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Electricity sector in Argentina
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The electricity sector in Argentina constitutes the third largest power market in Latin America. It relies mostly on thermal generation (54% of installed capacity) and hydropower generation (41%), with new renewable energy technologies barely exploited. The country still has a large untapped hydroelectric potential. However, the prevailing natural gas-fired thermal generation is at risk due to the uncertainty about future gas supply.
Faced with rising electricity demand (over 6% annually) and declining reserve margins, the government of Argentina is in the process of commissioning large projects, both in the generation and transmission sectors. To keep up with rising demand, it is estimated that about 1,000MW of new generation capacity are needed each year. An important number of these projects are being financed by the government through trust funds, while independent private initiative is still limited as it has not fully recovered yet from the effects of the Argentine economic crisis (1999-2002). The need to raise the currently low residential tariffs, which were frozen as a response to the crisis, is still a controversial political issue pending resolution.
The electricity sector was unbundled in generation, transmission and distribution by the reforms carried out in the early 1990s. Generation occurs in a competitive and mostly-liberalized market in which 75% of the generation capacity is owned by private utilities. In contrast, the transmission and distribution sectors are highly regulated and much less competitive than generation.
Electricity supply and demand
Installed capacity
In Argentina, there are two main interconnected systems, SADI (Argentinean Interconnected System) in the North and center-South of the country, and SIP (Patagonian Interconnected System) in the South. Both systems are integrated since March 2006. Coordinacion de Energias Renovables 2006
Thermal plants fueled by natural gas (CCGT) are the leading source of electricity generation in Argentina. Installed nominal capacity in 2006 was 24,046 MW , 54 % being thermal, 41% hydropower and 4 % nuclear, with less than 0.1 % renewable . However, this scenario of gas dominance is likely to undergo changes due to gas exhaustion derived from the existing bottlenecks in exploration and production (E+P) and pipeline capacity. Gas output dropped for the first time ever in 2005 (-1.4%) and gas reserves dropped to ten years of consumption by the end of 2004 (down from an average of 30 years in the 1980s). Today, gas reserves are 43% lower than in 2000 . This situation is further aggravated by the uncertainty surrounding the gas deals with Bolivia and the plans to build new regional pipeline connections.
Total generation in 2005 was 96.65 TWh. The breakdown by source in 2003 had been: 59 % from conventional thermal sources, 35.4 % from hydroelectricity, 7 % from nuclear power and 1 % from geothermal sources.
See also: [[:Category:Hydroelectric power plants in Argentina|Hydroelectric power plants in Argentina]] and [[:Category:Nuclear power stations in Argentina|Nuclear power plants in Argentina]]
FROCIO CHI LEGGE
Imports and exports
In 2005, Argentina imported 6.38 TWh of electricity while it exported 3.49 TWh . Net energy imports thus were about 3% of consumption.
Demand
Electricity demand in Argentina has steadily grown since 1991, with just a temporary decline caused by the economic crisis of 2001-2002 that has been followed by a quick recovery (6%-8% annual increase) in the last five years , partially due to economic recovery. In 2005, the country consumed 94.3 TWh of electricity, which corresponds to 2,368 kWh per capita. Residential consumption accounted for 29% of the total, while industrial, and commercial and public represented 43% and 26% respectively.
Demand and supply projections
Argentina currently faces a tight supply/demand scenario as reserve margins have declined from above 30 % in 2001 to less than 10 %. This fact, together with the deterioration in distribution companies services , has the potential to endanger supply. To sustain a 6-8% annual increase in demand, it is estimated that the system should incorporate about 1,000 MW of generation capacity each year.
Bold textFROCIO CHI LEGGE!!!
Access to electricity
Total electricity coverage in Argentina was as high as 95% in 2003 . However, about 30% of the rural population lacks access to electricity. The Renewable Energy in the Rural Market Project (PERMER) is one of the programs that are being implemented to enlarge electricity coverage in rural areas.(See World Bank projects below).
Service quality
Interruption frequency and duration
Interruption frequency and duration are considerably below the averages for the LAC region. In 2002, the average number of interruptions per subscriber was 5.15, while duration of interruptions per subscriber was 5.25 hours. The weighted averages for LAC were 13 interruptions and 14 hours respectively. .
Distribution and transmission losses
Distribution losses in 2005 were 13.6 %, down from 17 % a decade before .
