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HBP Case KS1288
May 14, 2019
Integrating Renewable Energy in Argentina
Introduction
In 2011, Argentina’s power market, the third largest in Latin America after Brazil and Mexico, faced a
peculiar conundrum. Despite being blessed with large reserves of natural gas and oil, Argentina went
from exporting to importing natural gas and other fuel oils from Chile and Bolivia to feed its electricity
grid.
This predicament was more than a decade in the making. In 2001, Argentina defaulted on $100
billion Dollars of debt, crippling the economy and setting in motion a prolonged financial crisis. The
national currency (the Peso) lost 75 percent of its value. By 2003, more than half the population was
living below the poverty line, and roughly a quarter was unemployed.1 Before the crisis, retail power
prices were set in US Dollars, but with the Peso’s devaluation, household and industrial expenditures in
electricity skyrocketed. The government found itself under enormous political pressure to keep the
prices artificially low. Electricity distribution companies were encouraged to purchase power from the
country’s wholesale electricity market administrator, CAMMESA, at prices below cost and the National
Treasury paid CAMMESA for the difference (see Exhibit A for more).
As a result, between 2005 and 2015 the share of energy subsidies rose from 1.5 percent of
government spending to more than 12 percent. In 2015, the country’s budget deficit was a staggering 6
percent of GDP.21
At the end of 2015, a center-right coalition led by President Mauricio Macri assumed power and
declared solving the energy crisis as one of its top priorities. When the administration attempted to raise
utility tariffs, however, it faced loud protests from citizens. In search of other solutions, the government
seized on Argentina’s still largely untapped, but potentially vast renewable energy sector and created an
ambitious program called RenovAr (meaning renew in Spanish).
In 2016, the country’s share of renewable energy stood at less than 2 percent of the power mix.
RenovAr’s goal was to raise that percentage to 20 percent by 2025.
This case was written by Anjani Datla, Senior Case Writer and Henry Lee, Senior Lecturer in Public Policy at the John F. Kennedy
School of Government, Harvard University (HKS). Funding for this case was provided by the Joseph B. Tompkins, Jr. Fund for
Case Study and Research. We are grateful for translation support provided by Analia Cimolai. HKS cases are developed solely as
the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of
effective or ineffective management. KS1288
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CAMMESA, as the government-mandated buyer of all renewable energy generated by RenovAr
projects, would play a key role in the program’s implementation. For their part, CAMMESA’s executives
were cautiously optimistic. More renewable energy in the electric system was a welcome improvement,
but seamlessly integrating renewable energy into the electricity grids had proven challenging in many
countries—developed and developing alike. Argentina’s cash-strapped wholesale electricity market,
which for the better part of two decades had seen few upgrades, would have to contend with a host of
expected and unexpected bottlenecks.
Argentina’s Electric System

In 2017, the Argentine electric system’s generation capacity was roughly 31 GigaWatts (GW). 65
percent of the power produced in the country came from thermal generators, fueled mostly by natural
gas, with a small portion that ran on oil. Another 26 percent came from hydropower, 6 percent from
nuclear and the remaining from coal and renewables (see Exhibit B). Demand peaked in the summers. In
2017 peak demand was roughly 26 GW.3
The Ministry of Energy and Mining sets electricity policy and is in charge of regulating the
functioning of the country’s electricity market. The National Electricity Regulator (ENRE), an
independent entity within the Ministry is responsible for implementing the regulatory framework. ENRE
and provincial regulators in Argentina’s provinces establish tariffs and supervise compliance of
regulations for distribution and transmission companies. The Ministry is responsible for authorizing new
transmission lines and upgrading existing ones (see Appendix 1).
The wholesale electricity market consists of generators, distributors, transmission companies, as

well as large users.
CAMMESA: CAMMESA, (short for Compañía Administradora del Mercado Eléctrico Mayorista
Sociedad Anonima, in Spanish), administers the country’s wholesale electricity market and is set up as a
private non-profit corporation, 20 percent of which is owned by the Argentine government and the
remainder of the equity held by the representative entities of the transmission utilities, distribution
companies, generators and large users. CAMMESA is governed by a Board of Directors consisting of
government representatives, and representatives of the transmission utilities, distribution companies,
generators and large users. CAMMESA’s responsibilities include the operation and dispatch of electricity
generation, maintaining the system’s security, and the determination of spot prices. CAMMESA is not
allowed to own generation or any other type of assets and can only enter into Power Purchase
Agreements (PPAs) on behalf of utilities and consumers.
The Argentine government considers both distribution and transmission of electricity to be a public
service and grants distribution and transmission companies long-term concession agreements that are
Integrating Renewable Energy 2 of 25 HKS Case 2159.0

