R 181031Z MAR 09
FM AMEMBASSY BUENOS AIRES
TO SECSTATE WASHDC 3328
INFO MERCOSUR COLLECTIVE
USDA FAS WASHDC
DEPT OF ENERGY WASHINGTON DC

UNCLAS BUENOS AIRES 000302 
 
 
E.O. 12958: N/A 
TAGS: ENRG ECON SENV AR
SUBJECT: ARGENTINA'S CONSIDERABLE RENEWABLE ENERGY POTENTIAL 
 
REF: A) BUENOS AIRES 275;  B) 2008 BUENOS AIRES 1745 
 
¶1.  Summary:  Argentina is a potential world leader in renewable 
energy.  Already a leading producer and exporter of biodiesel, 
Argentina's extensive forestry resources could provide ample biomass 
for second-generation biofuels (ref A).  The country's southern 
Patagonia region enjoys some of the most sustained and strongest 
winds found anywhere.  Wind power probably offers the best potential 
for renewable energy generation, and incipient development of wind 
farms is taking place as a result.  The sunny climate of the west 
and northwest of the country offers good conditions for solar power. 
 Hydroelectric power already provides over 40% of electricity 
consumed in Argentina.  The country also has a long history of 
nuclear power use, with long-term plans calling for a new plant to 
come on-line every five years (ref B). 
 
¶2.  While biodiesel production and exports have seen a dramatic rise 
over the past three years, structural problems have hampered the 
full development of other sources of alternative energy. 
Residential and business electricity tariffs that, despite some 
recent increases, have been held at levels substantially below world 
market norms have discouraged private investment in new 
capital-intensive energy projects, in particular wind farms and 
hydroelectric plants. 
Still, recent public-private partnerships between individual 
provinces and private companies in wind power development appear to 
point to a workable model.  This cable looks at the state of 
renewable energy in Argentina, with the exception of biofuels which 
was covered in a separate report (ref A).  End Summary. 
 
---------------------- 
Electricity Production 
---------------------- 
 
¶3.  Argentina's installed nominal electricity generation capacity is 
24,000 MW.  The overwhelming majority of electricity is generated 
through hydroelectric (40%) and thermal power generation (52%), the 
latter mostly from natural gas.  Argentina still has a large 
untapped potential for hydroelectric power.  Nuclear power provides 
about eight percent of the country's energy needs.  Despite a recent 
leveling in electricity demand due to the global economic slowdown 
and some increases in domestic wholesale and retail electricity 
tariffs, it is estimated that the country will need to add 
approximately 1,000 MW of new generation capacity annually in the 
medium term. 
 
¶4.  As a result of the liberalization of the power generation market 
in the 1990s, over three-quarters of power generation capacity is 
currently controlled by private interests.  Transmission and 
distribution, however, are much less competitive and are still 
highly regulated and controlled by the GOA.  No new large 
privately-funded greenfield power generation project has been 
undertaken over the past eight years, in large part because 
wholesale electricity tariffs paid to generators have been held well 
below international market levels since the aftermath of the 2002 
economic crisis.  The GoA's 2007 "Energy Plus" initiative, which 
allows generators to charge higher wholesale tariffs for new 
cost-effective capacity, has encouraged some incremental investment. 
 
---------------------------- 
Renewable Energy Legislation 
---------------------------- 
 
¶5.  The most important legislation promoting renewable energy is Law 
25,019 from 1998 and Law 26,190 from 2007.  The 1998 law, known as 
the "National Wind and Solar Energy Rules", declared wind and solar 
power generation of national interest, provided an additional 
payment per MW/h produced and granted tax exemptions for 15 years 
from the law's promulgation.  Law 26,190 of 2007 broadened the 1998 
law by declaring of national interest the generation of electricity 
from any renewable source intended to deliver a public service.  It 
outlined which sources of renewable energy qualify for state 
support, provided tax breaks for renewable energy equipment and 
offered tariffs for certain renewable resources.  It included 
promotion of wind, solar, and small hydro power, a fuel cell 
project, and rural electrification. 
 