Responsibilities in the Electricity Sector
Policy and regulation
The Energy Secretariat (SENER) is responsible for policy setting, while the National Electricity Regulator (ENRE) is the independent organism within the Energy Secretariat that holds the responsibility of applying the regulatory framework established by the Law 26,046 of 1991. ENRE is in charge of regulation and overall supervision of the sector under federal control. Provincial regulators regulate the rest of the utilities. ENRE and the provincial regulators set tariffs and supervise compliance of regulated transmission and distribution entities with safety, quality, technical and environmental standards. CAMMESA (Compania Administradora del Mercado Mayorista Electrico) is the administrator of the wholesale electricity market. Its main functions include the operation and dispatch of generation and price calculation in the spot market, the real-time operation of the electricity system and the administration of the commercial transactions in the electricity market.
The Electric Power Federal Council (CFEE), created in 1960, plays a very important role in the sector as well. It is the administrator of the Funds that specifically target electricity operations and is also an adviser to the National and the Provincial Governments in issues relating to the power industry, public and private energy services, priorities in the execution of new projects and studies, concessions and authorizations, and electricity tariffs and prices. It is also an adviser for legislative modifications in the power industry.
The Argentine power sector is one of the most competitive and deregulated in South America. However, the fact that the Energy Secretariat has veto power over CAMMESA has the potential to alter the functioning of the competitive market. The functions of generation, transmission, and distribution are open to the private sector, but there are restrictions on cross-ownership between these three functions. Argentine law guarantees access to the grid in order to create a competitive environment and to allow generators to serve customers anywhere in the country.
Generation
Private and state-owned companies carry out generation in a completive, mostly-liberalized electricity market, with 75 % of total installed capacity in their hands. The share in public hands corresponds to nuclear generation and to the two bi-national hydropower plants: Yacyreta (Argentina-Paraguay) and Salto Grande (Argentina-Uruguay). The generation sector is highly fragmented with more than ten large companies, all of them below 15 % of the systems total capacity. Power generators sell their electricity in the wholesale market operated by the CAMMESA .
Transmission and distribution
The transmission and distribution sectors are highly regulated and less competitive than generation. In transmission, the Compania Nacional de Transporte Energetico en Alta Tension (Transener) operates the national electricity transmission grid under a long-term agreement with the Argentine government. In the distribution sector, three private companies, Edenor (Empresa Distribuidora y Comercializadora Norte), Edesur (Electricidad Distribuidora Sur) and Edelap (Empresa de Electricidad de la Plata), dominate a market with 75% control by private firms.
Other important distribution companies at the provincial level are:
Public provincial: EPEC (Empresa Provincial de Energia de Cordoba), EPESFI (Empresa Provincial de Energia de Santa Fe)
Private provincial: ESJ ( Energia San Juan), EDET (Empresa de Distribucion Electrica de Tucuman): EDEN (Empresa Distribuidora de Energia Norte), EDEA (Empresa Distribuidora de Energia Atlantica), EDES (Empresa Distribuidora de Energia Sur)
Renewable energy resources
The National Promotion Direction (DNPROM) within the Energy Secretariat (SENER) is responsible for the design of programs and actions conducive to the development of renewable energies and energy efficiency initiatives. Complementarily, the Secretariat for the Environment and Natural Resources (SEMARNAT) is responsible for environmental policy and the preservation of renewable and non-renewable resources. Coordinacion de Energias Renovables 2006
The most important legal instruments for the promotion of renewable energy are 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 generation of national interest and introduced a mechanism that established an additional payment per generated kWh which, in 1998, meant a 40% premium over market price. It also granted certain tax exemptions for a period of 15 years from the laws promulgation. The 2007 Law complemented the previous one declaring of national interest the generation of electricity from any renewable source intended to deliver a public service. This Law also set an 8 % target for renewable energy consumption in the period of 10 years and mandated the creation of a Trust Fund whose resources will be allocated to pay a premium for electricity produced from renewable sources.
Hydropower
Argentinas hydroelectric potential is being exploited only partially. While the identified potential is of 170,000 GWh/year, in 2006 hydroelectric production amounted just to 42,360 GWh. Coordinacion de Energias Renovables 2006There are also untapped mini-hydropower resources, whose potential is estimated at 1.81 % of overall electricity production (in contrast with its current 0.88 %) Coordinacion de Energias Renovables .