overseen by federal and provincial regulatory authorities.a
Generation: Most of the power generators in the country are privately owned with a few
exceptions. The state owns the nation’s three nuclear power generators, two hydro plants and one small
oil and gas company.
Transmission: In 2016, Argentina had about 32,000 Kilometers of transmission lines. Transener a
private company owns and operates the high voltage transmission system that transports electricity
between regions. Six other private companies own and operate the regional distribution system (of
medium and low voltage) that connect generators, distributors and large users (see Exhibit D for
transmission grid). Transener and other transmission companies have exclusive monopoly rights in their
concession areas, but they are required to provide open, non-discriminating access to all generators and
consumers at regulated rates. If, and when, capacity constraints arise, transmission companies cannot
discriminate by rationing access to the grid. CAMMESA is in charge of dispatch and of deciding which
generators are called upon or what demand should be curtailed to balance the system.
Distribution: In 2016, there were more than 70 distribution companies, most were privately
owned. The two largest—Edenor and Edesur—are privately owned, and operate in Argentina’s capital,
Buenos Aires and the surrounding metropolitan areas. Edenor and Edesur are regulated by ENRE.
Edelap, another large private distributor for neighboring Buenos Aires province, operates under
provincial jurisdiction. Like the big 3 distributors listed above many of the provincial distributors are
privately owned, only a few are in the hands of provincial governments or municipal entities.4
Tumultuous History of the Electricity Sector
In 1991, Argentina underwent an extensive program of privatization that included unbundling the
vertically integrated state electricity companies into generation, transmission and distribution entities.
Many experts viewed the country’s successful privatization efforts as an important example, with
lessons to offer other developing countries. Argentina sought to encourage foreign investment in the
energy sectors by pegging the Dollar to the Peso. Tariffs collected in Pesos would be adjusted to any
changes in the value of the Dollar, in effect the government agreed to absorb all the currency risk.
By the late-1990s, however, a growing fiscal deficit, coupled with and an inability to make debt
payments, led to the 2001 debt default. Tariffs pegged to the US Dollar were no longer tenable, and the
government abrogated its contractual commitments to private investors and their banks (primarily
European firms). Revenues plunged by a factor of three. Facing a financial crisis, companies in the power
sector demanded that Argentine regulators raise the tariffs but given that a significant portion of the
aThe transmission and distribution companies operate under long-term (95-year) concessions for monopoly service supply
within a certain area or grid. Concessions are awarded through competitive bidding and subject to management performance
contracts, renewed and rebid every 10 years (except at the time of the first award in which case the contract term is 15 years).
The concession arrangements define service quality standards and penalties in cases of failing to meet those standards. In
return for their services, transmission companies receive regulated tariffs that are reviewed every five years.

population had just seen their savings wiped out, increasing the tariffs was deemed politically infeasible.
In response to the economic crisis of 2001, the government took the following actions:5
• Converted electricity prices and transmission and distribution tariffs to free floating Argentine
pesos from their original value, which was pegged to the U.S. dollar. The government’s action
reduced the value of the peso by almost a factor of three;
• Froze all regulated transmission and distribution tariffs;
• Capped spot prices in the wholesale electricity market; and
• Revoked all price adjustment provisions and inflation indexation mechanisms contained in
existing public utility concessions (including electricity transmission and distribution
concessions) and empowered the government to renegotiate all of them.
Over the next ten years, the government imposed additional financial and regulatory controls.
Tariffs continued to be kept below costs, in order to both ease the financial burden on residential users,
as well as provide an implicit subsidy to industrial and commercial users in the hope of attracting
investors to those sectors. With the exception of Venezuela, Argentina’s electricity tariffs were four
times lower than that of any major Latin American economy and ten times lower than that of
neighboring countries (see Exhibit H).
These measures created a gaping structural deficit in the operation of the wholesale electricity
market. The devaluation of the Peso and high rates of inflation meant electricity companies saw a
decline in revenue in real terms. “Most electricity companies [incurred] large amounts of foreign
currency indebtedness under the convertibility regime,” noted Pampa Energia a private electric
company. “Following the elimination of the convertibility regime and the resulting devaluation of the
Peso, the debt service burden of [electricity] companies increased sharply, leading many of [them] to
suspend payments on their foreign currency debt in 2002.”6
Not surprisingly, most Argentine electricity generators, transmission companies and distributors
deferred further investments in their networks. The supply surplus gradually disappeared. In addition,
the economic crisis and the ensuing emergency measures had an adverse effect on other energy sector,
leading to shortages in supply.
Meanwhile, with electricity prices low, demand grew at a rapid clip (3 percent every year between
2008 and 2016).7 Rising demand coupled with the decline in new power projects exacerbated the deficit
in power generation, transmission, and distribution causing a severe strain on the system (see Exhibit A
for characteristics of Argentina’s power problem).
Still, as the economy continued to struggle, political authorities faced significant pressure not to
raise tariffs. High inflation pushed thousands of households below the poverty line. The government
responded by maintaining electricity tariffs at artificially low rates. In time, Argentines, especially in
Buenos Aires, experienced periodic blackouts, particularly in the summer when the grid system coped
with its peak demand. According to CAMMESA, in February 2016 (the Argentine summer), demand was