¶6.  The 2007 law also established a target of 8% for renewable 
energy consumption by 2017 and mandated the creation of a trust 
fund, the Renewable Energy and Energy Efficiency Partnership 
(REEEP), whose resources would be allocated to pay a premium for 
electricity produced from renewable sources.  The Planning 
Ministry's Energy Secretariat is responsible for the development of 
renewable energy strategies and encouraging energy efficiency.  The 
Secretariat of the Environment is responsible for environmental 
policies conducive to the preservation of renewable and 
non-renewable resources. 
 
------------------------------- 
Hydroelectric and Nuclear Power 
------------------------------- 
 
¶7.  Argentina's hydroelectric production amounts to about 42,000 MW, 
while its estimated potential exceeds 170,000 MW.  There have been 
no new major private investments in hydroelectric plants since the 
1990s, however.  At issue again is the current policy that sets 
electricity tariffs below international market levels, which has 
discouraged large-scale private investment.  On the public side, 
however, works are in progress to raise the height of the Yacyreta 
dam, shared by Argentina and Paraguay, to a height of 83 m, thus 
increasing its output from 1,700 MW to 3,100 MW. 
 
¶8.  Argentina has been a player in the nuclear field since the early 
1950s.  In 2006, the GOA launched a plan to boost nuclear power 
generation.  As a result, construction work on the Atucha II nuclear 
power plant, initiated in 1981, was reinvigorated, with completion 
expected for 2010.  Atucha II will add 750 MW of generation 
capacity.  In addition, the Embalse nuclear power plant, with 648 MW 
of generation capacity, will be refurbished to extend its 
operational life beyond 2011.  The GOA's plans call for a new 
nuclear plant to come on line every five years until 2020.  In a 
conversation with the Ambassador, the Canadian Ambassador mentioned 
a possible agreement with Canada to build the next nuclear power 
plant, following the completion of Atucha II.  Argentina has its own 
heavy water production facility to supply these plants.  An 
extensive overview of the country's civil nuclear industry was 
covered in ref B. 
 
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Wind Power 
---------- 
 
¶9.  The Patagonia region of Argentina has some of the most sustained 
and strongest winds found anywhere, and some development of wind 
farms has taken place as a result.  The rolling hills of the 
Province of Buenos Aires also offer excellent wind conditions. 
While the theoretical wind power potential for Argentina has been 
estimated at 500,000 MW of electricity generation, this huge 
potential is still largely unexploited.  Official reports estimate 
that 1,000-2,000 MW could come from wind power generation by 2015, 
compared with the current 27 MW (2008). 
 
¶10.  One of the reasons for the underdevelopment of wind power in 
Argentina is that electricity tariffs and current developmental 
incentives do not yet make wind farms attractive enough.  Another 
deterrent to wind power development is the lack of transmission 
lines to connect Patagonia with the national grid, though some work 
has taken place over the past couple of years, in particular with 
the coming on-line of the first section of the Linea Patagonia. 
 
¶11.  While wind power generation increased in Argentina over the 
last decade, it still represents an infinitesimal part of the 
country's potential.  Total operating wind power capacity in 2008 
was 27 MW, distributed among 13 operating wind farms (10 of them 
built in the 1990s).  This represented less than 0.05% of the 
theoretical potential of wind energy in Argentina.  Wind farms and 
their total capacity were distributed as follows, by province: 
Chubut (4 farms - 17,460 kW), Buenos Aires (6 farms - 6,100 kW), 
Santa Cruz (1 farm - 2,400 kW), La Pampa (1 farm - 1,800 kW), 
Neuquen (1 farm - 400 kW). 
 
¶12.  Other projects are being considered.  The Province of Chubut 
obtained a World Bank credit of $7 million for the provision, 
installation, set up and maintenance of 1,500 small turbines of 500 
¶W.  One of the main wind power projects in Argentina is "Ingentis", 
a wind park of 100 MW in Chubut, composed on 50 turbines of 2 MW 
each, for an estimated investment of $150 million.  The shareholders 
in the project are the Province of Chubut with 39%, and two private 
Argentine companies, Emgasud and Pampa Holdings, with 30.5% each. 
 
