April 15, 2016

Argentina Establishes New Landmark Renewable Energy Policy

Decree 531 outlines plans to create a trust fund of 12,000 million Argentine Pesos (USD 819 million) for renewable energy this year, and also outlines bidding processes for renewable energy projects.

The new policy establishes a fund for renewable energy development.

The Argentine government has finalized the policy for the development of renewable energies within the country. Decree 531, completed on 30 March, establishes the mechanisms needed to achieve the renewable energy goals of 8% in 2017 and 20% in 2025.

One of the main points within the Decree is the creation of a trust fund for renewable energy, the Fund for the Development of Renewable Energies (Fondo para el Desarrollo de las Energias Renovables). The decree states that 12,000 million pesos (US$819 million) will be added to the fund this year.

The annual amount within the fund will never be less than 50% of the saving achieved on fossil fuels that were achieved with renewable energies from the year before. The Argentine electrical grid currently has a high dependence on fossil fuels.

To calculate the amount that will be put within the fund, it will take into account the renewable energy targets that are met.

Another issue in question is the purchase mechanisms for those with renewable energy obligations: by private contract, by self-generation or cogeneration, or by partaking in a joint procurement mechanism from the Management Company of the Wholesale Electricity Market Anonymous Society (Compañía Administradora del Mercado Mayorista Eléctrico Sociedad Anónima) or from an entity designated by the authority.

It also details related issues for the bidding of renewable energies. The Decree outlines the possibility of having quotas for technology within the bids. Another relevant point is that the price “could be established” in U.S. dollars rather than in Argentine pesos.

On the other hand, the Decree established more favorable conditions for the projects that use more national components. Instruments are also provided to encourage local production of components for renewable energy projects.

The goals of 8% renewable energy in 2017 and 20% in 2025 are covered by the law 27191 that was adopted with broad support in Argentine parliament under the previous government. President Mauricio Macri’s new government, who came into office last December, goes one step further in the promotion of renewable energies with the publication of Decree 531.

Argentina has a high dependence on fossil fuels in its electricity grid and the development of renewable energies within the country is still very low. According to the Fundelec organization, solar and wind energy represented just 0.2% of the total electricity generated last year.

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