New Argentine government could unlock wind potential

ARGENTINA: Following the surprise victory of Mauricio Macri in Argentina's presidential elections in November, all eyes are on the right-winger's efforts to kick-start the country's economy which is struggling after years of interventionist policies.

New Argentine president Mauricio Macri
New Argentine president Mauricio Macri

The election result bodes well for players in the country's energy sector which struggled with chronic underinvestment since authorities froze gas and power prices at pre-crash levels.

At the end of November, the left wing Peronist party conceded defeat to the centre-right Camblemos (Let's Change) party, and Mauricio Macri replaced Christina Fernandez de Kirchner as president of Argentina.

New energy minister Juan Jose Aranguren, a former oil executive, is expected to dismantle the web of subsidies and cross-payments developed over the last twelve years. Not least because they are costing the government an estimated 4% of GDP.

Given the huge interests at play, reform of the energy sector is likely to be gradual. But as consumers — both households and industries — are exposed to more market forces, renewables will be seen as a likely solution, said Gerardo Rabinovich, an industry consultant.

Argentina's wind resource is viewed as one of the largest on the planet with many projects promising capacity factors of more than 45%. Developers have filed plans to install more than 5GW of wind capacity.

However, despite feed-in tariffs and tenders, the country is nowhere near reaching a target of meeting 8% of power needs through alternative renewables sources by 2016. Today, Argentina has just 271MW of installed wind capacity compared to almost 1GW in neighbouring Chile and over 8GW in Brazil.

Legislation passed last September reiterated the 8% target, albeit delayed to 2017, backed by a series of incentives such as relief from corporate and sales tax.

Meeting the 8% target in two years is impossible, said Rabinovich. But developers are watching carefully how the new regime implements the law.

More important than any subsidies will be Macri's efforts to bring Argentina back into the international financial markets again, according to Rabinovich.

The principle barrier to developing wind energy projects in Argentina has been reluctance among banks to provide project financing.

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