Over the last decade, the Argentine Government has been aggressively restructuring the electricity sector by introducing new policies and setting up regulatory bodies to protect both the agents and end users operating in this domain. Apart from this, Government initiatives to encourage the introduction of new generation technologies have significantly upped market prospects. The favorable exchange rate and tax incentives have amplified the market's attractiveness to investors. The state-owned energy company, Energía Argentina Sociedad Anónima (ENARSA), is offering 15-year power purchase agreements for renewable projects up to 50MW.
New analysis from Frost & Sullivan (energy.frost.com), Argentina Electricity Outlook 2010, finds that the compound annual growth rate (CAGR) for the electricity market in Argentina will be 4.8 percent from 2010 to 2019, which is close to the gross domestic product (GDP) pegged at 5 percent for the same period.
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"Excellent possibilities await new participants, particularly in the deregulated and decentralized independent power producers (IPP) market, which is poised to grow at 8.7 percent per year," says Frost & Sullivan Research Dominic Gonçalves. "The competitive aspect of the generation segment has opened the door for many foreign investors scouting for growth opportunities."
Despite the favorable outlook for the market, the difference between the spot market price and the seasonal price has remained a growth bottleneck. The ripple effects of the pricing issue have been felt in investments in both the generation as well as the transmission sectors. Generation agents are hesitant to invest in a segment that cannot assure tangible expansion or growth possibilities.
Another factor curbing market momentum is the dependence on gas in thermal generation plants. Frequent gas shortages put the entire electricity market at risk. To circumvent this problem, nuclear and thermal energy options are being increasingly utilized. By 2019, these two sources will assume greater importance, along with the wind power generation. Going forward, electricity generators such as hydro, biomass, wind, and geothermal will find greater uptake.
To ensure business progression, participants must target the upcoming segments such as renewable energy. "Buoyed by active support from the local government, the renewable market has emerged as a hotspot for investments," says Dominic. "Being a fledgling market with very few participants, it has huge potential." The wind power segment is better developed compared to others in the renewable space. Production in this segment will reach 600 MW by 2015.
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Argentina Electricity Outlook 2010 / N934-14