Though Argentina has yet to install a first offshore wind turbine in its waters, power production from arrays off the southernmost South American nation should not be overshadowed by its recently unstable currency and economic turbulence – not least as the global green hydrogen market hots up.
The electricity production from onshore wind power in Argentina has increased from 1.41TWh in 2018 to 9.42TWh of electricity in 2020 – even as the country during those same years suffered from an economic downturn – demonstrating that Argentina is able to kickstart a fast build-out of renewable energy despite macroeconomic tumult.
What made the growth of renewables possible in the first place, despite an unstable currency both leading up to 2018 and particularly after? The answer is RenovAr, Argentina’s ambitious programme to further renewable energy other than hydropower.
Initiated in 2016 backed by World Bank guarantees to provide clean-energy developers with a safety net against macroeconomic and currency shocks, RenovAr has held four overall successful auctions to date. But with the last taking place in 2018, a fifth iteration, containing important infrastructure projects, is now long overdue.
It is still unclear how highly Argentina’s current president, Alberto Fernandez, is prioritising the energy transition, and recently, early growth in its renewable energy build-out has slowed, largely due to a weakening Argentinian peso and wavering investor trust in clean-energy projects, which has caused the price of capital to increase.
The result has been that several earlier awarded projects have been unable to meet the milestone deadlines stipulated in their contracts. But, that said, likely all that the build-out requires to pick back up now is political will – and the trust of financiers.
This July, the Fernández government published a law that will help renewable energy projects by increasing options and flexibility if they have trouble meeting their milestones, signalling to the renewables industry that it has not been forgotten.
If the RenovAr auctions get back on track and investors start trusting the system again, I foresee that interest in renewables in Argentina might swiftly turn to offshore wind during the coming decade, resulting in commercial-scale buildout by 2035.
Argentina largely relies on gas for electricity today, but due to climate goals and a stagnating domestic gas production as well as expensive fossil fuel imports, other sources are needed to diversify the mix. Offshore wind is a stand-out option due to its cemented status as a renewable energy source that offers large capacities and production levels.
The overall technical potential for offshore wind in Argentina amounts to a staggering 2.5TW, making it the most resource-rich sector market in South American, beating even Brazil’s 1.4TW and Chile’s 1.1TW potential. Argentina is blessed with heavy wind-streams along almost all of its Atlantic coastline, and as if that wasn’t enough, its waters are also relatively shallow (0-200 meters) in the windiest stretches, allowing for fixed-bottom or shallow floating concepts to be used.
This would mean a quicker build-out, as fixed-bottom technology is already matured in Europe and Asia, and shallow-floating concepts are expected to commercial before some the deeper-water concepts.
So vast is the wind resource in Argentina that it could be harnessed to win the regional hydrogen race for the country as well, making it an international exporter of green hydrogen in the future. The first step towards that future is the fifth round of RenovAr auctions. We’ll be keeping an eye on newswires in Argentina – as will the wider offshore wind developer fraternity – to see how quickly the country’s undeniable potential begins to give shape to its role a future powerhouse in the region.
· Rikke Nørgaard is managing director of Copenhagen-headquartered analyst house Aegir Insights. The full report on Argenttina's offshore wind market can be found here