Argentine generator YPF Luz says renewables investment hinges on dispatch priority

Argentine power generator YPF Luz has a “big portfolio” of energy projects – and to advance them transmission priority dispatch is needed, a company official said.

YPF Luz, a unit of national oil company YPF, is targeting term market Mater, where large consumers contract electricity supply directly rather than through the wholesale power market.

Mater projects compete for priority dispatch in auctions held by wholesale power market administrator Cammesa. Transmission congestion in some corridors is a headwind to Mater market growth.

“We have a big portfolio [of projects], mostly on the renewables side. Our strategy, or policy, is that we start projects once we have priority dispatch on the renewables side, or at least a good part of that, so then we can start building the projects,” YPF Luz CFO Gabriel Abalos said during the company’s 2Q22 results call.

YPF Luz is building, in San Juan province, a 100MW solar PV plant under Mater, Zonda I. Cammesa awarded the project which has nearly reached the 50% completion mark, a total of 53MW of priority dispatch, in auctions corresponding to 2Q21 and 3Q21. Japanese auto parts company Toyota Boshoku Argentina and the Japanese textile company Sewtech Argentina have contracted output from the plant, among six new Mater clients YPF Luz secured in 2Q22.

About 36% of YPF Luz revenue corresponds to private power-purchase agreements (PPA) in the renewables and thermoelectric segments. Just over half of revenue corresponds to PPAs with Cammesa. 

Grid expansion work is needed in Argentina, particularly between demand center Buenos Aires province and renewables hubs in the northwest and southeast. Argentina was recently awarded a US$1.14bn conditional credit line geared to energy sector decarbonization. Funds would support projects included in a government power transmission plan. 

The country’s renewables expansion has decelerated since the halting of the RenovAr supply contract auctions. New capacity being built today largely corresponds to Mater projects and self-supply plants. Large consumers are interested in not only reducing carbon footprints but also bolstering supply security.

Demand of large users, or GUMAs, in the Mater market was 14.8TWh in 2021, via 344 agents, or offtakers. Metals companies are among the biggest. 

A government-led scheme may result in a resumption of renewable energy supply auctions, BNamericas was told recently. Argentina halted its successful RenovAr supply auction program several years ago, amid macroeconomic and project financing challenges, sapping wind from the industry’s sails.

HEADLINE CAPACITY, GENERATION STATS

Argentina, which has around 43GW of installed capacity, obtained 59% of power from thermoelectric plants last quarter, with hydroelectric accounting for 22%, non-conventional energy (NCRE) plants 13%, and nuclear 6%. In terms of the NCRE breakdown, wind accounts for 77%, solar 13%, biomass 6% and mini hydroelectric 4%.

Nationally, power generation was 34.5TWh in 2Q22, up from 33.9TWh in 2Q21.

YPF Luz’s installed capacity stands at 2.48GW, with thermoelectric plants accounting for 2.09GW, the same as in 2Q21, and renewables 397MW, up from 274MW.

Electricity dispatched by YPF Luz NCRE plants rose 51.4% in the quarter to 450GWh, as thermoelectric output dropped 17% to 1.705TWh, impacted by lower output from its 1.3GW Tucumán combined-cycle complex, in turn, affected by reduced gas imports from Bolivia. 

YPF LUZ GENERATION ASSETS

YPF Luz has four wind farms and 10 thermoelectric generation units in operation. Under-construction Zonda I constitutes the company’s incursion into the solar power sector.