Argentina is finally getting its act together on renewables

While other Latin American countries storm on ahead in pursuit of greener energy, Argentina has barely got itself up and running, with chronic underinvestment in renewables. Until now, that is.

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Long seen as a bit of a laggard on renewable energy generation compared to some of its South American neighbours, Argentina has finally seen the light and is investing in wind and solar power. Over the next few years the country is hoping to attract billions of dollars of foreign investment in renewable energy, with wind farms and large-scale solar parks set to play a leading role in the transformation of the national energy grid.

Years of neglect and underinvestment have left Argentina with a heavy dependence on fossil fuels, even having to spend billions of dollars on imports over the last few years. Over 60% of the country’s electricity comes from thermal power plants (powered mainly by natural gas), with large-scale hydroelectric dams providing around 30%, nuclear power stations 4%, and renewables barely 2%. However, at the start of this year President Mauricio Macri declared 2017 to be “the year of renewable energy”, with a 2015 law (implemented under the previous government) committing Argentina to getting 20% of its electricity from renewable energy sources by 2025.

Argentina is unusual in the relative lack of clean power in its energy mix, especially when compared to many of its South American neighbours – not least next-door Uruguay, which now gets over 90% of its electricity from low carbon sources. This is despite the significant renewable resources that Argentina has at its disposal, from the sun-baked plains and deserts in the north and west of the country (an area perhaps more famous for its endless vineyards), to the windswept pampas of the southern half of the country.

Finally, though, there seems to be more appetite to take full advantage of these conditions, which analysts say could soon make Argentina Latin America’s most attractive market for renewable energy investment. According to BNamericas, a combination of market-friendly reforms by Macri’s centre-right government, the continued global trend of plummeting renewable energy costs, and the absence thus far of a “hyper-competitive” landscape such as that seen in markets like Chile or Mexico, is set to pave the way for a boom in wind farms and large-scale solar parks.

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Turning things around

“The development of renewable energy today holds a central position in Argentina’s energy, political, social and economic agenda”, says Sebastian Kind, a renewable energy minister in the Macri administration. “We’ve established long-term policies and we are now bearing witness to the results of those policies”.

An upcoming government-run energy tender has attracted plans for potential projects with a total capacity of 9.4GW, with wind representing 3.8GW and industrial-scale solar making up 5.3GW (for comparison, the total installed capacity of the national electricity grid currently stands at around 30GW). Construction also got underway at the 300MW Cauchari solar park, a flagship for Argentina’s renewable energy ambitions,  at the start of October. An earlier goal of 8% renewable capacity by the end of 2017 now seems out of reach, but it is hoped that this target will be met by the end of 2019.

While all this undoubtedly demonstrates the interest in Argentina’s renewable energy potential, the government will only be able to award 1.2GW worth of capacity at the upcoming auction, due to a lack of electricity distribution infrastructure which is creating a bottleneck that threatens to apply the brakes on the country’s dash for cleaner energy. Furthermore, while the country’s economic outlook appears to be on the mend after a rocky few years, financial credit on global markets can still be harder to come by, with the result being that investment isn’t as cheap as it is in other Latin American countries.

The leaner economic times of recent years have also led Macri’s government to undertake a series of painful austerity measures, affecting sensitive political issues such as electricity and gas tariffs, which had been frozen for years under the previous government while inflation in the wider economy reached an annual rate of 40%. Macri argues that the relative cheapness of energy had resulted in a lack of investment and subsequent deterioration of the country’s energy infrastructure, but with hikes in consumer tariffs of up to 500% such moves have been controversial.

Other policy areas lean and not green?

Beyond the question of how easy it will be for Argentina to attract the necessary investment to get it to 20% renewables in the next eight years, there are still several key areas where environmentalists have good reason to be sceptical of the quality of the country’s green credentials.

For starters, by all accounts Argentina has been facing something of an energy crisis for years. That means it is embracing renewables as part of an all-of-the-above approach, which still involves plans to keep building fossil fuel power plants and – more worryingly still for green campaigners – to develop the massive Vaca Muerta shale oil and gas fields, in the south of the country. That means going all-out on fracking, with fears of all the environmental and social costs that go with it.

The Vaca Muerta shale fields – which, after their discovery in 2011, suddenly turned Argentina into the holder of the second largest shale gas reserves in the world – cover some 30,000 square kilometres and may contain as much as 16 billion barrels of oil and 300 trillion cubic feet of natural gas. The energy and mining minister Juan José Aranguren told an industry event in Houston earlier this year that the Argentinean government is hoping to reach US$20 billion of investment by 2019, which would dwarf its stated aims for inward renewables investment.

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On top of this, critics contend that Argentina is falling down badly with its record on deforestation. According to the UN Food and Agriculture Organization (FAO) more than 7 million hectares (70,000 square kilometres) of forest has been lost in Argentina, mainly due to the expansion of agriculture and pastureland in the country’s northeast. In spite of some recent signs of greater effort to tackle this, the rate of forest loss still stands at around 180,000 hectares per year, meaning that carbon emissions linked to deforestation and land-use change make up 14% of Argentina’s total annual emissions – a situation that wipes out any gains from the gradual greening of the country’s energy mix.

Add this lack of protection for its forests to the current fossil fuel-heavy profile of its energy mix, and you can see why Argentina’s overall contribution to global efforts to mitigate climate change is seen, by some, as underwhelming – especially given Argentina’s position as a ‘high income country’ with a level of economic development well above most of its Latin American neighbours.

Climate Action Tracker (CAT), which tracks the progress being made by countries towards meeting the Paris Agreement (and its stated aim of keeping global temperature rises to within 2°C above pre-industrial levels), classes Argentina’s current climate strategy as “highly insufficient”, noting that under current policies and projections the country’s annual carbon emissions are set to rise by 50% above 2010 levels by 2030.

However, CAT’s assessment also acknowledges that under Macri, Argentina has shown “positive developments in the climate arena”, including the submission of an updated and more ambitious pledge towards the Paris Agreement, at the COP22 summit in late 2016 – one of the few countries in CAT’s assessments to have done so. If nothing else, that could be seen as an indicator of Argentina’s ambitions to finally get up and running and join the clean energy revolution that has already been underway in other parts of Latin America for quite some time.

After all, it’s better late than never!

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