Energy storage, 25-30MW distribution network-connected solar gaining traction in Argentina

Argentina’s electric power sector is undergoing change, driven by a deregulation-focused reform push and efforts to expand energy storage capacity.  

Indeed, the country is working to build a fleet of battery systems, while on the generation front, distribution network-connected solar projects of 25-30MW are generating interest.

To get a snapshot of the state of play, BNamericas spoke with Marcelo Álvarez, president of Argentine renewables chamber Cader, which has decided to incorporate the word “storage” into its full name, to reflect the growing importance of the technology in the country.

BNamericas: We’ve read that Cader will change its official name to incorporate energy storage. Why?

Álvarez: Explicitly including storage in Cader’s name aims to incorporate the BESS storage value chain in Argentina, because large-scale renewable penetration will require supply management, and we believe storage plays a leading role in managing variable — often misunderstood as intermittent — energy such as renewables, particularly wind and solar. The idea, therefore, is to bring new BESS market participants in Argentina into Cader.

BNamericas: We understand that a new centralized tender for energy storage capacity is being planned. Why is energy storage attractive in Argentina today?

Álvarez: In Argentina’s case, with AlmaGBA first and now AlmaSADI — the auction expected to be launched in the coming days — these are steps in the right direction, likely driven by a lack of investment and planning in the past. 

Unlike what is happening in Chile or Brazil, where storage is used to manage supply and avoid curtailment caused by overlapping injections during periods of grid saturation, in Argentina the goal is to prevent supply outages.

Under these auctions, bidders make infrastructure available to [wholesale power market administator] Cammesa, which decides when to charge and discharge battery banks according to system needs. 

So, the driver is quite different from what is fueling the exponential growth of storage in Chile and, to a lesser extent, in Brazil.

I believe this represents an opportunity for Argentina to move along a learning curve, reduce costs, gain experience and grow without repeating the mistakes made by other markets.

BNamericas: Regarding solar and wind projects, where is demand for new clean energy capacity currently coming from, for example, mining?

Álvarez: In renewable energy, in terms of private-sector demand, amid the transformation of the electricity market and the contracting of demand, it remains cheaper than the energy it displaces. However, its main barrier is transmission infrastructure.

As a result, many more plants are being developed in distribution networks — mainly 25-30MW solar projects — located at the end of lines or at critical nodes, because they displace more expensive energy and their interconnection is cheaper, with available transport capacity in distribution grids.

A Cader report to be released soon, prepared with [consulting firm] Mercados Energéticos, shows that distributed generation is systemically cheaper due to avoided or deferred costs and because it places the investment in infrastructure on private players rather than on the Argentine national state.

In March, we are likely to launch a campaign and publish the findings of these studies.

BNamericas: Is Cader continuing to promote the development of new transmission lines, and do you expect any significant auctions this year?

Álvarez: We continue to push for the need to invest in high-voltage transmission networks so that power can be transported from areas with high capacity factors — both wind and solar — to the nodes with the greatest demand for energy. Sixty percent of demand is concentrated in greater Buenos Aires, the AMBA region. 

We understand that it is the executive branch’s decision not to carry out public works, but rather to rely on private investment.

What we are aiming for is that the tender — whose technical specifications are said to have been ready for some time — is structured in a way that makes those investments bankable and allows private players to take on the inherent risks involved. 

Investment in high-voltage transmission infrastructure is much larger than the investment required for generation projects. Therefore, the bidding scheme needs to be properly designed, involving the appropriate stakeholders at each stage and ensuring that guarantees are strong enough to make the projects bankable.

BNamericas: Finally, broadly speaking, how is the government’s electricity sector reform impacting the day-to-day business of clean energy generators?

Álvarez: The transformation of the electricity market is underway. As is often the case in Argentina, we are transitioning from A to B without clearly defining who A is and what B is. 

In the shift toward full market contracting, the main problem is the bankability of distribution companies and cooperatives.

With the exception of a few that are solvent and have the track record to purchase or contract energy and manage dispatch, the vast majority are neither in a position to do so nor to be considered bankable.

As a result, renewables are currently operating in a market marked by uncertainty because there is no clear reference price.

Most economic actors do not want to enter into long-term contracts because they do not know whether they are paying too much or too little. Although renewables are cheaper than the technologies they compete against, the transformation of [renewables term market] Mater into Mat and the technology-agnostic approach at certain nodes puts renewables — in some cases, and at only a few nodes — at a disadvantage compared with gas. In other cases, delays are justified by the absence of sustainable medium- or long-term reference prices.

So, economic actors do not enter into long-term contracts, and that creates uncertainty.