295,333 tones in the year 2006. Top production was reached in 1979, with 1,326,254 tons, and since then, the fall has been constant. The Measured Reserves/Production ratio was 1620 years in 2006.

3.4.2. Availability

For Oil and Natural Gas, the hypotheses have been that, as from the year 2007, apart from Proven Reserves, 50% of Potential Reserves could be available, and the other 50%, as from 2010 or 2012, according to the Scenarios. It was also estimated that Possible Reserves could be available as from 2013, and Speculative Reserves, as from 2016. In the case of Coal, production requirements could be met by the Measured Reserves, taking into account the warnings that will be presented below.

A preliminary analysis of the preceding aspects reveals that there are strong restrictions on hydrocarbon self-sufficiency, which represents a future threat to the system due to the additional costs that importing crude oil could imply. If demand estimates are confirmed, it would be very difficult to meet the required levels with national, and even imported, Oil and Natural Gas until the year 2010.

In the short term, there could also be restrictions on electric equipment, and it does not seem feasible to substitute it with electricity imported from Brazil.

These are the main threats that the energy sector will have to face at national level. Coal seems to be the only fuel with enough availability in the country.

3.4.3. Renewable resources

Main renewable resources are presented in next table; the proposed scenario reflects an important use of them, as new promotion laws have already been enacted.

Table III.9. Renewable resources

Solar 417,494 Million TOE Geothermal 25 Peta Joule Biomass 19,000,000 TOE

(10) Proven, Probable, Potential and Speculative Reserves totaled 1128 Bm3 in 2005, only 30% of which were Proven. (11) Recent discoveries might increase this relation, according to journalistic versions, in 3 years more. (12) Proven, Probable, Potential and Speculative Reserves reached 1954 thousand billion cubic meters in 2005, of which only 22% were Proven. (13) Which added to the 206,5 Possible Reserves and 67,8 inferred reserves, totaled 752,3 million tones.

25 Firewood 27,094,377 Tons Bagasse 3,460,000 TOE Hydro 170,000 GWh-year Wind 6,087 TWh-year Other Primary 9,352,279 TOE

Source: own elaboration. 3.5. Energy consumption patterns in the household sector (urban/rural and poor/non poor)

Whereas energy consumption per capita (CRh in Figure III.11) grew to an average rate of 1.2% in the 1970-2004 period, GDP per capita (PBIh in Figure III.11), after revealing a very marked cyclical behavior, reached, in 2004, levels similar to those of 1970. Household energy consumption had a more dynamic behavior as a consequence of population growth and the urbanization process, and not only of the average income (GDP per capita).

Figure III.11. Per capita Evolution of household energy consumption and GDP. 1970 – 2004 (1970=100)

Source: own estimation based on data from the Energy Secretariat and INDEC.

Argentina has undergone a virtual stagnation of average incomes and an increase in social inequity over the last 30 years. However, the progressive penetration of grid-distributed gas and the country’s high electricity coverage would make a contribution to reduce “energy inequity” facilitating the access to high quality fuels (14) to the household energy basket. Nevertheless, this penetration was reduced in the last decade and some regional inequalities remain across the country.

(14) In 2004, grid-distributed gas and electricity accounted for 81.4% of the total; if LPG is also taken into account, that percentage reaches 94.7%.

26 Figure III.12. Share of grid-distributed gas in household energy consumption. 1970 – 2004

Source: own estimation using data from the Energy Balance

Electricity consumption in the household sector recorded a strong increase during the 1970s and 1990s, and a much slower dynamic in the 1980s.

The interconnection level of its electricity system contributed significantly to the improvement of the systems’ coverage throughout the national territory.

Figure III.13. Household electricity consumption

Source: self estimate using data from the National Energy Balance

The households’ tariff freeze for both gas and electricity, made the impact of the deep crisis less severe. But that was not the case for poor families not covered by grid-distributed gas that, therefore, had to resort to LPG – whose price did increase significantly – in order to cover such

27 basic uses as cooking. It is necessary to consider that income distribution inequity grew even more in the year 2002, as has already been pointed out.

According to the 2001 National Population Census, 95% of the dwellings were electrified. Out of the total of non-electrified ones, 60.2% are rural; of these, the largest percentage corresponds to disperse rural population (56.6% of the total of non-electrified dwellings).

However, the percentages of electrified dwellings vary greatly from region to region. The lowest percentages are recorded in north-eastern provinces (Formosa, Chaco, Corrientes and Misiones) and north-western provinces (Santiago del Estero, Salta) (15).

If the whole Household consumption is addressed, in 2004, total figure reached 9,890 kToe, which accounted for 21.8% of the total final energy consumption in the country (not including Own Use). The Distribution of this figure over mentioned sub-sectors indicates a 92% of total energy use by urban Households; a further 6% consumed by rural Households with electricity and finally a 2% used by non electrified rural Households.

Natural gas covered 61.9 % of the sector consumption, followed by Electricity (19.6%) and then LPG (13.3%). The rest of the fuels contributed relatively low levels. This means that only three sources (Natural Gas, Electricity and LPG) represent 95% of the Household Consumption.

In 2004, 92.2% of the total Household consumption was recorded in urban households, and the remaining 7.8%, in rural ones.

Figure III.14. Structure of Net Consumption by Fuels Urban Households. Year 2004

Charcoal Firewood 2.2% 0.2% Electricity Kerosene 20.1% 0.7%

LP Gas Natural Gas 9.8% 67.0%

Source: Energy Balance, Argentine Energy Secretariat

(15) These percentages are as follows: Formosa 74,3%, Chaco 86,4, Corrientes 88,4, Misiones 88,4, Santiago del Estero 74,3 and Salta 87,6%. Further regional data distinguishing main urban areas will be presented in Chapter V.

28 Figure III.15. Structure of Net Consumption by Fuels. Rural Households. Year 2004

Charcoal Electricity 1.8% Firewood Kerosene 12.9% 11.5% 8.8% Wind Natural Gas 8.2% 1.0%

LP Gas 55.8%

Source: Energy Balance, Argentine Energy Secretariat

Differences in Intensity across sub-sectors are more marked if they are measured in useful energy. This is so because of the larger consumption of less efficient fuels in rural areas (firewood, kerosene, wind), and the fact that those rural households with no access to distribution grids do not use Electricity. Next table shows an estimate of energy intensities and structure by uses.

Table III.10. Energy consumption structure and intensities by uses. Year 2004

NET ENERGY USEFUL ENERGY RURAL RURAL Uses URBAN Non- URBAN Non- Electrified Electrified electrified electrified 1. Lighting 6.0% 9.3% 7.5% 0.8% 1.0% 0.8% 2. Cooking 24.1% 39.9% 40.7% 21.3% 39.8% 59.5% 3. Water heating 29.4% 21.6% 6.1% 28.9% 23.8% 9.9% 4. Heating 26.9% 12.6% 2.5% 26.5% 11.2% 1.3% 5. Cooling & Ventilation 1.2% 1.3% 0.0% 1.9% 2.5% 0.0% 6. Food conservation 7.9% 9.3% 7.0% 12.6% 9.2% 2.8% 7 Water pumping 0.1% 0.8% 35.6% 0.2% 1.0% 24.7% 8. Engines 0.0% 0.3% 0.0% 0.0% 0.6% 0.0% 9. Other uses 4.4% 5.0% 0.5% 7.7% 10.9% 0.9% TOTAL 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% koe/household 964.7 844.2 711.9 486.3 343.9 143.6

Source: own estimation

Additional conclusions -from an electricity tariff study- (16) argues about the convenience of subsiding low income households’ gas or kerosene consumption - instead of electricity tariff (due to caloric - heating and cooking - uses encouragement originated on a low electricity price). Then it will be possible to give an additional reduction on electricity tariff for small consumptions - around 150 kWh/ month. Interestingly a consumption pattern is developed for electricity uses, it is found that a low income family might use 469 kWh instead of 240 kWh every two months, if electricity is employed for caloric uses (cooking and home heating) this

(16) Bertero, R. 2004.

29 figure becomes even larger that the average consumption of total households (between 452 kWh and 365 kWh, in the Buenos Aires area).

Another recent survey (Fundación Bariloche, 2008, 106 homes surveyed) aimed at very poor villages of southern Buenos Aires, analyzes the consumption by sources, in (almost) absence of distributed gas, which is the feature of poor households.

Table III.11. Useful Energy consumption by fuel sources and uses [koe/household] Very Low Income Urban Families without distributed Natural Gas, Nov 2007.

Natural Biomass USES / FUELS LPG Kerosene Charcoal Electricity TOTAL Gas Residues Lighting 1.1 1.0 0.5% Cooking 61.3 2.2 0.8 2.0 0.1 0.4 66.8 34.4% Water Heating 12.3 4.1 1.6 0.8 21.1 40.0 20.6% House Heating 1.9 1.1 1.0 6.7 0.03 12.6 23.4 12.0% Food 41.7 41.7 21.5% Conservation House Cooling 2.2 2.2 1.2% Other 19.0 19.0 9.8% appliances 75.4 7.4 3.5 9.6 0.2 98.0 194.1 100% TOTAL 38.9% 3.8% 1.8% 4.9% 0.1% 50.5% 100.0%

Source: Self elaboration.

Main use in terms of energy consumption is Cooking, accounting for the 34.4% of home consumption, the next are Food Conservation and Water heating (21.5% and 20.6% respectively)

This energy consumption profile reflects the priority of fulfilled needs given by cultural and economical reasons, showing where the main unsatisfied needs in poor households lie.

If prices and budget issue are addressed, what is remarked is the disadvantage of most poor families, which pay as much as 6 argentine pesos (around 2 dollars) for covering – very poorly and in a relatively dirty way - basic caloric or heating uses with charcoal. If LPG is employed the expenditure is reduced down to 2$ while if natural gas is employed for same energy activities, the cost is around 0.5 cents.

Nevertheless these observations must beard in mind the impossibility of substitution between basic needs (uses) and the fact that the figures presented reflect average values, some homes have substantive energy lacks, hidden behind the average.

3.6. Consumption and Efficiency of Energy Use in the Household Sector

Some data of household appliances’ efficiency is presented in here; this will be further developed in section 5. The objective is to present a description of household situation in order to identify the main feature relevant for energy security.

30 i) Caloric Uses of Firewood and Charcoal

In most cases, Firewood and Charcoal fuel devices which are used by rural Households, for Cooking, Water Heating and Heating indistinctly.

The type of equipment differs according to whether it is a Low, or Middle or High Income Sector.

For Low Incomes, the present average efficiency may be estimated at 10%

For Middle and High Incomes, the present average efficiency may be estimated at about 20%

In high and middle income rural sectors, which account for 1.05% of the total population, caloric uses also account for 100% of the household consumption of Firewood and Charcoal by these families. The average efficiency for caloric uses of these fuels was approximately 20% in 2004. ii) Caloric Uses of Natural Gas and Liquefied Petrol Gas – estimated in 2004

- Food cooking: average efficiencies reach 45%. - Water heating: especially using tank less and storage water heaters, with an average efficiency of about 50%. - Heating: the average efficiency of heaters is 55% (17). Heating uses are estimated to account for 34% of caloric uses. - Efficiency of all Uses for NG and LPG: 50%. iii) Electricity Uses

The structure of electricity consumption by type of use has been extracted from the “Energy Needs” Study by Fundación Bariloche (2000), and is only an approximation, since these types of data are not available in Argentina.

Table III.12. Structure of electricity consumption estimates for the household sector (%)

STRUCTURE USE (%) Food Conservation 40.3 Lighting 30.6 Stand-By Devices 15.1 Air Conditioning 5.6 Washing Machines 3.6 Other types of Space Conditioning 0.6 Other Devices 4.2 TOTAL 100

Source: own estimation.

There is an important potential (36.8% of household final consumption) for implement measures for electricity savings in: Food Conservation, Lighting, Stand-by Devices, Air Conditioning and Washing machines.

(17) OLADE, Energética 21. Magazine p.36

31 IV. Threats to Energy Security and Measures to enhance them and their impacts at the National Level

This section presents briefly the main threats that the country faces (present and future) regarding energy security, together with some links to their origin and impacts.

Supply security threats are due to factors external to the system, as for example the international oil prices and internal elements of the system, as for example political decisions made in the past such as the transfer of the energy natural resources control. The system’s vulnerability is the result of two factors: the magnitude of the threat and the system’s response capacity (weakness or strength to adjust to the threat or to overcome it definitively). The actions and measures to adjust or mitigate the threats depend on the nature thereof: internal or external to the system and on the design and implementation of policies and strategies.

Before developing the above statement, some selected Indicators summarizing the National Level situation are exposed. By this, we intend to provide a brief description based on current (year 2007) and past pictures (years 1990 and 2000).

The assessment includes the following indicators - in all the cases calculated for years 1990, 2000 and 2007:

i. Energy Import Dependency; ii. Diversification of energy sources; iii. Energy Path - energy per unit of GDP and GDP per capita; iv. Depletion of energy reserves of different fossil fuels and their rate of depletion; v. Investment in new power plants; vi. Investment in Oil and Natural Gas exploration; vii. Investment in Renewable; and viii. Economic implications of energy imports. i) Energy Import Dependency

It is measured by Net Energy Import Ratio (NEIR):

NEIR = NEI / NDS

Where:

NEI is the net energy import for the considered years NDS is the Net Domestic Supply of energy = Net Domestic supply of Primary Energy + Net Domestic Supply of Secondary Energy – Secondary Energy Domestic Production.

Table IV.1. Net Energy Import Ratio (NEIR)

1990 2000 2007 NEIR -5.03% -36.3% -9.54% Source: own estimation.

The indicator has negative values for Argentina, as the country was, and still is, a next exporter of energy. Up to the nineties exports were marginal. During the nineties the liberalization policies pushed and promoted the energy exports (especially Oil and Natural Gas); this is the reason of the remarkable increase in the indicator. As this Private stakeholder behavior was not accompanied by investment in exploration (as others indicators will show), reserves began to

32 decrease and hence energy exports should be reduced (especially Natural Gas). So, the evolution of the indicator clearly reflects the absence of a long term policy and the erroneous policy implemented during the nineties, from the National Energy System point of view. ii) Diversification of Energy Sources

There are two proposals to measure diversification:

9 Shannon-Wienier Index (SWI)

SWI = −∑ Si × Ln(Si ) i Where, Si is the share of fuel i in total primary energy supply (TPES).

A higher value of SWI implies a more diversified energy resource mix. Grubb (Grubb, M. et al, 2006) indicated that “a value above 2 shows a system with numerous sources, none of which play a dominant role; such a system can reasonably be considered to be quite secure in the face of interruption of any individual supply component.”

9 Herfindhal-Hirshman Index (HHI)

HHI S 2 = −∑ i i Where, Si = Si is the share of fuel i in TPES.

A lower value of HHI means higher level of diversification in energy supply mix. Michael Grubb, (Grubb, M. et al, 2006) indicated that “The US Department of Justice suggests that a result less than 1000 indicates a competitive market place and that a result greater than 1800 indicates a highly concentrated market place”.

Next table shows the evolution of the proposed indicators.

Table IV.2. Shannon-Wienier and Herfindhal-Hirshman Index

Indicator 1990 2000 2007 SWI 1.22 1.17 1.12 HHI 3786 3920 4111 Source: own estimation.

Both indicators are in convergence and show a high degree of concentration in Primary Energy Supply. Together Oil and Natural Gas, evolved from 86% of total supply in 1990, to nearly 90% in 2007, showing a path of growing concentration. iii) Energy Path: relation between Energy per Unit of GDP and GDP per capita

The energy Path is the relation between energy per unit of GDP and GDP per capita.

The results of the calculations made for Argentina depends on the information used (18).

(18) The information on Energy was taken from the Energy Balances, published by the Energy Secretary (official Information). The information on National Accounts could have two sources: INDEC (National Institute for Statistics) or World Bank, using PPP. In the first case the information is presented in local currency at constant values from 1993. In the second case the information is in USD at constant value of 2000. The results are very different and also

Table IV.3. Energy per Unit of GDP and GDP per capita

World Bank Figures Argentine Official Figures Energy Intensity GDP PPP Energy Intensity GDP INDEC (19) INDEC (USD/Inhabit.) (TOE/GDP PPP) (USD/Inhabit) (TOE/GDP) 1990 7310 0.121 6101 0.144 2000 12130 0.090 7897 0.138 2007 15000 0.080 6898 0.173 Source: own estimation.

Considering World Bank figures the Argentine Energy Path is very similar to the one of a Developed Country. Using Official information on National Accounts, the results show a different path, at least recently.

Figure IV.1. Energy Path, years 1990, 1997, 2000 and 2007 (PPP)

TOE/GDP PPP

0.130

0.120

0.110

0.100

0.090

0.080

0.070 7000 9000 11000 13000 15000 GDP per capita PPP

Source: WB

the behavior of the path, depending whether the calculus base employed is Official Information, or World Bank figures. (19) INDEC- Instituto Nacional de Estadística y Censo (National Institute for Statistics and Census)

34 Figure IV.2. Energy Path, years 1990, 1997, 2000 and 2007 (USD constant value of 2000)

TOE/GDP INDEC

0.240

0.120

6000 6500 7000 7500 8000 GDP per Capita - INDEC

Source: INDEC

As a conclusion, it should be remarked the limits of this kind of indicators to make comparison among countries. iv) Depletion of Energy Reserves of different Fossil Fuels and their Rate of Depletion

It is measured through:

Reserve to production ratio (R/P ratio) = Estimated reserves / Current annual extraction. The evolution of such ratio was calculated for Oil and Natural Gas Reserves.

Table IV.4. Reserve to production ratio (R/P ratio) Oil and Natural Gas

R/P Ratio 1990 2000 2007 Oil (years) 12 11 9 Natural Gas (years) 25 18 10

Source: own estimation.

As can be seen, in both cases the fuels that represent near 90% or Argentine Energy Matrix, the depletion of reserves is dramatic, especially in the case of Natural Gas. v) Investment in New Power Plants

The information on Investment is not easy available. As is made by private stakeholders, it is not public information. Some private or public institutions publish some information but it is not a set of information covering the whole period.

As proxy variable, power installed capacity is used. Power reserve capacity evolution is defined as the difference between the installed capacity and the maximum yearly demand. Both variables are for Wholesale Electricity Market (MEM).

35 Table IV.5. Installed capacity (MW) and Reserve capacity (%)

Power 1992 2000 2007 Installed capacity (MW) 13267 20719 24407

Reserve capacity (%) 47 50 33

Source: own estimation.

But, in the same period that installed capacity growth at an annual rate of 4,2%, power consumption growth at an annual rate of 4,9%. As a consequence, reserve margin decreases between extremes as much as 14%. Current threat on electricity security of supply is related with this decoupling between installed capacity and consumption evolution.

vi) Investment in Oil and Natural Gas Exploration

As in the case of electricity, the information on Investment is not available. As it is made by private stakeholders, it is not public information.

As proxy variable, number of exploration wells per year is used.

Table IV.6. Number of exploration wells per year Source 1990 2000 2007 Natural Gas 6 11 9 Oil 22 30 27

Source: own estimation.

In the case of exploration or exploratory wells drilling, figures for one year are not very representative of the tendencies. During the former period, when the National Oil Company was under Public Ownership (Oil Public company YPF), the number exploratory wells drilled, averaged 100/120 per year. During the nineties private stakeholders produced or extracted the oil (the cheapest activity of the oil industry) but they did not look for Oil, (the most expensive activity of the Oil Industry). A similar situation is happening for Natural Gas. As the period of analysis considered, does not cover the situation before Argentine energy industry structural reform took place, this kind of change in behavior can not be caught by the indicators (20). vii) Investment in Renewables

Due to the problem on availability of information, the role of Renewable as percentage of Primary Energy Supply is presented as a proxy variable.

(20) The real reserves’ level is not known precisely by the Government. As the oil fields have been privatized, the government depend on the information provide by oil companies.

36 Table IV.7. Renewable Energy as percentage of Primary Energy Supply

1990 2000 2007 Source (%) (%) (%) Hydro Energy 4.0 4.7 4.3 Charcoal 1.1 1.0 1.4 Bagasse 0.9 1.3 1.3 Others 1.5 1.1 0.7 Total 7.5 8.2 7.7

Source: own estimation.

A marginal change in structure depends on short term circumstances, lake water availability. As could be seen the participation of Renewable has been practically frozen since the last 17 years. viii) Economic implications of energy imports

It can be assessed through the use of the following indicators:

9 Energy Import as percentage of GDP 9 Energy Import as percentage of total exports. 9 Net Energy Import as percentage of GDP. 9 Energy export as percentage of total exports.

Table IV.8. Selected Economic indicators

Indicator 1990 2000 2007 (%) (%) (%) 1- Energy Imports/GDP 0.2 0.4 4,3 2- Energy Imports/Total Exports 2.6 3.9 5.1 3- Net Energy Imports/GDP -0.3 -1.4 -1.5 4- Energy exports/Total exports 8.0 18.6 12.4

Source: own estimation.

As already mentioned, Argentina is, still, a net energy exporter (21). Indicators are showing a clear change in tendency, with a dramatic increase in imports reflected by the relation with GDP and total Exports and a decline in the participation of Energy in Total Exports.

