Argentina has the highest potential for renewable energy in Latin America due to its geography and climatic conditions. However, the vast majority of the country's energy is generated by thermal energy plants. To remedy this situation, the government amended the Renewable Energy Act in 2015 and issued a regulatory decree including new promotional schemes to foster investment in large renewable energy projects. The aim is to reduce the country's dependency on fossil fuels – from both foreign and domestic sources – and reduce the emission of climate-changing greenhouse gases and other pollutants.
During 2016 the Ministry of Energy, using renewable energy project tenders, conducted two public tenders for the procurement of electricity from renewable sources. As a result, 59 projects amounting to 2,423 megawatts (MW) were awarded, which were distributed among 17 provinces, representing 5.7% of national electricity consumption.
Further, recent electricity tariff increases have sparked the interest of small business owners that want to reduce their reliance on large centralised power plants by implementing renewable energy sources, such as rooftop solar panels.
Distributed renewable electricity systems generate clean, renewable electricity on the site where that energy will be used. The term distributed generation distinguishes these systems from large (ie, 1 MW to 1,000 MW), centralised power plants that provide most of the nation's power. Distributed renewable electricity systems (ie, 1 kilowatt (kW) to 100 kW) can take many forms, including:
- geothermal systems;
- micro-hydroelectric systems;
- methane digesters;
- solar panels; and
- small wind turbines.
In Argentina, a number of provinces have different regulations to promote distributed renewable electricity systems based on net metering or feed-in tariff schemes. In order to unify these regulations, the National Congress is analysing the Bill for the Promotion of Distributed Energy Generation from Renewable Sources, described in more detail below.
The bill sets out national policies, a contractual framework and regulatory requirements for the generation of electricity from renewable sources by users connected to the distribution grid. The energy produced will be used for self-consumption and excess electricity will be injected into the grid.
The bill establishes two important rights. First, every user-generator in the distribution grid can install equipment to generate renewable energy up to a given power capacity yet to be determined. Second, the user can use that energy for self-consumption and to contribute excess electricity to the distribution grid.
In order for user-generators to connect their equipment to the distribution grid they must first obtain authorisation from a distribution company. Subsequent legislation will determine the technical and security requirements and the specific procedures to be complied with to obtain such approval.
Further, a distribution company must conduct a safety and technical evaluation of the energy equipment to be installed. Such evaluation will review the safety of the equipment against persons and property, as well as the security and continuity of service.
Once authorisation has been granted, the user and the distribution company will enter into an agreement with the user-generator. This agreement will include the pricing method for the electricity that will be delivered to the national grid, including any discount or bonus earned by the user-generator for the consumption of its auto-generated electricity.
The bill contains the distribution company's obligations which states that they are responsible for connecting the equipment to feed the excess electricity into the grid.
The distribution company will calculate and administer the user-generator's compensation for its contribution based on a net metering scheme (ie, a contribution tariff).
The contribution tariff will be determined by subsequent legislation issued by the executive branch and will agree with the seasonal price to be paid by the distributor in the wholesale electricity market. The final amount of the user-generator's bill will be calculated monthly using the cost of its electricity demand minus its electricity contribution to the national grid. In the event that the user-generator has produced an excess amount of electricity in a certain month, a credit will be granted in its favour for future billing periods.
Trust fund for distributed generation development
The bill creates the Fund for the Distributed Generation of Renewable Energy (FODIS), which is a public trust fund governed by national authorities to administer public funds for the financing of distributed renewable energy projects. FODIS's assets will be provided by national budget resources, financial transactions and the contribution of credit agencies, among other things. According to the bill, the National Treasury will allocate Ps500 million to FODIS in its first year.
FODIS aims to provide:
- payment guarantees;
- project financing assistance;
- tax benefits;
- grant loans; and
- subsidies or contributions to distributed generation from renewable sources.
The benefits granted by FODIS will be determined by subsequent legislation issued by the executive branch.
Beneficiaries can be any person domiciled in Argentina and legal entities registered in the country, whose projects comply with FODIS requirements.
An enforcement authority established by the executive branch will:
- establish technical and administrative rules for the approval of projects;
- establish guidelines and rules for connection approval to the distribution grid;
- act as the trustor of FODIS;
- promote policies to encourage the use of equipment developed in Argentina;
- apply promotional benefits; and
- establish general guidelines for energy generation agreements.
The enforcement authority will also establish benefits to promote clean energy generation, which FODIS will implement.
Promotion of national industry
In order to promote active policies that encourage the use of domestic equipment, the bill establishes a programme for:
- research;
- design;
- development;
- investment;
- production; and
- installation services for energy generation.
The programme includes benefits on income tax, value added tax and preferential investment rates.
These benefits are subject to safety and quality standard approval, which will be established by subsequent legislation.
The bill's main aims are:
- unify inconsistent provincial laws in order to reduce local bureaucratic red tape;
- combine technical and security standards;
- simplify permit requirements; and
- reduce lengthy review procedures in order to ensure timely installation and avoid added costs.
Financing alternatives will be made available through FODIS in order to help consumers and investors to develop their projects and reduce any financial obstacles.
The introduction of the bill is notable, as Argentina continues to advance its legislation to promote electricity generation from renewable sources, reduce fossil fuel consumption and diversify the energy matrix. Congress is expected to pass the bill in the following semester.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.
For further information on this topic please contact Federico Godoy at Beretta Godoy by telephone (+54 11 4326 7386) or email ([email protected]). The Beretta Godoy website can be accessed at www.berettagodoy.com.