more than 25GW in a system with installed nameplate capacity of 31 GW (available capacity at any given
time was 26 GW).8
Although each year CAMMESA faced challenges meeting peak demand, it managed to cover it by
either tapping into reserve capacity or importing power from its neighbors. Nevertheless, shortages
could occur on the distribution end (particularly in highly populated areas, such as Buenos Aires). “There
could be a shortage during a heat wave on four consecutive days of extreme heat,” Mariana Matranga,
Secretary of Energy in 2014 and 2015 noted. “During heat waves, it was hard to supply electricity to
Buenos Aires during the afternoon peak, as the distribution grid was not robust enough to power all the
air conditioning systems.”9 For example, in January 2014, the peak was an estimated 24 GW of which 7
GW was from air conditioning systems in the city of Buenos Aires (most of which were installed after
2003.10
Distribution companies Edenor and Edesur, for their part argued that with frozen tariff prices and
rising inflation they were in no position to upgrade their aging systems. Transener, the high-voltage
transmission company also faced declining revenues and could no longer invest in upgrades to the
transmission grid or undertake expansion projects. In the 1990s, Transener had successfully won tenders
to build new transmission lines to expand the grid and connect lines across the country, but after 2002,
it fell to the government to finance (largely from the federal budget) new expansions and transmission
upgrades—upgrades it could not afford.
CAMMESA’s Growing Role
In the wake of the economic crisis, CAMMESA as both the grid operator and the wholesale
electricity market administrator, faced challenges on many fronts. During peak season, for example, the
share of power reserves CAMMESA could count on had grown increasingly unpredictable. Jorge Siryi,
head of weekly planning at CAMMESA noted that even though the system had the capacity to generate
31 GW of electricity, power generators could be out for maintenance at certain points or unusable
during others. In 2017, CAMMESA was able to cover peak demand with adequate reserves and little
importation, but during a very similar peak in 2016, “we needed to use the full importing capacity to
succeed, because several of our thermal power plants were not available.,” Siryi said.11
In addition, generators were no longer allowed to enter into bilateral contracts with consumer
agents or utilities, they could only sell to CAMMESA, based on rules issued by the Ministry of Energy and
Mining.b In all, CAMMESA had been called on by the government to take on additional roles in the wake
of a dramatically altered wholesale electricity market.
b Argentina has added more generation in recent years. In addition to the RenovAr program, the Macri government entered
into PPAs with thermal power projects amounting to 4 GW slated to come on line in 2018.

A So-Called Spot Market
Typically, in competitive wholesale electricity markets, the least expensive power generators are the
lowest bidders in the spot market. Generators bid their short-run marginal costs, which includes fuel,
operating, and maintenance costs, but not capital costs. Short-run marginal costs are very low for wind,
solar or hydro plants (because there are no fuel costs associated with these types of generation) and
higher for thermal plants. Consider for example a hypothetical scenario developed by noted Harvard
economist Jose Gomez Ibanez.12
There is a market with three plants: a hydro plant of 300 MW capacity with a short-run
marginal cost of $10 per Mega Watt Hour (MWH), an efficient thermal plant of 200 MW
capacity with a short-run marginal cost of $20 per MWH, and an older thermal plant of
200 MW capacity with a cost of $30 per MWH. Assuming that plants bid their short-run
marginal costs, if consumers demanding 400 MW of power, then 300 MW would be
dispatched from the hydro plant and 100 MW from the efficient thermal plant and the
wholesale price paid to all generators would be $20 per MWH. If 550 MW were needed,
the hydro and efficient thermal plants would both be dispatched at their full capacities,
another 50 MW would be dispatched from the inefficient thermal plant, and the
wholesale price would be $30 per MW hour. All generators would be paid the prevailing
wholesale prices for the hours they were dispatched, so that the last plant dispatched
would earn only its marginal costs, while the more efficient plants would earn more
than the marginal costs.
When determining which electricity generator would be dispatched, CAMMESA chose the least
expensive (and most efficient generator) first. But after the economic crisis, Argentina’s spot market no
longer operated like a typical competitive market. It was based on administratively calculated marginal
costs, not actual bids. CAMMESA managed neither a typical day-ahead market nor a real-time market.
Generators could no longer bid in real time. In the spot market, load dispatch and hourly electricity
prices were determined administratively by CAMMESA, based on hourly demand forecasts and the
short-run marginal costs of the generators (as determined by CAMMESA) that cleared the market in
each area. All generators were paid the costs of the last MW demanded plus specific additional
payments as described below.
The “merit order” was based on three elements: the type of generation, “nodal factors” and the
type of fuel used by the power generators.
1. Type of Generation: According to the new renewable energy law, renewable energy had to be
given priority in the dispatch protocol. Therefore solar, wind etc., took the top spot in the merit order,
along with “run of the river” hydro and nuclear generators. Other types of hydro generators and thermal
plants came in last.
2. ‘Nodal Factors’: Each power generator was assigned a specific location or “node” in the
transmission system where power could be inserted or withdrawn. Nodes were typically located close to
generating stations, distribution companies or large users. The Argentine grid’s more than 500 nodes