Now that the National situation has been illustrated by indicators, the main discussion on Energy Security is developed

4.1. Context threats, general measures and main impacts

The analysis made, detected the existence of a supply security threat, with potential impacts on costs, competitiveness, social equity, availability of domestic fossil fuels as well as on the regional integration process. This threat is mainly related to the characteristics and consequences of the structural reforms applied during the last decade and to the national situation generated after the end of convertibility. It is to say of essentially internal character, in

(21) This is the reason why, indicator number 3 of the table is negative.

37 the frame of an international context of increasing prices of the oil and of conflicts in strategic zones.

Effectively, as the result of the structural policies of the nineties– most of them currently still in force – the energy system faces several risks related to supply security:

I.On the one hand, the effective control of nearly all the energy offer and natural energy resources was privatized. Substantive short term rationality defines the trend, within a weak regulation context and nearly absence of intervention through public policies. II.The tariff structure and price levels (gas and electric power) favor higher consumption, eliminating signals for efficient use and social equity. III.The real investment process is oriented towards the maximization of the net present value, and energy stakeholders strategy prioritize the remission of utilities, the distribution of dividends and the simultaneous foreign indebtedness. This rationality of the companies responsible for supply conditions the long term supply, as it endangers the necessary link between the resource revenue and the financing of the required investments. IV.On the other hand, some of the characteristics of the strategies of private investors were: 9 The increasing use of natural gas for power generation and the orientation of increasing amount of natural gas to the foreign market, both actions explain nearly 60% of the increment in production during the nineties and imply that future security of supply could not be guaranteed. 9 The increment of hydrocarbon production for the internal market, and especially for the external one, as well as the minimization of investment risks (more compression capacity in the transportation of natural gas instead of new gas pipelines, low risk exploration investments concentrated in already discovered fields; foreign indebtedness policies and simultaneous distribution of dividends; production oriented to the external market independently of reserve replacement; expansion of distribution networks pre- financed by third parties and returned at a lower value, and protection from the risks of a virtual pesification by means of legal actions which, if succeeding, would allow for expropriation indemnifications and would imply leaving a portion of the acquired debt in the hands of the National Government). V.The reduction of investments since 1999, discouraged by the recession, while the present value maximization strategy is framed within a short and medium term policy, disconnected from the license and concession terms or the long term supply optimization criteria. VI.Despite the gas and electric power regulatory frameworks limit vertical integration, such limitation is overcome by corporate strategies. In view of a weak regulation, the companies manage to achieve a high integration level, both vertically and horizontally. This situation not only allows for dominant positions in each chain, but also through the integration of the different links of the chains (e.g.: natural gas production and distribution; gas production; electric power generation and distribution, large consumers, etc.) VII.Consequently, many of the main actors participate simultaneously in different energy sector activities, creating integrated, oligopoly markets, highly concentrated in the major deregulated links and integrated with the sectors that constitute regulated natural monopolies. VIII.The unclear legal framework let them have a dominant market position as well as a strong power correlation with the authorities. IX.Finally the provincialization of hydrocarbon resources property (from former National ownership to Provincial jurisdictions control) leaves a weakened actor in charge of negotiations with private oil firms.

At a Macroeconomic level, the convertibility policy collapsed by the end of 2001, generating significant currency devaluation. The new macroeconomic scheme led to an important industrial reactivation vis-à-vis the 1999-2002 recessive period. The first sectors to show that reactivation were the ones that managed to articulate or re-articulate themselves into the international

38 market. The large foreign companies did it first, followed by some lower-sized local companies. The sectors that managed to participate in the new import substitution process also increased their activity.

That reactivation is framed within a context of limited gas offer and with a transportation capacity that has grown very little since 1999. This new vulnerability of the industrial sector as regards resources and infrastructure may be first identified in the dependency on fuel as a production input which could not be guaranteed on the long term, and then, in its immediate response. For example, many industries started to buy their own electric power generation equipment. This distorts the generation park and imposes higher pressure on the demand of liquid fuels (especially for the farming and transportation sectors), so being a hardly rational and unsustainable measure as regards the use of resources.

On the one hand, such complex situation is framed within a regulatory scheme (still in force) which followed the reformation process and facilitated, in some way, the sector vulnerability situation. On the other hand, and in order to embrace the most critical elements of this situation, several short term measures of partial scope have been adopted

Some examples are mentioned below:

9 The partial “dollarization” of the deregulated segment of the hydrocarbon sector, especially for the integrated companies with strong upstream participation; the new situation is particularly favorable since prices have been gradually growing in the international market. 9 Resolution 208/2004 and other regulations have been enacted, improving the price perceived by the natural gas producers in exchange for an offer guarantee only for the firm contracted capacities. In turn, those users who have not acquired firm capacity, can directly contract it from the producers, carriers and distributors at free prices. 9 Although, the gas and electric power transportation and distribution services remained “pesified” in an important part of the market, which led to a hard negotiation process. While some of the companies have already been authorized to apply price increments to the commercial and industrial sectors, the analysis of the residential sector is still pending. This has generated additional uncertainties and more distortions like regressive structures and the lack of incorporation of social tariff (for low incomes). 9 In turn, the electric power generators were offset by the higher cost of gas and use of alternative fuels by a fund (FONINVEMEN) which, when depleted, turned into a debt that can be capitalized through investments in two thermal generation stations. The debt with this fund was increasing. The growing liquid fuel importation through public funds was also an important distortion in the functioning of the system, as it broke the link between the electric power generation costs and its remuneration. This generated, on the one hand, a cost increase for certain productive sectors and, on the other hand, a lack of supply guarantees. 9 Due to the gas shortage, supply to interruptible users was restricted. Argentine exportation had also been limited, mainly to Chile, a country that depends almost 100% on the Argentine gas supply. This situation prevailed during the 2007 winter season, even generating an extraordinary situation. The authorities permanently informed of the electric power system critical situation, and directly asked large consumers, companies and industries to disconnect themselves from the network to avoid the general interruption of the service. Finally, within a complex regulatory, institutional, physical and political framework, it may be noted that the main threats from a supply guarantee standpoint are related to the increased dependence on oil, derivates, and natural gas, coupled with restrictions in the electric power offer due to problems related to the lack of equipment and fuel availability.

39 These threats affect the energy system as a whole at the national level, and particularly those sectors with less resources of their own, as for example the low income residential sector.

Furthermore, several actions, including the ones mentioned below (without any specific order), have been started:

9 Agreement to import Fuel Oil from Venezuela (closed), which generates strong commercial deficits (around U$S 4000 millons); 9 Agreement to import gas from Bolivia (closed at a value of U$D 5/ million of BTU, but now this price increased to U$D 7/ million of BTU); 9 Importation of electric power from Brazil (partially closed) ; 9 Two programs for Rational Use of Energy (PURE for electric power and gas) (22); 9 Electric power transportation works (partially closed); 9 Generation works: Atucha II Nuclear station (not closed) and increment of Yaciretá´s quota; 9 Natural gas transportation extension for the 2006/2007 period (not closed meaning it has not started yet); 9 Bio-fuel boosting Act; 9 Referential prices and more economical outlets were established for the oil liquefied gas (GLP), whit a strong social impact; 9 Launching of the Nuclear Plan; 9 Incentive plan for the exploitation of the so-abundant mineral coal. 9 Launching of the Plan called “Energía Plus” to foster industrial self-production, 9 Substantives taxes on both, oil crude and derivates exportations (called retentions), once the local refineries are supplied.

All these examples, while indicating a proactive attitude towards the complex situation, also generate strong ambiguities and inconsistencies. The energy supply situation is a clear example of it. On the one hand, no clear, defined and systematic official policy exists. The operators themselves are following different strategies. In some cases, these strategies do not converge (neither are expected to) into the initiatives established by the different areas of the government, while in other cases, they are protected by the rules and/or contracts from the past, such as in the oil upstream area.

An additional threatening element is that the impact of the price and rate readjustment, despite it had little average relevance for the sector as regards the total costs of the industry (23), is already another element for the internal price increment. Both the new inflationary pressures and the supply risk can aggravate the uncertainty climate that tends to paralyze productive investments. These are undoubtedly, two of the major threats that have become concrete risks for energy security.

(22) For example, the Energy Efficient Use Program (Programa de uso eficiente de la energía – PURE) for gas consumption, with estimated net savings of 400 ktep/year and the Electric Power Efficient Use Program (Programa de uso eficiente de la energía eléctrica – PUREE), with estimated net savings of approximately 200 ktep/year (yearly average). (23) According to the Product-Output Matrix, INDEC, 1997 and Study on Energy consumption by the Industrial Sector. Service Agreement Nº 28.03 Agencia Alemana de Cooperación Técnica SRL / Fundación Bariloche, March 2004.

40 Energy Security and Global Macro-Economic Impacts

The most relevant macro-economic impacts as regards energy security are those related with the external sector and fiscal revenues (24). Besides, the analysis must be focused on gas, oil and their oil products, which are highly influential on the trade balance and the fiscal revenues.

The impacts on competitiveness can be identified in the productive sectors through the weight of energy as regards the total costs, a higher weight implying more vulnerability to shortage (25).

In the future scenario, oil-related activities lose weight, because Natural Gas should be substituted in power generation. Those activities that meet the internal demand have a growth rate similar to that of the product, while the dynamism and participation of the hydrocarbon sector decrease. The main fiscal impact involves loss of revenues due to export retentions.

Impacts on the trade balance of oil, gas and oil products

The results of the future scenario imply the interruption of oil exportations between 2008 and 2009, and a slight recovery of them between 2010 and 2012, to then have null values.

Thus, it is expected that the positive balance existing up to 2006 will give way to an increasingly negative balance until the year 2011. Such negative balance would be, by that time, of between 500 and 600 million dollars, but it would exceed 3 billion dollars in 2025.

As regards the foreign trade scenarios concerning oil products (26), it is expected the introduction of a new higher-conversion refinery by the year 2010, which will enable the supply the demand by domestic diesel.

Fiscal Impacts

The taxes revenues coming from the hydrocarbon sector represented near the 97% of the national fiscal revenues of the energy sector, excluding the AVT of the regulated activities. In turn, it is worth mentioning that the set of the main fiscal revenues corresponding to the energy sector, including royalties, has represented nearly 3.5% of the GDP between 2004 and 2006, a fact that hides important modifications of the different components which, in turn, have been the result of quantity and price variations. A fiscal revenue reduction up to the year 2013 is expected vis-à-vis the year 2006. The proportion of integrated fiscal revenues as a percentage of the GDP would go from 3.4% in 2006 to 1.9% between 2014 and 2018, reaching only 2.3% in 2020.

Impacts on economic growth and competitiveness

(24) To assure domestic supply oil exports should be cut in the near future with the consequent losses on revenues coming from export taxes. (25) Please note that, besides the relative weight of energy on the total costs, the impossibility to replace it by another input makes the vulnerability caused by the energy shortage affect all productive activities. Moreover, despite the relative weight of energy on total costs, the impossibility to replace it by another input makes the vulnerability in the case of lack of energy reach all the productive activities. Furthermore, the delicate current energy situation was worsened by ongoing increases in oil prices, which in turn enlarged the price of the fuel that Argentina has to import. Additionally, the official decision to prevent electric power and gas increases for residential customers in the Capital and Greater Buenos Aires areas resulted in four times more energy subsidies vis-à-vis 2007, reaching the amount of almost US$2700 Million. (26) The analysis only considers motor oils, diesel, fuel oil and LPG.

A lower value added level produced by the energy sector would affect, at least, the economic growth proportionally to the activity reduction. However, we can affirm that it may also affect growth by reducing the fiscal revenues, weakening the income of foreign exchange, and due to its multiplying impacts through the related productive structures.

It is not possible to quantify the indirect impacts that might be generated by the demand and supply scenarios at the global level of the economic activity, these impacts will surely affect the economy and should be considered when dealing with energy security policies. The oil price susceptibility to the crude oil price values of the international markets is an important issue to be considered, while the internal pricing mechanism through the effect of retentions would no longer be applied.

Even though it is hard to estimate the quantification of energy shortage impacts on the growth goals, it is very feasible that the economy may fail to grow at the rates expected until 2008, while the short term energy offer seems to present restrictions and rigidity.

Apart from the cross-incidences within the energy sector, the sectors that are more susceptible to the increment of energy costs are the transportation and farming service sectors. In turn, some industrial sectors also show important values, namely: basic chemistry, mineral extraction, and the sectors related to construction assets.

The cargo transportation sector is highly influential on the production costs of general assets. Besides, it must be considered that the value of diesel, which is the main fuel of the sector, is currently subsidized and, therefore, its price variation would inevitably imply the increment of the subsidy value, according to the considered future prices. Should the existing subsidy not be adjusted, it will affect the expenditure of both the intermediate demand and final consumption sectors, distorting the home income-expenditure ratio.

4.2. Measures and their impacts to enhance Energy Security

To reduce the risks of future shortage of supply, structural policies and strategies are necessary, not only Institutional changes but also Regulatory and Legislative (understand as the modification of the rules of the game).

A brief overview has been introduced on the main conditions and prevailing threats to guarantee the energy supply for a tendency or business as usual scenario. The actions/policies that have been implemented so far to mitigate the complex situation in the medium and long term have also been discussed.

Thus, an alternative scenario is introduced as a result of potential measurements that would allow for the enhancement of the complex supply security conditions discussed above in the future. That scenario would include: i) Changes in the energy usage guidelines (Energy Efficiency, EE). These guidelines imply technological improvements and improvements in the operation of equipment and devices that lead to a lower net energy consumption. ii) Changes in the substitution guidelines for energy sources in each energy sector, with special focus in renewable energy sources (RE).

42 The results described next relate to the combination of the factors stated above (EE and RE). However, they will be analyzed separately for better identification indicating for each of them potential, impacts, measurements, etc.

4.2.1. Energy efficiency

4.2.1.1 Potential. Impacts on the energy mix

A preliminary estimate of the potential energy savings as of the year 2030 has been made for each consumption sector.

In the case of electric power, savings in Lighting are particularly considered; Food Preservation and Ambient Conditioning, applicable to the Residential, Business and Public sectors.

In the Industrial Sector, energy saving measures will focus on steam generation systems, duct insulation systems, general maintenance systems and valve systems. In terms of Electric Power use, the highest savings are expected in Engines (labeling measures), since if well it is true that potential measures may also be applied in lighting and environment conditioning, their involvement in the electric consumption is relatively low. For each industrial branch, the URE measurements related to technological improvements in the production processes are considered in each industry. These brief considerations may be summarized quantitatively expecting savings in energy consumption for the industrial sector of 22% in caloric usage; 11.6% in electric power-related usages for the year 2030. The total energy savings in the industry for the year 2030 would be of 17%. As regards accrued energy savings, they exceed 80000 KTep for the whole period under consideration.

In the generation of heat or during its use in driving force by means of the use of fuel is where the more possibilities of energy savings rely (boilers, stoves, heaters, Otto cycle engines and Diesel cycle engines)

One of the sectors with the highest savings possibilities is Transportation, where the technological changes in engines could cause a substantial decrease in fuel consumption per ran Kilometer, thus estimating potential savings of up to 4% as regards a scenario in which only tendency changes are involved. The insertion of Biodiesel and Bioethanol is further expected. This measure would allow, together with other ones, that by the year 2020, approximately 94% of the final demand for such sector shall derive from fossil resources, almost 5.2% from bioenergy, 0.6% from Electric Power and 0.2% from Hydrogen (especially in automobiles, taxis and hauls of less than 4 Ton.)

In the case of the Agricultural Sector, the main source of consumed energy has been Diesel. The sector’s consumption is distributed between the Agricultural and Livestock sectors. In the year 2004, the former represented 92% of the consumption, while 8% of the remaining consumption derived from Livestock. It is expected that in an efficiency scenario the energy intensity would be reduced, generating energy savings of 21% as regards the consumption of the year 2005 for a business as usual scenario. On the other hand, the accrued savings would reach approximately 35,000 ktep during the period under analysis (2004 – 2030).

In the non-energy sector, savings could also be expected if efficiency measures are taken in the specific consumption during industrial processes. As a consequence, the achieved energy savings would be of approximately 15%, while the accrued savings vis-à-vis a BaU scenario would be of approximately 14,157 Ktep.

43 The following tables present an accurate estimate of the percentages of potential energy savings for each sector and fuel, as well as the resulting energy saving for sector totals that could be obtained towards the end of the projected period.

Table IV.9. Household, and Commercial and Public Sector (%)

Grid- Liquefied % Firewood Electricity Distributed Petrol Charcoal Total Gas Gas Household 8.6 36.8 14.1 14.1 8.6 18.8 Commercial and Services 14.1 36.5 14.7 14.7 25.3

Source: own estimation

Table IV.10. Industrial, Agricultural and Petrochemical Sectors (%)

Grid- Liquefied Fuel Non Bagasse Electricity Distributed Petrol Gaso- Diesel Bio- Total % Oil Energy Gas Gas line Diesel

Industrial 22 11,6 22 22 22 16.90

Agricultural 11.6 10 23.3 21.76 23.3

Petro-chemical 15 15 15 15 15 Source: own estimation

As a result of the assumption discussed above, accrued energy savings of 253000 kTep could be generated between the years 2005 and 2030. As regards energy savings, in absolute terms the highest savings would derive from the Industrial Sector (achieving 32% of the savings by the year 2030 between both scenarios), followed by the Residential Sector with 28% of the savings, the Business and Public Sectors with 13% of the savings, and the Agricultural Sector with 9% of the Non-Energy Consumption and 5% of the savings deriving from the Transportation Sector.

Thus, the dependency on fossil fuels would be reduced even more and would represent 73.5% of the final demand.

4.2.1.2 Main barriers to energy Efficiency improvement

There are a number of barriers to increased investment in energy efficiency in Argentina. Some of these barriers are similar to those in other countries, while others are specific to the financial situation and regulatory framework in Argentina. Lack of regulatory incentives to promote energy efficiency. The regulatory framework for electricity and natural gas provides inadequate incentives for utilities and many classes of consumers to undertake energy efficiency investments, even where the marginal cost of energy supply is significantly above the marginal cost of investing in energy efficiency. Consumers associations still have to focus on EE as an instrument to improve consumer well being. Lack of adequate price signals to energy consumers, especially among residential consumers. Partly as a result of the financial crisis, energy prices for some consumers have been frozen and not allowed to reflect increases in the costs of energy supply. Some residential tariffs

44 specifically discourage energy efficiency, for example, by effectively providing lower tariffs for increased usage. Inadequate information among industrial consumers about EE technologies and experiences. Very recently, there were programs towards providing industrial consumers with information on EE potential and specific measures. However with limited in scale as well as in scope - geographically and sector-wise. Dissemination of best practices is not sufficiently used as a replication tool for EE investments. At provincial level there is also insufficient knowledge and informative actions about EE. High transaction costs for enterprises to implement energy efficiency investments. The high cost of the initial design and implementation of EE projects is added to the lack of access to financing for introducing EE measures. Perceived high risk among banks to finance energy efficiency projects. Access to financing has been difficult due to the 2002 crisis, and energy efficiency projects are still perceived as high- risk initiatives, while there are doubts related to their actual profitability. Infant ESCO industry. There are only a few energy services consulting companies that yet do not function as real ESCOs. However, with adequate support and information, these companies are expected to pursue cost-effective energy efficiency investments. Multiplicity of stakeholders and fragmented institutional framework. The multiplicity of stakeholders involved or concerned with EE increases the information barrier and makes difficult the coordination of EE actions. At government level, EE overlaps the mandates of several entities which also makes coordination difficult and can lead to duplication of efforts in that field. In summary, the system confronts regulatory, legal, economics, institutional, information and financial barriers, to mention the most relevant.

4.2.1.3 Measures to improve energy efficiency to enhance energy security

There are important references on the actions and measures that would have a positive impact on the efficient use of energy, thus increasing energy security. All of them may be found in a wide number of studies that have allowed for the identification of potential energy savings in different sectors.

