S&P report warns that Argentina’s renewables plan requires a stronger regulatory framework to succeed

The Argentine energy sector faces a predicament. During peak seasons, the country’s inefficient electricity generators are unable to satisfy growing power demand – at best obliging the country to import electricity and at worst leaving some areas in the dark. In response, the Argentine government hopes to attract US$15 billion of investment (most likely from the capital markets) in an effort to modernise its grid – setting a 20% renewable energy mix target for 2025.

A report published by S&P Global Ratings, however, opines that the plans to boost the Argentine grid with more wind and solar energy sources may face difficulties. Investors may have already been dissuaded from renewables as a consequence of the country’s default history and low wholesale electricity prices. But eclipsing these concerns is the unpredictable regulatory framework that oversees the country’s renewables investments.

For Argentina to continually attract investors, a more investor-friendly regulatory framework could form part of the solution. This includes providing guarantees to investors that power purchase agreement terms are honoured – including timely invoice payments. Without rapid action, S&P Global Ratings believes investors’ risk-return calculations may begin to swing out of the country’s favour.

The report was covered by specialist press outlets, including Power Engineering International, Power Finance and Risk, Energy Live News, and RENews.

 

Photo credit CC search user: Global Panorama. (License).

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