had specific factors that affected dispatch.c
The reference point for determining the spot market price is the Ezeiza 500 kV node, the system
load center located near Buenos Aires. In each of the other nodes on the grid, the electricity price is
calculated by subtracting the price at each node from the price at the Ezeiza node. After the financial
crisis, when the marginal price system was abandoned, the calculation of “local price” was also
abandoned. Instead, CAMMESA obtained cost data from generators and transmission providers and
calculated an average cost for every hour, based on historical data. This calculation served as the nodal
price. The dispatch thus was based on an historical average, rather than real-time marginal costs. When
a capacity or stability limit was reached, access to the transmission system was limited. From a practical
standpoint for CAMMESA, when dispatch curtailment was required, the dispatch manager let the most
marginally expensive generator go offline. If there were two facilities with the same marginal cost, the
curtailment was made pro rata.
3. Fuel Type: CAMMESA also gave equal weight to the fuel used by the generating machine when
determining merit order. To reduce overall costs CAMMESA gave priority to machines that used natural
gas first, followed by fuel oil. Diesel had the lowest priority. In the early 2010s, following another energy
crisis, CAMMESA began to actually purchase and supply fuel to incumbent generators.
Under these conditions, the spot price (which was capped) did not reflect the real cost of
generation. Instead, CAMMESA paid the generators a price which allowed them to recover their
maintenance, operational, and fuel costs. In addition, it provided generators an additional payment to
cover certain investments in generation, called a capacity payment. The payment was made only when
the generators were available (see Exhibit C for average prices paid by CAMMESA).
It was in this complex environment that the Macri administration was attempting to increase its
share of electricity generated by renewable energy with the RenovAr program.
Windswept and Sunbaked
During the summer, the Argentine Patagonia (in the south of the country) could experience winds as
high as 75 miles an hour.13 “In few parts of the world [is] the climate of a region [so] determined by a
single meteorological element: the constancy and strength of the wind,” noted a weather expert.14 In
sheer size and capacity, Argentina is home to the largest wind resource in the western hemisphere. And
on the other end of the country, in the northwest—part of the Atacama Desert that spreads across the
border into Chile and Bolivia—solar capacity is also estimated to be among the highest in the world. The
Pampas, the agricultural heartland of the country, contains large capacity for biomass and biogas.
With exceptional renewable energy potential, Argentina also had the added benefit that the areas
cWhile having exclusive monopoly rights within their concession area Transener and other transmission companies in Argentina
are obliged to provide open, non-discriminating access to all third parties at regulated tariffs. If capacity constraints arise,
transmission companies cannot discriminate through. Instead, CAMMESA decides which generators are called upon.

with high winds and high insolation were also sparsely populated, leaving vast tracts of land open to
arrays of solar panels or unbroken farms of wind turbines that would neither disturb population centers
nor endanger nature reserves.
Integrating Renewable Energy
RenovAr was designed to implement a 2015 renewable energy law that mandated 20 percent
renewable energy in the power mix by 2025. With RenovAr, the Macri administration promulgated an
ambitious renewable portfolio standard and mandated that CAMMESA enter into twenty-year Power
Purchase Agreements with renewable energy providers. In addition, large consumers of energy (with
demand over 300 Kilowatts) could also achieve the same target by generating their own renewable
energy, or by entering into bilateral contracts directly with third party renewable generators or
distributors, or by buying renewable power from CAMMESA, which served as the default buyer of all
renewable power.d
In 2017, with less than 2 percent of renewable energy in the power mix, CAMMESA faced no
problem dispatching all the solar and wind power generated. CAMMESA officials recognized, however,
that if the share of renewable energy grew to 20 percent or more, CAMMESA would encounter new and
complex issues.
The major challenge confronting dispatch operators was that solar and wind energy were
intermittent by nature. Wind turbines or solar panels could generate electricity only when the wind was
blowing or when the sun was shining. But for dispatch, “we need to balance generation to load at all
times,” explained Siryi. “I might have to maintain generation, decrease it, or increase it in a short span of
time. In order to do that I need to have generation capable of doing exactly what I say. We call this
‘dispatchable generation.’ I can tell a hydro plant to increase by 100 MW, and it can do that
immediately. Even thermal can do the same thing. But wind and solar can’t do that. I have only two
options with wind or solar, dispatch it or curtail it.”
The lack of flexibility became more acute the higher the penetration of renewables. Countries such
as Germany and Denmark, where there was a substantial presence of renewable energy in the grid,
relied on conventional power plants and interconnections, such as hydro, gas or coal to step in when
renewables faltered or stopped producing. A simulation of the Argentine system in 2026 with 10,000
MW of renewables installed demonstrates the challenge. The evening peak still has to be covered by
conventional generation once the sun has set and the wind dies down.
d
This move reversed the 2003 ban on distributors and generators entering into bilateral contracts with users, but
just for renewable energy.

