Argentina Renewable Energy Policy Handbook Power

Transcription

1 Argentina Renewable Energy Policy Handbook 2017 Report Code: GDAE1101P

2 1 Table of Contents 1 Table of Contents List of Tables Introduction Renewable Energy Policy GlobalData Report Guidance Renewable Energy Policy, Argentina Overview Law on Promotion of Renewable Sources of Energy for Electricity Production: Law on Promotion of Renewable Sources of Energy for Electricity Production: 27, Incentives under Law no. 27, FODER and Decree 531/ RenovAr Program Renewable Energy Generation Program Financial Incentives and Policy Support for Solar Financial Incentives and Policy Support for Wind National Strategic Plan for Wind Energy Biodiesel Competitiveness Plan The Biofuel Law Biodiesel Content Requirement National Bioenergy Program Energy Efficiency Project Energy Efficiency Policies for Appliances National Program for Rational and Efficient Use of Energy Appendix Market Definitions Installed Capacity Electricity Generation Electricity Consumption Thermal Plant Hydropower Plant Nuclear Renewable Energy Resources Abbreviations Bibliography

3 4.4 Methodology Coverage Secondary Research Primary Research Modeling and Forecasting Contact Us Disclaimer List of Tables Table 1: Abbreviations

4 2 Introduction 2.1 Renewable Energy Policy Renewable energy represents a possible solution to two major global issues: global warming and diminishing fossil fuel reserves. It is sustainable and clean, generally emitting no or very little CO 2, and these factors have led major countries to shift their focus toward the development of renewable energy sources. Renewable energy has the potential to boost the global economy. However, the most important challenge in the deployment of renewable energy is that it is more expensive than conventional fuels. In order to make renewable energy competitive, it is necessary for governments to provide support in the form of favorable policies and incentives. Various governments are establishing regulatory frameworks, policies, and incentives to develop the renewable energy sector, as they increasingly recognize its importance. Renewable portfolio standards, or quota obligations, and Feed-in Tariffs (FiTs) are the two most prominent support mechanisms used to drive the development of the renewable energy market, and most of the countries that recognize this offer one or both of these policy measures. Other incentives, such as capital subsidies, grants, rebates, tax credits, tax exemptions, loans at reduced interest rates, net metering, Renewable Energy Certificates (RECs), and public competitive bidding, are also offered variously by major countries to promote renewable energy capacity building. 2.2 GlobalData Report Guidance The report begins with an introduction to renewable energy policy and its importance in making renewable energy sources competitive with conventional energy sources. It then discusses the major renewable energy policies in Argentina. 4

5 3 Renewable Energy Policy, Argentina 3.1 Overview Argentina has been facing severe power shortages in recent years, prompting the government to refocus on increasing installed capacity. The growth of the power market has been slow, with installed capacity increasing at a compound annual growth rate of 2% between 2000 and In 2015, conventional energy sources such as thermal and nuclear accounted for 63% of installed capacity, while large hydropower accounted for 33%. The installed capacity from renewable energy sources, including small hydropower, was just 3%. The current installed capacity is unable to satisfy demand, which is increasing at a high rate. There are three sectors that the government has earmarked for expansion: hydropower, nuclear power, and renewable sources. Within hydropower, small-scale projects are expected to become prominent. However, several large projects are also planned, and this is expected to result in increased demand for hydropower equipment. The government s focus on nuclear power generation is also expected to create demand for nuclear equipment, as well as demand for facilities for nuclear waste disposal. There is substantial untapped renewable potential, which presents another opportunity for growth. The Ministry of Energy is exclusively responsible for developing and implementing policies relating to power, oil, and fuel to promote competition and efficient resource allocation. The National Regulatory Entity for Electricity (Ente Nacional Regulador de la Electricidad, ENRE) was created in 1993 by Law and was allocated the authority to set environmental rules and regulations and design procedures for implementation in generation, transmission, and distribution verticals. According to clause No.1 of Resolution SE No. 475/87, all companies in the power market should conduct environmental impact assessments in the pre-feasibility stages of planned projects and monitor the projects continuously thereafter. The resolution lists the standard formulation of procedures for the environmental management of specific activities such as the laying of transmission lines. The Wholesale Electricity Administrator Company (Compañía Administradora del Mercado Mayorista Eléctrico, CAMMESA) was established to operate the wholesale power market. In 2006, the Department of Energy issued Resolution No. 1281/06, or the Energy Plus resolution, an initiative to encourage companies to increase power generation in order to meet demand. Companies that consume large amounts of energy, compared with base demand at 2005 levels, are liable to pay a price equivalent to the cost of generation plus a profit to the generator, as approved by the Department of Energy. The low utilization of renewable energy sources such as wind, solar photovoltaic (PV), geothermal, and biomass is due to a lack of government incentives that support renewable investment and limited financial support in terms of financing and project funding options. However, with energy demand increasing, Argentina is now more willing to encourage the development of its untapped renewable energy sources, and a large number of projects are receiving financing from the government, which is also encouraging private participation through foreign 5