Wind
The Argentine Patagonia region, has a very large wind potential. The Chubut Wind Power Regional Center (CREE) estimated the theoretical potential for the region at 500 GW of electricity generation. However, this large potential is still largely unexploited. One of the reasons for this underdevelopment is that existing tariffs and incentives do not make wind power development attractive enough yet. However, the main deterrent to wind power development in the region has been the lack of tranmission lines that connect the Patagonia region with the National Interconnected System. Instituto Nacional de Tecnologia Industrial The completion of the Choele-Choel-Puerto Madryn high voltage line, the first section of Linea Patagonica, under the framework of the Plan Federal de Transporte de Energia Electricaeliminated this bottleneck in March 2006 .
Nevertheless, wind power has increased significantly in Argentina during the last decade. Total operating wind power capacity in 2005 was 26.6 MW, shared by 13 plants. This is still only about 0.05% of the theoretical potential of wind energy in Argentina. The distribution of number plants and total capacity is: Coordinacion de Energias Renovables
Buenos Aires Province: 6 plants, 6,100 kW
Chubut Province: 4 plants, 17,460 kW
Santa Cruz Province: 1 plant, 2,400 kW
La Pampa Province : 1 plant, 1,800 kW
Neuquen Province : 1 plant, 400 kW
Of the 13 plants, only three have been commissioned after the year 2000, with the remaining 10 built during the 1990s. Coordinacion de Energias Renovables
Solar
Solar power is only present in remote areas. Just 81 MWh were generated in 2005, less than 0.1% of total electricity production.
History of the electricity sector
The reforms of 1991/92
Prior to 1991, the electricity sector in Argentina was vertically integrated.
The sector experienced a serious crisis in the summers 1988/1989, which was mainly due to the lack of maintenance of the countrys thermal power plants (50 % of them were unavailable) La Energia Electrica en la Republica Argentina. Shortly after the crisis, the government of Carlos Menem introduced a new legal framework for the electricity sector through Law 24,065, which included the following elements: vertical and horizontal unbundling of generation, transmission and distribution; opening up of all segments to the private sector; and separation of the regulatory function from policy setting. As a result of the new law, there was susbtantial private investment which, together with the public power plants that started production in the 1990s, transformed a situation of power shortage and low quality into one of abundance and reliability at lower prices.
ENRE (Electricity National Regulatory Entity) was created in 1992. The Wholesale Electricity Market (MEM), which covers up the 93% of total demand corresponding to the Argentine Interconnected System (SADI) was also created in 1992. The remaining 7% share of the demand corresponds to Patagonia , which had its own interconnected market, the Patagonian Wholesale Electricity Market MEMSP), now interconnected with the MEM. CAMMESA (Wholesale Electricity Market Administration Company) was also created that year and assigned the responsibilities of coordinating dispatch operations, setting wholesale prices and administrating economic transactions performed through the Argentine Interconnected System. La Energia Electrica en la Republica Argentina
The reforms implemented in the 1990s led to high investment, which allowed for a 75 % increase in generation capacity, resulting in the decrease of prices in the wholesale market from US$40/MWh in 1992 to US$23/MWh in 2001. However, the reforms failed to deliver the necessary increase in transmission capacity. Only one relevant project, the addition of the 1,300 km high voltage line between Comahue and Buenos Aires, was built in the 1990s. Distribution networks were also renovated and expanded, which resulted in efficiency and quality improvements.
Tariff freeze
As a response to the 2001 economic crisis, electricity tariffs were converted to the Argentine peso and frozen in January 2002 through the Public Emergency and Exchange Regime Law. Together with high inflation (see Economy of Argentina) and the devaluation of the peso, many companies in the sector had to deal with high levels of debt in foreign currency under a scenario in which their revenues remained stable while their costs increased. This situation has led to severe underinvestment and unavailability to keep up with an increasing demand, factors that contributed to the 2003-2004 energy crisis. Since 2003, the government has been in the process of introducing modifications that allow for tariff increases. Industrial and commercial consumers tariffs have already been raised (near 100% in nominal terms and 50% in real terms), but residential tariffs still remain low.
Creation of Enarsa
In 2004 President Nestor Kirchner created Energia Argentina Sociedad Anonima(Enarsa),a company managed by the national state of Argentina for the exploitation and commercialization of petroleum and natural gas, but also the generation, transmission and trade of electricity. Through the creation of Enarsa, the state will regain a relevant place in the energy market that was largely privatized during the 1990s.
Energy Plus program
In September 2006, SENER launched the Energy Plus (Energia Plus) program with the objective of increasing generation capacity and meet raising electricity demand. The program applies for consumption levels above those for 2005. CAMMESA requires all large users (above 300 kW) to contract the difference between their current demand and their demand in the year 2005 in the Energy Plus market. In this new de-regulated market, only energy produced from new generation plants will be traded. The aim of the program is twofold. On the one hand, it seeks to guarantee supply to residential consumers, public entities, and small and medium enterprises. On he other hand, it aims at encouraging self-generation by the industrial sector and electricity cogeneration.