Source: CAMMESA.
But when solar and wind are generating electricity the curve looks different. “When I have solar I
need less conventional generation because all that sun covers a greater portion of the load,” said Siryi.
Under such conditions a different curve called “net load” is created which represents demand that must
be met by other generators when all wind and solar is dispatched.
In effect, the fluctuations in wind and solar resources have broader implications for conventional
power plants that experience more periods of idleness and steeper ramp-ups. At about 5 PM, for
example, when wind and solar energy decrease, demand in Buenos Aires rises, and thermal plants have
to be ready to quickly ramp-up. But having been idle in the earlier part of the day, some thermal plants
can’t restart (many have limits on stopping and restarting). For this reason, many countries incorporate
“capacity payments” for conventional power plants to minimize those limits. CAMMESA officials
acknowledged that Argentine regulators would have to redesign the current structure of capacity
payments for traditional generators to stay in the game.
An additional potentially disrupting factor was the low marginal cost of renewable energy. “When
you are a thermal plant, and you have market-based marginal prices, it is more profitable for you to
generate when the price is high,” said Siryi. “For example, wind is cheap. When you have a lot of wind
energy, prices will drop. A thermal generator doesn’t want to generate when prices drop. That
generator might choose to stop and start again when prices rise, but here in Argentina, it's different
because we don't have the signal of price anymore.”

Still, Sebastian Kind, Undersecretary of Renewable energy and chief architect of the RenovAr
program believed that the Argentine grid, stretched to capacity, would have no problem integrating a
greater percentage of renewable energy to meet demand. “There will be little disruption to existing
thermal and other providers,” he said. “There is no risk that other generators will have to reduce
operations. With our growing demand (the Ministry of Energy estimated demand to rise at 5-6 percent
every year) all electricity that can be generated will be consumed.”15
The more pressing issue was how the country would address the need to expand and upgrade the
transmission grid.
Curtailment
The optimal solar and wind resources in Argentina are located in provinces far from the densely
populated central part of the country; hence transmission capacity became a prime concern for the
government.
While Argentina had a surplus of transmission capacity between 2002 and 2015, by 2017, a shortfall
of roughly 400 MW had emerged. Transener estimated that Argentina might need to add 1,800
kilometers of additional transmission lines by 2021 to meet rising demand and rising generation
capacity.16 And RenovAr, which had successfully issued two rounds of auctions between June and
November 2016, had already enabled CAMMESA to enter into contracts for nearly 60 renewable energy
projects amounting to nearly 2.5GW of renewable energy, at prices that were on par with international
averages. A substantial portion of the renewable energy providers were contracted to begin operations
as early as 2018. Building transmission lines, however, could take up to five years.
In the short-term, therefore, before the grid could expand, CAMMESA had little choice but to
restrict access. For the first two rounds of RenovAr auctions, the goal was to ensure that new renewable
energy projects entered the grid easily. As part of the bidding process, RenovAr provided information on
available transmission capacity at each node. Its hope was that this information would provide
renewable generators with an idea of how much power they could transport from each location. But the
success of the two auctions left many nodes filled to capacity. “Each node has a limit to what it can
take,” explained Gustavo Baez, in charge of the RenovAr PPAs at CAMMESA. “Suppose a node has a
capacity for 100 MW, it can only take 100 MW, not more, because that’s the level the grid accepts.”17
Awards for new PPAs under RenovAr were limited at each node at a maximum capacity that was
predefined by CAMMESA before the tender. This was a strategic choice for the government because it
did not want to be in a position where it had to curtail renewable energy production over the 20-year
term of the PPAs. “If and when the renewable producers don’t produce they don’t get paid,” said Baez.
“It is a risk for them.”
Upgrading the Grid
To avoid congestion at nodes and make room for new renewable generation, the government