6 direct investment in the energy sector. It has set a target for 8% of its power consumption to be accounted for by renewable energy sources by 2016, in order to support the development of the renewable power industry. In 2014, the share of renewable energy in total generation was only 3.5%. Solar PV is a nascent market in Argentina and is not yet developed except for very specific small-scale applications and programs like the Renewable Energy Project in Rural Markets (Proyecto de Energía Renovable en el Mercado Eléctrico Rural, PERMER), which supports the promotion of renewable energy in the country. Argentina has ideal conditions for solar energy exploitation, with large areas near population centers having low cloud levels. The PERMER program aims to support rural populations by supplying renewable energy sources to schools and many households. 3.2 Law on Promotion of Renewable Sources of Energy for Electricity Production: In 2006, Law superseded the earlier Law and set the legal framework for the promotion of renewable energy sources in the country. It also set the target of 8% of the country s power consumption to come from renewable energy sources by The law extended the revised and expanded FiTs to all renewable energy sources. The following FiTs were provided under the law: Wind power: ARS0.015 ($0.0048) per kilowatt hour (kwh) Solar power: ARS0.9 ($0.288) per kwh Small hydropower with up to 30 MW of capacity: ARS0.015 ($0.0048) per kwh Other renewable sources, such as geothermal, tidal power, biomass, and biogas: ARS0.015 ($0.0048) per kwh The tariffs were provided for a period of 15 years. The law also offered an additional adjustable premium of $4 per Megawatt hour (MWh) to wind power generators, funded through the Renewable Energy Trust Fund. This law was superseded in 2016 by Law no. 27, Law on Promotion of Renewable Sources of Energy for Electricity Production: 27,191 Law no. 27,191 sets mandatory renewable energy targets for all consumers up to The law has set a target of 8% renewable energy by December 31, 2017 and 20% renewable energy by December 31, Purchase Agreements (PPAs) will be tendered by the Ministry of Energy and Mining with the costs being passed on to the final consumers. Large consumers, defined as those with average consumption exceeding 300 kw, have been given the option of opting out of the tendered PPAs and getting their supply directly from a distributor or from the wholesale market at a price ceiling of $113 per MWh or through self-consumption projects (Navia and Sewell, 2016). 6

7 3.3.1 Incentives under Law no. 27,191 Some benefits have been carried over from the earlier Law, no Accelerated depreciation for income tax purposes of the assets or infrastructure works involved in projects including capital goods, civil, electromechanical, and assembly works, and related services has been continued. Similarly, the following have been continued: income tax loss credit carryovers for 10 years; tax exemptions on minimum presumed income in connection with the assets involved in the project; tax exemption on dividends or profits distribution, as long as they are reinvested in infrastructure projects in Argentina; and benefits for utilization of local components (minimum of 30%). Under the new law, beneficiaries have also been exempted from import duties, over new capital goods, special equipment, or parts or components of such goods and certain supplies until December 31, Consumers who adhere to the targets will also be allowed exemption from certain taxes, fees, or royalties, of national, provincial, or municipal levels, or of the Autonomous City of Buenos Aires. In addition, beneficiaries have been allowed to transfer into the prices of the PPAs any future tax increases (Sammartino, 2016) FODER and Decree 531/16 The decree, completed in March 30, 2016, created a trust fund for renewable energy, the Fund for the Development of Renewable Energies (Fondo para el Desarrollo de las Energías Renovables), with a commitment of ARS12,000m ($819m) for The amount of money to be moved into this fund every year will depend on two factors: renewable energy targets that are met; and will never be less than 50% of the amount saved by switching over to renewables from fossil fuels in the previous year. The decree has proposed various methods of power purchase for those consumers that opt out of tendered PPAs: by private contract, by self-generation or cogeneration, or by partaking in a joint procurement mechanism from CAMMESA or from an entity designated by the ministry. The decree has also outlined specific points related to the bidding process for renewable energy. There is a possibility for having quotas for technology within the bids. Price can also be denominated in terms of US dollars instead of Argentine pesos. Benefits related to encouraging the utilization of local content in renewable power projects, wherever available, have also been outlined in this decree (Lopez, 2016). 7

