Emerging PV Markets: Analysis and Insights

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Demand analysis of emerging PV markets: Argentina of South and Central America

Country profile

Argentina has a population of about 44.5 million. In 2018, the double whammy of a monetary crisis in the country and appreciation of the U.S. dollar caused a severe devaluation of the Argentine peso, with the inflation surging to 56%. Consequently, Argentina’s GDP of the year ended up with a negative growth rate of -2.515%. Although a different party has taken office following the presidential election in October this year, there is a pessimistic outlook about how the Argentine market will fare. Argentina’s GDP growth may keep falling.  

Regarding its climate, Argentina lies in the Southern Hemisphere and experiences four distinct seasons throughout the year. The southern Argentina is a subarctic climate with a temperature staying below the freezing point for much of winter. And because of its proximity to Antarctica, the temperature averages 6.3 °C throughout the year in southern region. The central Argentina, characterized by subtropical and temperate climates, has balmy weather. The north has a tropical climate with a temperature hovering at 40 °C or higher in summer and averaging 21.6 °C throughout the year. Argentina is richly endowed with sunlight, with a daily solar radiation of 5.6 kWh/m2.

Renewable energy development in Argentina

In September 2015, Argentina’s Ministry of Energy and Mining passed Law No. 27.191, which mandates a 2025 goal of achieving 20% of electricity from renewable energy sources and accumulates 10 GW of installed renewable power capacity. The development of the Argentine renewable energy industry will depend largely on solar and wind power. 

Argentina’s share of energy from renewable sources targets for 2018–2025

Much of Argentina’s electricity generation comes from non-renewable sources, which account for some 80% of installed energy capacity nationwide. Hydropower is the most developed renewable source in Argentina, representing 17% of the nation’s installed energy capacity; by contrast, solar power, wind power, and biogas together constitute a mere 3% of the total.

Argentina’s aggregate energy installations in September 2019 by sources

Argentina’s PV policy and development

Since the establishment of a renewable energy goal in the second half of 2015, the Argentine government has been working toward this goal. In 2016, it launched RenovAr, a program to promote the development of the domestic renewable energy industry through auctions. Under this program, five auction rounds have been held, with around 1.8 GW of solar PV procured. The awarded projects are being built under a 20-year power-purchase agreement (PPA) signed with the wholesale electricity market administrator CAMMESA, and they are expected to get commissioned within the 2018–2022 timeline. In RenovAr 3, the last round of the RenovAr Program, the capacity assigned was lower than in the previous three rounds because it targeted small and medium-sized enterprises with a system size limit of 10 MW.

Solar capacity assigned under RenovAR

To improve the adoption of green power across the country, the Argentine government permits consumers to choose green energy suppliers and negotiate the terms and conditions of contracts. It also requires that power users with annual demand for over 300 kWh to source a certain share of power from renewables and those who fail to do so shall be fined. This year, the target requires for these energy buyers have risen to 12%.

To facilitate the execution of the policy of purchase obligation and the purchase of green power, the Argentine government introduced the Renewable Energy Term Market (MATER) framework in 2017, which removes barriers against buying green power and allows developers to sell power generated under PPAs. So far, four auction rounds under MATER have been held, with some 287 MW of projects assigned—many of which come with a 10-year PPA.

Solar capacity assigned through auctions under MATER

When it comes to promoting distributed PV projects, the Argentine government allows excess electricity to be sold to the grid. This year, it has also launched a plan to grant a tax credit certificate to distributed generation up to 2 MW of system size. The incentive will offer ARS 15,000 (USD 250) for each 1 kW installed with a cap of ARS 1 million.

On the demand side, the local PV market had remained sluggish until 2018, when the domestic demand for PV installations started to pick up on the strength of auctions. By then, Argentina had accumulated 191 MW of installed PV capacity, a significant increase from just 8 MW the year before. The PV market has been growing ever since. Indeed, a lot more solar PV capacity was installed in 2019 than in the last, reaching 434 MW in cumulative capacity in the third quarter.

Cumulative solar PV capacity installed in Argentina

Argentina-China trade: Module import and export

China shipped some 480 MW of solar modules to Argentina in 2018, a significant growth from just 100 MW the year before. Chinese module shipment to Argentina have achieved even more growth in 2019, totaling 410 MW just during Q1–Q3. At this rate, shipment volume would break last year’s record.

Chinese module shipment to Argentina has been growing markedly since 2018, and most of the modules are probably used in tendered PV projects.

Chinese module shipment to Argentina (2017 to Q3 2019)

Conclusion

Argentina has set a 2025 goal of generating 20% of electricity from renewable sources and accumulating 10 GW of renewable energy installations. While a new administration took office following the presidential election this year, whether the existing energy policy will undergo any change remains to be seen.

Stimulated by tendered projects in recent years, the long-stagnant Argentine PV industry has started to grow. The cumulative installed PV capacity reached 191 MW in 2018—a significant increase from just 8 MW the year earlier—and surged to 434 MW as of Q3 2019. Clearly, Argentina has seen considerably growth in PV demand this year than the last.

Increase in the import of Chinese modules is evidence of Argentina’s growing need for solar PV. Compared with just 100 MW in 2017, Chinese module shipment to Argentina rose to about 480 MW in 2018. This figure is even higher in 2019, having reached 410 MW over Q1 to Q3. At this rate, it’s expected that China’s shipment volume of module this year would surpass that of last year. Most of these modules are probably utilized in the PV projects assigned through the recent auctions under RenovAr and MATER. 

However, the Argentine economy has been lethargic these years, with a negative GDP growth of -2.515% in 2018, and it shows no signs of recovery this year. It remains to be seen whether this sluggish economic landscape will impact the PV projects in pipeline and the development of the PV industry. Moreover, whether the newly elected government can prop up the poor Argentine economy would be a critical factor in sustaining the long-term growth of the domestic PV market.

 
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