The Ministry of Energy and Mining has announced that Round 3 of the RenovAr auctions will likely be held in September or October, as both the government and private sector players hope lessons can be learned from the first two rounds and incorporated into the next auction.
By Adam Critchley
Argentina has so far held three electric power auctions, Round 1, Round 1.5 and Round 2, with solar capacity totalling around 1.7 GW.
In Round 2, held last November, 66 projects were awarded, for wind, solar, biomass, biogas, landfill biogas and small-scale hydroelectric plants.
Prices have fallen in each auction, with averages in Round 1, held in July 2016, of $59.70 per MWh, while prices in Round 1.5 averaged $59.2 per MWh. Round 2 saw prices fall further, to $40.40 per MWh.
But there have been delays in the execution of projects awarded so far, and companies need to refrain from chasing the lowest prices going forward and concentrate on sustainability, according to Verónica Geese, Secretary of State for Energy, Santa Fe.
“The [auction] process has been a success, but the question now is project execution, and the construction of projects has become quite complicated,” she tells Solarplaza.
“There are delays, and instead of coming into operation this year, as stipulated by the contracts, projects to be built in Jujuy province will now not be coming online until next year,” she says.
Jujuy has been a a regional leader in Argentina's solar growth, along with Salta, both of which were awarded projects in Rounds 1 and 1.5.
Jorge H. Giubergia, General Director for Electricity at Salta’s Energy Secretariat, told Solarplaza last year that part of Salta’s key to its solar success is that, in addition to the province's high irradiation levels, the local authorities offered competitive terms to developers for land acquisition, and that Salta could see solar capacity surpass 800 MW over the coming years.
However, he warned at the time that the big challenge would be to see if developers are able to secure financing for their projects.
Too Much, Too Soon?
According to Geese, the project delays raise the question of whether it is the right time to launch Round 3.
She says that, in the case of at least some of the projects, the delays are due to a failure to procure financing, while others have yet to procure the equipment and components required, given that the projects are large-scale.
“One must always learn, and Argentina needs to learn that, by trying to do things too quickly, there are consequences, and there will be penalties for those developers that fail to deliver projects on time, and while such penalties have yet to be enforced, the bidding rules for the auctions did stipulate there would be penalties,” she says.
She adds that the country must consider whether, if a developer had pledged to be generating electricity from solar projects by March 2018 to inject into the national grid and such projects are now being delayed until March 2019, the auctions can still be deemed such a success.
“And such failure to comply by developers awarded projects means that companies that were left out of the project awarding process will be observing this, and wondering why fines are not being applied to such companies as stipulated in the bidding rules,” she says.
“And those developers who were left out will be saying 'I could have complied and developed my project on time.'”
She said that, prior to the launch of the RenovAr program, the Argentine government observed similar auction processes in other countries, such as Chile and Uruguay, and where it was advised to take things slowly, focusing on smaller, rather than large-scale, projects.
“It is better to proceed slowly but ensuring that the process is a success, than pressing ahead quickly. Taking the time to learn from each auction before launching the next one.”
And she warns that, more than the individual developers or the projects concerned, it is the system itself and renewable energy that will suffer as a result of the delays, because the auction process for such energy sources will not be seen as a success.
“Success in renewable energy is not the lowest price, and we have seen that in many countries,” she adds.
“Solar is not just a business, it also needs to be sustainable.”
In her opinion, it may have been better to wait longer between auctions, rather than launching three within a year, given the subsequent uncertainty and delay regarding projects' development, and highlights the danger of Argentina facing a project bottleneck, as happened in Chile and Uruguay, where the completion and connection of large-scale solar projects was delayed due to insufficient transmission infrastructure.
“I think we need to be more prudent, nobody is born knowing everything, and we have to learn as we go.”
However, she points to Santa Fe's potential to become a significant renewable energy hub.
The province has 12 biogas projects in the pipeline as a result of the RenovAr auctions, totalling 31 MW, and which are expected to bring in more than $110 million in investment.
And she believes that small-scale is the way to go in developing renewable energy in Santa Fe.
“We believe this is the best model, rather than large-scale parks as we have seen in the provinces of Salta and Jujuy, for example, by developing a corridor of solar parks of 5, 10 or 15 MW, and this is the model that we are looking to follow.”
The province will shortly see the inauguration of two solar facilities, which will feed private offtakers, including an electric bus line in the city of Rosario, and Geese expects at least two or three more projects to be awarded in Santa Fe in Round 3, and hopes that some 20 projects will be underway in the short term.
First Project Completion
The first project awarded as part of the RenovAr auctions, the 35 MW Nonogasta project in La Rioja, is slated to enter operations in May, and which evidences the long timeframe between the project being awarded at auction and its completion.
In an interview with local portal Energía Estratégica, Alejandro Lew, the Nonogasta project's CEO, said the experience of the solar facility's construction has been a learning curve, and while satisfied with the construction and logistics side, he said external factors such as a lack of experienced contractors in the country meant that the company had to internalise certain processes it had expected to outsource.
With regards to Round 3, he was quoted as saying that the prices in that auction will not only depend on component costs, but also, and to a greater extent than in the previous auctions, on the evolution of the financial context and the development of local, trained contractors that comply with the regulations put in place for the sector.
He said Argentina's solar sector is also suffering from a delay in the implementation of promised fiscal incentives, such as VAT reimbursement, and which is an issue that remains pending for the next auction.