Is Argentina Headed Towards a Clean Energy Revolution?

Guest post by Andrea Becerra

It’s been six months since Argentina’s new President, Mauricio Macri, took office. And from what we’ve seen so far, his focus on growing the country’s renewable energy sector is encouraging – and significantly different from his predecessor. At the closing of 2015, Argentina was among 195 countries to join the Paris Agreement in a commitment to reduce greenhouse gas (GHG) emissions and prevent average global temperatures from rising above two degrees Celsius. At the same time that many of the world’s leaders were gathered at COP21 in Paris, Argentina’s new president was being inaugurated in Buenos Aires.

Macri inherited a country mired in debt, with a yearly inflation rate of 25 percent and trade restrictions that turned away potential investments in renewable energy. This is a shame, as Argentina has remarkable resources for both wind and solar power. Perhaps the previous administration’s most significant legacy for renewables is Law No. 27191, passed in September 2015 and finalized by Macri in March of this year. The law requires users of over 300 kWh (primarily utilities and large industry) to source eight percent of their energy with renewables by the end of 2017, rising to 20 percent by the end of 2025. According to Macri, increasing Argentina’s production of renewable energy could save the country $300 million a year by reducing its dependence on imported natural gas and other fuels, and cutting two million tons of greenhouse gas emissions (equivalent to removing 900,000 cars from circulation).

How realistic are these goals? In 2015, non-conventional renewable energy totaled around two percent of Argentina’s energy mix, made up largely by small hydro followed by wind, solar and biofuels. Fossil fuels comprised 64 percent of the country’s energy with nuclear and large hydroelectric providing the rest. Clearly, there is a long way to go. Argentina’s undersecretary for renewable energy, Sebastián Kind, estimates that the country needs to attract $15 billion in investments to meet the energy goals stipulated under Law No. 27191.

To start to bring in those investments, Macri set the country’s renewable energy ambitions in motion in February by announcing plans to build a 3 GW solar power park in the province of Jujuy, the largest solar project in Argentina. At the end of May, Argentina launched its first renewable energy auction, calling on companies to bid on 1,000 MW of renewable energy, in the hopes of attracting approximately $2.1 billion. The auction began with a 20-day consultation period and the final rules are expected to be defined this month.

While the country’s renewable energy sector seems to be taking off, conventional energy sources are also growing. The shale gas industry is beginning to attract investors, which could significantly deepen the country’s dependence on fossil fuels. Since the start of his administration, Macri has been courting financiers to boost the country’s shale development. Most recently, ExxonMobile announced an investment of up to $10 billion USD in shale gas exploration and production in Argentina’s Vaca Muerta shale formation.

In addition, the government is facing mounting criticism over a controversial hydroelectric power project. The previous administration launched a 1.7 GW hydroelectric project in the Patagonia, financed by China Gezhouba Group, and built with its Argentine partner Electroingenieria. The $5.7 billion dollar project has been controversial among environmentalists who claim the project violates the national park law, which prohibits developments in protected areas, as well as Argentina’s glacier protection law. The two dams, called Nestor Kirchner and Jorge Cepernic, threaten the Upsala, Spegazzini and Perito Moreno glaciers, all located in a UNESCO world heritage site. Local conservationists also claim that the flooding caused by dams will threaten native birds, in particular the 800-remaining endangered hooded grebes.

When Macri assumed the presidency in December he put a halt on the hydroelectric project. In April, however, Macri’s government announced that it would follow through with the proposed project with China. “Argentina needs the dams in order to provide an important part of the country’s energy, since they’ll account for 4 percent of the total generated,” said Daniel Redondo, secretary of energy planning at the ministry of mining and energy. “Now we’re aiming to modify the project to reduce the environmental impact, or at least mitigate it or compensate for it,” Redondo said. While the government announced that the project has been modified to reduce its environmental impact, environmental groups claim that the project continues to pose a danger for its glaciers.

Despite the growth of the shale gas industry and the country’s largest hydroelectric project, the actions of the new administration promise an expansion of the renewable energy sector. Much is resting on the country’s new renewable energy legislation, Law No. 27191, to guide Argentina’s clean energy future. Most recently, during climate talks in Bonn, Germany, Undersecretary of Climate Change for Argentina, Carlos Gentile, signaled Argentina’s intention to revise the Intended Nationally Determined Contribution (INDC) it submitted in the lead-up to the COP21 to include more ambitious reduction targets for GHG emissions. This will create additional international pressure to expand the renewable energy sector.

Since Macri’s inauguration, Argentina has expressed a commitment to improve the energy sector by welcoming foreign investors and passing legislation that encourages the growth of renewable energy. However promising these steps may be, Argentina will continue to face tough choices that determine the future success of renewable energy within the country. In the years ahead, Macri must not only verbally support a commitment to clean energy but also ensure an investor-friendly climate and the successful implementation of policies that will help Argentina realize its vast potential for renewable energy.