The arrival of colder temperatures has provided the government with a temporary reprieve from addressing power outages, at least until December. However, the outlook for future summers remains increasingly dire due to decades of underinvestment in transmission infrastructure. This lack of investment has created a bottleneck, preventing the construction of new power plants to meet growing electricity demand. After a year and a half in office, the administration is poised to launch bidding processes in April to expand the transmission system, although financing remains a contentious issue between the government’s political and technical wings.
Since 2002, electricity consumption has surged by over 117%, while transmission capacity has only expanded by 54%. As a result, the grid is “saturated,” according to Transener, the country’s leading high-voltage transmission operator. This situation has driven up maintenance costs and left the system vulnerable to disruptions, as seen in recent years whenever transmission towers failed due to extreme weather events.
Just as the construction of the Perito Moreno pipeline (formerly known as Néstor Kirchner) enabled the substitution of imported gas with domestic production from Vaca Muerta—thereby reducing energy tariffs—investment in electrical transmission lines would lower dispatch costs and facilitate the integration of more efficient power generation sources.
Renewable energy companies have pointed out that current grid constraints force them to build wind and solar farms not in the most resource-rich locations, but where available transmission capacity allows them to connect to the grid.
Recognizing the urgency of expanding transmission infrastructure, the government has debated how to finance these projects amid a broader policy of curtailing public spending. Initially, Energy and Mining Coordinator Daniel González and Energy Secretary María Tettamanti proposed a fixed charge on electricity bills to fund the expansion, a model known as “stamping.” However, this approach was rejected by key presidential advisor Santiago Caputo, who has taken an increasingly active role in energy policy.
The remaining option is to tender the projects, requiring private firms to secure financing, build, operate, and maintain the lines under 30-year concession contracts. Investors would recoup costs through a fee charged to end-users benefiting from the expanded infrastructure once the projects are operational.
However, this model faces a significant challenge: the long payback period for these high-capital investments. With more than 20 years of frozen electricity tariffs in the country, banks may hesitate to offer loans without guarantees that future governments will not reintroduce price controls. Industry experts warn that any additional financial risk will ultimately be passed on to consumers through higher utility rates.
Through Resolution 151 of 2024, the government revoked the Thermal Generation Reliability Supply (TerConf) program, which had involved investment commitments of $4 billion.
To address investor concerns, the government is negotiating with the World Bank and the Inter-American Development Bank (IDB) to establish a guarantee fund for companies seeking financing. A similar mechanism was implemented during Mauricio Macri’s administration in 2017 when the World Bank provided $480 million to support Argentina’s Renewable Energy Development Fund (FODER), ensuring payment security for renewable energy projects.
In the coming weeks, the Energy Secretariat is expected to issue a resolution formally announcing the launch of a bidding process for high-voltage transmission projects. These projects align with the infrastructure plans outlined in the now-canceled TerConf program under Resolution 507 of 2023, which was rescinded last July by then-Energy Secretary Eduardo Rodríguez Chirillo.
The most anticipated project is AMBA I, designed to increase transmission capacity by 1,500 MW in the metropolitan area, where electricity demand is most concentrated. The project is estimated to require an investment of $1.1 billion.
However, for these projects to materialize, the country’s risk premium—currently hovering around 900 basis points—must decline. Without lower borrowing costs, attracting investment for large-scale infrastructure remains a formidable challenge.
Source: LA NACION