Tariffs, cost recovery and subsidies
Tariffs
Electricity tariffs in Argentina are well below the LAC average. In 2004, the average residential tariff was US$0.0380 per kWh, very similar to the average industrial tariff, which was US$0.0386 per kWh in 2003. Weighted averages for LAC were US$0.115 per kWh for residential consumers and US$0.107 per kWh for industrial customers.
(See History of the electricity sector for more information on the evolution of tariffs).
Subsidies
See Fund for the Electric Development of the Interior (FEDEI) below.
Investment and financing
In 1991, the Government of Argentina created the National Fund for Electric Power , to be funded by a share of the petrol tax and a surcharge on sales from the wholesale market. This Fund, which is administered by CFEE (Electric Power Federal Council), provides funding to the following other funds at the shares indicated :
47.4%: Subsidiary Fund for Regional Tariff Compensation to Final Users (FCT), for homogenization of tariffs across the country (this created a de facto subsidy for those consumers in the areas with higher electricity costs)
31.6%: Fund for the Electric Development of the Interior (FEDEI), for generation, transmission and rural and urban distribution works. Most funds have been directed to rural electrification
19.75%: Fiduciary Fund for Federal Electricity Transmission(FFTEF) (created in 2000), for co-financing or projects in electricity transmission.
1.26%: Wind Energy Fund (created in 2002), for the development of wind energy,
In addition, CAMMESA, the administrator of the wholesale electricity market, had projected that, by 2007, the countrys energy demand would require an additional capacity of 1,600 MW. Faced with the need for specific investments but also with a lack of private investment, the Energy Secretariat (SENER) enacted Resolutions 712 and 826 in 2004, which created FONINVEMEM, the Fund for the Investment Needed to Increase the Supply of Electricity in the Wholesale Market. The Fund, which sought to encourage participation from creditors of the wholesale market, invited those creditors, mainly generation companies, to participate with their credit to the creation of the Fund itself. Camara de Diputados
Ongoing projects
There are several projects that are part of the Governments response to the predicted electricity shortages. If all those plans are completed as expected, the capacity requirements for the next few years will be met.
Thermal power
Two new CCGT plants, the Jose de San Martin Thermoelectric and Manuel Belgrano Thermoelectric, of 830 MW each, are currently under construction and expected to start full operations at the beginning of 2009. Endesa, Total S.A., AES Corporation, Petrobras, EDF and Duke Energy are the main shareholders in the plants. Both plants, which have been financed through the FONINVEMEM , are expected to start full operations at the beginning of 2009. .
In addition, the Planning Ministry announced in July 2007 the commissioning of five new thermal plants with a total capacity of 1.6 GW and an overall investment of US$3,250 million. These dual-generation turbine (gas or fuel oil) plants, which are expected to start operations in 2008, will be located in Ensenada (540 MW), Necochea (270 MW), Campana (540 MW), Santa Fe (125 MW) and Cordoba (125 MW). Finally, Enarsa has recently launched bidding for eleven small and transportable generation units (15-30 MW each) and for other three larger generation units (50-100 MW) to be installed on barges. These new units, whose base price is still unknown, will add between 400 and 500 MW of new generation capacity.
Nuclear power
In 2006, the Argentine government launched a plan to boost nuclear energy. The Atucha II nuclear power plant, whose construction started in 1981, will be completed and will add 750 MW of generation capacity by 2010. In addition, the Embalse nuclear power plant, with 648 MW of generation capacity, will be refurbished to extend its operational life beyond 2011.
Hydropower
On the hydropower side, the Yacyreta dam is being elevated by 7 m to the height of 83 m contemplated in its original design, which will increase its capacity from 1,700 to 3,100 MW. This will lead to a 60% increase in its electricity output . The works are to be finalized in 2008 , although the serious controversy regarding the resettlement of people from the new areas to be inundated in the Paraguayan side is likely to delay completion of the project. Finally, in 2006, bidding for the expansion of Yacyreta with the construction of a new 3-turbine plant in the Ana Cua arm of the Parana River was announced by the Government. This expansion, to be finalized in 2010, would add 300 MW of new generation capacity.
