Argentina has established a long-term state policy for energy development, which encourages the use of non-fossil fuels suitable for environmental protection and economic sustainability.
In pursuance of this goal, newly implemented legislation has introduced a promotional regime and declared that the generation of electric power from sources of renewable energy in order to supply the electric public service is of public interest.(1)
Law 27,191 set a target that 20% of the total consumption of electric power would be from renewable sources by the end of 2025. It is estimated that this goal can be achieved by incorporating 10,000 megawatts (MW) of clean energy into the Argentine interface system, with annual investments calculated at $1.5 billion.
Other objectives include:
- the diversification of the energy matrix;
- the extension of the installed capacity; and
- the promotion of investments in the energy field.
In 2016 the Ministry of Energy and Mining launched the RenovAr Programme, which consists of a set of tender proceedings for the procurement of electrical energy from renewable sources.(2) The tenders are organised in different rounds and the winning parties are awarded power purchase agreements to be entered into with CAMMESA (the company that administers the national power market). The tender process is open to local and foreign legal entities and individuals.
The tender programme's minimum financial and technical requirements are accessible to a wide range of investors, which has resulted in a high level of participation.
Further, the programme provides applicants with different types of incentive and fiscal benefit when submitting projects. Some of these benefits include:
- anticipated value added tax refunds;
- accelerated depreciation for income tax purposes;
- an extension to 10 years of the set-off term for tax credits and debits;
- tax credits and an exemption from the minimum presumed income tax; and
- income tax on payments of dividends, among other tax benefits.
The projects are funded by the Fund for the Development of Renewable Energies, which was created to finance and guarantee renewable energy projects. Some of the project's risks are covered by this public trust and a guarantee from the World Bank Group, which must be requested with the submission of a tender offer.
Due to Argentina's exceptional conditions for the development of clean energy, the programme proved to be a success in its first two rounds.
Round 1 and Round 1.5 saw over 59 projects awarded, equating to over 2,400 MW of power generation, with the number of initial offers going beyond expectations. The results of these rounds are summarised below.
Round 1
In July 2016 the first call for tender opened for a total capacity of 1,000 MW. The level of interest was significant: more than 120 offers were submitted, totalling 6,000 MW.
A total of 29 projects were awarded (amounting to a total of 1,142 MW) – namely:
- 12 wind energy projects (707.5 MW);
- 4 solar energy projects (400 MW);
- 2 biomass energy projects (14.5 MW);
- 6 biogas energy projects (8.6 MW); and
- 5 small hydro energy projects (11.4 MW).
Round 1.5
Given the success of the previous round, another call for tender was scheduled to award additional power purchase agreements for a total of 400 MW for wind energy and 200 MW for solar photovoltaic projects.
In November 2016 30 projects were awarded, amounting to over 1,280 MW of power capacity.
In August 2017 the programme's second round was published with the aim of adding 1,200 MW of renewable energy to the Argentine interface system.
The energy contribution will be distributed as follows:
- wind energy – 550 MW;
- solar photovoltaic energy – 450 MW;
- biomass energy – 100 MW;
- small hydro energy projects – 50 MW;
- biogas landfill energy – 35 MW; and
- biogas energy – 15 MW.
Further, the government has set the following maximum prices for investments:
- wind energy projects – $56.25 per MW hour (MWh);
- solar photovoltaic energy projects – $57.04 per MWh;
- biomass energy projects – $100 per MWh;
- biogas energy projects – $160 per MWh;
- waste landfill biogas energy projects – $130 per MWh; and
- micro hydro energy projects – $50 per MWh.
In October 2017 the Ministry of Energy and Mining released a list of the approximately 200 offers submitted, which amounted to a total of 9,403 MW, as follows:
- 58 wind energy projects (3,818 MW);
- 99 solar energy projects (5,290 MW);
- 20 biomass energy projects (188 MW);
- 36 biogas energy projects (75 MW); and
- 15 small hydro energy projects (32 MW).
The volume of offers submitted in Round 2 shows that the programme continues to be a success. On this occasion, the offers amounted to a total energy production that was eight times higher than the amount to be awarded in the tender.
This highlights that the government is complying with the aim of reaching a 20% installed power capacity from renewable energies by the end of 2025. The Ministry of Energy and Mining will award new projects in November 2017.
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.
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