Argentina Power Market - Segmented by Power Generation, and Power Transmission, and Distribution Network - Growth, Trends, and Forecast (2018 - 2023)
Better access to financing, a gradual increase in electricity tariffs, and a general improvement in the business environment is expected to benefit the country’s power sector, during the forecast period. In 2017, the country witnessed a slowdown in investment activities in the distribution and power generation sector. However, the economic and industry-specific reforms, introduced by the Macri government, are expected to create opportunities for engineering, procurement, and construction (EPC) companies, project operators, and investors across all segments of the power sector. Moreover, during the forecast period, Argentina’s non-hydro renewables industry is poised to register a significant CAGR. Nonetheless, growth in non-hydro renewable industry is expected to come on a low base, and its contribution to the overall power sector is likely to remain limited. In 2017, the current non-hydro renewable energy generation capacity was just 1.3 GW.
Transforming Political Landscape – A Positive Indicator for Market Growth
In December 2015, Mauricio Macri assumed the presidency, after a twelve-year tenure of the previous Presidents Nestor Kirchner and Cristina Fernandez de Kirchner. The Macri government declared a state of emergency in the same month, for the power sector, giving extra powers to the Ministry of Energy until 2017. The government gradually increased power tariffs, whereas the subsidies are likely to be eliminated by 2019. The development such as power consumption subsidy removal and the rise in the electricity tariffs have improved monetary returns for transmission and distribution companies. Moreover, the Macri government has been promoting shale gas and renewables production. During the forecast period, big oil & gas majors, like Chevron, Dow, BP, and Shell, among others, are likely to invest up to USD 15 billion.
Renewable Energy – A Budding Market Segment of Argentina’s Power Sector
In 2016, the renewable share was 10.5% in the total primary energy consumption of the country, and out of that 10.5%, 8.7 million metric ton of oil equivalent (Mtoe) was from Hydropower, and the rest 0.7 Mtoe was from non-hydro renewables. The country places environmental protection at the highest level, as mentioned in Argentina’s national constitution (Article 41). According to the basic principles, each province maintains jurisdiction over the environment and natural resources-related issues. Whereas, the nation is responsible for the framework of environmental protection. Moreover, the Government of Argentina launched a renewable energy plan called RenovAr, in 2016, which is expected to drive the investment in renewables. RenovAr is expected to move the country toward its green energy targets for 2018 and 2025, which is 3GW and 10GW of installed renewables capacity, respectively.
Rebounding Economy – Boosting Investors’ Confidence
The country’s economy is expected to recover during the forecast period, as the government has unwound multiple distortions, which are likely to put the economy on a stronger footing. The economic growth is expected to recover at a slow pace in the coming years, and the inflation is expected to decline at a slower pace, than targeted by the country’s central bank. Private consumption is expected to increase between 2018 and 2019, with real wages improving, after its decline in 2016. The GDP growth of the country is expected to consolidate, with a gradual fall in the fiscal deficit, during the forecast period.
Key Developments in the Market