Argentina aims to rake in $5 billion in investments in
renewable energy by 2018 with the goal of reducing its energy deficit, a
government official told Reuters, as hopes for near-term increased output from
the Vaca Muerta shale field fade.
The South American country has ideal conditions for
producing renewable energy, experts say: vast, wind-swept plains in Patagonia
and sun-soaked subtropical lands in the north.
Yet renewable energy, excluding hydropower which many
environmentalists do not consider sustainable, accounts for less than 1 percent
of power generation, compared with 8 percent in neighboring Brazil.
The government earlier this month implemented a law
mandating that renewable energy as a share of power consumption must rise to 8
percent by 2018 from 1.8 percent currently.
This aims to "diversify the power grid, replacing
liquid combustibles which are normally mostly imported fossils," Sebastian
Kind, Argentina's undersecretary for renewable energy, said in a recent
interview.
Argentina has been running an energy deficit since 2011,
draining foreign exchange reserves. So far, it produces virtually no solar
energy and has only a few wind farms.
"The first goal is for 8 percent, requiring around $5
billion of investment to achieve between 2,000 and 3,000 megawatts," said
Kind. "The law aims for a 20 percent share by 2025, which means 10,000
megawatts, requiring between $15 billion and $20 billion."
The law offers several fiscal benefits for investors in
renewable energy and promises the creation of a trust fund, FODER, to provide
payment guarantees and project financing.
This should go some way toward making up for the high cost
of borrowing faced by investors in Argentina due to sovereign risk. The country
defaulted for the second time in 12 years in July 2014 due to a dispute with
holdout creditors that had rejected its prior debt restructurings.
The drive toward renewable energy is generating enthusiasm
in the private sector. Dow Argentina announced in March a joint venture with
state firm INVAP for a wind farm that would require investment of around $123
million.
Argentina will hold its first power auction since the bill
was passed in May.
Pampa Energia SA has said it is interested in bidding to
produce around 200 megawatts at the next auction, worth around $400 million in
investment.
Argentina had hoped increased shale oil and gas output from
its vast but barely tapped Vaca Muerta formation would help reduce its energy
deficit. But low world oil prices and high drilling costs are making it less
attractive for investment.
Argentina also has a tricky economic backdrop, with
inflation running around 30 percent and restricted access to global markets.
The government is poised to pay the holdout creditors and exit default within
weeks, and is working on bringing down inflation. But it will take time to
reboot the economy.
"Vaca Muerta will not reactivate as much as we hope
until there is a certain economic normality, an agreement with holdout
creditors for example and a deceleration in inflation," a source at the
Energy Ministry said.
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