Blindfolds off- Joining the fight against corruption.
LATIN LAWYER
Famously, petrol is cheaper than bottled water in Venezuela. Such distorted values used to apply to Argentina, too: generous state subsidies meant that a monthly electricity bill in Buenos Aires was roughly
the price of a coffee and croissant. But not anymore. President Mauricio Macri began raising the price consumers pay for electricity almost as soon as he entered office in 2015, phasing out subsidies and normalising market conditions, as part of a push to encourage domestic energy production and reduce Argentina’s costly dependence on energy imports.
Meanwhile, to try and scale back Argentina’s reliance on imported fuel, in 2016 the Macri administration launched RenovAr, a plan for regular public bidding processes through which private companies bid to supply renewable energy to the government under power purchase agreements (PPAs).
The hope is that renewable energy will constitute 20% of the energy matrix by 2025. This is an ambitious target, given that in 2016 just 2% of Argentina’s energy came from renewable sources.
In three public tenders held within the past two years, the price the Argentine government paid for one megawatt of renewable energy dropped by a third. In the first auction – known as RenovAr Round 1 – the government awarded 17 projects, agreeing to purchase energy for US$60 per megawatt hour. By the
second auction – called Round 1.5 because it happened so quickly after the first – 30 projects were tendered
and the price had dropped to US$54 per megawatt. By Round 2 in August 2017 that figure was down to just
US$40, close to what the governments of Chile, Mexico and Peru pay under their own PPAs.
The fact that prices dropped steadily throughout all three auctions – and were far lower than the US$80-US$90 per megawatt the government anticipated paying back in 2015 – proves there is private sector appetite for Argentina’s renewables potential. “When RenovAr came to market, it was a test for Argentina as a new investment destination,” says Fabricio Longhin of Clifford Chance LLP, who worked as an external consultant along with the International Finance Corporation (IFC) on the design of the RenovAr programme.
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