The Fight for Argentina's Energy Source
A combination of massive oil and natural gas reserves with land area perfectly suited for both solar and wind power gives Argentina a critical decision. By fully committing to renewable energy, Argentina could grow its electric grid, bring industry to poor and underutilized areas of the country, and meet their commitments to carbon reduction. However, the combination of an unstable currency, an outdated power grid that cannot connect the entire country, and legislation that promotes natural gas over renewables has slowed the growth of renewables and led to Argentina exporting more oil than ever.
There is talk in Argentina of using the natural gas reserves as a way to ease the transition to renewable energy. However, for a country where the majority of emissions are from the energy sector this would worsen the problem rather than fix it. Energy sector emissions are responsible for 53% of emissions in the country, which is unsurprising in a country whose power index is dominated by 64% thermal power plants. A report titled A Roadmap for the Power Supply Sector in Argentina found that “the energy supply sector (especially the electricity supply sector) can count on many proven mitigation options and market-ready technologies.” The combination of available technologies for renewable transitions with the large rate of emissions created by the energy sector makes the idea of natural gas as a transition energy both unnecessary and harmful. If Argentina wants to reach the commitments that it made to the Paris Agreement it will need to dramatically shift its outlook, as the Climate Action Tracker rated Argentina’s NDC as “highly insufficient.”
Argentina must take advantage of a combination of renewable energies to shift its reliance from carbon-based energies. Hydroelectric production was able to start strong, but due to the growth of energy consumption without continued hydro growth, the share of hydroelectric has fallen from 34% in 2000 to 26% in 2016. The government has created several programs to help the shift to renewable energy, most notably the RenovAr project, which is responsible for the contracting of 4.7 GW of renewable capacity. However, due to the economic instability over the last several years, the fourth round of RenovAr, which was expected to support large scale wind and solar projects, has not yet been initiated. A report funded by the International Climate Institute found that different sources of renewable energy development in Argentina will require different levels of investment. This report found that wind energy will need to raise its investment in nacelles from the roughly 10% it currently uses to approximately 50%. This will also mean doubling the local content share of turbine blades and increasing domestic spending on maintenance and plant operations. Boosting local content shares in Argentinian wind production would raise investment levels significantly. The International Climate Institute also found “large-scale deployment of the remote solar and wind resources will inevitably trigger network reinforcements.” An investment in renewable production will mean a stronger national power network.
As solar and wind have emerged as the leading technologies for low carbon development, Argentina's terrain is well suited to utilize these sources. The already installed hydroelectric dams could provide the stability that some expected from natural gas. Unfortunately, the government seems determined to prioritize natural gas and oil expansion. A report by the Argentinian Secretary of Argentina outlined the doubling of natural gas production and doubling oil production as two of their six major goals, along with bringing renewable energy to 20% of electricity consumption. This is a two steps backward one step forward approach, placing more of Argentina’s economic reliance on natural gas and oil, which will hinder government policies supporting renewable development. This is mirrored in the financial policy of the Argentinian government. The Partnership for Action on Green Economy found, “in 2020, the fossil fuel subsidy is estimated to represent 5% of the national budget, surpassing the amounts allocated to programs such as the Universal Child Allowance and the Universal Allowance for Pregnancy.” These policies seem to be working; Argentina is producing more oil than ever, reaching 282,000 barrels in December of 2022.
Mariano Maiola, a renewable energy manager at The Cale Group, explained the current major limitations to renewable energy deployment in Argentina. The first is “limitation(s) in the transmission grid, the SADI (Argentina Interconnection System) has very little capacity to admit new energy injection points.” With the best suited locations for wind and solar being found in the far north and south of the country, a grid capable of transferring power from these regions to population centers will be paramount. Maiola reported the second major roadblock was “limitations in equipment imports: Argentina currently has many restrictions to make payments abroad.” This is reiterated in an article titled What’s Holding Back Solar in Argentina which reported “...Argentina is almost wholly reliant on the importation of PV products.” This places renewable investors in a tough spot, struggling to get materials from abroad and unable to use local products due to limited production. Companies are wary of building or investing in manufacturing plants in a country with a high level of economic instability.
If Argentina intends to honor their commitments to renewable energy development and carbon reductions, they will need to make a decision. Their goals of doubling oil and natural gas production and using natural gas as a bridge energy source on the path to renewables guarantees that they will not meet their renewable commitments. However, by investing in grid expansion, encouraging PV module and turbine manufacturing, and shifting their support from carbon based to renewable energy sources, Argentina could become a leader in South American clean energy adoption.