WEC Argentina highlights investment shortfall and smart grid potential

Argentina’s electrical system has been hampered by the lack of capacity and network investments amid soaring energy demand during the last decade, delegates heard at a recent seminar organised by CACME, the WEC’s Argentine committee.

Mr Silvio Resnich, an Argentine energy consultant and CACME member, highlighted the current state of the Argentine electricity system at the seminar on smart grids on 16 May in Buenos Aires. He said that despite rapid energy demand growth, the state continues to subsidise electricity tariffs. To satisfy demand the national government has been paying for fuel imports even when imported fuel has become increasingly expensive.

Shale gas reportIn addition, the majority of power plants in Argentina are gas-based facilities, but the lack of gas is forcing power plants to turn to liquids, Mr Resnich added. In 2012 Argentina had to import 30% of its natural gas demand in addition to significant amounts of petroleum products to run power plants. With growing energy demand, gas imports have grown, too – in early 2013 Argentina saw a 35% rise in gas imports compared to the same time in 2012.

Mr Resnich warned that major investments are needed in generation, transmission and distribution if Argentina were to meet its continually rising demand. The country’s energy demand has been rising since 2002, when it began to emerge from its economic downturn. Argentina also needs to develop a regulatory framework based on a long-term view, in order to enable the right conditions to attract long-term investments, he added.

These are the conditions needed before Argentina can launch smart grids in the country, noted Jorge Feroli, WEC Argentina’s chairman, in the event’s opening speech.

The CACME seminar aimed to show how smart grids work in order to help the sector prepare for their launch once the above conditions are met. Mr Ferioli referred to the WEC report on smart grids, which examines some best practice examples implemented worldwide. The event was attended by more than 60 executives from the Argentine oil and gas sector.

Dr Jannick Julliard, Manager at the German company Siemens, discussed the design and implementation of smart grids in Europe, drawing on experiences in Germany, Canada, Colombia, Uruguay, Switzerland, and Malaysia.

According to the Energy Sustainability Index in the WEC’s 2012 World Energy Trilemma report, Argentina, although positioned relatively high (number 22) in the Index, still faces major challenges and is expected to further drop in the rankings. With the current energy policy of low prices for producers and high subsidies to consumers, there is little chance to revert the decline in production. Oil production declined by 30% since 1998, while natural gas production declined by 8% since 2006. As a consequence, Argentina, previously a net energy exporter in 2006 with a surplus of

US$6 billion, turned into a net energy importer in 2011 with a deficit of US$3 billion. The lack of investment in all energy sectors has become a major challenge, further intensified by the nationalisation of YPF, where the new management is struggling to attract new investors to exploit the country’s large reserves of unconventional oil and natural gas. (Read more on: http://bit.ly/14ZUbRY)

CACME has been working towards facilitating the development of the Argentine energy sector by disseminating and publicising the findings of the WEC’s studies. It has been calling for the government, industry, and other stakeholders to raise the necessary investment to develop the country’s shale gas resource in order to replace liquefied natural gas (LNG) imports.

CACME has also been active in developing the Argentine chapter of the WEC’s Future Energy Leaders Programme (FELP). It was the first member committee of the WEC to establish this group of young professionals in Latin America in 2011. CACME is providing scholarships for its four Future Energy Leaders to attend the World Energy Congress in Daegu this year.