moved to upgrade the grid. “We want to eliminate existing bottlenecks,” said Minister of Energy and
Mining Juan Jose Aranguren. “But in order to optimize our investment, we need to make sure that we
have assessed properly how much transmission capacity is required in the area where we have good
quality renewable sources. For example, we will continue investing in the north because like in Chile,
with the Atacama Desert, you can produce significant volumes of solar energy, but it is 3,000 km from
the load centers.”18
According to Alfonso Burbaud, Transener’s control center chief, several transmission investments
such as new substations and new high voltage transmission lines, would be necessary. But “Transener
only operates and maintains the country’s high voltage transmission system,” Burbaud noted.19 “It does
not have the authority to propose new transmission lines.” That was the responsibility of the Ministry of
Energy and Mining. In late 2016, the Ministry created a committee composed of officials from the
Ministry and CAMMESA, and representatives from agents in the wholesale market (such as Transener,
distributors and generators etc.) to identify transmission needs.
The committee first reviewed plans for new generation to determine investments in transmission.
Next, it consulted with the Ministry’s Federal Energy Council (Consejo Federal de Energia) made up of
representatives from the provinces. At least 60 percent of provincial representatives had to approve a
new line before it could be put out for bid. The council was also responsible for identifying three
different routes for each proposed new line, and for obtaining all environmental permits.
Around the same time, the Argentine government passed a new Public Private Partnership law
intended to spur private investment in various sectors, including electricity transmission. By the end of
2018, the Ministry of Energy and Mining planned to seek bids for nine transmission lines and two
substations (following a public consultation period) to cover more than 2,000 miles of high voltage
transmission.20 (See Exhibit J for proposed new lines.)
The winning bidder for each transmission line would sign an 18-year contract (the first 33 months
of which would be the construction phase, and the next 15 years the operations and maintenance
phase) with the Ministry of Energy and Mining. For longer transmission lines (a line from Patagonia to
Buenos Aires, for example) the contract would be paid through a fee added to every resident’s electric
bill. If the transmission line ran through several provinces, ratepayers in all those provinces would pay
the additional fee. Operation and maintenance fees would be set by ENRE, the national regulatory
agency.
Transener, the incumbent transmission operator would provide supervisory services during the
construction and operations phases of the new lines and be paid a fee for those services. The service fee
would be paid by users at a level specified in the concession contracts. This stipulation, however,
spurred controversy noted Paulo Farina, former President of CAMMESA under President Cristina
Fernandez de Kirchner. Users (or agents in the system) claimed the fees were high, (ranging between 3
and 6 percent of the investment).21
Given that the bulk of the new transmission investment was designed to shore up transmission to

the heavily populated Greater Buenos Aires region, it appeared that the Ministry anticipated most of the
incremental demand to come from that area.
For Renovar projects, however, the shortfall in transmission would prove difficult. Farina added that
there could be as much as a three-year lag before Argentina had the transmission capacity to
accommodate investment in new electricity generation. He also expected the cost of transmission on
average to be between $10-$15 per MW for wind and $30-$40 per MW for solar.
Renewables Everywhere
Even as CAMMESA grappled with the realities of integrating renewables, political factors were
driving the location of renewable projects. Many provinces were hoping to join the renewables
bandwagon. Minister Aranguren had to routinely fend off requests to allow more projects than the
existing grid could handle (see Exhibits E, F, G for location of renewable projects etc.).
“The renewable energy law envisioned a regional development tool,” said Aranguren. “That means
we need to make use of the opportunity that this new power generation provides to bring about
broader changes. We have some regions that are not so relevant in terms of GDP generation. They
should also be allowed to participate. For that reason, we have set regional quotas for wind and solar,
because otherwise all the wind investment will go only to Patagonia. All the solar investment will go to
the northwest. Even biomass and biogas are expensive energies. In the end we will not get the best
prices, but we need to use this program to promote all the regions in the country.”
But Argentina would no doubt have to wrestle with the tradeoff between situating a renewable
plant in an ideal location and building long transmission lines. Or locating renewable generation closer
to the load where the renewable resource would be less, but so would the transmission costs. For
example, in the past, transmission lines from Patagonia were expensive due to large line losses and poor
capacity factors. If for the new transmission lines, Argentina only focused on the lowest cost options,
such lines might not be justified. With the transmission process still largely under government control,
and generation increasingly operating in a market system, Argentina faced yet another potential
disconnect.
But Kind remained optimistic. “Going from the north to south in Argentina is like going from Madrid
to Moscow,” he said. “This is the challenge and the opportunity. We are only 40 million inhabitants, not
400 million like in Europe. All the things that we can do to improve the system will help us all. These are
not just upgrades for renewables, these are upgrades for the whole system, and the whole system
needs an upgrade. That is how the country can move forward.”

Appendix I: Argentina’s Wholesale Electricity Market
In 2017, the Argentine electricity system’s available generation capacity was roughly 26 (GW) in a
system with installed capacity of 31GW. 65 percent of the energy produced in the country came from
thermal generators powered mostly by natural gas, with a small portion that ran on oil. Another 26
percent came from hydropower, 6 percent from nuclear and the remaining from coal and renewables.
The system peaks in the summers. (See Exhibit B for more.)
Note: “Large Users” are commercial and industrial consumers (with demands above 300 kW). Some of these users
buy electricity bundled with transmission and distribution services from distribution companies. Others purchase
electricity directly from CAMMESA and/or in bilateral agreements with generators.
Source: Based on data provided by CAMMESA and Ministry of Energy and Mining.

