Argentina is planning at least four energy auctions this year that are expected to attract as much as $7 billion in investments as president Mauricio Macri seeks to boost generating capacity for both conventional and renewable power plants.
The country will hold two auctions for new thermal capacity, one for renewable energy and one for new transmission lines, according to Energy Minister Juan Jose Aranguren. The government is considering another one for thermal projects.
The auctions are part of Argentina’s efforts to revive its economy and make its power grid more reliable. They follow similar events last year that are expected to result in $6.5 billion in investment in the country’s power industry.
“We want to maintain the virtuous cycle of public, open auctions, then national and international capital can collaborate to improve Argentina’s electric system reliability and to reduce costs of generation,” Aranguren said in an interview in Buenos Aires on Thursday. “We have also to ensure the expansion of the transmission system in parallel to the new generation capacity.”
Argentina announced in January plans to increase electricity rates for domestic consumers by as much as 149 percent in two stages, in a bid to reduce subsidies and cut the primary fiscal deficit to 4.2 percent of gross domestic product this year. The first took effect in February and the next is set for November, to help utilities invest in the grid and prevent blackouts in Buenos Aires, Aranguren said.
As much as 6.5 gigawatts of new capacity will be added to the grid over the next three years, according to Bloomberg New Energy Finance. That includes 3.6 gigawatts powered by fossil fuels and 2.8 gigawatts from renewable sources other than large hydropower.
Renewable Auction
The renewable-energy auction will be in July or August, Aranguren said. Companies that won contracts to deliver electricity in earlier auctions are still seeking financing to build projects. About 3 gigawatts of renewable power projects were auctioned in 2016.
“There are a lot of people looking for financing now,” he said. “If we do the next one too soon, before new projects already auctioned are structured, we might generate a bottleneck on the financing side.”
Argentina has set an ambitious goal of boosting its clean energy consumption to 8 percent by the end of this year, from about 1 percent now, and 20 percent by 2025. The main mechanism to achieve these goals is its RenovAr renewable energy auction program. More than 60 percent of Argentina’s energy comes from fossil fuels, according to Bloomberg New Energy Finance.
A lack of transmission lines in Argentina may hamper the outcome of the next clean-energy auction, as most of the country’s transmission capacity was filled by projects from the first two events last year, according to Bloomberg New Energy Finance. Limited transmission nodes in areas with good wind and solar sources may drive up prices in the next auctions.
There’s enough transmission capacity for projects already awarded, and Argentina will need to add 5,000 kilometers (3,100 miles) of transmission lines in the next three years, Aranguren said.
“New power transmission lines are necessary to follow the expansion of generation capacity,” he said.