45 Box 1. Initiatives in energy efficiency

A large number of projects developed by the Government have generated enough information for the design of specific measures. Among them the following may be identified:

I. URE Program: Agreement subscribed between the Secretariat of Energy and the European Union, in the period 1992-2000. II. Cooperation agreement subscribed between Instituto Nacional de Tecnología Industrial (INTI) (National Institute of Industrial Technology) and the Japanese International Cooperation Agency - JICA 1996-2000. III. Agreement subscribed between the Secretariat of Energy and the Inter-American Development Bank (IDB), 1998-1999. IV. Cooperation Agreement subscribed between the Secretariat of Energy and the German Agency for Technical Cooperation (GTZ) 1999-2005. V. Efficient Lighting Program (PNUMA-GEF): Argentine Street Lighting Program (ASLP). 1999-2001 VI. Efficient Lighting Program (PNUMA-GEF): Efficient Lighting Initiative (ELI). 1999-2003 VII. ARGURELEC Projects (Secretariat of Energy – European Union). 1998 – 1999 VIII. The ARCO Project (Secretariat of Energy – European Union). IX. In 2003, the Secretariat of Energy, designed the Energy Savings and Efficiency Program (PAEE), in line with the Secretary of Energy’s policy objective of promoting energy efficiency and the use of renewable energy sources. An ‘Energy Efficiency Bill’ was proposed and approved by the upper chamber of Congress in October 2003. The law establishes the SE’s mandate and responsibilities for promoting EE. X. In 2004 the PURE (Program for the Rational Use of Energy) was launched, an incentive-based program similar to the initiative developed by Brazil in 2001 during its energy crisis. The program was extended in 2005 and incentives were stiffened. XI. Since 2005, the Secretariat of Energy has been promoting the Energy Efficiency Program in Argentina before the Global Environment Facility (GEF). The objectives are to aid i) in the reduction of the energy infrastructure expansion investments; ii) to reduce the users’ electric power bills; iii) to increase the competitiveness of the productive sectors; iv) to install a cultural change in society in relation to an energy sustainable consumption. The main activities of the Project are: (i) to promote penetration in the market of energy-efficient practices and technologies, even through mechanisms for the financing of energy efficiency investments by energy services enterprises (ESEs); (ii) to ease the execution of Demand Side Management (DSM) Projects by electric power distributors: Edenor, Edesur and EPEC; and (iii) to provide technical assistance to support the promotion and management of the Project. Preliminary estimates indicate that after ten years of implementation (by 2015), the Project would allow a 2,400 MW reduction in the electric energy demand; a 16.5 TWh reduction in the annual generation of electric energy; and savings of 1.7 million tons of oil equivalent (tep) per year – as well as a reduction of about 28 million tons of CO2. XII. At the end of 2007, the new national government has launched a series of isolated measures of short and medium term destined to the saving electric power (with impact in the gas consumptions and derived due to) and saving 0.4 tons of CO2 emissions. The main measures named “Plan of rational and efficient use of the energy” (PRONUREE) are: 1. daylight saving time; 2. massive replacement of 5 million inefficient lamps. Latter on as a second stage, the substitution of 20 million lamps is foreseen jointly with promotional sale prices; 3. Regulation of all air conditioners within the public sector; 4. Substitution of inefficient lights of the thoroughfare; and 5. high efficiency domestic appliances purchases financing.

Source: Own elaboration.

Besides, global measures are being taken in order to mitigate the absence of long-term policies aimed at preventing or reducing daily power outages as a result of the system’s incapacity to meet the electric power demand.

According to the identified potential and the references on the actions in specific sectors, there are plenty of measures to actually transform the energy efficiency potential.

Even though it is not possible to fully exhaust all the possible strategies, it is necessary to identify a number of options that have proved successful in other regions and countries and that would be possible to apply in the Argentine case.

The identified barriers constitute the objectives to overcome and, consequently, allow for the identification of the main measures and instruments that could be applied.

The savings potential discussed above may be reached through a number of measures. One partial proposal of the measures that would be required could be the following:

9 A proper level of internal rates of return and prices reflecting the true energy costs for society, especially as regards the Residential Sector consumption and the electric power and natural gas sources. The impact on income distribution should also be considered, designing a price and rate structure that may decrease or eliminate any negative impact on the low income sectors. 9 The implementation of an investment fund that may generate financing resources linked to energy efficiency options in consumption sectors, especially in the Residential, Services and Industry sectors. The credits granted through this mechanism should only be applied to the purchase of equipment of proved energy efficiency, both for final and intermediary use. The strategy could be complemented with that of the Labeling which, aside from providing the decision-maker with information, could constitute the source of the equipment that qualified to have access to financing. 9 Labeling program and definition of the minimum standards for equipment destined to the Residential, Services and Industrial sectors in order to provide information in the decision- making process. 9 Encouragement of efficient energy self-production and co-generation through regulatory mechanisms and, enabling its integration to the Public Service. 9 Distributive and financing program through efficient electric power equipment distributors: lamps and other electro-domestic appliances.

Certain sectors, such as Transportation, of great efficiency potential would require more complex actions that could even be combined. The growth of private transportation has become an increasing problem without apparent limit.

It is possible to imagine that there are alternatives aimed at having a positive contribution to the Economy of Transportation, Energy and the Environment, including:

9 Substitution of means/options aimed at enhancing the train, metro and bus public transportation infrastructure. A higher and better offer through the availability and combination of low cost means would contribute to the discouragement of the use of cars in urban areas. 9 Different measures aimed at the restriction of car traffic in urban areas: day restriction, restricted areas, tolls, etc. 9 Regulation of taxi circulation, preventing the circulation without passengers in restricted areas. 9 Reduction of parking areas in restricted zones. 9 Fuel substitution, Diesel by NCG in buses and taxis. 9 Restrictions to the sale of diesel cars for private usage.

47 4.2.1.4 Impacts of the measures/policies on cost of energy (both in financial and non-financial terms) at the national level

As a result of the implementation of the different efficiency measures applied to all sectors nationwide, and with the purpose of contextualizing the savings that might be generated, the accrued savings corresponding to Oil products are compared to the verified and potential Oil reserves up to the year 2005 (according to the SE), and the same process was applied to Natural Gas. As regards Electric Power, it was calculated the equivalent of the electric power consumption savings, in terms of capacity-installation construction that might be avoided. These estimates have been done in consideration of the exercise developed only up to 2025, as there is more accuracy as regards the hypothesis of possible discoveries.

Table IV.11. Final demand savings between both scenarios as compared to reserves

2005 Reserves Verified or Proven Potential Proven+ 50% pot. Oil 349.096 153.324 thousand m3 425.758 Natural Gas 438.950 248.856 million m3 563.378

Accrued Savings Tendency vs. Structural Monetary Savings Oil 80.511 thousand m3 U$S 30000 millions (US$ 60/barrel) Natural Gas 62.248 million m3 U$S 11000 millions (US$ 5/ million BTU)

Savings Percentage on reserves Verified or Proven Potential Proven+ 50% pot. Oil 23% 53% 19% Natural Gas 14% 25% 11%

Savings on installed electric capacity Monetary Savings 326 Twh accrued savings, U$S 2000 millions (in install capacity) Electric equivalent to 2,530 MW for 21 U$S 7000 millions (US$ 5/ mill BTU, 50% Power years of operation thermal generation with natural gas)

Source: FB estimations.

In the case of Oil, savings on oil products would be equivalent to 23% of the verified reserves, 53% of the potential reserves, or 19% of the verified reserves plus 50% of the potential reserves. Furthermore, such accrued savings would be equivalent to almost three times the consumption registered in oil refineries in 2004. In turn, it implies extending the reserve/production ratio in 2 years.

As regards Natural Gas, the percentages amount to 11% of the verified reserves plus 50% of the potential reserves. The accrued savings would imply extending the production/reserve relation in 1.3 years.

Finally, the accrued savings in Electric Power demand would be equivalent to the generation of a station of 2,530 MW installed capacity for 21 years, the construction of which might be avoided if the energy savings presented in the policy scenario are verified.

One scenario in which such significant monetary amounts could be saved would allow for the alleviation of the energy shortage risks, and it would further ease the access to higher quality energy at a lower price, such as natural gas, thus enhancing the conditions of the poorest

48 sectors of the population. Needless to say, it would allow for the possibility to destine such amounts to other more urgent needs of this population.

4.2.1.5 Environmental impacts of the government measures/policies at the national level

The environmental impacts of the efficient use measures would be significant and cover both local and global aspects.

Identification of Local Environmental Impacts.

The main environmental impacts avoided at local level are verified in the supply chain of the different sources, the consumption of which would be reduced as the result of the efficient use measures.

That is to say: Hydrocarbons (Oil, Natural Gas), Mineral Coal, Nuclear Sector (Mining and Fuel Cycle), Hydro Stations, conventional thermo-electric Stations and Electric Power transportation.

The potential effects referred to natural environment resources, of socioeconomic or health- related scope include: Water, Air and Climate, Soil and Soil Use, Natural and Cultural Heritage, Resources, Wastes, Socioeconomic, Population’s Health and Welfare, Production, Handling or Transportation of Toxic or Hazardous Substances, Territory and Public Opinion.

Depending on the sectors or production chains, the reference to each element is either total or partial.

49 Table IV.12. Impacts of socioeconomic or health-related

Impacts Thermal Electric Power Hydro Stations Item Hydrocarbons Coal Nuclear Stations Transportation + use + use + less conflict + use Water + use reduction reduction reduction with other uses reduction + prevents Air and + prevents + prevents contaminating Climate pollution pollution emissions + prevents + prevents + prevents + liberates soil Soil pollution in pollution pollution for other uses mining activity + prevents + prevents + prevents + prevents + prevents Natural and potential potential potential potential potential Cultural destruction or destruction destruction or destruction or destruction or Heritage damage or damage damage damage damage + extends + extends + extends Resources uranium availability availability availability + prevents + prevents + prevents + prevents Wastes pollution pollution pollution pollution -/+ reduces Socio- - reduces activity - reduces - reduces activity level but - reduces - reduces activity economic level activity level activity level prevents activity level level resettlement + reduces health + reduces + reduces + reduces + reduces Health risks health risks accident risks accident risks risks + reduces Dangerous + reduces + reduces + reduces + reduces manipulatio Substances manipulation manipulation manipulation manipulation n + prevents + prevents + prevents + prevents + prevents Territory environmental pollution pollution pollution pollution effects +/- depends +/- depends on on the + fearful of this + fearful of this Public Opinion the affected affected technology technology population population

Positive effect quantification would require specific estimates that exceed the scope of this report.

Global Impacts

The three main GEI whose emissions are directly related to the Energy Sector are: Carbon Dioxide (CO2), Methane (CH4) and Nitrous Oxide (N2O).

An alternative scenario implying efficient use measures and penetration of energy renewable sources substituting emitting sources would have an approximate impact exceeding 470 million Tons of CO2 eq., of which near 90% would correspond to Fuel Burning and the remaining 10% to Fugitive Emissions. Next graph shows the comparative picture that both scenarios might take.

50 Figure IV.3. Comparison of Emissions by Scenarios (Million Tons CO2 Equiv.)

Tendency Structural

200 200

Agropecuario Agropecuary 180 180 Savings: Transporte Transport 20% 160 Industria 160 Industry Comercial y Publico Commercial & Public Sectors 140 Residencial 140 Household uivalente

q 120 120

100 100

80 80

60 60 en Millones Ton CO2 E en Millones

40 40

20 20

0 0

4 5 6 7 8 9 0 2 3 4 5 6 7 8 9 0 2 3 4 5 0 0 011 1 1 1 01 1 2 21 2 2 2 2004200520062007200820092010201120122013201420152016201720182019202020212022202320242025 200 20 20 200 200 200 201 2 201 201 201 20 20 20 2 20 20 20 20 202 20 20

Source: own estimation

4.2.2. Renewable Energy

4.2.2.1 Renewable energy Potential. Impacts on the energy mix. Environmental Impacts

Renewable energies are quite low, reaching only about 7% of the national primary energy supply (3, 8% of final consumption). Within this figure, the participation of hydro energy (3,5%) and of non-woody biomass (sugar cane products and other biomass, 3,5%) is significant; the role of renewable firewood and charcoal is not significant (0,6%); the contribution of the new renewable energies is almost null (wind, photovoltaic and geothermal energy).

Renewable energies present a huge theoretical potential in Argentina but, for the purposes of this study, only the portion of such potential that may be used after considering a number of restrictions (technology, operation cost, available area, etc), which originate the concepts of technical and economic potential, is of practical interest here.

Supplementing the information shown in Table III.9 (3.4.3: Renewable Resources), an estimate of the short and medium-term penetration potential of renewable energies for the generation of Electric Power is introduced below. The following penetration potentials were identified:

51 Table IV.13. Renewable resources

Technology Penetration Potential

100MW by the year 2015, maximum 1000MW by the year Solar thermo electrical 2025 (structural) 48MW by 2015 for residential use, maximum 1400MW by Solar photovoltaic 2025 Wind 2100MW by 2015 Biomass 68MW by 2015 Milling plants 800MW Hydro <30MW 430MW Geothermal 30MW by 2010

Source: Final Report of the Technical Assistance Project for the preparation of the “Strategic Energy Plan of the Argentine Republic” designed by IDEE/FB for the Energy Department, 2007.

In the alternative Scenario, according to the experts’ opinion concerning the use of these technologies in the final energy consumption, the use of renewable energies is expected to go up from 3.8% to 7.2% of the final consumption in the horizon year, mainly due to the penetration of biofuels (biodiesel, bioethanol, biogas), which increases from 0% of the final energy consumption in the base year to 3.7% in the horizon year, and of solar energy, going from 0% to 0.97% in the same period.

As regards the use of renewable sources by sectors, in the base year the Rural Residential, Livestock and Industrial sectors show higher usage, with 21.5%, 16.7%, and 9.1% of final consumption of each sector respectively.

In the livestock sector, the use of renewable energies grows 42.7% in the horizon year thanks to the penetration of biodiesel and, to a lesser extent, to wind pumping. Furthermore, it grows significantly in the agricultural sector due to the penetration of biodiesel and, to a lesser extent, to solar energy for drying purposes, reaching to 15.6% of the final consumption in the horizon year. On the other hand, in the industrial sector, the regression of traditional biomasses reduces the general participation level in the horizon year. The penetration in the transportation sector is quite significant due to the introduction of biodiesel and, to a lesser extent, to the introduction of bioethanol, reaching 9.4% in the horizon year.

The table contained in Annex II summarizes the results of the substitution measures adopted at final consumption level in each sector.

As regards the energy offer, the use of renewable energies in the electric power generation sectors was estimated. Such decisions or proposals were based in the goals set by the applicable regulation (27).

Act Nº 26.190 imposes quite an important requirement as regards terms to develop renewable energies and implies the implementation of almost all the wind projects included in the portfolio, besides an important amount of generation produced by the sugar cane milling refineries and all the hydro projects under 30MW, which seems hard to achieve as regards the terms and capacities thereof, without the urgent implementation of additional measures for the promotion of renewable energies.

(27) Hydro Power Plants over 30Mw were not considered.

Table IV.14.Estimated renewable energies installed capacity. Alternative scenario (MW)

Installed capacity (MW) 2004 2008 2013 2018 2025 2030(*) Wind 28 288 1,142 2,007 2,322 2600 Solar (*) 0 9 34 56 65 80 Mini-Hydro 372 411 703 866 1,012 1250 Geothermic 1 1 31 34 42 50 Biomass 55 42 42 62 72 80 Milling Plants 220 265 500 861 996 1000 Total 675 1,017 2,451 3,886 4,508 5060

Source: Final Report of the Technical Assistance Project for the preparation of the “Strategic Energy Plan of the Argentine Republic” designed by IDEE/FB for the Energy Department, 2007 (*) Although there is no official report, the top value of the load curve is estimated in 6.5 MW.

4.2.2.2 Main barriers to promote renewable energy resources/Technologies

There are significant renewable energy resources in Argentina that could be used for electric power generation. Previous surveys have performed a preliminary quantification of the generation potential and identified the existence of the technological capacity for the execution of projects. However, a number of different barriers conspire against the execution thereof in the short and medium term.

The main barrier in relation to the dissemination of renewable energies for electricity generation in Argentina seems to be the lack of incentives and an adequate framework (institutional, legal and regulatory). In this sense, the passing of the law Nº 26190, and its regulation, has represented a necessary - although not sufficient - step in the correct direction

R&D: Argentina registers a moderate R&D activity with respect to renewable energies, involving technologies such as photovoltaic, wind, solar thermal, mini hydro, biomass, and hydrogen. More R&D is needed for uses such as food refrigeration, and water pumping based on biogas, and biomass combustion and gasification. In general terms, there is very good potential of human resources available in the country for R&D. There is an overlapping of efforts in certain areas and lack of coordination, resulting in deficient organization and information availability on the part of renewable energies stakeholders. Many public institutions still present huge legal and bureaucratic obstacles for transferring technological developments with commercial aims, which make it even more difficult to associate with private stakeholders and to develop patents.

Manufacturers and industrial capacity: Within the industrial area, there is good potential capacity to fine tune and manufacture most of the renewable energy technologies that have reached the commercial stage within the industrialized world. As regards less complex technologies with an associated market niche, this capacity is shown or has been shown in the past through the existence of small companies that manufacture equipments in the fields of hydro energy, small wind chargers, wind pumping, solar water heaters, biodiesel, geothermal energy, ethanol, gasifiers, biomass boilers, and different photovoltaic system components. However, the quality of these equipments is highly variable, and it would be necessary for the manufacturers to be aware of and apply adequate quality standards. Some of the simpler technologies could be very easily developed at industrial level, as there is more than sufficient capacity for it, although the lack of an attractive market explains the nearly zero level of application and installed capacity in these areas, even when there is abundant R&D.

53 O&M infrastructure: Renewable energies projects characterized by low population densities and the intervention of multiple stakeholders which need to be coordinated, some of which are not physically present in the area where the project is implemented, will require the existence of an adequate network for O&M, for developing capacity of users and to provide financial support,. Some infrastructure already exists in the rural areas and should be used, supported and expanded in order to overcome this barrier. The O&M structure in general shows substantial deficiencies with respect to geographic coverage throughout the country and the time periods involved in the repair of equipments. This calls for more efforts so that those designing a project may plan this aspect in depth, and so that equipment manufacturers and dealers expand their O&M networks and the scope of their guarantees to reduce the rejection of the technology due to lack of or inadequate maintenance. Technicians should be aware of the quality standards and regulations to comply with during the installation and maintenance of the equipments.

Policy and Institutional issues: It is necessary to strengthen the areas related to energy planning and the use of the resources, the coherent design of energy and development policies, and the establishment of adequate regulatory, legal, and incentive frameworks for renewable energies. There is insufficient capacity to gather, organize, and promote information.

Finally, there are legal voids, lack of regulatory coherence and deficiencies in the implementation of incentives in general. The few existing legal mechanisms towards the promotion of certain renewable energies are still hard to implement, and in some cases somewhat deficient as to their scope, or even not viable on account of the lack of adaptation to the nation’s socioeconomic reality and the weakness of the organizations in charge of their application.

Financial: Renewable energy faces higher transaction costs than conventional projects, requiring specific financing schemes, particularly in the case of poor population sectors where payment capacity is very low. There are no specific credit schemes to finance this type of projects, and many projects involving renewable energies in Argentina have been partially financed with provincial funds, electricity development funds, and funds from the Ministry of Education with the support of international bodies.

Consumers: Training is essential, as it is linked to the adequate operation of the systems and their higher acceptance; both are critical aspects to ensure sustainability. In particular, in low power projects, the consumer must be aware of limitations and implications regarding adequate management of the energy demand. Cultural aspects are also significant, when introducing a new technology its degree of compatibility and potential acceptance must be estimated.

Private Stakeholders in Argentina: The private investment sector demands a coordinated national policy that articulates stakeholders and activities at national and provincial levels. They claim stronger incentives than those included in renewable energies promotion laws, which in practice have proven insufficient to initiate a process of massive dissemination.

Energy Resources: The information available on resources sometimes lacks spatial detail and stems from extrapolation of a few scattered measurements. Furthermore, long temporal series of data are sometimes lacking, except for specific locations associated with weather data stations.

Technical and infrastructure: Large renewable energies resources are located in areas with low population density and which lack adequate energy transmission infrastructure, a further barrier for tapping these resources in large scale, as occurs in Patagonia with the wind resource. Thus, the development of power transmission infrastructure is a prerequisite.

54 4.2.2.3 Measures to promote renewable energy resources/Technologies to enhance energy security

The actions carried out by consecutive governments towards the study and implementation of renewable energies projects were of a different nature, effectiveness, and duration. An historical survey of these actions indicates that they were initiated several decades ago as an energy self-supply and diversification strategy. In this frame a considerable number of RES/T projects have been implemented, but its impact has been low in the national primary energy supply.

Among the measures/actions/efforts aimed at promoting Renewable Energies, the following may be highlighted: the diversity of enacted legal regulations; the large number of entities that either directly or indirectly discusses the issue; and the programs and/or projects that have been initiated, especially from the governmental area. It should be noted that some of them have finally been transformed, as shown in true barriers to the RES/T promotion.

As regards the standards currently in effect at the national level related to the New and Renewable Energy Sources (RES/T), they include the following: Act Nº 25019/1998, “National Regulations for Wind and Solar Energy”, Decree 1396/2001, “Competitiveness Plan for Biodiesel Fuel”, and Resolution Nº 129/2001 of the Secretariat of Energy and Mining, “Biodiesel Definition and Specifications”. There are no other regulations in support of the rest of the renewable energies.

In some provinces, laws for the promotion and/or support of the RES/T were enacted, among which the legal framework of the Province of Chubut should be highlighted, by means of which wind energy generation is compensated, requiring an increasing percentage for the integration of local manufacturing components to receive such bonus. In the province of Buenos Aires, the development of renewable energies is supported by means of an incentive to generation and it the exemption, for the term of 10 years, from the payment of the property tax. It further binds electric energy distributors to the purchase of the electric energy injected to the market at market prices.

As regards the institutional framework, there are many public entities on which plans and activities related to Renewable Energies depend, even though they do not always act in coordination with each other.

Thus, the entities, plans and programs with activities related to Renewable energies include:

9 Ministry of Federal Planning, Public Investment and Services of the Nation: “National Strategic Plan for Wind Energy” 9 Secretariat of Energy: “Renewable Energies Project in Rural Markets” - PERMER. 9 Secretariat of Mining: Geothermal Energy Program. 9 Secretariat of Agriculture: Biofuel Program. 9 Secretariat of the Environment: Sustainable Energy Development Unit. 9 Secretariat of Science and Technology: Special Program for Renewable and Non- Renewable Resources.

In numerous National Universities there are groups that are specifically devoted to the issue of Renewable Energies with a significant dedication to the development of human resources.

