The sustained growth of the renewable energy industry should be attributed to the success of a four stage model. The economic expansion unequivocally leads to larger demand of electricity and transportation.
The implementation of effective support policies to increase market penetration in detriment of conventional power sources is essential to reflect this enlargement in the renewables generation capacity.
Argentina had the largest economic growth in Latin America for the past 10 years. For this period, annual GDP growth rate averaged 7.0 % chiefly as a result of the strong recovery following the 2001-2002 crisis. Pent-up demand of local industrial goods and high soybean commodity prices accounted for the bulk of investments. Consequently, the electricity demand grew 58% in the same period and the installed capacity increased from 23 to 31 GW, mainly with the construction of combined cycle gas turbines (CCGT). An optimistic scenario foresees electricity demand attaining 125,550 GW/h by 2016.
However, the positive growth rate was not aligned with current gas production, which dropped 14.4% from 2005 to 2012 and thus imports rose. To date, natural gas is the primary fuel of Argentina, representing 41% of the electricity matrix. In spite of YPF’s (Argentina’s oldest Oil & Gas Company) nationalization in 2012, downward trends could not be reversed. The actual scenario consolidated energy imports for over $ 10.0 billion annually and interrupted the industrial supply of natural gas in winter as residential provision is prioritized and natural gas replacement for fuel oil and gas oil in power plants increase the marginal cost of electricity.
To reverse the crisis, industry’s long term planning aims toward three objectives: shale gas development, nuclear resurgence and wind energy boom. The main driver for latter is the exceptional availability of natural resources; in fact, there are 6 regions in Patagonia where the wind speeds surpass 12 m/s at 50 meters height.
In order to exploit this potential, state owned ENARSA implemented a competitive bidding program, GENREN and offered 710 MW. To date less than 20% of the GENREN is completed and three wind farms have commissioned under GENREN’s umbrella: Rawson (80MW), Loma Blanca (51MW) and Arauco (23.1 MW). During its first year of operation, Rawson wind farm accomplished a capacity factor of 44.4% (greater than the world average of 28%) due to existing climatic conditions of the wind energy, which ensure a profitable return on investment at competitive levelised costs of electricity.
Research Analyst – Energy & Environment Practice
Frost & Sullivan
Industry Analyst – Energy & Environment Practice
Frost & Sullivan