Argentina'a Renewable Energy Industry

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Argentina'a Renewable Energy Industry

Profiles Reveals the Enormous Potential of the Country Agribusiness Renewable Energy Real Estate Infrastructure Philanthropy Regulation Art Wine Commodities Emerging Markets Wealth Advisory Ventures OCT 2011 There is a growing trend towards investment in renewable energy generation in Latin America, as the regions abundant natural resources can easily be harnessed into clean energy solutions that will fuel the regions continued economic growth. A recent study by Bloomberg New Energy Finance shows that in 2010, over US$13 billion was invested in Latin America in clean energy generation, and is growing at a compound annual growth rate of 70% since 2004. Thats almost twice as fast as global investment in the industry, which in itself is among one of the fastest growing industries in the world. And while Brazil has been on the receiving end of much of that investment and particularly in ethanol production, the trend is now towards investment in more countries as well as in a far broader range of technologies. Argentina is particularly well positioned in this regard given its abundance of natural resources and a need for additional energy generation to continue to expand its rapidly growing economy. Argentina currently has a mere 553 megawatts (MW) of installed renewable energy, and three quarters of it is comprised of mini-hydro projects; this represents less than 2% of the countrys energy matrix. Furthermore, almost all of the investment pre-dates the 2006 Renewable Energy law, which requires that by 2016, fully 8% of the energy matrix be derived from clean energy. This represents a legal requirement to have more than 3.000 MW of renewable energy operating in the next five years and will require no less than US$5.5 billion in investment. This investment will change Argentinas energy matrix in an important way and will come at the expense of fossil fuel usage. As seen in the two graphs, the less than 2% in 2010 will grow to 8% by 2016 and will be coupled by a doubling of nuclear power generation. The wind sector is the technology that is most likely to receive the largest share of this required investment. While there is only 65 MW of installed wind energy at this time, many of the largest players are already present, even if on a very small scale, and they include (from largest to smallest market share): IMPSA/Grupo Pescarmona of Argentina; Vestas; GAMESA; Wobben Enercon; Siemens; SeaWind; and NRG Patagonia, another Argentine technology provider. Additionally, General Electric as well as a number of the larger Chinese wind turbine manufacturers are establishing beachheads in the country. The opportunity for a big upside is enormous. Brazil has 1000 MW of installed wind energy already operating, and its growth rate in slowing down noticeably. Argentina, with just 65 MW trending towards close to 3000 MW in the next few years, is clearly a country on which to focus.Not only that, the country is known to be one of the best locations for wind energy anywhere in the world. A recent study, entitled State of the Argentine Renewable Energy Industry: 2011, expects that by 2013 there should be 2276 MW of installed wind energy distributed not only in the southern Patagonian provinces but throughout the country after completion of the first two large clean energy tenders (known as GENREN I and II) are completed and the private sector builds and operates the electricity. The first round of investors closed power purchase agreements (PPAs) with the national electricity company at an average price of US$127 per MWh under fifteen year contracts. This compares quite favorably with the rapidly descending rates of US$80/MWh in Brazil and US$90/MWh in neighboring Uruguay. But wind is just one of the technologies receiving a lot of attention and investment. The solar photovoltaic sector, Argentinas NW corner adjacent to the Chilean Atacama Desert is considered among the top spots globally to be developed in the coming years because of its unique solar radiation. Mini-hydro is the granddaddy of clean energy in Argentina, with some facilities in operation since 1911. While there are over 420 MW of this technology operating, another 11 MW are coming online in the coming months, with many more projects in the works. Given the countrys long Andean spine, the resources are enormous. The first investors closed PPAs at an average US$162 per MWh over 15 year contracts. Within the technologies that encompass what is known as Ocean Power, such as tidal energy and wave energy, Argentina is also attracting significant attention. Tidal energy is the third-fastest growing clean energy technology (after wind and solar) and is receiving new investment at a faster pace than biofuels, geothermal or biomass, for example. Once again, Argentinas Patagonian coastline is considered among one of three global hotspots, which also include the coast of South Korea and the northern coast of Australia. Korean, Russian and U.S. technology providers are establishing connections in Argentina to develop this technology, which can be harnessed at very attractive rates. In biodiesel, Argentina has already established itself as a leader and is currently the fourth largest producer in the world and number one exporter. As a matter of fact, there is a race for third place going on between Argentina, Brazil and the United States (after Germany and France, the worlds

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Argentina'a Renewable Energy Industry

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two largest producers). Biodiesel production levels are head-to-head between these three countries and it will be interesting to see which country takes the lead. Argentina, with a B5 mandate that has already been increased to a B7, is working towards establishing a B10 mandate. Given this industrys maturity, all of the large biodiesel technology providers are present in the market, with Germanys Lurgi AG holding a commanding 45% market share, followed by companies such as Westfalia, Desmet and Crown.

The recently published State of the Argentine Renewable Energy Industry: 2011 study holds these and many more specific details regarding the ups and downs of an industry with far more ups than downs in the coming decades.

Author Biography Carlos St. James is the Managing Director of Santiago & Sinclair, LLC, an Austin, Texas-based firm focused on clean tech solutions in Latin America. He is also the founder and President of the Argentine Renewable Energies Chamber (CADER, by its initials in Spanish); board member of the Global Renewable Fuels Alliance (GRFA) based in Toronto, Canada; and Regional Director and board member of the Latin American and Caribbean Council on Renewable Energies (LAC-CORE) based in Washington, D.C., all ad honorem roles. He also sits on a number of private sector boards focused on various aspects of renewable energies. He is the author of more than two dozen published studies and articles on the industry almost all available in both Spanish and English, and has spoken at more than 30 conferences in fifteen countries on four continents over the last four years, sought out by both the public and private sector for his understanding and insights into the renewable energy industry in Latin America. He obtained his undergraduate degree in International Economics from DePaul University in Chicago, Illinois, and his masters degree in International Relations from the Fletcher School at Tufts University in Medford, Massachusetts; he holds both Argentine and United States citizenship. He can be contacted at cstjames@santiagosinclair com.

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