8 Apart from the benefits/incentives mentioned in the previous section, certain (FITs) are also being offered for the various renewable energy sources. They are: $0.11/kWh for solar power $0.005/kWh for wind, geothermal, biomass, biogas, and hydropower projects (Norton Rose Fulbright, 2016) RenovAr Program This program has been launched to specifically develop Argentina s renewable energy sector. The first auction was launched in August 2016 to add 1 GW of renewable electricity to the national grid with a breakdown of 600 MW of wind power, 300 MW of solar power, 65 MW from biomass, 20 MW from small hydropower dams, and 15 MW from biogas. The projects must materialize within two years and the total investment estimated to accumulate from the first round is $1.5 $2 billion. There were 75 companies participating in the first round in 123 projects totaling 6 GW, making the tender six times oversubscribed. The awarded PPAs will be for 20 years and will be denominated in Argentine pesos, with guarantees for cases that may hinder free currency conversion (Norton Rose Fulbright, 2016). The next round for RenovAr is intended to be held in early Renewable Energy Generation Program The Argentine Federal Secretariat of Energy launched GENREN in 2009, in order to ensure that the set target 8% of power from renewable energy by 2016 was met. Under this program, a 15-year purchase contract is awarded for 1,000 MW of renewable power at guaranteed prices. The program is aimed primarily at wind power projects (500 MW) and is expected to create 7,000 jobs. 3.5 Financial Incentives and Policy Support for Solar Although Argentina has favorable climatic conditions for solar energy exploitation, with large areas with low cloud levels near population centers, the technology has not been widely developed, except for very specific small-scale applications. Solar energy was first promoted in Argentina in 1998 through Law /98 on the Promotion of Wind and Solar Energy Production. In 2006, the Law on the Promotion of Renewable Sources of Energy for Electricity Production provided a FiT of ARS0.9 ($0.288) per kwh for solar energy. PERMER supported the installation of solar energy systems in rural areas. This has again been superseded by Law no with a FiT of ARS1.61/kWh ($0.11/kWh). 3.6 Financial Incentives and Policy Support for Wind Wind power was initially promoted by national legislation on wind and solar energy, through Law , which was established in The law established that those that make a capital investment in the installation of wind equipment may defer the payment of VAT for a period of 10 years from the date of implementation of the law. 8

9 The law also provided for the establishment of a fund to promote power generation from wind power and solar resources and stated that facilities for the generation of power from these sources would enjoy fiscal stability for a period of 15 years. The law was subsequently superseded by Law for Promoting Renewable Energy Sources, which was passed on December 6, 2006, and provided a FiT of ARS0.015 ($0.0048) per kwh for wind power. This has again been superseded by Law no with a FiT of ARS0.07/kWh ($0.005/kWh). 3.7 National Strategic Plan for Wind Energy The National Strategic Plan for Wind Energy was initiated in 2005 with the objective of installing approximately 300 MW of wind power capacity within a period of three years. The plan was designed on the basis of an agreement between the Ministry of Planning, Public Investment, and Services, the Regional Center for Wind Energy (Centro Regional de Energía Eolica, CREE) in Chubut province, and the state-owned energy enterprise Energy Corporation Argentina (Energía Argentina SA, ENARSA). The plan requires 80% of the wind power equipment used in the projects to be produced in Argentina. The government has selected several possible sites for the first large wind farms in the country: Plan Vientos de la Patagonia I near Comodoro Rivadavia, in Chubut: 60 MW Santa Cruz: 60 MW Buenos Aires: 100 MW ENARSA has been designated as the co-ordinating body for each of the projects. Chubut province has taken the lead, applying a strategic plan for wind energy, which constituted Law 4,389 and a wind distribution map. Provincial Law of Chubut 4,389: this regulation specifies additional subsidies and tax benefits and establishes the percentage of wind turbine components that must be manufactured or assembled within the province. The subsidies amount to ($0.001) per kwh, on top of the national subsidy. Provincial Law of Buenos Aires 12,603: this regulation specifies additional subsidies for wind energy. The subsidies amount to ($0.001) per kwh, on top of a national subsidy. Provincial Law of Santa Cruz 2,796: this regulation provides for tax exemptions of %, depending on local content, and small subsidies of ($ ), depending on local content, for renewable energy projects. 9