55 Experiences and current usage status

Among the main experiences in the use of renewable energies in electric power generation promoted by the Government, by local authorities and private entities, it should be highlighted that the Argentine Electricity Market has more than 2800 agents, which generated 96646 GWh in 2005. The amount of electricity supplied by renewable sources was less than 1600 GWh in the same period.

Solar Photovoltaic: The PERMER is a Project destined to finance the purchase and installation of systems to supply electric power to users who, due to their location, lack such service and do not have access to it in the short or medium term. The photovoltaic installations performed within the framework of this project and in and in the process of tender or actually awarded total approximately 1MWp (residential and public services). At present, in 15 of the 24 Argentine provinces the PERMER program shows different levels of progress, Jujuy being the province with the highest degree of progress.

Other photovoltaic energy installations: Among the projects outside the scope of the PERMER that contribute to this installed capacity there are: the electrification of the rural schools in the Province of Buenos Aires; the provision of the residential Electric Energy and for public services in the province of Neuquén and water pumping in Catamarca.

High capacity wind energy: At the end of the 1990s, some electric power cooperatives and private investors installed small wind farms and generators, mainly in the South of Buenos Aires and Chubut provinces. As a result of this favorable context, plans for the installation of up to 3000 MW of wind power in Buenos Aires and Patagonia were mentioned. Investments were made for capacity building, resource measurement and buying wind converters. But due to economic crises the context suddenly changed. Currently there are approximately 29MW of high wind capacity installed in Argentina (0.11% of the total installed capacity in 2005) and a portfolio of projects that add up to approximately 2,000MW, some of which form part of the National Wind Plan.

Low wind capacity: According to the National Agricultural Census of 2002, during that year there were 112 wind turbine generators installed in agricultural facilities (EAP) for the production of electric power, assuming an average value of 500MW per equipment, an installed capacity of 581kW and 184,7 kW installed in rural schools and in distributed population may be obtained.

Biomass: A significant use of biomass nowadays is the use of sugar cane bagasse as fuel for boilers in sugar mills. There are certain isolated cases of electric power generation with biomass residues (bagasse, tung husk, sawmill residues) and firewood (6 projects).

High Enthalpy Geothermal: For the use of high enthalpy geothermal energy, the only demonstrative project developed in the country is the 0.67 MW binary-cycle Pilot Electric Power Station installed in 1988 in the geothermal field of Copahue, Neuquén, which has been inoperative for several years now.

Small Hydro Projects: The following table shows a summary of the existing hydro stations under 30 MW (Source: SE, National Prospective Direction).

Table IV.15. Install hydro stations

Capacity Energy Operating Average Load (MW) (GWh) Hours Factor Existing installations 347 Operating installations 372 1,152 3,470 0.40

Source: Authors’ elaboration.

This mini-hydro capacity represents near 1.3% of the total capacity installed in Argentina in the year 2005, and 3.7% of the total hydroelectric capacity. In terms of energy, it represents 1.2% and 3.4% of the total energy produced in Argentina and hydroelectric energy respectively.

Hydrogen: There are no operating programs for the use of hydrogen, except for the small experimental Pico Truncado station of water electrolysis from wind-generated electricity. There is numerous research teams involved in the subject, particularly for the use of fuel cells.

4.2.2.4 Impacts of the measures/policies on the mix and on the environmental at country level

Due to the wide variety of applications and the small relative weight, in many cases, there is no energy “accountancy” and, therefore, it is impossible to quantify the avoided emissions by comparison with other conventional supply sources. For such reason, all estimations have been based, in some cases, on simple hypotheses.

Only in the case of wind generation connected to networks, and of some small hydro projects, are there accurate data about the total generated energy where it is possible to calculate the avoided emissions.

This is not the same for solar installations, where it is necessary to make some generation hypotheses.

Photovoltaic solar energy: The total installed capacity is approximately of 6.5 MWp; if we assume that, at national level, there is an average of 5 hours-day of peak solar radiation (1000 W/m2) the total annual energy amounts to 11,860 MWh/year. The emissions avoided per year, assuming diesel substitution, would be 10,674 t of CO2 equiv.

Wind energy for electric power supply: The estimation of the emissions avoided by the generation of electric power through wind turbine generators has been of 90,000 Ton/CO2 per year.

Small hydro projects: The total installed capacity now operative is 372 MW. Considering a typical use factor value of 0.25, the annual energy generation would be equivalent to 821 GWh, and the avoided emissions would amount to 739.000 t CO2 equiv.

Geothermal energy: The total installed capacity is approximately of 150 MWt, 83.6 MWt of which are intended for balneology. Taking only the capacity intended for direct thermal uses, which totals 66.4 MWt, and adopting a 0.4 use factor, it is possible to estimate the avoided GEI emissions assuming that, for example, all the heat is produced by substituting liquid fuel (gas-oil or fuel-oil) used with a 60% efficiency, that is to say, with a CO2 equivalent emission factor of 0.45 t CO2/MWh. Then, the avoided emissions would amount to 107,000 t CO2 equiv/year.

Costs

The following table shows unitary investment prices enabling to dimension the measure implementation costs. In turn, these costs are offset by fuel savings and investments in substituted conventional energies.

Table IV.16. Implementation costs of renewable technologies

Technology Cost Big-scale wind turbine generator 1000 USD/Kw. Small-scale wind turbine generator 3000-6000 USD/Kw. Wind mill 500 USD/Kw. Small hydro stations 600-3000 USD/Kw. (w/civil works) Solar Photovoltaic 4000-10000 USD/Kw. Solar oven 200-2000 USD/unit (ch/gr) Solar collector 200-600 USD/unit (ch/gr) Turbo steam with biomass 1500-2500 USD/Kw. Biodigestor 1000 USD/m3 Biodiesel 450-500 USD/Tn Electric Power Generation with Geothermic 600/1500 USD/Kw.

Source: Torcuato Di Tella Foundation and Institute. National Communication: National Adaptation Program and Regional Adaptation Plans. November 2006. Chapter: Energy Sector vulnerability and adaptation.

4.2.3. Other Measures and their impacts

The actions related to efficient use and penetration of renewable energies may be complemented by other possible measures.

In the case of the involved study, there are specific options that, while may not be quantified and assessed in the framework of this study, could be listed as options to be analyzed in more thorough studies.

Strengthening oil and gas exploration and extraction

Argentina has many geological beds to be studied yet and, up to date, only the known beds have been analyzed without evaluating the possibility of investing in the exploration and development of new ones. An international call to attract investments in this activity may help improve the reserve/production relation and reduce vulnerability in face of the potential depletion of domestic resources and the growing international prices. In addition, high oil prices give the opportunity to make new efforts to discover resources, also offshore.

Increasing refining capacity

As Argentina is having problems in the supply of oil products, especially Diesel, to improve security of supply means to increase the capacity of refineries to meet the demand for lighter products such as transportation fuels.

Strengthening regional energy integration

South America has an important energy integration history, especially in the Southern Cone. The strengthening of the gas and electric interconnections will make mutual securities grow.

58 Umbrella bilateral and multilateral agreements, together with specific long-term contracts, would give security to a region that, in fact, not only has plenty of energy resources but also presents an outstanding level of complementation among them.

Diversification of the energy matrix

It is necessary to recover policies to foster the development of the most abundant sources and substitute the use of the least abundant ones. In such sense, the development of a more diversified primary energy matrix, giving a major role to hydro and nuclear energy, mineral coal and renewable energies, would generate benefits both for the energy sector and the economy as a whole, enabling to develop new activities related to such sources and causing important effects on the rest of the economy.

Electricity Generation Portfolio

As a complement to the previous measure, the diversification of the electricity generation matrix, the reduction of pressure on non-renewable resources, specifically natural gas and oil products, could be achieved through long-term agreements guaranteeing prices and quantities to those who undertake investment projects related to sources alternative to those mentioned above.

Finally, the resources generated as the consequence of the Crude and Oil products export taxes (withholdings or retentions) may constitute a fund to finance projects which, through different measures, will tend to increase supply security.

59 V. Threats to Energy Security. Measures to enhance energy security and their impacts at the Household Level

Following the same pattern that the previous section (National Level), we introduce first some key figures describing the situation of the Household Sector, in order to identify latter main threats regarding Energy Security. Unfortunately, at the Household Sector the intended analysis is more difficult, as the lack of information is larger. Moreover, available data in many cases allowed presenting only a brief picture of the sector’s situation, without the dynamic view that data for – at least – a couple of years would provide. Next, the main threats linked with the particular situation of both rural and urban Households - as well as high and low incomes - are presented. i) Shares of Commercial Energy Consumption

Country wide

From available sources, a general picture of energy consumption by sources in rural versus urban sector, was found only for year 2004. Nevertheless it is clear that this dilemma is not an issue in Argentina as total country. Table below reflects that urban sector only consumes a 2.4% of traditional energy (28). The rural electrified sector consumes 9.0% of traditional energy, while non electrified rural sector consumes 26% of wood, as energy source. Nevertheless this last group accounts only for a 2.4% of total homes in Argentina.

Table V.1. Net or Final Energy Consumption by Sources Argentine Household Sector. Year 2004 (kToe)

RURAL Energy Sources URBAN TOTAL Electrified Non-electrified

Number of households: 9456.9 % 699.5 % 248.3 % 10404.8 % (in thousands)

Wood 14.8 0.2% 42.3 7.2% 45.9 26.0% 103.1 1.0% Charcoal 204.3 2.2% 13.6 2.3% 0.0 0.0% 217.9 2.2% Kerosene 67.3 0.7% 63.7 10.8% 3.8 2.1% 134.8 1.4% Wind Energy 0.0 0.0% 0.0 0.0% 63.0 35.6% 63.0 0.6% LPG 890.3 9.8% 363.9 61.6% 64.1 36.3% 1318.3 13.3% Natural Gas 6110.3 67.0% 8.0 1.4% 0.0 0.0% 6118.3 61.9% Electricity 1835.8 20.1% 99.0 16.8% 0.0 0.0% 1934.8 19.6% Total 9122.8 100% 590.5 100% 176.8 100% 9890.1 100%

Source: own estimation.

A more detailed picture of energy uses or services is also available, only for year 2004. It is remarked the core relevance of Cooking, among Rural non electrified energy use.

(28) Nevertheless, charcoal is difficult to include or should be only partially included, due to the importance of asado the traditional way of meat cooking in Argentina.

60 Table V.2. Energy Consumption structure and intensities by uses Year 2004 - Argentine Household Sector

NET ENERGY USEFUL ENERGY RURAL RURAL Uses URBAN Non- URBAN Non- Electrified Electrified electrified electrified 1. Lighting 6.0% 9.3% 7.5% 0.8% 1.0% 0.8% 2. Cooking 24.1% 39.9% 40.7% 21.3% 39.8% 59.5% 3. Water heating 29.4% 21.6% 6.1% 28.9% 23.8% 9.9% 4. Heating 26.9% 12.6% 2.5% 26.5% 11.2% 1.3% 5. Cooling &Ventilation 1.2% 1.3% 0.0% 1.9% 2.5% 0.0% 6. Food conservation 7.9% 9.3% 7.0% 12.6% 9.2% 2.8% 7 Water pumping 0.1% 0.8% 35.6% 0.2% 1.0% 24.7% 8. Engines 0.0% 0.3% 0.0% 0.0% 0.6% 0.0% 9. Other uses 4.4% 5.0% 0.5% 7.7% 10.9% 0.9% TOTAL 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% koe/household 964.7 844.2 711.9 486.3 343.9 143.6

Source: own estimation.

Using available information of INDEC’s permanent household survey on 10 urban centers – including the three biggest ones – figures are presented regarding the fuels employed for caloric or thermal purposes (cooking, home and water heating) by income strata.

Table V.3. Structure of Fuels used for Main Heating or Thermal Uses by Household quintile, years 2003 and 2006 (in %) Urban areas of Argentina

Kerosen/ Income Natural Gas LPG Firewood/ Other Quintile Charcoal and Year 2003 2006 2003 2006 2003 2006 2003 2006 Quintile 1 57.0% 58.5% 39.4% 38.4% 1.9% 1.4% 1.7% 1.8% Quintile 2 57.7% 58.5% 39.2% 39.9% 1.3% 0.7% 1.8% 1.0% Quintile 3 65.9% 65.3% 32.8% 34.0% 0.4% 0.2% 0.9% 0.5% Quintile 4 73.7% 76.9% 25.6% 22.9% 0.3% 0.1% 0.4% 0.1% Quintile 5 89.0% 89.3% 10.7% 10.6% 0.2% 0.0% 0.1% 0.1%

Source: Elaborated from INDEC permanent households’ survey.

For comparison purpose the urban area of Formosa – almost without Natural Gas availability - is presented below. Thus, it is possible to distinguish the situation of households in those urban areas endowed with Natural Gas network, from the unfavorable situation of those Provinces not reached by the Natural Gas network (29).

(29) The detail by representative provinces is presented in next section.

61 Table V.4. Structure of Fuels used for Main Heating or Thermal Uses by Household quintile, years 2003 and 2006 (in %) Urban areas Formosa

Kerosen/ Income Natural Gas LPG Firewood/ Other Quintile Charcoal and Year 2003 2006 2003 2006 2003 2006 2003 2006 Quintile 1 0.0% 0.4% 74.4% 86.5% 25.6% 12.7% 0.0% 0.5% Quintile 2 0.0% 0.9% 89.6% 94.8% 10.4% 4.3% 0.0% 0.0% Quintile 3 1.7% 1.6% 91.7% 95.8% 6.6% 2.7% 0.0% 0.0% Quintile 4 1.5% 0.0% 96.2% 98.2% 2.3% 1.8% 0.0% 0.0% Quintile 5 0.0% 0.3% 100.0% 99.7% 0.0% 0.0% 0.0% 0.0%

Source: Elaborated from INDEC permanent households’ survey.

It is very clear the progressive substitution of GLP, Firewood, Charcoal and Kerosene (30) by Natural Gas as income grows, as well as the substitution of Firewood, Charcoal and Kerosene by GLP in absence of the NG option.

Tables above reflect not only the better energy availability in terms of modern fuel, as income grows (from quintile number 1 to 5), but also the evolution from year 2003 to year 2006. Unfortunately data of absolute consumptions were not survey nor estimated, as well as the Merlo Case Study (described below) only the employment or existence of specific energy source was surveyed, but not the quantity consumed.

As available information allows, some additional detail is presented from specific studies, related with energy use in poor households.

Specific Local Studies

The prepayment meters pilot project in Merlo, EDENOR utility concession area was implemented during years 2002-2003 for addressing the needs of 4,300 households, many of whom could be defined as ‘newly poor’. The relevant feature is the lack of natural gas connection in an urban area. (102 interviews, June 2004, Annecke et al, 2004). Energy consumption for Cooking and Heating is shown in Table below (31).

(30) In Argentina Kerosene can be considered as a relatively poor energy source, although it is not as dirty as firewood or charcoal, heating appliances are closer to biomass’ appliances than to LPG’s. (31) If the situation before the prepayment meter is considered, LPG was the most important fuel for cooking, while electricity was the most used source for water- and space-heating. This holds even if all biomass sources are consolidated (23 % for electricity versus 7%+14%=21 % for wood plus charcoal). Following the installation of the prepayment devices, the satisfaction of space-heating needs actually got slightly worse – increase from 31% to 34% of unattended energy use. Also, considering that these households use relative more expensive water-heating options (electricity and LPG), there is an access issue with respect to the lower-cost option: natural gas.

62 Table V.5. Structure of Fuels for Cooking and Heating Merlo Case Study - Share of Total Homes - February 2004

Space heating Water Sources / Uses Cooking Before After heating prepayment meter Wood 2% 3% 7% 14% Charcoal - - 14% 17% Kerosene 1% 1% 10% 11% Electricity - 49% 23% 15% LPG 97% 45% 14% 10% Un-addressed use - 2% 31% 34% 100% 100% 100% 100%

Source: Annecke et al, 2004.

In the next table another study findings - dealing with poor households - are presented. As energy units of consumption were survey (which was not done in the Merlo study), it is possible to estimate the share of traditional energy, even by energy service, adding Charcoal and Biomass Residues. Thus, these urban poor households use 16.5% of traditional energy.

Table V.6. Net or Final Energy consumption by fuel sources and uses [koe/household] Low Income Urban Families without distributed Natural Gas (FB, 2008). November 2007

Natural Biomass USES / FUELS LPG Kerosene Charcoal Electricity TOTAL Gas Residues Lighting 18.5 18.5 4.5% Cooking 136.1 4.3 2.3 31.1 1.3 0.5 175.7 42.8% Water Heating 27.4 8.2 4.7 8.4 26.4 75.2 18.3% House Heating 4.1 2.3 2.6 26.9 0.1 15.7 51.8 12.6% Food Conservation 64.2 64.2 15.7% House Cooling 2.5 2.5 0.6% Other appliances 22.5 22.5 5.5% 167.7 14.8 9.6 66.5 1.4 150.3 410.3 100.0% TOTAL 40.9% 3.6% 2.3% 16.2% 0.3% 36.6% 100.0%

Source: Self elaboration.

63 ii) Household Energy Expenditure

Country wide

Table V.7. Average energy expenditure in year 2004 (USD of 2004 1usd=3 Argentine $). Shares of household expenditure and income. Total Country

d01 d02 d03 d04 d05 d06 d07 d08 d09 d10 Monthly energy expenditure in US$- 19.01 28.59 31.94 36.22 40.25 47.25 52.84 58.83 62.29 76.14 estimated % of average 14.5 12.8 11.7 11.6 10.6 10.1 9.0 8.1 6.9 4.9 monthly Expenditure % of average 18.3 13.6 11.4 10.7 9.4 8.5 7.5 6.6 5.3 3.1 monthly Income

Source: FB estimates based on INDEC data. Note: lower income strata are spending more money on energy than their salaries allow them to (social plans, debts, others) that is why the fraction or percentage related to EXPENDITURE is lower than the one based on INCOME. Considering 1 US$ = 3 Argentine pesos of 2004.

Figure above shows an estimate of household energy expenditure including all significant sources: natural gas, LPG, kerosene and electricity consumed within the home (transport energy is excluded). Monthly energy consumption is presented by income decile (d01 or the first decile comprises the poorest 10 % of households, while d10 or the tenth decile shows the energy consumption of the richest 10 %). As expected, poorer households spend a greater part of their income on energy.

Specific Local Studies

Some additional information was found comparing the cost of energy sources for a Patagonian city (Bariloche), although these figures do not reflect exactly the national picture – e.g. electricity is much cheaper in Buenos Aires Metropolitan Area – relative costs can be considered a good estimation. It must be remarked that this city has bigger needs of caloric or thermal energy services (house and water heating) than the country average, as it is located near the Andes Mountains in the south-west.

64 Table V.8. Energy prices and consumer energy-purchasing power for different household fuels Year 2005, Patagonian City of Bariloche

Energy obtained with Energy per unit a medium salary Common Energy prices Resource (lower heat value) (official national Trade unit US$/Unit (MJ) [a] average) (GJ/salary) [b] Subsidized natural gas m3 35.4 1.1 213 Unsubsidized natural gas m3 35.4 2.3 102 Subsidized LPG Kg 46.1 11.4 21 Unsubsidized LPG Kg 46.1 16.0 15 Electricity kWh 3.6 1.6 144 Firewood Kg 15 4.4 54 Kerosene Liter 35.2 14.12 17 Diesel Liter 36.6 13.3 18

Trade unit means the common unit for trade for residential consumers. a) The energy per unit corresponds to the low heat value for every fuel, since the combustion produces water in vapour form (see IEA, 2005). Prices include all taxes and fixed charges paid even with minimal consumption. b) The energy per salary is calculated with a medium salary. The medium salary was obtained from the government’s official statistics centre INDEC. The medium monthly salary for the first part of 2005 in Bariloche was taken to be equal to the medium salary in the whole country, namely $ 720 per month (USD 240) (INDEC, 2005). This value applies to the registered workers, and is somewhat higher than that considering also unregistered salaries.

Source: Gonzalez et.al, 2007 (32)

Additionally tables from mentioned Merlo prepayment project addresses the needs of 4,300 people; could be defined as ‘newly poor’. This population does not have access to distributed gas. Next table shows a picture of the expenditure in fuels; higher relevance for LPG is found, while standard deviation of surveyed data is not too large.

Table V.9. Average expenditure in Argentine pesos per month on all fuels. Merlo Case Study

Kerosene Gas Coal Wood Candles Batteries Electricity All fuels Mean 3 29 2 0 1 1 23 57 Standard 14 15 8 3 3 3 11 26 deviation

Source: Annecke, Wendy, 2004

A detailed picture (see Table below), using average tariff for electricity – without considering whether it is paid or not – and natural gas, and real field study prices for other fuels bought by these particular households (33), contains a warning about the share of income necessary to buy existing levels of energy at current prices. The poor profile of surveyed families is illustrated by the 54 % of total energy expenditure spent on cooking.

(32) Residential energy use in one-family households with natural gas provision in a city of the Patagonian Andean region Gonzalez A.D. et.al., Energy Policy 35 (2007) 2141–2150. (33) UPEA Theme case study: poor neighborhoods of Villa Fiorito and Budge, southern Greatest Buenos Aires.