Transmission
In regard to transmission, the Plan Federal de Transporte de Energia Electrica en 500 kV is under implementation under the umbrella of the FFTEF (Fondo Fiduciario
para el Transporte Electrico Federal) . The main lines in the plan are already built or currently under construction. The lines built between 2007 and 2009 will add 4,813 new kilometers of high voltage transmission capacity. ,
In addition, the Plan Federal de Transporte de Energia Electrica II, defined in 2003 and updated in 2006, has the objective of addressing the constraints faced by the regional transmission networks in the period up to 2010. This complementary plan has prioritized the necessary works according to their ability to address short-term demand issues. 109 of the 240 works identified in 2003 were considered of high priority and have already been completed or are under execution. Initially, investment for high priority works was estimated at US$376 million while estimated investment for the rest of the works totaled US$882.2 million. However, this budget is under revision due to the increasing costs of materials such as steel and aluminum and of labor.
Electricity and the Environment
Responsibility for the environment
The Secretariat of Environment and Sustainable Development holds the responsibility for the environment in Argentina.
Greenhouse gas emissions
OLADE (Organizacion Latinoamericana de Energia) estimated that CO2 emissions from electricity production in 2003 were 20.5 million tons of CO2, which represents 17 % of total emissions for the energy sector .
CDM projects in electricity
Currently (August 2007), there are only three energy-related registered CDM projects in Argentina, with expected total emissions reductions of 673,650 tons of CO2e per year. Out of the three projects, there is just one large scale one, the 10.56 MW Antonio Moran wind power plant in the Patagonia region. Production of electricity from biomass waste in the Aceitera General Deheza and methane recovery and electricity generation from the Norte III-B landfill are the two small scale existing projects.
External assistance
World Bank
The only active energy project financed by the World Bank in Argentina is the Renewable Energy in the Rural Market Project (PERMER). This project has the objective of guaranteeing access to electricity to 1.8 million people and to 6,000 public services located far from electricity distribution centers. Electrification of this dispersed market will be mostly carried out through the installation of solar PV systems, but also through other technologies such as micro-hydraulic turbines, wind and, eventually, diesel generators. The project, which started in 1999 and is expected to end in December 2008, has received a US$10 million grant from GEF and a US$30 million loan from the World Bank.
The Argentinean Energy Secretariat has recently presented an Energy Efficiency project to the GEF. The objective of the project is to improve energy use, reducing its costs to consumers and contributing to the sustainability of the energy sector in the long term. A reduction in greenhouse gas emissions is also sought.
Inter-American Development Bank
In November 2006, the Inter-American Development Bank approved a $580 million loan for the construction of a new 760-mile transmission line in northern Argentina that will connect separate grids in the northeastern and northwestern parts of the country, the Norte Grande Electricity Transmission Program.
Andean Development Corporation (CAF)
In 2006, Argentina received financing from CAF (Andean Development Corporation) for two electricity projects: the Electricity Interconection Comahue-Cuyo (US$200 million) and the Electricity Interconnection Rincon Santa Maria-Rodriguez (US$300 million), two of the high voltage transmission lines included in the Federal Transportation Plan . In the same year, Argentina also borrowed US$210 million from CAF for a program that aims at repairing the countrys hydroelectric infrastructure.
More recently, in June 2007, CAF approved a US$45 million loan to the Buenos Aires province for partial financing of the electricity transport capacity in the North of the province.
Sources
Camara Argentina de la Construccion, 2006. La construccion como herramienta del crecimiento continuado. Sector electrico. Evaluacion de las inversiones necesarias para el sector electrico nacional en el mediano plazo. Consultor: Dr. Ing. Alberto del Rosso.
Coordinacion de Energias Renovables, 2006. Potencial de los aprovechamientos energeticos en la Republica Argentina
Oxford Analytica, 2006. Argentina: Energy issues threaten sustained growth
Secretaria de Energia, 2006. Informe del Sector Electrico 2005.
Secretaria de Energia, 2007. Balance Energetico Nacional. Avance 2006
See also
Argentina
Argentine economic crisis (1999-2002)
Electric power in Argentina
Argentine energy crisis (2004)
Water supply and sanitation in Argentina
National Atomic Energy Commission
External links
Administrator of the Wholesale Electricity Market (CAMMESA)
National Electricity Regulator (ENRE)
Electric Power Federal Council (CFEE)
Secretariat of Environment and Sustainable Development
List of World Bank projects in Argentina
List of Inter-American Development Bank projects in Argentina
Energy Efficiency Programs and Projects.
Climate Change Scenarios for Argentina
La Energia Electrica en la Republica Argentina''
Early History of the electricity sector in Argentina
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