10 3.8 Biodiesel Competitiveness Plan The Biodiesel Competitiveness Plan establishes an exemption for biodiesel from the fuel transfer tax equivalent to approximately $0.05 per liter of diesel for a period of 10 years. The plan also provides special arrangements regarding capital gains tax for investment in biodiesel facilities, with an accelerated period of repayment for new facilities. As part of this process, the provincial governments must exempt biodiesel producers from various taxes for a period of 10 years. 3.9 The Biofuel Law Argentina s Biofuel Law was introduced in April 2006, and regulations for the implementation of the law were published in February 2007 through Decree 109. The law provides the framework for increasing the investment in and production of biofuels. The primary objectives of the framework are to increase the supply of energy, develop environmentally friendly fuels, and develop rural areas primarily non-traditional production areas in order to benefit small and medium producers. The law mandated the use of biofuels by 2010, with gasoline to contain 5% ethanol, and diesel to contain 5% biodiesel. The latter figure was raised to 12% in February The government is responsible for the investment, generation, and marketing of biofuels in the local market. The law provides three alternatives for companies producing biofuels: To generate for the local market, taking advantage of the benefits of tax incentives To generate for self-consumption, taking advantage of the benefits of tax incentives To produce for the export market these companies will be subject to government controls and will not be eligible to receive tax incentives The major features of the Argentine biofuel law (and regulations) are the following: Incentives are provided for the generation and use of biofuels in the local market for a period of 15 years. The Secretariat of Energy is the controlling authority. Tax breaks fall under the purview of the Ministry of Economy. This ministry will determine the maximum overall amount of fiscal incentives provided in relation to biofuels. Every year, the controlling authority establishes the volume of biofuels required to abide by the law, calculates and alters the percentage mixes, determines the price of biofuels for the domestic market, implements volumes, establishes terms and conditions for those producing for their own consumption, and approves exports. 10

11 Companies will be accredited a percentage of the total tax break offered by the government. In the assigning of tax breaks, priority will be given to small and medium enterprises, farmers, and entities operating in non-traditional production areas. Biofuels will be exempt from three particular taxes on fossil fuels. Producers are also exempt from VAT. Producers may take advantage of a direct subsidy Biodiesel Content Requirement In July 2010, the Ministry of Federal Planning, Public Investment, and Utilities passed a resolution that increased the blending mandate for biodiesel in regular diesel to 7% from the previous rate of 5%. The blend rate was subsequently raised to 10% and then, in February 2016, it was raised to 12% (IEA, 2016) National Bioenergy Program The National Bioenergy program aims to facilitate national energy security, sustainable development, the attenuation of climate change, and the achievement of environmental equilibrium through the supply of bioenergy. The program has three main objectives: Identifying bioenergy sources and characterizing their potential Studying the potential of non-traditional crops for bioenergy development Identifying new enzymes to develop second-generation biofuels 3.11 Energy Efficiency Project The Energy Efficiency Project was approved on June 26, 2008, with the primary objective of increasing energy efficiency by developing appropriate services and equipment. The total cost of the project is $99.44m, and it will be active until June 30, The project is divided primarily into three parts. The first is the development of the country s energy efficiency fund. This involves: The development of pipeline projects, which will be funded with the help of grants The development of an Argentina Energy Efficiency Fund The second component of the project is the development of a Utility Energy Efficiency program, which includes: Supporting the acquisition and distribution of compact fluorescent lights; providing information, training, and supervision; measuring the effectiveness of the program; and providing an equal share of the benefits derived from the program to residential customers 11

