2018 Argentina Renewable Energy Report
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22 - 25 OCTOBER 2018 - BUENOS AIRES Argentina's largest clean energy congress & exhibition 2018 ARGENTINA RENEWABLE ENERGY REPORT Written by Mariyana Yaneva, Plamena Tisheva, Tsvetomira Tsanova Edited by Mariyana Yaneva May 2018 @AIRECnews | #AIREC www.airecweek.com WWW.AIRECWEEK.COM CONTENTS INTRODUCTION 3 POWER MARKET ARCHITECTURE AND INSTITUTIONS 4 WHOLESALE ELECTRICITY MARKET 4 MARKET PARTICIPANTS 6 ARGENTINA’S GRID INFRASTRUCTURE 7 THE RENOVAR PROGRAMME 10 ROUND 1 12 ROUND 2.0 16 PROJECTS PROGRESS 20 ROUND 3.0 20 SOLAR PV DEVELOPMENT IN ARGENTINA 21 SOLAR IRRADIATION AND GEOGRAPHICAL RESOURCE 21 CURRENT INSTALLED CAPACITY & POWER GENERATION 21 PROJECT LANDSCAPE AND CONSTRUCTION TIMELINES 22 WIND POWER DEVELOPMENT IN ARGENTINA 24 WIND SPEEDS AND GEOGRAPHICAL RESOURCE 24 CURRENT INSTALLED CAPACITY & POWER GENERATION 24 PROJECT LANDSCAPE AND CONSTRUCTION TIMELINES 25 FORECASTED INSTALLED CAPACITY OF WIND AND SOLAR POWER PROJECTS BY 2025 27 FINANCING RENEWABLE ENERGY PROJECTS IN ARGENTINA 28 FODER AND WORLD BANK GUARANTEES 28 GREEN BONDS 30 PROJECT FINANCING 30 PROCURING RENEWABLE ENERGY TO C&I CUSTOMERS 31 OPPORTUNITIES IN DISTRIBUTED GENERATION, OFF-GRID AND MINI-GRID 33 ENERGY STORAGE 35 REFERENCES & PHOTO CREDITS 36 WWW.www.airecweek.comAIRECWEEK.COM INTRODUCTION Argentina recently opened its electricity market to incorporate wide-scale clean energy and is currently one of the most promising markets for renewables in Latin America. The economic and political crisis at the turn of the millennium took its toll on the Argentine electricity market, providing little incentive to generators and distributors to further invest in increasing their generation and distribution capacity. However, the country’s bold clean energy targets and recent update of the regulatory framework has raised its profile for renewable energy investors. Argentina is targeting an 8% share of renewables in its power mix by the end of 2018, going up to 12% by 2019, 16% by 2021, 18% by 2023 and 20% by 2025. 3 GW 10 GW 20% 18% 19% % of the total power demand 17% 16% 14% 12% 8% RenovAr Round 1.0 Existing + 1.1 GW - 2.75% RenovAr Round 1.5 Auction 1.2 GW - 3.0% 2016 Legacy Conracts (R202) 0.5 GW - 1.5% 9% Existing 0.8 GW - 1.8% 2018 2019 2020 2021 2022 2023 2024 2025 Note: Percentage of RE in toral demand calculate using P75 genartion estimates and 2018 projected demand Source: Comisión Nacional de Energía Atómica - October 2017 With an overall grid-connected capacity of 754 MW at the end of March 2018, renewables (excluding large hydro power plants) are currently generating around 2% of the electricity in Argentina. The 8% target for the end of 2018 looks ambitious but quite achievable if projects awarded in the RenovAr auction in 2016 get built in time, CNEA, the National Atomic Energy Commission in Argentina has estimated. This report will give you an overview of Argentina’s current power market architecture, the RenovAr auctions programme (including detailed project description of the rounds that took place so far), as well as the investment opportunities outside the tenders, both in the commercial and industrial (C&I) sector and off-grid, small scale developments. Wind and solar power advances are explored in greater detail with an outline of the latest capacity and generation figures, as well as project progress. Special attention is also paid to financing schemes, grid issues and future development of energy storage. www.airecweek.com WWW.AIRECWEEK.COM 3 POWER MARKET ARCHITECTURE AND INSTITUTIONS The institutional framework of the electricity sector in Argentina is defined by three main government entities – the Ministry of Energy and Mines (MINEM), the National Electricity Regulator (ENRE) and the wholesale electricity market operator Compañía Administradora del Mercado Mayorista Eléctrico (better known as CAMMESA). The Ministry and its Secretaria de Energia Electrica (SEE) designs the national energy policy and sets the broad regulatory framework. ENRE is an autonomous entity responsible for regulating and supervising the functioning of the national electricity market. It grants grid access licenses and supervises compliance of generation, transmission and distribution entities with safety, quality, technical and environmental standards set in the regulatory framework and the license agreements. Argentina is a federal country, so provinces also have the legal capacity to regulate energy issues in their jurisdictions, implementing their own laws, regulations and support policies. Provincial energy laws and regulations cannot contradict the national regulatory framework but could build on it. Provincial electricity regulators (or ENRESP under their Spanish acronym) regulate the electricity