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Argentina + crisis + creativity = opportunity

ImageArgentina has a unique potential for the exploitation of renewable energies, particularly wind energy. However, the present context of the domestic energy market has discouraged any investment, with even more dramatic consequences in the renewable energies area. This is leading to an inevitable energy provision deficit in the short term. Nonetheless, this critical situation might play in favour of renewables if we take suitable measures.

By Prof. Dr. Eng. Erico Spinadel, President of the Argentinean Wind Energy Association
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At present in Argentina a fixed price scheme rules the energy market and this has settled prices below the international market level. We must add to this scenario the country’s international financial situation and a regulation that puts renewable energies at a second level against conventional energy sources. These factors have frozen investment in energy and in renewables in particular. Throughout 2004 only one 0.9MW grid-connected windmill has been installed. This lack of investment in the sector, together with the high rate of energy demand, has engendered great suspicion about the reliability of energy provision in the coming months and years.

The rising uncertainty about future energy supplies may be a great opportunity to enhance the development of renewables in Argentina. There are many major energy consumers that are extremely susceptible to interruptions of energy supply, such as the steel, food or chemical industries. In this context, these companies are willing to pay over market prices if they are assured of an interruptible supply of energy. It is here that renewables can play a key role at competitive market prices.

It is worth emphasising this core concept: renewables cannot compete with the present price level of the market, but the rising crisis may make them competitive. The uncertainties mentioned above make some consumers well disposed towards paying higher prices if this means a reliable source of energy. This possibility puts renewables into the game again with no need for regulation changes or any other type of state intervention.

Right now, the Argentinean Wind Energy Association (AAEE) is developing a programme to promote the formation of joint ventures between hydroelectricity generators and wind farms, in order to provide long-term power purchase agreements (PPAs) to major grid-connected consumers. These two types of renewable energy generators interact in a mutually positive symbiosis. Hydroelectric generators sell their energy at higher prices, and at the same time they save water from their dams. On the other hand, wind farms are able to engage in uninterruptible supply projects, and sell 100% of the energy they are able to produce at profitable prices.

We are confident that this programme will encourage investment in the renewable energy area, and especially in wind energy. If we are able in this way to make wind energy exploitation a profitable business, it will become a tempting alternative for investors. At the same time, we believe that this model could be applied, in essence, to other developing countries with similar problems in consolidating investment flows.
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