Exhibit A: Characeteristics of Argentina’s Power Problem
Argentina’s electricity shortage was mainly with peaking capacity and was related to the artificially low
tariffs that discouraged investment in new generation capacity on the supply side and energy savings on
the demand side. The shortage did not stem from a lack of investment in natural gas or other energy
sources, because lower production was covered with gas imports and liquid fuels (both local &
imported). Although, this, in turn, made costs rise, they were still covered by subsidies of the national
state.
The table and graph below show the gradual loss of reserve margin.
Chart 1.
Table: Power Demand
Source: Ministry of Energy and Mining

Exhibit A (continued): Characteristics of Argentina’s Power Problem
In Argentine Pesos
“Precio Monómico” reflects the average system cost and was paid mainly by the major wholesale
market users. “Precio Monómico ponderado Estacional” reflects the cost that was passed to the
ENERGY
distribution companies. The gap TRADE
between them BALANCE
highlights the magnitude of the subsidies.
Energy
In 2011,Balance
Argentina became a net energy importer.
Energy Trade Balance (Billion of dolars)

10
7,8 7,8
7,0 6,9 6,4 6,5 6,6 6,7
6,2 5,6
4,9 4,8 5,4
5
4,6 4,5
3,9 3,9 4,1 4,9 5,2 5,4 6,1 4,1 3,5 3,8 2,0
0
-0,5 -0,5 -2,8 -2,5 -5,8 -6,4

-1,0 -0,8 -1,0 -1,5 -1,7
-5
-2,8 -2,6
-4,3 -4,5
-10
-9,4 -9,3
-11,3 -10,9
-15
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Energy Exports Energy Imports Trade balance
Goal for ARGENTINA: Achievement of energy self-sufficiency.

Source: INDEC

Exhibit B: Electricity Generation by Fuel (in Gigawatt Hours)
160000
140000
120000
100000
80000
60000
40000
20000
0
1990 1995 2000 2005 2010 2015
Coal Oil Gas Biofuels Waste Nuclear Hydro Geothermal Solar PV Wind
Source: Data from International Energy Agency

Exhibit C: Breakdown of 2016 Average Price CAMMESA Pays Generators
Source: CAMMESA

A ARGENTINO DE INTERCONEXION (SADI)
Red de 500kV
Exhibit D: High Voltage Transmission Grid (2016)
500 kV 14.000 km
Líneas de 330 kV 1.100 km
transmisión 220 kV 2.800 km
132 kV 29.200 km
Source: CAMMESA

Exhibit E: RenovAr Wind and Solar Projects Rounds 1 and 1.5

Source: CAMMESA

Exhibit F: Projects Awarded under RenovAr (Round 1)

Exhibit G: Projects Awarded under RenovAr (Round 1.5)

Exhibit H: Electricity Tariffs in Argentina vs. Rest of Latin America
Electricity Price in US Dollars per Kilowatt hour - 2011
Country Residential Commercial Industrial
Haiti $0.35 $0.40 $0.40
Grenada $0.32 $0.32 $0.28
Jamaica $0.32 $0.27 $0.25
Barbados $0.30 $0.32 $0.36
Uruguay $0.28 $0.18 $0.13
Brazil $0.26 $0.22 $0.19
El Salvador $0.24 $0.18 $0.18
Guyana $0.24 $0.35 $0.29
Cuba $0.23 $0.11 $0.10
Belize $0.22 $0.23 $0.17
Nicaragua $0.22 $0.29 $0.22
Chile $0.21 $0.22 $0.15
Colombia $0.19 $0.22 $0.15
Guatemala $0.18 $.0.22 $0.16
Dominican Republic $0.18 $0.23 $0.20
Panama $0.17 $0.17 $0.16
Costa Rica $0.14 $0.17 $0.13
Honduras $0.14 $0.21 $0.20
Peru $0.13 $0.10 $0.06
Mexico $0.10 $0.22 $0.11
Bolivia $0.09 $0.11 $0.06
Ecuador $0.09 $0.08 $0.06
Paraguay $0.08 $0.09 $0.05
Trinidad and Tobago $0.05 $0.07 $0.04
Suriname $0.03 $0.05 $0.03
Argentina $0.02 $0.05 $0.03
Venezuela $0.02 $0.03 $0.01
Electric Energy Tariffs (US Dollar per Megawatt Hour) 2017-18

350 333
300
269
251
250
208
200 185 191
150 122 114 117

100
50
0
Arg. Abr-18
Alemania
Chile
Francia
Arg. Dic-17
España
EEUU
Uruguay
Brasil
Source: Adapted from Carlos St. James; Latin American Energy Review, February 2016. Energy tariffs chart provided by Paulo
Farina.

Exhibit I: Proposed New Transmission Lines
Proposed Transmission Projects (2018)
Project Investment (in US$ million)
Río Diamant–Charlone line 240
Plomer–Vivoratá line 146
Rodeo (San Juan)–La Rioja line 174
Remodeling of Smith substation 185
Atucha II–Belgrano II line 22
Puerto Madryn–Choele Choel line 173
Plomer–Belgrano line 26
Charlone–Plomer line 240
Plomer–Atucha II line 62
Remodeling of Plomer substation 104
Plomer–Ezeiza line 56
Map of Proposed Transmission Lines

Endnotes
1 Data provided by Ministry of Energy and Mining.