65 Table V.10. Estimation of annual expenditure on energy: Villa Fiorito and Budge case-study. November 2007 total survey (in AR$)

USES \ SOURCES LPG NG KE CH BR EE TOTAL Lighting 20.3 20.3 2.8% Cooking 310.8 1.3 5.3 71.9 3.0 0.5 392.8 53.8% Water Heating 62.6 2.5 10.8 19.4 28.9 124.2 17.0% Space Heating 9.4 0.7 5.9 62.1 0.3 17.2 95.7 13.1% Food Conservation 70.3 70.3 9.6% Ventilation 2.7 2.7 0.4% Other Devices 24.6 24.6 3.4% 382.8 4.5 22.0 153.4 3.3 164.6 730.5 100% TOTAL 52.4% 0.6% 3.0% 21.0% 0.4% 22.5% 100%

Source: Authors’ estimates from http://www.montamat.com.ar/ and field study prices, December 2007 Notes: Lower heating value of fuels was used for comparisons. For biomass residues the same price per energy unit as charcoal was used, for simplicity. Relative prices in terms of AR$ per GJ are: LPG 54.45 (AR$ 25 per 10 kg cylinder); NG 7.40 (0.27 per m3); EE 29.08 (104.7 per MWh); CH and BR 55.17 (6 per bag of 4 kg); and KE 54.45 (1.9 per l).

Argentine $730 - total energy expenditure - represented, in December 2007:

9 14 % of the cost of the indigence-level basic basket of food (AR$ 442) mentioned earlier; 9 6 % of the officially defined poverty income (AR$ 955); 9 41 % of the most important (in terms of number of beneficiaries) social welfare plan for households in Argentina (AR$ 150), or finally 9 27 % of the unemployment subsidy (AR$ 225). iii) Access to Modern Fuels

Electricity

1990 2000 2007 % of homes 89.9 % 94.0 % 95 / 97.6 % (34)

However, the percentages of electrified dwellings vary greatly from region to region. The lowest percentages are recorded in north-eastern provinces - Formosa, Chaco, Corrientes and Misiones - and north-western provinces -Santiago del Estero, Salta.

Gas

It is possible to get an accurate idea of access to Natural Gas and LPG, by the section 1.1 Shares of Commercial Energy Consumption/ Country wide above.

(34) Some sources shows this very high level of electrified houses by 2007, other sources (OLADE, official Energy Secretary) express a 95% reached in 2001 without further increase.

66 5.1. Threats to energy security

The main threats linked with the particular situation of both rural and urban Households - as well as high and low incomes - are presented below. After that, some tables are exposed summarizing the threats/problem/vulnerability related with Oil and Natural Gas dependence, and Electricity supply restrictions, that have an impact on the household sector. The threats on the Household level triggered by institutional, regulatory and macroeconomic situation are not repeated – at least not as extensively - as previous chapter already indicated household sector impact as well. Nevertheless the linkages between current policy and households threats are summarized on mentioned tables.

5.1.1. Specific threats

While analyzing the threats to energy security within the Household sector, it is important to distinguish grid or network provided sources (natural gas and electricity) from the other energy sources (mainly LPG and charcoal, complemented by wind, firewood and kerosene in rural areas).

Thus, on one hand the grids do not reach all the country population – already mentioned feature of regional inequality – and on the other hand the extension of the service remains a pending task of the utilities – lack of investments showing the need of regulation improvements. As grid extension and related infrastructure investments have long pay back periods.

Argentina has an unambiguous urban profile of its population, which is expected to get even deeper.

Table V.11. Households’ structure and foreseen evolution

in million Households 2004 2010 2015 2020 2025 Total Homes 10,405 11,147 11,691 12,264 12.859 % 100% 100% 100% 100% 100% Urban Homes 9,457 10,167 10,694 11,251 11.830 % 90,9% 91,2% 91,5% 91,7% 92.0% Rural with Electricity 0,700 0,797 0,873 0,950 1.029 % 6,7% 7,1% 7,5% 7,7% 8.0% Rural Without Electricity 0,248 0,183 0,124 0,063 % 2,4% 1,6% 1,1% 0,5%

Source: Own elaboration, form INDEC data.

This urban profile encompasses additional pressure on grid provided services. Furthermore as both average consumption and electrification level grow - pushing the capacity to the limit of technical failure (with increased service interruptions) the household provision becomes more vulnerable (35).

In addition it must be expressed that some of the provinces outside Buenos Aires urban area made tariff actualization – including a social tariff scheme or at least some considerations - leaving its users in a different situation regarding the Buenos Aires metropolitan area - regional

(35) For this report purposes 100% of urban population is consider electrified (99.6% of 10 surveyed urban areas had electricity by year 2001), see footnote # 15 and linked paragraphs for further detail.

67 inequality issue. As reflected in next graphs a need of fixing the regressive nature of the tariff structure in most of the jurisdictions is also identified.

Figure V.1.Household tariff by bi-month consumption ($ per KWh)

0.6 Jan 2001

Basic Jan 2007 0.5 Consumptions

0.4

0.3 Implicit Inequity in the Higher income $ per KWh tariff design consumptions

0.2

0.1

0 10 40 70 100 130 160 190 220 250 280 310 340 370 400 430 460 490 520 550 580

Source: Own estimates using data from current GBA tariff.

Figure V.2.Household electricity tariff by consumption. (Percentage of monthly expenditure)

4.00

3.50

3.00

1997 data

2.50

Poorer 1997 % Elect. expenditure 2.00 Strata 2004 estimated 2004 % Elect expenditure

1.50

1.00

0.50 Richer Strata

0.00 d01 d02 d03 d04 d05 d06 d07 d08 d09 d10

Source: Own estimates using data from INDEC.

68 As mentioned, after the 2002 crisis, gas and electricity household tariffs were not adjusted. Industrial users’ tariffs, on the other hand, were increased according to the impact of devaluation and their status in the market. However, the household tariff structure is still absolutely regressive and does not foster the rational use of energy (Figure V.1.). Although the relative incidence of the electricity bill was reduced, its impact on the energy basket is much higher for poor users with regular incomes than for the rest of the social strata (Figure V.2). Anyway the worsened service provision is not reflected, neither the worsened situation regarding monetary income by lower strata households.

Additionally, addressing the most poor-related energy source, it is estimated that by the end of year 2004 LPG represented between 50% and 60% of the total basic services expenditure by low income household (36). These results ask for urgent attention as the total figure of LPG sold in the market, reflects the existence of unmet basic energy needs.

The following figure shows the impact of devaluation and crisis in the year 2002 on consumption due to the significant increase in LPG price, explained because the market of the energy source lacks price regulation and it is strongly concentrated (37). The figure compares the performance of residential sales - that do not grow as demand does - against the explosive increase in exports. Obvious commercial reasons lie behind this differential conduct. Despite the many factors behind the lack of smooth behavior in both lines, the relation between increased production and external market is unambiguous, while unsatisfied domestic market is not addressed.

It is also possible to identify that even after the mentioned households’ gas and electricity “price frozen” the negative impact is higher for low income homes compared to richer ones. Currently a cross subsidy between productive users and households is prevailing, as the former pay higher actualized tariff. But a deeper analysis must review these rents transfers towards non poor households, to avoid affecting the energy sustainability and thus, energy security.

Since it is assumed that almost all homes consuming LPG at present are rural families or poor homes (about 4.5 to 5 million households in the whole country), analysis should focus in to what extent policies for this fuel help mitigate the energy insecurity of the poorest.

(36) De Dicco, R., December 2004, http://www.lafogata.org/04arg/arg12/ar_notas.html. (37) If the structure of Argentine LPG market is assessed - following National Energy Secretary data – a high degree of concentration is found in the upstream stage: only six firms represent the 85% of the production (Repsol YPF Gas - 35% - up to 55% once its controlled firm Pluspetrol is included - Total Gaz - 21%; and Shell Gas - 8%, among them). Regarding the downstream, even though the gas spliters/ separators and distributors are integrated for 49 and 280 entities, respectively, both Repsol YPF (Spain) and Petrobras (Brazil) operate indirectly in most of the firms within both stages. Furthermore there is no official signal toward a harder regulation of this market, for example fixing final prices. That is why this situation is considered structural and requires not only a rigid commitment by the governmental authorities, but also a proper implementation tool in order to allow a fairer price to the poor households. Following some experts analysis, the production cost of the LPG lies around 2 $ for a 10 kg cylinder, while the social price proposed is 16$. Thus the earnings of the mentioned operators reached more than U$S 5.300 millions in the period 1997- 2004 (De Dicco, R. 2004).

69 Figure V.3.Evolution of LPG consumption in the residential sector. Compared with exportations 1985- 2005.

4000

3500 Production Exportations Residencial Consumption 3000

2500

2000 thousands ofTOEs

1500

1000

500

0 1985 1986 1987 1988 19891990199119921993199419951996199719981999200020012002 2003 2004

Source: Estimate on the basis of Energy Balances by the Secretary of Energy.

The figure below shows an estimate based on an update of the energy consumption (38) basket by decile of population income, in terms of current prices in the local currency, and its relation to the average expenditure and income of the households (see average income level on table below). It should be stated, however, that these estimates refer to average households by decile and may not reflect the real situation of most poor population. Anyway, it is revealing to notice the negative saving of the groups in the first two deciles concerning expenditure by household, and also the high share of energy expenditure in their average income.

Other sources of information do not show such a big share of energy expenditure, probably due to the underestimation of GLP and Kerosene, but the regressive feature of energy prices (weighed by its quantities) is also present.

(38) Including only Household energy, mainly electricity and gas (distributed and LPG) but excluding fuels for transport.

70 Figure V.4.Average energy expenditure in year 2004 ($ of 2004). Shares of household expenditure and income

250.00 20.0 18.3 Monthly energy expenditure - estimated % on average monthly Expenditure 18.0

% on average monthly Income 200.00 13.6 16.0

% of monthly expenditure 14.0 14.5 11.7 11.6 150.00 10.6 10.1 12.0 12.8 11.4 10.7 10.0 9.0 8.1 100.00 9.4 8.5 6.9 8.0

7.5 4.9 6.0

monthly Argentine $ of 2004 $ of monthly Argentine 6.6 50.00 5.3 4.0

3.1 2.0

0.00 0.0 d01 d02 d03 d04 d05 d06 d07 d08 d09 d10

Source: FB estimates based on INDEC data. (a) considering 1 US$ = 3 Argentine pesos of 2004

Finally, only a 10% of the first quintile of income would have access to natural gas, another 40% would use LPG and pay six times the price of distributed gas (50% would consume no gas at all) (39). An almost equal proportion is found in the RETs’ II report, (Fundación Bariloche 2007) (40).

Using available information of INDEC’s permanent household survey on 10 urban centers – including the three biggest ones-, the following information is presented regarding the fuels employed for heating purposes (cooking, home and water heating) by income strata. Thus it is possible to distinguish the situation of households in those urban areas endowed with NG network, from the unfavorable situation of those Provinces not reached by the NG network.

(39) Social Interest tariff – ENARGAS. Commissions’ plenary session, Argentine National Senate, June 5th 2003. (40) The average price estimated for year 2006 for LPG is 61.2 USD/10^6 kcal, while that of natural gas reaches 11.3 USD/106 kcal and finally electricity worth 41.8 USD/10^6 kcal, considering household tariffs.

71 Figure V.5.Structure of Fuels used for Heating or Thermal Uses by Household quintile years 2003 and 2006 (in %). Representative urban areas with NG availability

a) Fuels for cooking Gran Córdoba b) Fuels for cooking Gran Buenos Aires

100% 10 0 % 90% other 90% KE/F 80% 80% W/CH 70% KE/F 70 % 60% W/CH 60% LPG 50% LPG 50 % 40% 40% 30% 30% NG NG 20% 20% 10 % 10 % 0% 0% q1 q1 q2 q2 q3 q3 q4 q4 q5 q5 q1 q1 q2 q2 q3 q3 q4 q4 q5 q5 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006

c) Fuels for cooking Santa Fe d) Fuels for cooking in Urban Areas of ARGENTINA

100% 10 0 % 90% KE/F 90% 80% KE/F W/CH 80% 70% 70 % W/CH 60% 60% LPG LPG 50% 50 % 40% 40% 30% NG 30% 20% NG 20% 10 % 10 % 0% 0% q1 q1 q2 q2 q3 q3 q4 q4 q5 q5 q1 q1 q2 q2 q3 q3 q4 q4 q5 q5 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006

Source: Elaborated from INDEC permanent households’ survey. Note: Gran Buenos Aires excludes the Capital City of Buenos Aires.

72 Figure V.6.Structure of Fuels used for Heating or Thermal Uses by Household quintile years 2003 and 2006 (in %). Representative Urban areas without or very restricted NG availability

a) Fuels for cooking Formosa b) Fuels for cooking Jujuy

10 0 % 10 0 % 90% KE/F 90% 80% KE/F 80% W/CH 70% 70 % W/CH 60% 60% LPG LPG 50% 50 % 40% 40% 30% 30% NG NG 20% 20% 10 % 10 % 0% 0% q1 q1 q2 q2 q3 q3 q4 q4 q5 q5 q1 q1 q2 q2 q3 q3 q4 q4 q5 q5 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006

c) Fuels for cooking Resistencia, Chaco

10 0 % 90% KE/F 80% 70% W/CH 60% LPG 50% 40% 30% NG 20% 10 % 0% q1 q1 q2 q2 q3 q3 q4 q4 q5 q5 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006

Source: Elaborated from INDEC permanent households’ survey.

73 The progressive substitution of LPG by Natural Gas, while other sources (mainly Charcoal in the case of very poor families) are abandon is very clear, when the households are ordered by income quintile (q1 comprehends 20% of poorest households, while quintile q5 presents fuel structure of the 20% richest).

LPG is replaced by NG when available or in turn LPG displaces Firewood, Charcoal and Kerosene in those cities where NG is not available. The exceptions are Jujuy City and Santa Fe city, where the poorest strata’s (deciles 1 and 2) energy consumption is showing the opposite trend during the 2003/2006 period: Firewood, Charcoal and Kerosene share was increased in Jujuy while GLP consumption, relative to NG also increased in Santa Fe. Remarkably higher deciles of income (4 and 5) do not suffered the same disadvantage. Although many factors can provide explanations for this – e.g. localizations of new homes, increased poverty, impossibility to afford upfront costs of NG in Santa FE or the LPG appliances as well as LPG prices in Jujuy), it seams that the consumption patterns is regressive, in terms of poor people paying more expensive fuels, and the better off benefiting from cheaper and cleaner fuels.

Nevertheless it is very clear the progressive substitution of GLP, Firewood, Charcoal and Kerosene by NG as income grows, as well as the substitution of Firewood, Charcoal and Kerosene by GLP in absence of the NG option. Finally it is noticeable how other sources - with the exception of GLP - become almost negligible when NG is available for thermal uses in cities.

Regarding Kerosene a lack of availability was also reported (main sales point are the gasoline stations).The situation of the provision of both fuels (Kerosene and LPG) reflects once again the “oligopoly” situation and the lack of monitoring and control by the regulatory entity. Similarly the charcoal price did increase constantly since 2002, drawing a delicate picture for the poor households’ energy access, as these sources are mainly used by most poor families for home heating and cooking in absence of LPG or when energy is bought on a daily basis.

It is possible to identify both the convenience of using natural gas, even unsubsidized (see Table V above), and the somehow low electricity comparative price. Once again poor users, relying on LPG, Kerosene or Firewood (which would be Charcoal in Buenos Aires metropolitan area) as clear more expensive fuels as they can not pay the electricity and distributed gas upfront cost connection.

The strategy to provide energy to the poorest homes in the short turn should focus on improving the availability of, and access to the LPG. But, in view of the unsatisfied basic needs, it is possible that such additional energy will only partially substitute less clean and more expensive sources (charcoal, firewood). In a second instance –medium term-, it is desirable to include the poorest homes into the natural gas network. Nevertheless the large differences of energy price in Argentina, due to existing subsidies, give very unequal opportunities to households, depending on where they are located and whether or not they are connected to the gas grid (41).

Additionally, the electric power distribution networks must be improved to cover the additional demand of these families. While gas availability may partially alleviate the provision of electricity (in the case of electricity employed for thermal or caloric uses) but, again, with unsatisfied needs and, in case of an income distribution improvement, there will be additional pressures on the electric power infrastructure.

(41) Please see footnote # 15 and considerations regarding gas network on section 3.2 regional issues on Energy Situation description.

74 5.1.2. General and main threats

As initially remarked, most important threats are associated with Crude Oil and Oil Derivates dependence; Natural Gas dependence and Electricity supply restrictions. Household sector is affected directly and indirectly by them in terms of the regulatory (R); institutional (I); physical (P); or political (PL) dimensions, meaning the different natures of the threat.

Next, these threats are summarized, emphasizing (bold) those that are more closely related to the Household sector and situations regarding poverty alleviation. Furthermore the direction of the expected tendency is remarked by a signal (▲,▼, =) indicating respectively whether the weaknesses is expected to get worse, better off or equal; and then the time dimension, expressing the short term (ST), medium term (2-4 years) (MT) or long term (LT).

These tables will be further developed at the end of the report, completing direct & indirect impacts and stakeholders involved, providing as well the national level description.

Table V.12 a.Summary of threats Problem / Vulnerability on the household sector. High Oil dependence

Time Tendency Threat / Problem / Vulnerability

REGULATORY: Lack of compliance of Hydrocarbons Law (concession contracts signed). 9 Non-complied contracts are being renewed. 9 Low royalties level (national oil exportations). 9 Oil companies are allowed to send a 70% of exportation proceedings to matrix house at home countries - disbursed earnings, dividends. 9 Prices partially linked to international ones. 9 Provinces (instead of the whole country) have the property of reserves; they have weaker capacity of negotiation than counterpart oil companies. Difficulties for contracts enforcement, reserves audit, among others. 9 The inflation impact of the fuel price increase modifies the poverty line figure and has an impact on the displacement of the available income expenditure. 9 Increase of electricity generation cost and hence, electricity tariff. 9 Transport sector (both passengers and cargo) critical situation due to lack of fuel. Increase in the public subsidy, increase in transport costs for final goods, inflation pressures – 9 Low income households more affected as they spent higher income share on final consumption goods. ST ▲ MT ▲ INSTITUTIONAL: There is a single Energy Secretariat department, concentrating the whole LT ▲ issue, isolated. 9 Strong supply concentration (oligopoly under lax regulation). 9 Stakeholders’ pressures with high relative power (compared to regulator) 9 Newly created energy company ENARSA is not endowed with enough budget, resources, staff, in order to play a stronger role in the sector. 9 Stakeholders not interested in national market (investments in new exploration, production, refining take place in other countries).

PHYSICAL: Substantive reduction of reserves

POLITICAL: Regulatory signals given in opposition to Rational Use of Energy. 9 Lack of long term planning. 9 Absence of coherence between actions.

9 Higher share of poor households’ income (even larger in terms of expenditure) is absorbed by energy sources and services. 9 LPG price increments are also having impact on poor wellbeing, reducing their quality of life. Substitution for wood and other dirtier sources in the short run.

75 Table V.12 b.Summary of threats Problem / Vulnerability on the household sector. High Natural Gas dependence

Time Tendency Threat / Problem / Vulnerability R: The legal framework of the reform remains almost unmodified. 9 Non-complied contracts are being renewed. 9 Lack of control and monitoring of concessionaries activity. 9 Increasing production prices paid, while privates actors express that they are not attractive enough (for developing further investments) 9 increasing Bolivian gas prices (imported alternative supply) 9 Importations from Bolivia are not warranted. 9 Compromising exportations to Chile are not warranted. 9 Tariff structure does not encourage rational use (encouragement of extracting as much as possible) and are uneven among final users. Triggering negative impacts on lower income households users. 9 Regulation and Control are weak. 9 Renegotiation of contracts (post devaluation) and international Court legal claims (sues) from private actors are pending. 9 The network does not expand towards poor households, very high costs of connection. 9 Further difficulties by lack of LPG, and low cost of electricity induces electrical appliances acquisition and use for caloric uses. Non rational use of energy, pressures on electricity demand. ST ▲ MT▲ I: There is a single Energy Secretariat department, concentrating the whole issue, isolated. LT ► 9 Strong supply concentration (oligopoly under lax regulation). 9 Stakeholders’ pressures with high relative power (compared to regulator) Newly created energy company ENARSA is not endowed with enough budget, resources, staff, in order to play a stronger role in the sector. 9 Increasingly open questions regarding public binding contracts for gas pipes and infrastructure building. Interrupted Works due to sound corruption cases. P: Substantive reduction of reserves, but real dimension is not known by government. 9 Lack of pipes’ capacity during winter, due to residential heating use in cities. 9 Reduction in quality of service provision. 9 Problems in electricity supply to all sectors. 9 It should be noted that the urban poor sectors use electric power for heating or caloric purposes during winter time in substitution of the expensive LPG. This increases its vulnerability even more. 9 Strong dependence on gas for Electricity Power Generation PL: Regulatory signals given in opposition to Rational Use of Energy. 9 Lack of long term planning. 9 Absence of coherence between actions. 9 Limited public awareness efforts towards a more efficient final use of gas 9 Impacts on poor wellbeing, reducing their quality of life, as prices of final consumption goods - increases, triggering inflation.