12 The provision of technical assistance, with the help of utilities, to experiment with new delivery mechanisms for energy efficiency services The last component of this project focuses on increasing capacity within the private and public sectors in order to boost the incentives for investing in energy efficiency Energy Efficiency Policies for Appliances A variety of labeling rules and provisions are applicable for appliances such as air conditioners and electrical appliances for washing, drying, and lighting purposes. The implementation of these policies is still voluntary, although it has become mandatory in the areas where it was already implemented in the country National Program for Rational and Efficient Use of Energy The Program for Rational and Efficient Use of Energy (Programa Nacional de Uso Racional y Eficiente de la Energía, PRONUREE) was approved by the government in December The program focuses on increasing energy efficiency by adopting highly efficient technologies, as well as educating people about energy efficiency. The program also necessitates the involvement of public and private institutions. PRONUREE includes short- and long-term objectives for the improvement of energy efficiency in the industry and includes a target of 10% energy savings by the end of The services sector and public buildings have been allocated respective energy saving targets of 12% and 10%, to be achieved by the end of The following are the major measures to be initiated by the program in the short term: Spreading awareness and conducting campaigns in order to educate and inform the general public on energy efficiency Initiating the replacement of inefficient lamps with more efficient lighting systems Establishing a system of energy efficient labeling for energy consuming equipment The following major measures are to be initiated in the medium- and long-term: Introduction of cost-reducing management tools for the efficient use of energy resources by developing an energy efficiency program for the industry sector The joint development of actions alongside participating companies, aimed at establishing consumer profiles, identifying improvement opportunities, and implementing management programs in production processes, and setting goals for improving them Initiation of a funding mechanism to facilitate investment in energy efficiency projects in the sector of small and medium enterprises 12

13 Formulation and revision of regulations for buildings with different applications, promoting the development of building codes that include energy efficiency aspects, such as the use of specific materials Promotion of more efficient public lighting systems and traffic lights across the country Promotion of energy savings in the transport sector through the expansion and improvement of public transport management. 13

14 4 Appendix 4.1 Market Definitions refers to the rate of production, transfer, or energy use, usually related to power. It is measured in Watts (W) and often expressed in kilowatts (kw) or Megawatts (MW). It is also known as real power or active power Installed Capacity Installed capacity refers to the generator s nameplate capacity as stated by the manufacturer, or the maximum rated output of a generator under given conditions. It is given in MW on a nameplate affixed to the generator Electricity Generation Electricity generation refers to the process of generating power from other forms of energy. It also refers to the amount of power produced, expressed in Gigawatt hours (GWh) Electricity Consumption Electricity consumption is the sum of power generated, plus imports, minus exports and Transmission and Distribution (T&D) losses. It is measured in GWh Thermal Plant A thermal power plant is a plant in which turbine generators are driven by burning fossil fuels Hydropower Plant A hydropower plant is a plant in which the turbine generators are driven by falling water Nuclear Nuclear power is the energy released from the fission of nuclear fuel in a reactor Renewable Energy Resources Renewable energy resources are those that provide energy that is naturally replenished but limited in the amount of energy available per unit of time. Biomass, geothermal, solar, small hydropower, and wind are examples of renewable resources. 14

