22 March 2018


Merchant Solar Solar Auction Market intelligence Argentina

RenovAr: Accelerating Argentina's Transition Towards Solar

Author: Solarplaza

Country Background

Argentina is the eighth largest country in the world (in terms of territory) and has the third largest economy in Latin America (in terms of GDP), making it a regional economic engine with a wide variety and abundance of natural resources. The country boasts 53 percent of agricultural land with large reserves of oil, gas, minerals and water. It also offers optimal conditions for the development of renewable energy, such as solar, wind, and hydro power development, among others. 
The current situation of renewables in Argentina is still in a very early phase, with  less than 2 percent of the country’s electricity being generated by renewable energy. Recently, Argentina’s government has been implementing plans to change that, especially because of the country’s dependence on fossil fuels, which accounts for 60 percent of the country’s electricity production. 

RenovAr Program

In May 2016, the Argentinian Ministry of Energy launched an innovative renewable energy bidding program called RenovAr, targeted at producing 20 percent of Argentina’s electricity from renewable sources by 2025. 
The public tendering program contemplates a series of fiscal incentives and financial support mechanisms, along with regulatory and contractual enhancements. To reassure private investors, the World Bank structured a guarantee in support of the government’s Renewable Energy Fund (FODER), which will be responsible for reducing financial risks for investors. The World Bank guarantee, together with the International Finance Corporation, have worked hard to create opportunities to link Argentina's renewable energy potential to private investments. The aim of this program is to overcome some of the investment barriers that resulted in the failure of previous government attempts.

Results from the Auction Rounds

Round one of the RenovAr program took place on the 20th of October, 2016 and closed with 4 out of 29 bids awarded at a price of around $59.75/MWh to solar PV projects, a total of 400 MW of solar power capacity. These projects are located in the northwest of Argentina in the provinces of Salta and Jujuy. 
On the 25th of November 2016, a follow-up round (“Ronda 1.5”) took place, where projects that didn’t win in the first round got the opportunity to place their bids again at a price below the average tariff of round 1. This time 20 out of 30 bids were awarded to solar  at the price of around $54.94/MWh. These projects - totaling 516 MW of capacity-  will be spread out in the provinces of Catamarca, Salta, La Rioja, Mendoza, San Juan and San Luis. 
The second round (Ronda 2) took place on the 29th of November, 2017, awarding 1.4 GW of renewable energy power generation capacity in the auction. From all of these renewable energy projects, 12 out of 66 bids were awarded to solar and saw the allocation of 556.8 MW of solar power capacity, with an average bid of around $43.5/MWh. 
Also round 2 had a second phase, in which five solar PV projects that were initially excluded got the chance to reduce their prices in order to be accepted as well. The average price for the new projects was around $41.52/MWh and will contribute with an additional 259.5 MW of solar power capacity. These new project will be located in the provinces of San Juan, Mendoza, La Rioja, Catamarca. Overall, after all of the three rounds of the RenovAr program, the allocated capacity for large-scale solar PV projects is estimated at around 1.7 GW of capacity. 

Current Situation

Most of the awarded projects are located in the province of San Juan, with almost 500 MW of solar PV capacity being installed in that area. San Juan is located in the northwest region of Argentina and benefits from high levels of solar irradiance, making it one of the sunniest places in Argentina.

All of the projects from the first and second round got between 360 to 900 days to reach their commercial operation date. For the projects awarded in the third round (Ronda 2), they have until the 15th of May to officially sign their PPAs, meaning that it could be possible to start construction by the end of 2018. However, most project are already facing delays because of different reasons, such as ground preparations, procurement of main components, or failure to reach financial close. For example, the 100 MW Cauchari project was expected to come online in May 2018, but has received a 10 month extension until March, 2019 due to problems with the electrical infrastructure.
After the three auction rounds, the developers with the most capacity of MW were JEMSE with 300 MW, followed by Latinoamericana de Energía with 250 MW and Energías Sustentables with almost 200 MW.  Other players such as Neoen, Martifer Renovables, Fieldfare/ Isolux Ingeniería and Empresa Medocina de Energía benefited greatly from the auctions with almost 100 MW each.

One thing to take into account is that the majority of projects are still in the beginning phases with only seven projects already under construction. Some big projects were already able to reach financial close, such as the 80 MW project in Cuyo, San Juan developed by JinkoSolar. Other projects have been sold after the PPAs were signed, like the 100 MW project in NOA, Salta which was bought by Neoen from Fieldfare & Isolux Ingenieria, and the 22 MW project in San Luis bought from Diaser by Total Eren. It should be noted that the majority of small scale project are from local developers. These projects would be easier to put into operation, as local developers have more support from the Argentinian government. 
After the success of the first guarantee, the World Bank is preparing a second guarantee of up to $250 million under the Round 2 of the RenoVar program. This extra guarantee shows that the government has increased its focus on leveraging public finance as a way to attract more private investment. 

The World Bank’s involvement has been repeatedly praised by private developers, equity providers and lenders, and has been stated as an important reason when considering to enter the Argentine market. The RenovAr project is facilitating Argentina’s reentry into international finance markets, as well as helping the country in rebuilding its track record with financial and industrial investors. It still needs to be seen how the development of the solar PV projects will progress, nonetheless the rounds that took place show a huge potential for over 1.7 GW of solar PV capacity to be connected to Argentina’s grid in the coming years. 


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