76 Table V.12 c.Summary of threats Problem / Vulnerability on the household sector. Electricity Supply Restrictions: Equipment and fuels

Time Tendency Threat / Problem / Vulnerability Remains almost unmodified. 9 Un clear incentives for investment in generation. 9 Full costs are not fully transferred to all users, distortions in electricity tariff, regressive structure. 9 Tariff structure opposite to rational use of energy, as the more consumption, the lower the price paid per kWh. 9 Weak control and regulation. 9 Renegotiation of contracts (post devaluation) and international Court legal claims (sues) from private actors are pending. 9 Reduction in quality of service provision.

I: Stakeholders acting also in hydrocarbons production put pressures on regulator, higher relative power (compared to regulator)

P: in the short run the supply would not mach demand ST ▲ 9 Strong dependence on gas for Electricity Power Generation. MT▲ 9 Reduced dual thermal supply (gas & fuel oil). LT ► 9 Limitation in liquid fuels’ logistic provision. 9 Problems in electricity supply to all sectors. 9 Electricity grids do not expand towards poor households, high costs of connection and provision to poor households. 9 Impacts on poor wellbeing, reducing their quality of life, as prices of final consumption goods increases, triggering inflation. 9 Further difficulties by lack of LPG, and low cost of electricity induces electrical appliances bought for caloric uses. Non rational use of energy, pressures on electricity demand.

Pl: Regulatory signals given in opposition to Rational Use of Energy. 9 Lack of long term planning. 9 Absence of coherence between actions among different chains (sources) of energy 9 Reduced public awareness efforts towards a more efficient final use of electricity. 9 Signals in opposition to Rational use of energy.

Source: authors’ elaboration.

5.2. Measures and their impacts to enhance energy security

This section presents and emphasizes a vision based on real potential for increase energy security through renewable and energy efficiency measures. Most probable actions and technologies will be briefly described and quantification over the whole country is presented as far as information was available.

5.2.1. Enhancing energy efficiency

Past, recent and current Government Strategy for EE

Chapter 4 made reference to the most important measures and programs.

The most relevant references include: a. URE Program: Agreement subscribed by the Secretariat of Energy and the European

77 Union developed between 1992 and 2000 (42). b. Efficient Lighting Initiative (PNUMA-GEF): Efficient Lighting Initiative (ELI). 1999-2003 (43). c. ARGURELEC Projects (Secretariat of Energy – European Union) 1998 – 1999 (44). d. In 2003, the Secretariat of Energy, designed the Energy Saving and Efficiency Program (PAEE). The Program for Energy Equipment Quality (PROCAE) to develop energy equipment standards and labeling. e. Additionally, in 2004 was launched the PURE (Program for the Rational Use of Electricity an gas). f. From 2005, the Secretariat of Energy is boosting the Energy Efficiency Project in Argentina financed by GEF. This year was approved its implementation. g. Nowadays, the National Government has launched the “plan for the rational and efficient use of energy” (PRONUREE), proposing for the household sector the replacement of 5 million low consumption lamps which will be delivered for free through the electric power distributors. In a second stage, such amount would be extended to 20 million lamps sold at promotional prices. The enforcement and extension of the PROCAE, with Loans from Banco Nación, will offer soft loans to users who purchase more efficient household appliances. h. Both the national government and many other provincial governments have done initial efforts towards raising awareness as regards the rational use of energy by the residential sector. Most of them are massive radio and TV campaigns, including certain ads. i. Many electric power companies have also launched public awareness campaigns that focus on the need to save energy and the changes in the energy consumption patterns. They are mostly massive radio and television campaigns, including ads in the utilities bills. In some cases there is guidance on the main measures aimed at optimizing the energy consumption of different home appliances.

Indirect Measures triggered by current energy policies.

The government has taken various measures (somehow contradictory with the Efficient Use of Energy) aimed at guaranteeing the energy supply both in the short term and during peak demand days. Supply was cut to business customers (textile, iron and steel, automobile and food sectors, among others, which have complained about it) (45) and to thermal generators of the metropolitan area and the interior cities with ongoing contracts.

On the other hand, partial electric power supply cuts have been registered in residential neighborhoods of the South area of the Greater Buenos Aires. Scheduled cuts have also been taking place in the industry, which allowed for the reduction of 1200 MW daily of the electric power demand. In warmer days, with certain industry previsions, estimates indicate “savings” between 650 and 800 megawatts.

(42) The proposal was: “Inclining towards the development of energy efficient use behaviours in the different socioeconomic actors of the supply and consumption market”. It was the basis for the PROCAEH and PROCAE projects (Energy quality system for electrical devices and energy devices respectively) recently reactivated in the Secretariat of Energy. (43) Destined to promote efficient illumination in the household sector; up to 2005, the buildings with efficient illumination were rewarded. (44) The project was developed in the framework of the ALURE EU Program. ICAEN, the Catalonian energy institute is the coordinator of this project. The Argentine participant, apart from the SE is the company EDENOR. (45) Many of them have made diverse investments in order to ensure the supply of diesel tanks or diesel electric generation equipment, to name a couple of examples, or established time changes in production to avoid consumption during peak hours.

78 Even though these measures do not aim at the rational use of energy, as it has already been stated, they aim at saving energy and guaranteeing the supply, especially in residential areas, which are mostly charged subsidized rates (large and medium consumption). This situation triggered an increasing level of inequity, especially with those users that do not have access to gas or to subsidized rates in relation to their income levels. On the other hand, a significant level of inconsistency has been generated by the rest of the users as regards savings needs or the rational use of energy and the risk of shortage.

When briefly analyzing the effects of these measures in relation to the supply guarantee notion, and its relation to the sustainable energy development, results contrary to those expected or desired ones are be identified. This is because these outcomes are not allowing the normal functioning of all the social and productive activities we are used to, including the preservation of elementary aspects such as security and public health.

9 Secure, timely and good quality of supply at reasonable costs: implies transfers from energy as an input (higher prices pay by industry) towards relative high power purchase households. 9 Equity in energy access and afford: the poorest suffer direct and indirect inequities, due to reduction in working hours and, in some cases, fire staff. 9 Environmental sustainability: environmental impacts are higher due to the increasing consumption of oil products. 9 Energy dependence: autarchy is decreasing considering the growing tendence of imported energy. 9 Participation of informed citizenship and democracy: the civil society is not having any voice n the definition of priorities.

Impacts of measures described, and households’ strategies to respond to energy insecurity

The impacts of the measures aimed at the efficient energy use have been diffused and impossible to quantify. Even presently their impact is weak, largely due to the barriers stated below. In fact, it could be said that in general there has been no changes in the residential sector consumption habits as a result of the implementation of such measures. Directly related to those results, it may be assumed that there are no environmental impacts related to the stated measures and policies.

On the contrary, such poor results have determined that the poorest sector has had to give improvised answers to the energy supply shortage. Below there is a description of some of them:

9 Financing request to access the natural gas connection (which, in general, has been difficult). Connection costs by themselves represent approximately three minimum wages. 9 Purchase of low consumption lamps. Cost of replacement approximately US$3 per lamp. 9 For the poorest sectors, an alternative is to connect to the electric grid furtively, which generates risks of criminal penalties due to manipulation of the electric voltage cables, aside from the physical risks. 9 Another alternative is related to delays in the payment of electric power invoices, which also generates supply cuts risks (even though for the time being such risks have been restricted in the Federal Capital City, Greater Buenos Aires and other provinces).

79 9 Related to the last two, a large part of the caloric usage has been covered based on the electric power supply, which generates risks of cuts due to capacity increases in facilities, as well as risks of minor fires, even though in some cases they have resulted in the total loss of precarious dwellings. 9 In order to substitute the LPG in caloric usages, the poorest sectors are using firewood again, together with other available biomass of lower quality. This option involves risks of fire, monoxide inhaling intoxication and lung and eye problems. 9 Another strategy that has been adopted has been the acceptance of the installation of approximately 5000 prepaid meters offered by EDENOR in its concession area. With them, the poorest homes may have access to electric power at the same price per kWh than that billed on a monthly basis, but self-interrupting the supply in accordance with each home’s needs. This method allows for the fractioning and management of the consumption in accordance with each home’s income distribution. It also allows users to prevent delays in payments to the electric power company, and to receive the proof that may allow them to have access to some kind of credit for minor purchases. The higher risk is related to the refrigerator power cut because the cold chain is cut, which may be decisive for their proper preservation of certain food.

5.2.1.1 Potential of energy savings and Impacts in the household sector in forecast scenario

This subject has been broadly discussed in item 3.6. The available information, broken down by source, is shown below. When possible, the low income situation has been remarked.

Furthermore, the current efficiency and the expected efficiency evolution are also indicated with the purpose of identifying energy savings and impacts on the consumption patterns.

Firewood and Charcoal

For low income, Firewood and Charcoal are used in Cooking, Water Heating and Room Heating devices. For the Low Income Sectors, the current average efficiency would be of 10% (2004). The average efficiency in 2025 for the families that continue using Firewood and Charcoal for such caloric uses is expected to go up to 20% in 2050. It is assumed that 50% of the families will change their cooking stoves, then, the efficiency in cooking with firewood or charcoal by the year 2025 would be 15%.

For Medium-High Income, this energy sources are used by rural sectors which represent the 10% of the 10.5% of the total population, for whom caloric uses represent 100% of the Firewood and Charcoal consumption. The affected families will be the 1.05% of the total population. The average efficiency in the year 2025 of the families that continue using these fuels for such caloric uses will go up from 20% in 2004 to 75% in 2050.

Then, the Average Efficiency for the total families using Firewood or Charcoal will be 20%, in the year 2025 (46) Therefore savings between the years 2004 and 2025 would be around 9%.

(46) 15% for the 90% (poor households) of such energy sources, plus 61.25% for the 10% (medium high incomes), that is to say 19.62%. Initial efficiency values for year 2004 are: 10% for the 90% of the rural population, plus 20% for the 10% of the rural population, which is to say: 11%.

80 Natural Gas and LPG

For cooking purposes – caloric uses, the average efficiencies in the year 2004 amount to 45%.For the year 2050, estimations indicate that average efficiencies would increase to 55%, basically due to a more adequate use of the devices, for example: cooking with covered utensils, avoiding excessive flames, reducing the flame to the minimum when the liquids are boiling, etc.

For water heating purposes, the efficiency in the year 2004 amounts to 50% and would go up to 60% in the year 2050, with better insulation and regulation systems.

For heating purposes, in 2004, the average efficiency of heaters was 55%. Estimations indicate that heating uses represent 34% of the caloric uses. It is assumed that 75% of the population will have access to this type of device by the year 2025. Then, the efficiency for the year 2025 would be 77.5%.

Efficiency of All Uses for NG and LPG, in 2004: 50.1%; in 2050: 64.2%. Energy savings between 2025 and 2004 would amount to 14.1%. Electricity

Based on different documents, the energy saving coefficients between the years 2004 and 2025 was estimated. The electric power consumption structure by energy use is only an approximation, since such detail is not available.

Table V.13.Estimation of the electricity consumption structure in the household Sector (%)

USE STRUCTURE Food conservation 40.3 Illumination 30.6 Standby devices 15.1 Air conditioning 5.6 Washing machines 3.6 Other room conditioning devices 0.5 Other appliances 4.3 TOTAL 100

Source: authors’ elaboration.

Food conservation: measures will be aimed at increasing thermal insulation. Based on the EU energy efficient labeling, the A level, would imply 53% savings as regards the 2004 values and, for the 80% of the 2025 stock, savings would amount to 44%.

Lighting provides a very interesting saving potential, more efficient lighting devices – compared to broadly employed incandescent ones - have been available in the market for many years..Measures would involve the substitution of existing incandescent lamps (60 W and 75 W), for compact fluorescent lamps (15 W and 19 W), with a 75% saving, as well as the incorporation of higher quality incandescent lamps, triggering a further 3% saving. On the whole a final 35% saving is estimated by 2025.

Very little has been done to save energy through improved Standby Devices. Therefore, estimations indicate that, by the year 2025 savings would amount only to 6.6%.

Air Conditioning, there is great uncertainty as to when the saturation level would be reached. Preliminary estimations indicate a 7% annual growth of this type of devices which, in the year 2005 would have reached a sales volume of 1.5 million units. Saving measures should be focused not only on labeling, but also including tax benefits for higher-efficiency equipment. Estimated savings for the year 2025 would amount to 18%.

Washing Machines, saturation level, according to INDEC’s data, would reach 85%. The most effective measure would be labeling and providing tax benefits for the manufacturing encouraging most efficient equipment sales, apart from the education on use modalities. Estimations indicate 15% savings by the year 2025.

Total Electricity Savings in Household Sector, considering those arising from each type of electricity use, would amount to 37% for 2025.

The potential savings that could be obtained between 2004 y 2030, after the implementation of an energy efficiency strategy, according to household sector’s estimations, could reach around 73000 kTOE. Next figure shows the structure of main sources.

Figure V.7.Cumulative energy savings in the household Level (%) of kTOE by energy source.

Charcoal Electricity 5% 13%

Liquefide Natural Gas Petrol Gas 61% 21%

Source: authors’ elaboration.

The figures below depict the evolution of the potential consumption savings in the residential sector and the structure of accrued usage. The achievements obtained in water warming, heating, and food cooking are highlighted. Such results are in line with the savings attained with Natural Gas, Coal and LPG.

82 Figure V.8.Cumulative energy savings structure in the household Level in kTOE by energy use.

7000

6000 Pump of Water w arming Heating 5000 Boiling Water 4000 Cooking 3000 Food conservation 2000 Lighting Motiv e 1000 Other Uses 0 Refrigeration and Ventilation

10 16 2004 2007 20 2013 20 2019 2022 2025 2028

Source: authors’ elaboration

Figure V.9.Energy savings in the Household Sector (%) by energy use.

Refrigeration and Lighting warming Ventilation 10% Heating 2% Food 26% conservation 15%

Cooking Boiling Water 20% 27%

Source: authors’ elaboration.

The main social benefit is directly related to the monetary savings achieved with energy savings. As it may be noted in the following table, the total saved amount between 2003 and 2004 reaches an amount equivalent to the yearly minimum income of four million people (at US$350/month) or almost 13% of the GDP of 2004.

A scenario in which such significant monetary amounts could be saved would allow for a more reachable access to higher quality energy at a lower price, such as natural gas, thus enhancing the conditions of the poorest areas of the population, without mentioning the possibilities of destining such amounts to other more urgent needs of this population.

A scenario in which such significant amounts could be saved would allow for the alleviation of the energy shortage risks, and it would ease the access to higher quality energy at a lower price such as natural gas, thus enhancing the conditions of the poorest sectors of the population.

83 Table V.14 Estimation the energy savings (monetary and non monetary) in household sector

Energy U$S/unit Million Energy Saved Source May 2008-08-20 U$S Natural Gas 61256.0 million m3 0.0833 5104 GLP 16438.9 million ton 0.3333 5479 Electricity 130777.5 GWh 0.0400 5231 Charcoal 7600.3 million ton 0.2667 2026 Total saved 17842

Source: authors’ elaboration.

As regards the environmental impacts, an analysis of CO2 emissions directly equivalent for both scenarios of the residential sector indicates that in the tendency scenario, emissions would grow approximately 122% compared to 54% of the scenario with the described energy savings measures. Between both scenarios, accrued emission savings of 167 million Tons have been estimated.

The following Figure depicts the evolution of emissions for each scenario discriminated by energy usage. It may also be noted that the highest emissions savings were achieved in water warming (47%) and heating (32%).

Figure V.10.Emissions evolution in the residential sector by use (Millions of Tons CO2 equivalent) a) Tendency Scenario b) Energy Efficiency Scenario (Structural)

45 45 40 40 35 35 30 30 25 25 20 20 15 15 10 10 5 5 0 0 4 6 8 2 6 0 0 0 0 1 1 2 0 2 4 6 8 0 04 16 18 30 2 20 20 2010 20 2014 20 2018 20 2022 2024 2026 2028 2030 0 01 01 0 0 02 02 0 2 2006 2008 201 2 2 2 2 2020 2022 2024 2 2 2 other uses Lighting Food conservation other uses Lighting Food conservation Cooking Water warming Heating Cooking Water warming Heating

c) Emissions saved by usage

14 12

10 Heating

8 Water w arming

6 Cooking Millon Tonns Millon 4 Food conservation

2 Lighting

0 other uses 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Source: authors’ elaboration.

The following graphic depicts the emissions evolution for each scenario discriminated by energy source. It may also be noted that the highest emissions savings were achieved in natural gas consumption (71%) and LPG (32%).

Figure V.11.Emissions evolution in the residential sector by source (Millions of Tons CO2 equivalent)

a) Tendency Scenario b) Energy Efficiency Scenario (Structural)

45 45 40 40 35 35 30 30 25 25 20 20 15 15 10 10 5 5 0 0

4 6 8 0 2 4 6 8 0 2 4 6 8 0 4 6 8 0 2 4 6 8 0 2 4 6 8 0 0 02 02 0 0 1 1 1 2 2 200 20 200 201 201 201 201 201 2 202 202 2 202 203 20 200 20 20 201 20 20 201 20 202 202 20 202 203

Firewood Kerosene Natural Gas Liquefide Petrol Gas Charcoal Firewood Kerosene Natural Gas Liquefide Petrol Gas Charcoal

c) Emissions saved by source

14 12

10 Charc oal

8 Liquefide Petrol 6 Gas Natural Gas Millon Tonns Millon 4 Kerosene 2 0 Firew ood 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Source: authors’ elaboration.

The following graphic depicts the emissions evolution by inhabitant for the years of supply cut in the tendency scenario and in the energy efficiency scenario. Increasing benefits may be noted, which reaches a 30% of emissions per inhabitant, by year 2030.

85 Figure V.12. Emissions evolution (tons CO2 equivalent /hab/año)

0.900 0.800 0.700 0.600 0.500 Tend 0.400 Effici 0.300 0.200 0.100 0.000 2004 2010 2015 2020 2025 2030

Source: authors’ elaboration.

5.2.1.2 Other potential energy savings and Impacts in the household sector

In addition there are other actions implemented by private utilities, like EDESUR, with following potential results (47).

Table V.15.Balance of saving potential and edge reduction for household appliances

Top Load Top Load Consumption Curve Number Consumption Curve Savings per Reduction Item of Savings Reduction unit for all devices MWh/year per unit kWh/year devices kW kW Refrigerator 11,000 162.5 1,800 0.020 224 Air Conditioner 11,000 112.1 1,200 0.327 3,597 Washing Machine 11,000 61.3 700 0.017 185 Total 3,700 4,006

Source: Econeler elaboration.

Forecasts indicate that approximately 923,000 refrigerators will be purchased in 2008 in Argentina. The 11,000 refrigerators included in the project, divided into 6 years, represent approximately 0.2% of the market – 1.0% of the market granted to EDESUR under concession. The 11,000 air conditioners represent 1.8% of the 600,000 units sold during the year 2006 in Argentina. Finally, the 11,000 washing machines represent 1.0% of the 1,130,000 units sold during the year 2006 in Argentina. The program will allow for savings of 3,700 MWh/year and for the reduction of the 4MW edge demand.

(47) “Support to the energy efficiency program design in electric power distribution companies”, November 2007, ECONOLER INTERNACIONAL.

86 5.2.1.3 Cost of energy savings in household sector

Two examples of costs related to investments in the household sector efficiency are shown below. These examples provide an idea of the values involved in the proposed measures. It is worthwhile noticing that most times these are profitable measures, even from the mere financial point of view. Therefore, special attention should be paid to the existing barriers, since in many cases, only an effort in the design, implementation, coordination and sustaining of long-term programs is needed more than funds to finance the measures.

Substitution of incandescent lamps for compact fluorescent lamps (efficient CFL)

The example of a methodological analysis has been taken. In such analysis, it has been simulated the operation of both types of lamps for R1 customers (bimonthly consumption equal or inferior to 300 kWh), which represent near 46% of the household customers, and for R2 customers (consumption superior to 300 kWh). Both the user and distributor financing have been considered in the analysis.

Tables V.16. and V.17 describes the results respectively obtained for each customer. It is observed that, under the current rates, the substitution of incandescent lamps for compact fluorescent lamps is economically convenient.

Table V.16.Customer Analysis – R1(*) Category

Item Unit Current Customer Benefit Current Distributor Benefit situation buys CFL Situation finances CFL Consumption kWh/year 491 123 369 491 123 369 Purchase of U$S 13,4 28,7 -15,3 13,4 21,4 -8,0 lamps Energy cost U$S 76,9 19,2 57,7 76,9 19,2 57,7 PUREE Bonus U$S 0,0 -6,7 6,7 0,0 -6,7 6,7 NPV U$S 90,3 41,2 49,1 90,3 33,9 56,4

(*) Lowest consumption level.

Table V.17.Customer Analysis – R2 Category

Item Unit Current Customer Benefit Current Distributor Benefit situation buys CFL Situation finances CFL Consumption kWh/year 491 123 369 491 123 369 Purchase of U$S 13,4 28,7 -15,3 13,4 21,4 -8,0 lamps Energy cost U$S 39,0 9,7 29,2 39,0 9,7 29,2 PUREE Bonus U$S 0,0 -6,7 6,7 0,0 -6,7 6,7 NPV U$S 52,3 31,7 20,6 52,3 24,4 27,9

The R1 Customer has more benefits for reducing consumption since the energy variable rate component is substantially higher. Then, it is observed that annual savings for an R1 customer amounts to U$ 56.4, and for an R2 customer, U$ 27.9. The results of the study indicate the economic convenience of substituting the incandescent lamps even within the framework of the rate stagnation. As soon as rates start corresponding with the costs, there will be a more favorable situation for the substitution.