15 4.2 Abbreviations Table 1: Abbreviations CAMMESA Compania Administradora Del Mercado Mayorista Electrico or Wholesale Electricity Market Administration Company ENARSA Energía Argentina SA (Energy Corporation Argentina) ENRE Ente Nacional Regulador de la Electricidad FiT Feed-in Tariff GENREN Programa Generación Renovable (Generation of Electricity through Renewable Sources) GW Gigawatt kwh kilowatt hour MW Megawatt MWh Megawatt hour PERMER Proyecto de Energía Renovable en el Mercado Eléctrico Rural (Renewable Energy Project in Rural Markets) PPA Purchase Agreement PRONUREE Programa Nacional de Uso Racional y Eficiente de la Energía (Program for Rational and Efficient Use of Energy) REC Renewable Energy Certificate Source: GlobalData 4.3 Bibliography IEA (2016). Argentina: Biodiesel content requirement. International Energy Agency, February 9, Available from: [Accessed on: March 13, 2017]. Lopez, B.D. (2016). Argentina establishes new landmark renewable energy policy, pv magazine global, April 7, Available from: [Accessed on: March 13, 2017]. Navia, T. and Sewell, A. (2016). Argentina Launches Innovative Renewables Program, Chadbourne & Parke LLP. Available from: Program_projectfinance [Accessed on: March 13, 2017]. Norton Rose Fulbright (2016). Renewable energy in Latin America: Argentina. Norton Rose Fulbright, October Available from: pdf Sammartino, M.E.C. (2016). Argentina: Investment Incentives In Renewable Energy In Argentina. RenovAr Rounds, Mondaq, October 6, Available from: x/533474/oil+gas+electricity/investment+incentives+in+renewable+energy+in+argentina+renovar+roun ds [Accessed on: March 13, 2017]. 15

16 4.4 Methodology GlobalData dedicated research and analysis teams consists of experienced professionals in marketing, market research, consulting background in the energy industry and advanced statistical expertise. GlobalData adheres to the Codes of Practice of the Market Research Society ( and the Strategic and Competitive Intelligence Professionals ( All GlobalData databases are continuously updated and revised. The following research methodology is followed for all databases and reports. 4.5 Coverage The objective of updating GlobalData coverage is to ensure that it represents the most up to date vision of the industry. We track hundreds of Alternative energy news sources on a daily basis. Using this news flow and regular interaction with the industry experts, we identify the key trends being witnessed by the industry. These can be market opportunity, industry consolidation, technological break-through, policy updates, etc. Our articles and reports investigate these trends in detail and evaluates the market implication of these trends Secondary Research The research process begins with exhaustive secondary research on internal and external sources being carried out to source qualitative and quantitative information relating to each market. The secondary research sources that are typically referred to include, but are not limited to: Company websites, annual reports, financial reports, broker reports, investor presentations and SEC filings Industry trade journals and other literature Internal and external proprietary databases National government documents, statistical databases and market reports News articles, press releases and web-casts specific to the companies operating in the market Primary Research A primary research effort further substantiates findings and information captured through desk research. This aspect of the research program serves both as a means of obtaining updates regarding issues such as changes in policy frameworks, power sector development, and as a quality control mechanism. GlobalData conducts hundreds of primary interviews a year with industry participants and commentators in order to validate its data and analysis. A typical research interview fulfills the following functions: 16

17 Provides first-hand information on the market size, market trends, growth trends, competitive landscape, future outlook Helps in validating and strengthening the secondary research findings Further develops the analysis team s expertise and market understanding Primary research involves interactions and telephone interviews as well as face-to-face interviews for each market, category, segment and sub-segment across geographies. The participants who typically take part in such a process include, but are not limited to: Industry participants: CEOs, VPs, business development managers, market intelligence managers and national sales managers Outside experts: Investment bankers, valuation experts, research analysts and key opinion leaders specializing in the power industry Modeling and Forecasting In case of data gaps and especially while forecasting the market, we use in-house models to forecast the data. Historic data and the analysis of trends within it form the basis of all forecasting methodology. Various qualitative and quantitative factors are usually taken into account for estimating the future growth. The forecasted data is validated through various industry experts and back-of-envelope check is also done. 4.6 Contact Us If you have any queries about this report or would like further information, please contact at the below given telephone numbers or address. North America: Europe: Asia Pacific: info@globaldata.com 17

18 4.7 Disclaimer All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, GlobalData. The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions and recommendations that GlobalData delivers will be based on information gathered in good faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such GlobalData can accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect. This report is a licensed product and should not to be reproduced without prior permission. The information in this document has been extracted from etrack by a registered user. GlobalData holds no responsibility for the loss of original context and for any changes made to information following its extraction. All information was current at the time of extraction, although the original content may have been subsequently updated. 18