Argentina Power Market - Growth, Trends, and Forecasts (2020 - 2025)
The market is segmented by Power Sector (Generation (Thermal, Hydropower, Nuclear, and Non-Hydroelectric Renewables) and Transmission and Distribution (T&D))
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Scope of the Report
Key Market Trends
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The installed power capacity in Argentina is expected to grow at a CAGR of 2.58% during the forecast period of 2020 – 2025. The government of Argentina has taken various steps, including boosting private investment for power network expansion and the Public-Private Partnership (PPP) law which was introduced in November 2016 to regulate and encourage private investment in critical sectors of the country’s economy, including electricity transmission infrastructure. These factors are expected to drive the market. On the flip side, the widening economic crisis took place in parallel to the increasing demand for electricity, and due to the fiscal deficit, the government could not invest sufficiently in the power sector to increase domestic generation capacity. This, in turn, is expected to hinder the market growth.
The conventional thermal power accounted for more than half of the electricity generation in Argentina in 2018 and is also expected to be the largest segment during the forecast period.
Due to geopolitical and global economic pressures, the Argentine government re-evaluated the waste management sector and promoted projects based on waste-to-energy. The government launched two programs, in which several projects are expected during the forecast period, with a focus on developing renewable energy, like biomass and biogas. This, in turn, is expected to create a significant opportunity for the waste-to-energy industry in Argentina in the near future.
RenovAr program was initiated by the Argentina government to improve the share of renewable energy in its energy mix to 20% by 2025. Under the RenovAr program, regular public bidding processes were held, in which, different companies presented their investment plans. Hence, the RenovAr program is likely to be one the most important factor encouraging the market growth during the forecast period.
Scope of the Report
The Argentina power market report include:
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Key Market Trends
Thermal Power to Dominate the Power Generation Market
In 2018, electricity generation through conventional thermal power sources reached 87,725 GWh, representing a decline of almost 2.6%, compared to the 2016 levels. Despite this decline, thermal power generation remained as the main source to meet the electricity demand in Argentina.
Oil, natural gas, and coal are the thermal power sources used for power generation in the country. However, the use of fossil oil and diesel in the power sector has reduced in recent years due to an increase in natural gas production in the Vaca Muerta shale play. Furthermore, in 2018, the supply of natural gas allocated to the electricity sector was higher than that of 2017. The energy sector of Argentina is expected to be gas-based in the future.
In December 2018, the US and Argentinian officials signed an agreement to work together to strengthen the energy infrastructure in both countries. Both countries have agreed to expand electricity generation from natural gas and convert existing fossil fuel power plants to operate using combined-cycle natural gas technology.
In March 2018, Argentina’s state-run energy company, YPF commissioned a new thermal power plant in the famous Vaca Muerta Shale play. The Loma Campana power plant is powered by two GE turbines with 110 megawatts capacity each. It will supply electricity to roughly 380,000 households, using natural gas extracted from the unconventional formation in the Neuquén Province.
Adding to this, there are around 9.5 GW of thermal power plants in the pipeline and planning stages in the country. These projects are worth around USD 9.92 billion and are expected to come online by 2025. The expansion of Vuelta de Obligado and Guillermo Brown thermal power, together with the construction of a new combined cycle power plant, is expected to be the major projects to be carried out in the mid-term.
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RenovAr Program to Drive the Market
The RenovAr program has so far attracted strong investor interest, which led to significant oversubscription of the bidding rounds. Bidders compete to sign 20-year power purchase agreements (PPAs) with CAMMESA (Compañía Administradora del Mercado Mayorista Eléctrico), which acts as off-taker on behalf of distribution utilities and large, wholesale market users.
Round 2.0 of the RenovAr program was launched in August 2017 with an objective to contract 1,200 MW, with quotas per region and technology. The tender drew strong investor interest and was more than seven times oversubscribed than Round 1.0.
Moreover, 88 projects with a combined capacity of 2,043 MW were successful in the second round. In November 2018, Argentina launched the third round of its RenovAr renewable energy auction program, aiming at a total of 400 MW of new installed capacity.
In June 2019, the Argentinian Finance Ministry’s Energy Secretary received 56 bids for the MiniRen or Round 3 of the RenovAr program. These bids represent a total of USD 520 million worth of investment, which is expected to be distributed in 14 provinces, hence creating ample opportunities for the renewable energy market players.
Therefore, the government’s focus on increasing the renewable energy share in the energy mix of the country to 20% by 2020 is expected to be bolstered by RenovAr program, in turn driving the power market in the country.
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The Argentina power market is fragmented. Although the majority of the market share is owned by the government and private companies, some of the key players in the power generation sector include Pampa Energia, YPF Luz, CEPU, AES, and Enel. Further, the transmission sector is dominated by Transener and six other regional transmission companies.