87 Incorporation of efficient refrigerators

This example has been applied for the same type of customers as above, and with the same calculation methodology (48). Estimations indicate that the efficiency of a new refrigerator amounts to 63%. It was simulated the operation of refrigerators for both alternatives, determining the consumption per hour band, and the customer-related costs were determined applying the current tariff structure.

Tables V.18. and V.19. describe the results respectively obtained for each customer category (with and without financing).

Table V.18.Customer Analysis – R1 Category

Item Unit Current Customer Benefit Current Distributor Benefit situation buys Situation finances Refrig. Refrig. Consumption kWh/year 1.124 416 708 1.124 416 708 Purchase of U$S 104,0 297,2 -193,2 104,0 253,1 -149,2 refrig. Energy cost U$S 319,7 118,3 201,4 319,7 118,3 201,4 PUREE Bonus U$S 0,0 -23,4 23,4 0,0 -23,4 23,4 / Penalization NPV U$S 423,7 392,1 31,6 423,7 348,0 75,7

Source: Lestard/Franke and Fundación Bariloche, December 2005.

Table V.19.Customer Analysis – R2 Category

Item Unit Current Customer Benefit Current Distributor Benefit situation buys Situation finances Refrig. Refrig. Consumption kWh/year 1.124 416 708 1.124 416 708 Purchase of U$S 104,0 297,2 -193,2 104,0 214,5 -110,5 refrig. Energy cost U$S 162,1 60,0 102,1 162,1 60,0 102,1 PUREE Bonus U$S 5,6 -23,4 29,0 5,6 -23,4 29,0 / Penalization NPV U$S 271,6 333,7 -62,1 271,6 251,0 20,6

Source: Lestard/Franke and Fundación Bariloche, December 2005.

It may be noted that, under the current tariff, the substitution of refrigerators is economically convenient (even for R1 customers). Estimations indicate that the substitution of refrigerators will imply 66% savings for R1 customers and 26% for R2 customers.

5.2.1.4 Enhancing Energy Security, Barriers to improving Efficiency

There are a number of barriers to increased investment in energy efficiency in household. Some of these barriers are similar to those at national level.

9 Lack of regulatory incentives to promote energy efficiency.

(48) Lestard/Franke and Fundación Bariloche. “Proyecto de Eficiencia Energética Argentina. Informe Final”. Buenos Aires, Diciembre 2005.

88 9 Lack of adequate price signals to energy consumers, especially among residential consumers. 9 Lack of information among residential consumers on the efficiency of energy equipment. 9 Multiplicity of stakeholders and fragmented institutional framework. 9 Lack of environmental awareness in general.

Other typical barriers of the household sector:

Cultural barriers

9 Belief that high-efficiency devices are expensive. 9 Non-recognition of labels 9 Belief that savings are not significant 9 No relation between energy savings and reduction of environmental impact 9 More attention paid to other selection criteria due to lack of consciousness 9 Mistrust in the validity of labels 9 Wrong advice from the sellers of household appliances regarding energy efficiency 9 Habit to reuse (or sell) household appliances after buying a new one. 9 Lack of knowledge of the poor sectors regarding the relation between the rational use of energy and climate change. 9 Rejection of programs, proportional to the lack of knowledge (mistrust)

Economic barriers

9 High cost of buying a new efficient appliance as compared to the cost of repairing the old one. 9 Financing offer: affects the decision of buying household appliances. 9 Lack of knowledge of popular sectors, precisely the segment that needs more economic solutions as it is where the clandestine use of electric power is concentrated. 9 Shortage of high efficiency models in some parts of the distributors' territorial concession. 9 No efficient and accessible equipment lines and materials are manufactured in Argentina. 9 Lack of interest and commitment of partners, e.g.: sellers, manufacturers, distributors, etc. 9 Low rate, which does not encourage the population to save electric power.

Regulatory barriers

9 Need to request a special authorization to ENRE to sell household appliances, an activity not included in the concession agreement. 9 Restrictive conditions imposed by ENRE to sell household appliances. 9 Lack of standards, test structures and a labeling system for appliances other than refrigerators. 9 The existing regulations are not spread. 9 Lack of framework sustaining this type of energy efficiency programs.

Specific barriers of some efficiency programs have been detected. The following ones are shown for illustrative purposes:

Lamp substitution project:

9 In general, people believe that low consumption lamps are sumptuary objects. 9 The introduction of low-quality low consumption lamps at a lower cost, generated mistrust in these devices. 9 People know nothing about the saving capacity of low consumption lamps. 9 Middle class sectors are more permeable to this type of analysis than low income population, which is precisely the sector that needs more economic solutions. 9 The price of efficient lamps (all of which are imported) is far away from the massive purchase power.

Project for Low-Income Customers

One of the main Buenos Aires electricity utilities – EDENOR – found three groups of barriers that must be addressed in order to develop and launch a group of efficiency measures in poor villages or neighborhoods.

Education, communication and awareness barriers were identified such as:

9 Lack of specialists on Electric Power Efficient Use. 9 Lack of historical data of Efficient Use programs in Poor Neighborhoods. 9 Poor spreading of the existing regulations. 9 Lack of encouraging situations; the experience and change of habits in the use of Electric Power. 9 Rejection of programs, proportional to knowledge (Mistrust) 9 Lack of stimuli regarding the Electric Power Efficient Use problem. 9 Lack of integration of the poor sector with the Climate Change commitment. 9 Lack of interest and commitment of partners, e.g.: Municipalities, manufacturers, Universities, etc.

Technology/Consumption Barriers like:

9 Lack of manufacturing of efficient and accessible equipments. 9 Lack of interest in using efficient equipment 9 Inexistence of an offer-demand market for efficient equipment. 9 Lack of interest in reducing the Electric Power expenditure and redistribution of incomes in households. 9 Lack of regulation, import controls, sale of electrical equipment and materials. 9 Lack of energy efficiency standard accreditation 9 Lack of credit lines and/or financing

Life Quality Barriers like:

9 Lack of stimuli on customers to be incorporated to the system. 9 Lack of a sustainability framework for this type of Electric Power programs

90 9 Lack of interest in improving the security and quality of the electrical installations. 9 Lack of actions securing health by using adequate devices and materials.

5.2.2. Promoting Renewable Energy

Some of the issues already presented in chapter 4 are developed, with more detail as regards the residential sector.

5.2.2.1 Measures and their impacts to enhance renewable energy

Past, recent and current Government Strategy

The background and actions carried out by consecutive governments towards the study and implementation of renewable source projects were of a different nature, effectiveness, and duration. A historical survey of these actions indicates that they were initiated several decades ago, as an energy self-supply and diversification strategy.

Among the main actions aimed at the promotion of renewable sources, which have somehow had an impact on the residential sector, the following may be highlighted:

National Decree 2247/85 was promulgated in 1985, promoting a non-conventional energy development policy through the Conservation and New Sources Office of the National Energy Secretariat. The Wind Energy Regional Center (CREE) was established in the province of Chubut within such framework, having as members the Planning Secretariat of that province, the National University of Patagonia, and the National Energy Secretariat.

A special mention should be made of Law 25019/98 of wind energy promotion. This National Law was followed by a Provincial Law in Chubut and in Buenos Aires, which established an additional incentive of 0.5 cent/kWh to be added to the nation’s coffers, yielding a total profit of 1.5 cent/kWh. Other provinces are considering passing similar laws. As a consequence of the 2001 crisis and the following devaluation of the local currency the context suddenly changed. The relative advantages introduced by this law were drastically reduced.

As a result of the actions implemented based on the Wind Energy Promotion Act, approximately 30 MW have been installed (high capacity equipment), which supply Cooperatives and Municipalities with a capacity factor that in some cases can reach 45%.

Towards the end of 1999, the board of directors of the World Bank approved a loan to Argentina for USD 30 million under a different name, PERMER, with an additional donation of USD 10 million from the Global Environment Fund to eliminate the existing barriers for the use of new technologies, in special PV (supplied by foreign companies) and eventually wind, hydroelectric or hybrid. This amount, together with the provincial funds, those of the concession holders, and those of consumers, would allow providing only basic electricity services as lighting and social communication (radio and TV) purposes to some 85,000 scattered consumers and some 3,500 public services.

Recently, the incorporation of the productive usage supply has been decided. The Project aims at ensuring electric power supply to residential customers and public sectors of all types (schools, medical emergency rooms, police departments, etc.) that are out of the scope of energy distribution centers. The initiative aims at enhancing the quality of life of the rural

91 population and to decrease emigration to urban areas through the sustainable management of safe environmental energy resources.

As a complement to Act Nº 25.019/1998, Decree-law Nº 1.597/1999 (National Regime for Wind and Solar Energy), Act Nº 26.190/12-2006 was approved – National Regime for electric power production from renewable energies also applicable to the other renewable sources (wind, solar, geothermal, tidal, hydro, biomass, dump gases, depuration plant gases and biogas).

The generation of electric power from renewable energies for the provision of a public service has been declared of national interest, and the purpose of this regulation is to achieve a contribution of the renewable energy sources equivalent to the 8% of the national electric power consumption in a 10-year term as from the effective date of this regulation (year 2006). This requirement imposes a contour condition at the minimum renewable energies penetration level, which was taken into consideration in the developed scenarios. In this way the renewable electricity generation would have to reach around 13000 GWh/year by 2016 from 1520 GWh in 2005.

Act 26.190 updates the remuneration established by Act 25.019 increasing the tax applied for the creation of the RENEWABLE ENERGY TRUST FUND, which will be administered and assigned by the Federal Board of Electric Power (49).

The equipment to be installed will receive such remuneration for a term of 15 years as from the request of the beginning of the benefit period.

This law has not been ruled yet (50).

Remarkably, actions towards public awareness in order to take advantage and extend the use of renewables within the household sector were not identified. Nevertheless some articles describing the global Climate Change problem are available in massive media like the TV or newspapers.

Household Sector Impacts and Results

(49) That will be used to pay up to: i. 0.015 $ per kWh effectively generated by wind systems installed or to be installed delivering their energy to the wholesale markets and/or destined to the provision of public services. ii. 0.9 $ per kWh made available to the user through solar photovoltaic generators installed or to be installed, destined to the provision of public services. iii. 0.015 $ per kWh effectively generated by geothermal, tidal, biomass, dump gas, depuration plant gas and biogas energy systems installed or to be installed, delivering their energy to the wholesale markets and/or destined to the provision of public services. Those included in Act N°26.093 are exempted from this remuneration. iv. 0.015 $ pe kWh effectively generated by hydro systems of up to THIRTY MEGAWATTS (30MW) installed or to be installed, delivering their energy to the wholesale markets and/or destined to the provision of public services. (50) Other legislation concerning the renewable energies existing in Argentina that might be relevant includes: 9 ACT N° 12063: Province of Buenos Aires. Generation and production of electric power from renewable energy sources (Year 2001, not effectively enforced) 9 Act 2796/2005. Province of Santa Cruz. Provincial Regime for Renewable Energies. 9 Act 12503/2005. Province of Santa Fe. 9 Act N° 25.019. Decree-law N° 1597. National Regime for Wind and Solar Energy 9 Wind Energy Act N° 4389/98, Decree-law N° 235/98. Province of Chubut. 9 Act 26.093/06, Decree-law 109/07. Regulation and promotion regime for the sustainable production and use of biofuels. 9 Act 23.123/06. Regime for the development of the technology, production, use and applications of hydrogen as fuel and energy vector.

There is no centralized record of these projects, which makes very difficult to obtain conclusion on its true effectiveness towards poverty alleviation. Nevertheless some results can be exhibit in the context of the Climate Change Knowledge Network (CCKN) (51). It includes an evaluation of the mentioned PERMER Project in the Jujuy Province, provided by the EJEDSA Utility (1900 rural households - 100 W average each), as well as other PERMER project regarding rural electrification employing renewables in the Neuquén Province carried on by the Provincial Energy Entity (475 rural households - 100 W average each).

The joint and active participation of the provincial government (granter of the subsidy), the regulating body, companies: EJEDSA (private) and EPEN (state) and the community (capacity) have allowed the materialization of the program. Subsidies provident from federal, provincial, and international founds, facilitated the access to the service of rural consumers with so lowest demand.

The main (qualitative) results observed in both programs can be resumes in following list:

9 Improvement of the standard of living of the beneficiaries (households and school-lodges) due to, among other things, a better use of the day to carry out activities (schoolwork, family and social meetings, etc.) 9 Development of more local community social and economic activities: mothers’ club, cooperative associations 9 Drop in expenditure in energy sources for lighting and social communication 9 Less pressure on non-renewable resources, especially through power generator small groups substitution 9 Access to further and more diversified information (television, radio, etc.), e.g. all schools have satellite TV 9 Less isolation or integral marginalization as to the possibility of cutting off difficulties to access a better education, health, cultural and information development, communication, recreation and the development of productive activities (whose potential energy needs are being studying at this moment) 9 Future possibilities of diversifying the economy of the social group through the incorporation of service and secondary-sector activities (workshops, carpenters’ shops, metal-mechanics’ shops, etc.); dietary improvement as from the incorporation of short-life foodstuff; and decrease in the number of illnesses or dysfunctions due to the preservation of food products in refrigerators 9 Training of locals in the maintenance of the installations, although with scarce development of new jobs as a result of the procurement of foreign units. 9 High dependence on subsidies, with risks for future sustainability 9 Reduction of carbon dioxide emissions to the atmosphere through the combustion of kerosene in the burners to be replaced with electrical lamps 9 Decrease in the inadequate disposal into the environment of low-quality polluting batteries, as those currently used in radio units and night lighting devices 9 Indirectly, the higher access to information may result in the modification of consumption habits and domestic activities, which could in turn lead to less pressure on the scarce vegetation in those cases where firewood is used for cooking, by incorporating the alternative of using bottled gas. 9 Afterwards, it was detected that the implementation of this type of costly installations for semi-nomadic populations that leave their homes for long periods of time require installations that may be better protected from potential furtive thieves.

(51) Venema, H. D. and Cissem M, Eds. 2004.

93 The success of these programs is based between others, on the following aspects:

9 Agreement and pledge of the provincial government to accept subsidy to this areas, in the electric service and in consequence to the company, 9 Coordination institutional between the sectorial and other government areas actors. 9 A regulatory frame adapted and flexible, 9 Good scheme and management of available founds and subsidies, and 9 Capacity of adaptation and collaboration of the companies with the complex situation of the local settlements

These results could be judged as representatives of many other projects implemented within the country.

5.2.2.2 Potential for renewable energy use in household sector

A scenario of energy efficiency that encourages renewable should be understood as the real potential penetration given de actual and foreseen situation of the country.

Solar Energy

The use of solar energy could represent 4% of the final energy consumption of the sector by the year 2025.

In the case of water heating, it is assumed that there will be an installed capacity of approximately 4,000,000 m2, which represents 13% of the energy consumption for water heating in the residential sector.

In the case of heating, there will be approximately 25,000 urban homes with solar heating, which represents 0.6% of the urban residential consumption for heating.

In the case of cooking, all rural homes in the areas of Argentina with optimum direct sun will have a solar stove. The rural population will represent 108,000 homes with solar kitchens, which will substitute approximately 23ktep/year of other energies (5.6% of the rural residential consumption for heating). It is possible that some restrictions may come up during the winter months in which solar radiation is lower. For such periods, as well as during the times when weather conditions are adverse, a solar stove promotion program could include as a complement a more efficient use of technologies using PLG, firewood or charcoal.

Wind Energy

In households with electric energy, wind energy penetrates slowly, reaching 98% of the energy demand for water pumping in the year 2025 within a favorable scenario to this type of energy. In households without Electric Energy, wind pumping meets 100% of the energy demand for water pumping.

Biomass

Charcoal could reduce its use in 9.3% to 4.5% in the horizon year. Firewood, on the other hand, reduces its use from 0.38% to 0.2% in cooking. On the other hand, use of firewood for water heating and heating is slowly reduced until almost disappearing from urban areas. In rural

94 areas, firewood strongly goes backward from 11.5% to 2.86%. Charcoal reduces its use up to 0.36% in an Energy Efficiency scenario.

Solar Photovoltaic

The total of photovoltaic panels installed in rural households with resources deriving from the PERMER programs reaches 2000 (200 kW – capacity peak). In construction there are other 3250 panels (335 kWp).

Table V.20. Households’ solar photovoltaic

2004 2008 2015 2025 Installed Capacity (MW) 6.5 13.5 48.3 1397

Generation (MWh/year) 11,863 20,498 73,450 2,125,000

Source: authors’ elaboration.

The figures indicated a maximum potential. It is considered that one part corresponds to interconnected photovoltaic energy (roofs, solar), where a double-control system is used.

Additionally, the first two lines in Annex II tables, summarize the participation of renewable in the household consumption, breaking it down into urban and rural sectors for the base year (first table) and for year 2030 (second table). It is the case of possible penetration objectives given the current situation.

Note that while in the urban sector it is expected to almost double the renewable consumption, in the rural sector its participation would decrease upon penetration of LPG, even though it is not renewable, it is of better quality for the uses of this sector.

At the total consumption, it is expected that the participation of these sources will duplicate, basically because it has been assumed that the objectives proposed by the new Law regulating them will be complied with. However, even if such objectives were met, the role of new renewable sources does not seem to represent a significant share due to the barriers to be mentioned.

5.2.2.3 Enhancing Energy Security, Barriers to promote renewable energy use in household sector

The main barriers detected in the implementation of renewable energy projects are presented below:

Institutional, political and legal barriers

The official programs in charge of boosting rural energization –main penetration sector- tend to satisfy the electricity and caloric use requirements of the scattered rural population by using local energy resources, mainly wind and solar energy, without fully incorporating the possibility of using the residue of forest activities, both of the field (forest management) and of the wood industry, as well as the use of dung concentrated in feed lots, dairies, and others, as source of energy (biogas production) and soil improvers.

95 One of the reasons for this partial use of the multiple resources available in the rural sector in general, is the absence of an active comprehensive policy for the implementation of rural energizing, that is to say, a policy that supports the industry for the production of the necessary means for the use of renewable energy resources; one that supports users for the acquisition of such means; technical assistance for the proper operating and maintenance of them; training for the efficient and effective use of the available energy; and the integration, in a single political-institutional instance, of the management of the resources generically called RES.

Economic and financial barriers.

Renewable require more initial capital for its implementation, which may turn investments unattractive in a context of high financing costs, or even inaccessible for the low-income sectors of the society and, much more for the poor ones. Therefore, the lack of alternative financial mechanisms and incentives recognizing the non-economic benefits of the RES/T, is an important barrier.

Technical barriers

Lack of detailed information on the distribution of population and their energy needs per type of use, as well as the energy service payment capacities.

For many local production technologies, the lack of quality, production and equipment installation standards is an important barrier. The implementation of projects with bad-quality equipment and/or components is one of the reasons for the rejection of certain technologies by the potential users.

Another important aspect has been the lack of operation and maintenance services and/or the lack of training of the involved personnel, which has caused the failure of many demonstrative projects.

Another barrier may be ascribed to the lack of sustained training and technical assistance actions to secure the adequate operation, maintenance and general management, of the infrastructure necessary not only to generate energy but also to use it.

5.2.3. Other Measures

In general terms, the deficiencies of the infrastructure reduce the productivity of the poor and restrict the development of human resources; such aspects include the energy security as regards the evolution of service infrastructure. The poor at urban areas are generally deprived of proper sanitary facilities, drinking water, and electric power and gas grids. The priority seems to concentrate it in the surge of communities, especially in urban areas lacking well defined streets, public lighting, or other services, nor do they have legal titles to their lands (52). Then the pressure on energy infrastructure is incorporated, which aggravates the situation.

There is a generalized consensus in the sense that the solution to the dilemma between the capacity to access basic infrastructure services and the financial sustainability requires certain kind of social policies to protect the poorest sectors from the impact of any rate increase. As the income recovers and the access capacity improves, the focus of the social problem for infrastructure sectors should move from social tariffs to social connection programs, especially between water sectors, the sewer system -that is not included in the scope of this

(52) Hicks, Norman, 2003.

96 work-, natural gas and, to a lesser extent, electric networks. In these items there is a significant deficit in coverage, and those who do not have access suffer considerable economic and social costs. This is a key aspect not only to the energy security but to all the services of the social type provided to the community.

Despite of the endless discussions on the need of social tariffs, no action has been taken for the estimation of the cost of such policies. As a form of illustration of the possible costs, it is assumed that the objective of the policies would be to maintain the subsistence consumption cost of water, sewer system, electric power and gas for poor households below 15% of their income. In view of the current prices, the total cost of this policy would be of about $300 million per year (53), which would be widely below the general portfolio of subsidies for such sectors, considering, above all, the increasing purchases of oil derivatives for the generation of electric power.

Although some specific measures can be listed in here, it is not easy to separate them form energy efficiency in a broad sense. Nevertheless some proposals can be mentioned.

Diversification of energy sources, on one hand this involves the use of more alternatives, which might be more expensive than relying on a few fuels, on the other hand a complementary source would probably help to make energy provision more reliable. A good example could be the introduction of solar energy in households in order to reinforce existing hydrocarbons heating, but this belongs to the renewable measure.

