Law to boost market falls at last hurdle

A new law, which grants a production subsidy to wind energy in Argentina and creates a potential for fast market growth there, was vetoed by President Carlos Menem late in October. Those who have lobbied intensively for the legislation say the battle is not over yet.

A political battle has flared up between the Argentine Congress and President Carlos Menem over a new wind law to have been implemented this month. With only 12 MW of wind plant turning in the country today, the law creates a potential for fast growth by declaring wind energy "of national interest" and granting it a production subsidy. The legislation had been approved by Congress. Late in October Menem vetoed the bill.

"It's not over yet," assures Corin Millais of Greenpeace International, one of the organisations that has lobbied intensively for the legislation. "The veto is a step back, but it doesn't mean the wind law is dead. It can still be saved."

Besides giving wind the right to grid connection, the law supports a production incentive of $0.01/kWh for wind for the next 15 years. Investors are also allowed a 15 year period to pay off loans for imported wind turbines instead of paying for them up front. "This law is essential for wind energy because without that framework, investments are impossible or very marginal," says Juan Carlos Villalonga of Greenpeace Argentina.

Ripples of anticipation have been emanating from the global wind industry in the last few months. "If you look at what was happening in Spain around October 1995, a similar law was implemented raising the price per kilowatt hour produced by wind," says Per Sørensen of Danish wind turbine manufacturer NEG Micon. "You just have to study the last two years of wind power development in Spain, because we are going to see the exact same thing happening in Argentina in the coming years." In 1997, Spain doubled its installed wind power capacity within 12 months to reach over 450 MW; currently the total is 590 MW -- and rising -- making Spain one of the fastest growing markets for wind in the world.

Provincial promotion

While the new Argentinean law creates a market for wind, the provinces can move it forward. In Chubut a law has been in place since July giving wind energy a half cent incentive for each kilowatt hour produced. Add this to the proposed federal incentive and wind projects in Chubut could receive a $0.015/kWh subsidy if the national law is working. "This is what makes the law interesting," says Jorge Alvarez of Danish wind turbine firm Vestas. Chubut includes the vast farmlands of Patagonia, where average winds have been measured at 11 m/s at 40 metres height. Buenos Aires province is considering similar legislation, for a $0.01/kWh subsidy.

Currently local electricity co-operatives, which act as distributors, are buying power from the gross electricity market, MEM, for around $0.025-$0.03/kWh. The cost of wind in Argentina ranges currently from about $0.026/kWh in Chubut to $0.04/kWh in Buenos Aires, where conditions are not as favourable. With the new incentives, wind can earn as much as $0.045/kWh in Chubut.

Alvarez says it is still too early to determine whether the wind law will work the way in which it is meant. "The spirit is there," he notes. "Maybe nothing will happen anyway. This is the risk. But I think the Argentinean market will develop positively. We are watching it very, very carefully."

Something big

While the lobby effort was a co-operation between many parties over the last two and a half years, including Vestas and Micon as well as Argentinean electricity co-operatives, "Greenpeace was the horse going in front," says Alvarez. The organisation hatched the idea in June 1996 as part of its opposition to a new nuclear energy policy then under discussion in Congress. A group of national representatives wrote a draft law based on the proposal.

Of the few modifications to the original Greenpeace idea -- notably, giving solar generation the same right to grid connection but not subsidies -- the legislation has made it all the way to its current place in the veto box. According to Greenpeace, the congress and senate can override Menem's veto with a supporting two-thirds majority. "This is a highly sensitive political moment," says Millais. "The leading party and the opposition both support rejecting the veto. They're all in favour of the wind law."

The energy ministry, which must implement the law if it passes, has been the main opponent from the beginning. It opposes energy subsidies in the country's liberal electricity market, says Villalonga, yet it overlooks the fact that taxpayers already subsidise state owned nuclear power plants.

Until the law is in place, Greenpeace is staying close to the process and hopes to use the exposure of the climate change convention in Buenos Aires this month in its lobby effort. The organisation has already garnered attention with its actions for wind in the capital city, claiming 15,000 new jobs can be created in the wind sector along with a national target of 3000 MW of wind energy by 2010. Last month, Greenpeace took its "Wind Not Oil" campaign to Shell Argentina, calling on the company to redirect its investments into a new energy frontier in an action conducted on the doorstep of Shell's Buenos Aires headquarters, where leaflets were distributed about Shell's supposed "decision" to turn from oil to wind.

"Wind resources in Argentina are very big," says Villalonga. "Combine political will with big resources and something big will start to happen."

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