The Sun Rises for Argentina: The NEXT Big Latin American Solar Market for Single-Axis Trackers

By on September 26, 2017

As solar PV spreads throughout the world, we’re always looking for the next big market where single-axis trackers will add the most value to the region’s solar projects. So far in Latin America, Chile, Mexico and Brazil have led the way with hundreds of megawatts of solar installed or under construction, but there’s another South American country we believe is ready for substantial growth: Argentina. I know this market well because it’s my homeland, and I’ve seen it recently take several strong steps toward making solar and wind a significant part of our power generation mix.

Argentina, once a regional energy powerhouse, is now a net importer of energy from its neighbors; namely, Bolivia, Chile and Brazil. Over the past decade, Argentina’s power generation matrix has been devastated and fossilized. But recently, new regulation has been put in place to generate new investment in clean, renewable power.

While there has been discussion of the country’s solar potential for years, the first real market signal came last year with the establishment of a national renewable portfolio standard (RPS), with targets of 8% by 2018 and 20% by 2025. There have been two renewable auctions this year: RenovAR 1 and 1.5, which saw about 2.6 GW of new projects and approximately 1.1 GW of solar projects awarded to domestic and international bidders, with most of the sites in the well-insulated west and northwest of the country. These contracts had record-low prices below $60/MWh, which shows the success of the country’s efforts. Now it’s time to execute.

If they stay on track (and that’s not a given), many of these solar PPA projects from the first two auctions will begin construction in late 2017 and early 2018. According to PV Magazine, RenovAR 2.0 was recently announced, and will contract 1.2 GW of new projects, including a 450 MW solar carve-out. However, that number could turn out to be more like 700–800 MW once the process is completed. NEXTracker expects to supply several of these projects with our NX Horizon single-axis trackers.

While the interest in the auctions bodes well for Argentina’s solar prospects, like any new and emerging market, our country has several challenges that must be dealt with as our pipeline builds. Specifically, there are three key issues facing the industry: access to financing, local content requirements, and Argentina’s political risk.

Argentina has seen its share of economic upheaval and instability, but things have settled down in recent years, providing a higher level of confidence in the investment and financial community. As you might expect given the RPS and RenovAR auctions, our current government is a strong proponent of renewables, but the upcoming midterm congressional election could adversely affect the political climate. It’s difficult to secure financing, and it remains challenging from a capital-raising point of view. In order to provide support, reduce the perceived risk and accelerate construction, the federal government established the Fund for the Development of Renewable Energies (FODER), and international development banks are also starting to provide project funding and loan guarantees.

FODER, which provides additional financing to developers and backstops the project PPAs, is accessible to or gives preferential access to projects that have local content. While any project can access the fund, priority is given to those projects that meet local content requirements. There are some complexities around the cost and how to implement that fund, so we’re seeing strong interestᅳyet sponsors and developers are raising money directly in capital markets, or seeking more traditional project finance options. All in all, we believe these are good signs for growth in Argentine solar, especially because we know the government is aware that financing is important and must consolidate that in some way, and FODER does just that.

While well-intentioned and aimed at catalyzing Argentina’s strong manufacturing sector, the local content rules are still new and not altogether clear. Questions remain about what constitutes a locally sourced component versus an imported one.

The previous exemption on import duties for renewable energy equipment has recently been extended for six months for wind, and one year for solar projects. While this exemption may seem contradictory to local content requirements, it demonstrates that the public sector understands renewable projects don’t need further complications. This extension grants Round 1.0 and 1.5 projects more flexibility, and that’s a good thing.

However, Argentina’s Ministry of Energy and Production is keen on making local content more attractive to project owners, and there are changes coming to existing regulation to strengthen the requirement as well as the tax benefits. There is a wide range of committed local content from the 1.1 GW of solar already awarded: About 85% of projects plan to use about 25% local content or less, while the other 15% of the projects plan to feature anywhere from 30% to 90%; in which case, local PV modules would be required.

I’m proud to see Argentina emerging as a solar leader, and one way or another, NEXTracker will be a part of our solar transition.

Watch this summary video of my interview with the organizers from last year’s AIREC conference. NEXTracker has come a long way in one year—from 3 GW to 10 GW of trackers sold globally —and Argentina is ripe for tracking:

NEXTracker will be participating in the second annual Argentinian Renewable Energy Congress (AIREC), which takes place Oct. 2-5 in Buenos Aires. This conference provides a comprehensive program dealing with all aspects of the renewable energy transformation occurring in the country. Alejo will be on a panel discussing solar technology and innovation as well as making a presentation about NEXTracker’s comprehensive solar and storage portfolio, which features both the NX Fusion Plus plug-and-play, long-duration vanadium flow battery-based solution and a standardized storage media-agnostic container platform. NEXTracker’s Nelson Falcão will also be taking part in AIREC, discussing the positives and negatives of local content requirements. If you would like to set up a meeting at AIREC, please contact Alejo Lopez at alopez@nextracker.com.