2 “It’s Cold Outside: A Battle over utility bills is Mauricio Macri’s first big crisis,” The Economist, August 11, 2016.
3 Data provided by CAMMESA.
4 All data in this section provided by CAMMESA and Ministry of Energy and Mining.
5Pampa Energia, “History of Argentina Power Sector Reforms,” available at: https://ri.pampaenergia.com/en/faq/history,
accessed October 20, 2017.
6 Ibid.
7 Data provided by Ministry of Energy and Mining.
8 Data provided by CAMMESA.
9Unless otherwise stated, all quotations attributed to Mariana Mataranga were drawn from an email sent to the author on
October 12, 2017.
10 Ibid.
11Unless otherwise stated, all quotations attributed to Jorge Siryi were drawn from an interview with the author on July 11,
2017.
12 Harvard Kennedy School Case “Transener (A): The Electric Industry and Wholesale Market,” Jose Gomez Ibanez.
13The Climate of Argentina, Paraguay and Uruguay, World Survey of Climatology, Edit. W. Schwerdtfeger, Elsevier Publishing
Company, 1976.
14 Ibid.
15Unless otherwise stated, all quotations attributed to Sebastian Kind were drawn from interviews with the author on June 8,
June 12, and July 13, 2017.
16 Data provided by Transener.
17Unless otherwise stated, all quotations attributed to Gustavo Baez were drawn from an interview with the author on July 11,
2017.
18Unless otherwise stated, all quotations attributed to Juan Jose Aranguren were drawn from an interview with the
author on July 10, 2017.
19Unless otherwise stated, all quotations attributed to Alfonso Burbaud were drawn from an interview with the author on July
11, 2017.
20Global Transmission Report, July 2018 available at https://www.globaltransmission.info/archive.php?id=33943,
accessed August 13, 2018.
21Unless otherwise stated, all quotations attributed to Alfonso Burbaud were drawn from an interview with the author on
August 13, 2018.


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HBP Case KS1288

May 14, 2019

Integrating Renewable Energy in Argentina

Argentina’s Electric System

The wholesale electricity market consists of generators, distributors, transmission companies, as

Integrating Renewable Energy 2 of 25 HKS Case 2159.0

Tumultuous History of the Electricity Sector

Integrating Renewable Energy 3 of 25 HKS Case 2159.0

Integrating Renewable Energy 4 of 25 HKS Case 2159.0

CAMMESA’s Growing Role

Integrating Renewable Energy 5 of 25 HKS Case 2159.0

Integrating Renewable Energy 6 of 25 HKS Case 2159.0

Windswept and Sunbaked

Integrating Renewable Energy 7 of 25 HKS Case 2159.0

Integrating Renewable Energy

Integrating Renewable Energy 8 of 25 HKS Case 2159.0

Integrating Renewable Energy 9 of 25 HKS Case 2159.0

Upgrading the Grid

Integrating Renewable Energy 10 of 25 HKS Case 2159.0

Integrating Renewable Energy 11 of 25 HKS Case 2159.0

Integrating Renewable Energy 12 of 25 HKS Case 2159.0

Integrating Renewable Energy 13 of 25 HKS Case 2159.0

Table: Power Demand

Source: Ministry of Energy and Mining

Integrating Renewable Energy 14 of 25 HKS Case 2159.0

Energy Trade Balance (Billion of dolars)

-0,5 -0,5 -2,8 -2,5 -5,8 -6,4

Goal for ARGENTINA: Achievement of energy self-sufficiency.

Source: Ministry of Energy and Mining

Integrating Renewable Energy 15 of 25 HKS Case 2159.0

Source: Data from International Energy Agency

Integrating Renewable Energy 16 of 25 HKS Case 2159.0

Integrating Renewable Energy 17 of 25 HKS Case 2159.0

Integrating Renewable Energy 18 of 25 HKS Case 2159.0

Integrating Renewable Energy 19 of 25 HKS Case 2159.0

Integrating Renewable Energy 20 of 25 HKS Case 2159.0

Source: Ministry of Energy and Mining

Integrating Renewable Energy 21 of 25 HKS Case 2159.0

Source: Ministry of Energy and Mining

Integrating Renewable Energy 22 of 25 HKS Case 2159.0

Electric Energy Tariffs (US Dollar per Megawatt Hour) 2017-18

150 122 114 117

Integrating Renewable Energy 23 of 25 HKS Case 2159.0

Map of Proposed Transmission Lines

Source: Ministry of Energy and Mining

Integrating Renewable Energy 24 of 25 HKS Case 2159.0

1 Data provided by Ministry of Energy and Mining.

Integrating Renewable Energy 25 of 25 HKS Case 2159.0

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