¶13. PEPSA, a local concern allied with ABO-Wind of Germany, recently 
received the authorization from the Secretariat of Energy to be a 
new agent in the wholesale energy market for the 50 MW wind farm it 
is installing in the Province of Buenos Aires.  German firm Sowitec 
has announced that it is considering an investment of $100 million 
in the Province of Buenos Aires.  General Electric has partnered 
with Argentine company Emgasud on a $450 million wind farm project 
that would generate 300 MW in Rivadavia (Chubut Province).  GE is 
confident that new regulations and incentives may soon be enacted to 
make investments in wind power more attractive to private investors. 
 
 
¶14.  The most prominent private Argentine company involved in wind 
power is IMPSA, flagship of the Pescarmona Group, which manufactures 
1.5 MW turbines in Mendoza, and opened a plant in Brazil in 2008. 
IMPSA is said to have plans to install 3,000 MW of new capacity in 
Patagonia over the next three years.  Another high-tech local 
company, INVAP, is currently involved in the development of a 1.5 MW 
wind turbine.  INVAP is a versatile corporation, half-privately 
owned and half-owned by the Province of Rio Negro.  It is well-known 
for its engineering capabilities and development of nuclear and 
space projects. 
 
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Solar Power 
---------- 
 
¶15.  Solar power is only present in remote areas and is used mostly 
for housing and small factories.  A $50 million World Bank loan 
approved in November 2008 will provide reliable electricity to rural 
communities with renewable energy, through the Renewable Energy in 
the Rural Market Project (PERMER).  The major focus of this 
initiative is the installation of 15,500 new solar home systems and 
630 solar PV systems for rural schools. 
 
¶16.  All of the solar power produced so far in Argentina is for 
local use and none is connected to the grid.  The Province of San 
Juan, however, plans to launch a tender for a solar power farm of 5 
MW that would eventually be connected to the national grid.  The 
price at which the resulting energy will be negotiated will create a 
precedent for future solar power developments.  Four companies have 
already expressed interest in bidding for this call in San Juan: 
IMPSA (Argentina), Abengoa (Spain), Giacomini (Italy) and Q-Cells 
(Germany).  An interesting element in this project is that San Juan 
Province is a major producer of quartz, a key component for solar 
panels. 
 
------------------- 
Hydrogen Fuel Cells 
------------------- 
 
¶17.  In 2006, the Argentine Congress approved Law 26,123 to promote 
hydrogen as a fuel.  Under the law, the development of technology, 
production, use and applications of hydrogen as fuel were declared 
of general interest, and research and development of this field were 
to be fostered by the government.  The law gives considerable tax 
benefits for 15 years to promote the production, use and 
applications of hydrogen, such as early refund of value-added tax 
when buying, manufacturing, or importing capital goods; accelerated 
amortization for income tax purposes; exemption from minimum 
presumptive income tax; and exemption from liquid and natural gas 
special tax.  While there is continuing interest and a significant 
body of research is being conducted in Argentina by several 
institutes and universities, there have not been any practical 
applications as of yet. 
 
--------------------------------------------- -- 
Comment:  A Willing Partner in Renewable Energy 
--------------------------------------------- -- 
 
¶18.  Argentina is a potential world leader in alternative and 
renewable energy.  With the right conditions and incentives, 
including further steps by the GoA to rationalize domestic wholesale 
and retail electricity pricing and so make alternative energies 
technologies more economically viable, Argentina could become the 
next large country to develop significant wind power generation. 
Local and foreign companies are partnering with provincial 
governments to take advantage of this potential or are positioning 
themselves for the new regulations and incentives that they believe 
will soon boost the sector.  The Argentines are also seeking 
partners for hydrogen fuel cell research and solar power 
development.  With Argentina looking to the USG and the EU for 
technology transfers and investments in alternative power 
generation, the opportunity is there for productive cooperation on 
renewable energy.  End Comment. 
 
WAYNE