WSHPDR_2013_Final_Report-updated_version

through fixed contracts for 15 years.
The Undersecretary of Electricity under the Ministry of
Energy's Office has established a programme to supply
the dispersed rural population with power (Programa
de Abastecimiento Eléctrico a la Población Rural
dispersa de Argentina). It aims to collaborate with the
provinces through provincial energy programmes to
electrify rural areas, primarily using photovoltaic,
wind, micro hydro turbines and diesel generators. The
national context is important to highlight the
development and implementation of a project funded
by the Global Environment Facility and the World
Bank. The project, El Proyecto de Energías Renovables
en Mercados Rurales (PERMER, renewable energy in
dispersed rural markets), aims, among other
objectives, to provide power to isolated rural areas in
a sustainable manner, using renewable sources.
The most recent policy on renewable energy was
established at the beginning of 2010, where Argentina
had implemented feed-in tariffs granting power
purchase agreements (PPA) for renewable energy.
PPA’s are obtainable from government-sponsored
auctions. 3
Legislation on small hydropower
The small hydropower action plan outlined by the
National Directorate for Promotion (DNPROM) of the
Ministry of Energy basically comprises:
A survey of the facilities in operation and out of
service, as well as those possible to be
refurbished, and of public irrigation works that
can be equipped with generating units.
A search for new sites and to select a
methodology for estimating total theoretical
potential of regions and basins.
Compilation, review, and proposal of a
reformulation of the provincial legal regimes of
water, environment and energy, in agreement and
collaboration with governments and provincial
agencies.
An analysis of the profitability of small
hydropower in isolated markets, the development
of case studies and a roadmap of projects related
(or not) to the Clean Development Mechanism
(CDM).
Identification and management of public and
private financing lines for the execution of the
technical and economically feasible works.
The Energy Department's Office is currently bound to
encourage the construction of the 116 micro-hydro
plants mentioned above. The Government considers
several possibilities to avoid an energy crisis to impact
the economic growth. One strategy is designed to
further develop the country's water resources through
micro-hydro facilities, which individually have a
generating capacity of up to 30 MW.
Financial capacity is a key element to consider,
particularly in the case of private investors looking for
commercial opportunities in the small hydropower
sector. Studies show that in order to encourage private
initiatives, financial mechanisms are essential as they
allow the collection of long-term loans at rates
appropriate to the realities of such projects.
Furthermore, it will be necessary to implement a
system of guarantees that awards credits to private
investors so that they are not inhibited by other
commercial arrangements. At this point, the
intervention of the federal, provincial and/or
municipal state to facilitate and manage credit is
needed. Complementary to this point, there is a need
of an adequate remuneration system for the energy
sold by small hydropower. When deciding the tariff
structure of small hydropower, it will be convenient to
take into account the environmental benefits and the
social cost of externalities, both affecting the company
but which are not incorporated yet by the generators. 6
Argentina, which has a weak penetration of
renewables in the national electricity supply, opted for
the regulatory mechanism of ‘quotas’ for grid access.
This system is advantageous for states with funding
problems but does not ensure private investment.
Barriers to small hydropower development
Argentina has great small hydropower potential,
however, a number of very diverse barriers hinder its
realization, as in other countries. Hydropower is
considered the most promising technology for
national development, followed by wind, then solar
and biomass. There are political constraints and
structural limitations within the governmental
agencies which are responsible for establishing
policies that provide solutions to these problems. It is
necessary to apply instruments that help formulate
and implement an energy policy that includes
renewable energy. At the moment the regulatory
framework remains insufficient.
Foreign investors perceive high risks and a lack of
incentive based on the limited availability of local
finance. Local finance is hindered by the limited
number of local banks and the lack of liquidity
experienced in commercial banks. Furthermore, the
difficulty in securing capital at reasonable costs in the
short term strongly hinders the volume of investment,
despite the countries resource potential. 3
It is necessary to acknowledge that programmes like
GENREN are being implemented, in which the
generator is not paid a premium but a guaranteed
price for the energy generated in order to provide a
more reasonable rate of profit.
There is a specific need to update the incentives posed
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