A good example of fuel diversification is the very successful introduction of Compressed Natural Gas for transport sector in Argentina, but time prove additional complications due to the lack of new oil/gas field in the Country, as well as the lack of investments in the expansion of the gas system. So if a new fuel is to be introduced it must be carefully assessed the availability over time, and the proper share that it can reach. Nevertheless additional care should rest on energy rents allocation and profits disbursements. As the argentine case shows, it is inconvenient to disconnect earnings from long term investments within a sector like Energy.

Other diversification alternatives do not count in the Household sector, as a final user. For example the nuclear energy or electricity generation related options.

Awareness rising and public campaigns are definitively a necessary measure towards energy security objective. The habits of the household sector are very difficult to modify, require long time periods and could be expensive. But once the patterns of consumption are modified – introducing energy saving behavior, permanent long term benefits can be achieved. The programs aimed at informing the community of clean and save alternatives are also necessary as complement for both energy efficiency measures and renewable energy penetration.

Energy efficiency policies in the residential sector should target both building construction - including insulation quality - as well as the efficiency of heating appliances. However, a lack of both consciousness and awareness prevent the design also being well insulated. There might be several reasons for this particular situation, but the availability of cheap gas or the expectation of it becoming available within the near future prevents from improving insulation.

As mentioned study concludes (54), policy measurements should be introduced gradually, in order to improve building insulation, both current status and the availability of construction materials and methods should be addressed by policy.

(53) Hicks, Norman, 2003. (54) Gonzalez , 2007.

9 The very first step is related with awareness and public education on current energy status. 9 Develop regional and local technical offices for information directed at professionals, builders and households 9 Research on low-cost building materials and methods should be promoted 9 Loans and subsidies to improve insulation quality 9 Building codes should include insulation requirements: Another key group of measures – which in fact belong to energy efficiency in a broad sense - is the construction characteristics of the buildings. Promote more energy-efficient houses will largely reduce energy requirements.

On the other hand as an example of existing isolated measures, a small program with subsidies on firewood for the poorest part of the southern Patagonia population – which runs during the winter season - can be mentioned. In this program, some firewood is directly given at no cost in certain locations, to people in neighborhoods at social risk. The program does not include any education on how to improve the efficiency of dwellings and appliances. Therefore the firewood provided is used in a somehow primitive way, avoiding the overcome of the energy poverty and hence energy security problems (55).

Perhaps some alternatives or other measures aimed at securing energy provision are related with the policy instruments available. From Command and Control to Economic Instruments a wide range of alternatives can be employed by the energy planners in order to improve the energy security issue, not only from the supply but also from the demand side. An example of policy instrument aimed at social purposes that could also contribute to energy security, would be linking company benefits to the actual consumption of electricity or natural gas. Some reasons for the convenience of utilities’ commitment would be (56):

9 The interest of securing basic electricity or gas consumption (threshold), relevant in presence of externalities like public health, home safety or water and sanitation provision. 9 If the consumption of electricity or gas - therefore the use of some appliances - by low income households is a component of the welfare function of society, a good option to cash transfers is found. A proper example may be when electricity allows educational activities in poor areas. 9 Welfare programs involving services are less prone to fraud, if the consumptions of electricity of low income households is clearly differential (smaller), again a key issue. 9 The introduction of distributive considerations in an energy prices restructure program can be politically necessary. This was the case of Colombia’s 1991 constitution, which required utility tariff to include social solidarity principles (57).

Of course this falls beyond the scope of the analysis, but it is useful to think in novel ways of ruling or regulating utilities in order to reach social objectives within the profit path required by private actors.

(55) Sagar, A.D., 2005. (56) Estache, A., Gomez-Lobo, A and Leipziger, 2000. (57) Corredor, G., 2005.

98 VI. Summary, Conclusions and follow up

A schematic summary of main conclusions is presented below, Executive Summary in turn provides a brief description of our findings.

6.1. Summary of threats, measures, impacts and stakeholders

The objective of next tables is to summarize the threats/problem/vulnerability. Key energies are Oil and Oil Products; Natural Gas and Electricity. Shown information is based on the analysis done through the report and present in each column, the household sector specific issues are remarked in blue. i. first column presents a core diagnostic issue as a main weaknesses; ii. then the tendency (▲,▼,=) indicating whether the weaknesses is expected to get worse, better or equal and the time dimension expressing short term (ST), medium term (2-4 years) (MT) or long term (LT); iii. third column indicates the nature of the threat (R: regulatory, I: institutional, P: physical or PL: political) originated by the weaknesses; iv. next shows the direct and indirect impacts of the threat over the energy system and the economy - household sector is remarked in blue v. a final column lists the stakeholders involved, with is relevant for addressing solutions or measures (stated in general terms on final row) to overcome or mitigate the impacts. The intention is to identify the complexity of the solution, as different stakeholders, with not necessarily coincident or compatible objectives and strategies are involved.

99 Table VI.1.Summary of threats, impacts and stakeholders Diagnostic Time Issue, as a Threat / Problem / Vulnerability Direct/ Indirect Impacts Stakeholders involved Tendency Weaknesses 9 Restrictions and limitations on supply. 9 Evidences of parallel/black market. 9 Growing level of derivates’ importations. R: Lack of compliance of Hydrocarbons Law 9 Reduction of commercial balance (external trade) as (concession contracts signed). exportation is reduced. 9 Energy Secretariat 9 Non-complied contracts are being renewed. 9 Reduction of fiscal revenues from royalties and other 9 National 9 Low royalties level (national oil exportations). taxes to oil exportation. Government 9 Oil companies are allowed to send a 70% of 9 Increase of electricity generation cost and hence, 9 Provincial exportation proceedings to matrix house at home electricity tariff Governments countries - disbursed earnings, dividends. 9 Restrictions to self generation of electricity 9 Environment & 9 Prices partially linked to international ones. 9 Most critical sectors affected by lack of fuel and Sustainable 9 Provinces (instead of the whole country) have the increment of energy costs are Agriculture and Development property of reserves; they have weaker capacity of Transport. Most affected industrial activities: basic 9 Secretariat negotiation than counterpart oil companies. chemistry, mineral extraction, and the sectors related 9 ENARSA - new Difficulties for contracts enforcement, reserves to construction assets. Energy State audit, among others. 9 Transport sector (both passengers and cargo) critical Company

situation due to lack of fuel. Increase in the public 9 Oil companies I: There is a single Energy Secretariat department, subsidy, increase in transport costs for final goods, 9 Producers, ST ▲ concentrating the whole issue, isolated. High Oil inflation pressures - low income households more retailers, refiners MT ▲ 9 Strong supply concentration (oligopoly under lax dependence affected as they spent higher income share on final 9 Exportation and LT ▲ regulation). consumption goods. Importation 9 Stakeholders’ pressures with high relative power 9 Encouragement, of Diesel consumption, due to companies (compared to regulator) distortions in final price (lower taxes aimed at cargo 9 Transport Sector 9 Newly created energy company ENARSA is not transport) compared to gasoline cars. Difficulty of 9 Users and endowed with enough budget, resources, staff, in refineries structure’s adjustment: lack of diesel, excess Consumers, order to play a stronger role in the sector. of gasoline. (ADELCO Liga de 9 Stakeholders not interested in national market 9 Higher share of poor households’ income (even larger Acción del (investments in new exploration, production, refining in terms of expenditure) is absorbed by energy Consumidor, etc.) take place in other countries). sources and services. 9 CAMMESA-

9 LPG price increments are also having impact on poor Wholesale P: Substantive reduction of reserves wellbeing, reducing their quality of life. Substitution for Electricity Market

wood and other dirtier sources in the short run. Administrator PL: Regulatory signals given in opposition to Rational 9 Governing functions are threatened as crisis spreads, Company Use of Energy. aggravated by the general insecurity as basic services 9 Lack of long term planning. provision is in risk. Energy sector impacts can trigger a 9 Absence of coherence between actions. major crisis if manifested together with other structural impacts (unemployment, increase in offenses and crimes). Solutions: Rational use of Energy in transport, services, and household sector. Increased and empowered regulatory function from the State. Political and Institutional intervention is necessary.

100

Diagnostic Time Stakeholders Issue, as a Threat / Problem / Vulnerability Direct/ Indirect Impacts Tendency involved Weaknesses 9 Energy Secretariat 9 National R: The legal framework of the reform remains almost 9 Restrictions and limitations on supply. unmodified. Government 9 Lack of pipes’ capacity during winter, due to residential 9 Non-complied contracts are being renewed. 9 Environment & heating use in cities. Interruption to industrial and 9 Lack of control and monitoring of concessionaries activity. Sustainable electricity generation sectors (switch to oil derivates). 9 Increasing production prices paid, while privates actors Development 9 Reduction in quality of service provision. express that they are not attractive enough (for developing 9 Secretariat further investments) 9 Substitution by imported oil derivates (fuel oil for 9 ENARSA 9 increasing Bolivian gas prices (imported alternative supply) electricity generation). 9 Gas companies 9 Importations from Bolivia are not warranted. 9 Reduction of commercial balance (external trade) funds. 9 Producers, 9 Compromising exportations to Chile are not warranted. 9 Problems for gas network expansion, lack of connection 9 Tariff structure do not encourage rational use retailers, between earnings and further investments obligation. (encouragement of extracting as much as possible) and 9 Exportation and 9 The network does not expand towards poor households, are uneven among final users, Importation very high costs of connection. 9 Regulation and Control are weak. companies 9 Further difficulties by lack of LPG, and low cost of 9 Renegotiation of contracts (post devaluation) and 9 Transport international Court legal claims (sues) from private actors electricity induces electrical appliances bought for caloric Sector are pending. uses. Non rational use of energy, pressures on electricity 9 Users and 9 I: There is a single Energy Secretariat department, demand. High Natural ST ▲ Consumers: concentrating the whole issue, isolated. 9 Interruption of CNG (Compressed Natural Gas) provision Gas MT▲ 9 Strong supply concentration (oligopoly under lax (ADELCO Liga triggers more consumption of gasoline (as big share of dependence LT ► regulation). de Acción del public transport uses dual fuels). 9 Stakeholders’ pressures with high relative power Consumidor, 9 Reduction in Industrial production and productivity, (compared to regulator) etc.) eventual problems of employment. 9 Newly created energy company ENARSA is not endowed 9 CAMMESA with enough budget, resources, staff, in order to play a 9 Problems in electricity supply to all sectors. 9 Gas Regulatory stronger role in the sector. 9 Increased lack of Thermal Generation Availability, and Entity- 9 Increasingly open questions regarding public binding reduction in emergency capacity reserve. ENARGAS contracts for gas pipes and infrastructure building. 9 Increase of electricity generation cost and hence, Interrupted Works due to sound corruption cases. 9 Electricity electricity tariff P: Substantive reduction of reserves, but real dimension is not Regulatory 9 Problems with non energy provision (petrochemical known by government. Entity-ENRE industry), cost increases, 9 Strong dependence on gas for Electricity Power 9 Negative environmental impact, as Gas replacement Generation Chile, Bolivia, Brazil PL: Regulatory signals given in opposition to Rational Use of involves more emissions of GHG. Governments Energy. 9 Impacts on poor wellbeing, reducing their quality of life,

9 Lack of long term planning. as prices of final consumption goods increases, Transport 9 Absence of coherence between actions. triggering inflation. 9 Limited public awareness efforts towards a more efficient equipment

final use of gas Exportation and Importation companies Solutions: Rational use of Energy in services, household sector and large electricity users, In depth revision of tariff and concession contracts. Electricity generation diversification: hydro, renewable, nuclear, coal, nuclear. Equitable Regional Energy Integration. Increased and empowered regulatory function from the State. Political and Institutional intervention is necessary.

101 Diagnostic Time Issue, as a Threat / Problem / Vulnerability Direct/ Indirect Impacts Stakeholders involved Tendency Weaknesses Remains almost unmodified. 9 Un clear incentives for investment in generation. 9 Full costs are not fully transferred to all users, 9 Restrictions on supply. 9 Energy Secretariat distortions in electricity tariff, regressive structure. 9 Increased lack of Thermal Generation Availability, 9 National 9 Tariff structure opposite to rational use of energy, and reduction in emergency capacity reserve. Government as the more consumption, the lower the price paid 9 Increase of electricity generation cost and hence, 9 Environment & per kWh. electricity tariff Sustainable 9 Weak control and regulation. 9 Reduction in quality of service provision. Development 9 Renegotiation of contracts (post devaluation) and 9 Increased Electricity Importation (Brazil). Secretariat international Court legal claims (sues) from private 9 Reduction of commercial balance (external trade) actors are pending. funds. 9 Utilities 9 Problems in electricity supply to all sectors. 9 Generators I: Stakeholders acting also in hydrocarbons production 9 Electricity grids do not expand towards poor 9 Transporters put pressures on regulator, higher relative power households, high costs of connection and provision Electricity (compared to regulator) to poor households. 9 Users and Supply ST ▲ 9 Impacts on poor wellbeing, reducing their quality of Consumers P: in the short run the supply would not mach demand life, as prices of final consumption goods increases, (ADELCO Liga de Restrictions: MT▲ 9 Strong dependence on gas for Electricity Power triggering inflation. Acción del Equipment and LT ► Generation. 9 Further difficulties by lack of LPG, and low cost of Consumidor, etc.) fuels 9 Reduced dual thermal supply (gas & fuel oil). electricity induces electrical appliances bought for 9 CAMMESA 9 Limitation in liquid fuels’ logistic provision. caloric uses. Non rational use of energy, pressures 9 Gas Regulatory on electricity demand. Entity-ENARGAS Pl: Regulatory signals given in opposition to Rational 9 Reduction in Industrial production and productivity, 9 Electricity Use of Energy. eventual problems of employment. Regulatory Entity- 9 Lack of long term planning. 9 Governing functions are threatened as crisis ENRE 9 Absence of coherence between actions among spreads, aggravated by the general insecurity as different chains (sources) of energy basic services provision is in risk. Energy sector Brazil Government 9 Reduced public awareness efforts towards a more impacts can trigger a major crisis if manifested efficient final use of electricity. together with other structural impacts 9 Appliances / 9 Signals in opposition to Rational use of energy. (unemployment, increase in offenses and crimes). Generation 9 equipment manufacturers

Solutions: Increased and empowered regulatory function from the State. Political and Institutional intervention is necessary. Rational use of Energy in transport, services, and household sector. In depth revision of tariff and concession contracts. Electricity generation diversification: hydro, renewable, nuclear, coal, nuclear. Equitable Regional Energy Integration. Source: authors’ elaboration. Notes: • It is not unambiguous to identify in which column the issue should go. E.G. the increase on productive costs due to gas importations, due to the absence of connection between the sales proceedings and the required investment to maintain the hydrocarbons chain sustainable, is a clear impact of the verified threat, but also a response or measure from the industry. Something similar can be said regarding the households and the decision of buying electrical appliances for home heating – instead of more efficient gas appliances - due to the very low price of electricity and the lack of extension of the gas grids. • Some of the measures adopted by a stakeholder might enhance its own situation regarding energy insecurity, but the Country get worse.

102 6.2. Follow up

The report presents a diagnosis of the principal reasons that threaten the safety of supply in case of Argentina, for both the macroeconomic level as well as the Household sector.

Alternatives scenarios presented potentials actions or strategies that identify the existing possibilities related to energy efficiency, energy matrix diversification - particularly renewables encouragement - or specific strategies for the Household Sector.

Nevertheless the topic is far from being exhausted; the possibility of advancing in offers major specificity would need to develop additional studies concentrated in the sectors identified like the most vulnerable.

The analyses developed here are preliminary approaches, whose principal contribution must be associated to an initial diagnosis and some general proposals that do not include overall strategies, actions and specific measures.

For a future phase some important pending issues can be further developed.

Especially the determination of priorities among the problems brought by both, the threats and the vulnerabilities detected, considering the level of complexity and the real possibilities once the limitations of existing resources are recognized. It is suggested that the above mentioned analysis should be carried on for each of three principal detected weaknesses summarized in: the High Oil and Natural Gas dependence, and the Electricity Supply restrictions (Equipment and fuel oils).

1. At the national level a core contribution would be to propose and develop a strategy to diminish the pressure on the fossil liquid and gaseous fuels; and to extend the offer of Nuclear power, Hydro energy, Mineral Coal and Renewables.

2. At the level of final consumption sectors, it is necessary to analyze the implementation of actions orientated at a major equity in the safety of supply. This will imply incorporating, for example, the regions not supplied by Natural Gas and guaranteeing the access to the GLP to the sectors of minor level of revenue. Another relevant aim would be to guarantee the access to the energy to reasonable prices to the industrial sector, especially in small and medium establishments.

In other words, it would give priority to the study of the problematic concerns to key sectors. Once priorities are defined, there might be established specific aims and strategic lines of action, which might be discussed by the principal actors related to the definite problematic.

3. Another proposal, linked with a pending issue, is the evaluation of the real impacts that generates the lack of energy, as well as the inefficiencies (energetic, economic, political, etc.) that are generated, not only at the demand level, but also at the supply level. To this respect, the following stage should center, at least in case of Argentina in three consumers' modules:

9 The industrial sector of small and medium companies 9 The Residential Urban sector of minor level of revenue 9 The Residential Rural Sector of minor level of revenue.

103 ANNEX I. Questionnaire

Fundación Bariloche is presently working on a brief paper on the topic of Supply Security and Energy Efficiency, on the basis of the Argentine Case Study.

According to the methodology we intend to apply, the opinion of qualified experts is to be sought out on topics related to supply security, along the lines of the following questionnaire.

We kindly request you devote a few minutes of your time to fill in the questionnaire or add any comments you consider appropriate. You are not expected to answer all the questions; it is up to you to choose which ones to answer. Write your answers on the line below the question.

Thanks for devoting your valuable time to this.

Questionnaire 1- What do you understand by Energy Supply Security?

2- Which objectives underlie supply security? Well-being, smooth running of the economy, physical permanent availability at an affordable price for everybody, environmental restrictions, sustainable development? Others? Which ones?

3- Is Supply Security synonymous with maximization of autonomy or minimization of dependence? Yes? No? Why?

4- What’s the role of efficient use of energy? Why?

5- Promoting savings in demand requires the definition of priority sectors. Which are they, in your opinion?

6- Is there something like “perfect energy”, or is it necessary to rely on a mix of all kinds?

7- Is final price important, or is supply security to be achieved at any cost?

8- Do regional cooperation and energy integration contribute to reducing energy vulnerability? On what conditions? What can guarantee it?

9- The diversification of fuels on the offer side must be understood by products (types of fuels) and by regions (countries of origin). What’s the importance of these two topics in supply security?

10- Which sectors are the most vulnerable to supply insecurity? Why?

11- Regarding energy matters, are we in the face of a more uncertain future at a global level? Why?

12- Is it more difficult nowadays to fully understand the way the system is run? Why?

13- Which could be the most suitable policy instruments to improve supply security? Is it possible to achieve a robust situation?

14- How should the poorest and more marginal sectors be incorporated to public energy policies regarding supply security?

Your comments

104 ANNEX II. Estimates of Renewable Energy Use the final energy demand by usage

Base Year and Year 2030.

Other Primary Energy Solar Wind Firewood Charcoal Biofuels Hydrogen Total Sources Sector Cooking: 0.38% Cooking: Urban residential - - Heating: 0.22% - - - 2.40% 9.28% Water heating: 0.04%

Water heating: 7.6% Water pumping: Cooking: Rural residential - Cooking: 17.4% - - - 21.49% 93.3% 4.4% Heating: 30.6%

Commercial, Services and Public - - All uses: 2.03% - - - - 2.03%

Transportation ------

Farming ------1.48% 1.48% All uses Cattle - (pumping): - - - - - 16.68% 16.68% Non-metallic minerals: 2.93% + 5.11% Industry - - 1.46% - - - 9.09% (husks) Other industries: 7.57% Total - 0.28% 0.63% 0.48% - - 2.09% 3.48%

Source: Final Report of the Technical Assistance Project for the preparation of the “Strategic Energy Plan of the Argentine Republic” designed by IDEE/FB for the Energy Department, 2007.

105 Use of renewable energies in the final energy demand by use.

Alternative Scenario – Year 2030

Other Energy Solar Wind Firewood Charcoal Biofuels Hydrogen Primary Total Sources Sector Water heating: Cooking: 0.2% Cooking: Urban residential 12% - - 4.9% Heating: 0.1% 4.5% Heating: 0.6%

Water heating: Water heating: 0.5% Water pumping: Cooking: Rural residential 34.5% Cooking: 1% - 19.2% 98% 1% Cooking: 5.6% Heating: 15%

All uses (Water Commercial, Services and heating, All uses BD All uses: All uses: 0.1% - 2.1% Public Cooking and (pumping): 0.78% 0.04% Heating): 1.14% BD Road: 7.55% Transportation - - - - Road: 0.64% 9.4% BE Road: 1.88% Farming Drying: 12% - - - BD: 14.3% 0.23% 15.59%

All uses BD: 15% Cattle - - - 42.7% (pumping): 25% BG: 2.7% Other industries Non-metallic minerals: 1.86% + Industry (Process heat): - 0.49% - BD: 0.10% 6.29% 3.83% (husks) 1.1%: Other industries: 2.8% BD: 3.2% Total 0.97% 0.36% 0.17% 0.20% BE: 0.45% 0.15% 1.67% 7.2% BG: 0.02%

Source: Final Report of the Technical Assistance Project for the preparation of the “Strategic Energy Plan of the Argentine Republic” designed by IDEE/FB for the Energy Department, 2007.

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