activity in their respective provincial regulatory frameworks. As the wholesale energy market administrator, CAMMESA coordinates dispatch operations, determines wholesale prices, manages transactions in the national interconnected system (Sistema Argentino de Interconexión, SADI), and acts as off-taker in certain power purchase agreements (PPAs). The board of directors includes equal representation of all market participants, including the Government of Argentina, the generation companies, transmission and distribution utilities and large power consumers. WHOLESALE ELECTRICITY MARKET All electricity transactions in the Argentine electricity sector are conducted through a wholesale electricity market which acts as a clearing house for electricity trading. Set up in 1992, the wholesale electricity market in Argentina is organized as a competitive market, including a spot market and a term market (or contracts market). Prices on the spot market are established on an hourly basis as a function of marginal cost of production measured at the system's load center. On the term market, quantities, prices and contractual conditions are agreed upon directly between sellers and buyers. Generators declare their marginal costs www.airecweek.com WWW.AIRECWEEK.COM 4 POWER MARKET ARCHITECTURE AND INSTITUTIONS semiannually. CAMMESA uses the semiannual marginal cost declarations from thermal and hydro generators to determine seasonal dispatch schedules to minimize energy cost in the spot market. A stabilization fund, managed by CAMMESA, was designed to stabilize prices for end users. Financed from the difference between the regulated and spot prices, the fund is used when spot prices exceed the regulated price and replenished when the regulated price exceeds the spot price. The following chart shows how the wholesale electricity market in Argentina was designed to work. Transmission Electricity Electricity flow flow Companies Seasonal Regulated Prices Customers Generators Pool Distributors administered by Spot Prices CAMMESA (limited by Other RES 240-03) Generators Large Stabilization Customers Fund Traders Negotiated Prices SPOT MARKET Large Customers Negotiated Prices Other Generators Traders CONTRACTS MARKET Source: Endesa Americas SA SEC filing 2016 However, in the aftermath of the country’s 2001–2002 economic crisis, the market was reorganized to become effectively controlled by CAMMESA. A government decree declared a state of emergency in the energy sector from December 16, 2015 to December 31, 2017. Free bilateral trading was suspended and large customers were obliged to buy electricity directly from CAMMESA. Wholesale prices were virtually frozen and kept artificially below costs, therefore creating a structural deficit in the operation of the market. The deficit has been covered with subsidies from the Argentine government. In February 2017, Resolution 19/2017 established generation remuneration based on capacity by technology and scale. The remuneration is denominated in US dollars and is converted at the exchange rate published by Argentina’s central bank on the last day before termination of each period set by CAMMESA. www.airecweek.com WWW.AIRECWEEK.COM 5 POWER MARKET ARCHITECTURE AND INSTITUTIONS MARKET PARTICIPANTS The Argentine wholesale electricity market has four types of market participants or agents: generators, transmission and distribution companies, traders and large users. At the end of March 2018, the market had 353 participants registered as market agents on the side of power generation: *A self-generator is an NUMBER OF GENERATION electricity consumer PARTICIPANTS that generates electric energy as a byproduct, GENERATORS 320 since its main purpose is SELF-GENERATORS* 26 the production of goods and/or services CO-GENERATORS** 7 ** A co-generator is TOTAL 353 a market participant who generates electric energy and steam or other type of energy for industrial, marketing, heating or cooling purposes jointly with a third party. On the consumption side, large consumers participating directly in the wholesale market are classified into three categories: • Major Large Users (Grandes Usuarios Mayores, or GUMAs), with capacity higher than 1 MW and energy consumptions higher than 4,380 MWh/year • Minor Large Users (Grandes Usuarios Menores, or GUMEs), with capacity between 30 KW and 2 MW, and • Particular Large Users (Grandes Usuarios Particulares, or GUPAs), with capacity between 30 kW and 100 kW. At the distribution level, all clients with a medium demand of over 300 kW are considered Grandes Usuarios en Distrubución Mayores (GUDI). Each category has different requirements with respect to purchases of their energy demand. For example, GUMAs are required to purchase 50% of their demand through supply contracts and the remainder in the spot market, while GUMEs,