Argentina declares emergency in energy sector
The recently elected Administration has declared the energy sector emergency. The measure was adopted by emergency decree No. 55/2023 (“Decree 55”).
Additionally, Decree 55 orders the gas and electricity regulatory bodies to undertake an integral rate review, in turn authorizing temporary rate hikes.
Further, Decree 55 entrusts the Secretary of Energy (“Secretary of Energy”) to establish a comprehensive governmental program with respect to power generation, transmission and distribution, and gas production, transportation and distribution, with the end-goal of establishing a pricing criteria based on market conditions and free access rules, while maintaining revenue levels in real terms and covering investment needs.
Finally, regulatory bodies ENARGAS and ENRE are intervened while their directors are appointed through a public contest.
Key aspects of Decree 55 are as follows:
I. Considerations of Decree 55
Decree 55 seeks to adopt urgent measures in view of the high risk of natural gas and electricity energy shortage to users all around the country, while assuring a better and more efficient service.
In a general way, Decree 55 also recognizes that gas and electricity public utilities associated infrastructure is becoming obsolete, namely because the lack of grid expansion programs.
It also added that power transmission lacks capacity, leading to curtailment. Moreover, it recognizes that the pricing criteria and current remuneration schemes do not have the adequate signs for new investment, nor promote a market-term among the industry participants.
With respect to natural gas transportation infrastructure, it is noted that local production of natural gas in northern Argentina and the availability of the resource imported from Bolivia have decreased, thus leading to potential shortages. Therefore, the need for the reversion of the Northern Gas Pipeline is highlighted, to guarantee gas supply on that area, which is critical to lithium and other industries too.
II. Relevant provisions of Decree 55
- Powers of the Secretary of Energy: The Secretary of Energy is empowered with elaborating an overall program with respect to the activities mentioned before, with the objective of establishing a rate and pricing criteria under conditions of competition and free access, maintaining in real terms the levels of income, covering investment needs, and guaranteeing a secure and continuous public utilities.
- Rate adjustment and temporary increases: Gas and power regulators ENRE and ENARGAS must start revising gas and electricity rates, and by December 31, 2024, a new rate scheme should be in place. Temporary increases are permitted.
- Intervention of ENRE and ENARGAS: The ENRE and ENARGAS are intervened until their vocals are appointed. Broad powers are given to the intervenors, who will be appointed by the Secretary of Energy.
For additional information, please contact Nicolás Eliaschev, Javier Constanzó, Daiana Perrone, Pablo Arrascaeta, Milagros Piñeiro, Florencia Martínez, Rocío Valdez and/or Victoria Barrueco.
Javier Constanzó, new Partner of the Energy & Infrastructure Department
We are pleased to announce the promotion of Senior Associate Javier Constanzó to the position of Partner.
Mr. Constanzó will join the Energy & Infrastructure Department where he will be a partner along with Nicolás Eliaschev, cementing the Firm's presence in those key industries. He is a regulatory and public law expert, who has an outstanding and extensive experience in structuring energy and infrastructure projects, with relevant expertise in project finance, acquisitions, and other corporate finance transactions in renewable and conventional energy projects. He also advises a range of clients in a variety of infrastructure matters, primarily involving lithium, representing banks, sponsors, mining companies, and power generation companies.
His contributions to the legal field have been acknowledged with distinctions, including being named a Rising Star by Legal500 on multiple occasions.
Javier has played key roles throughout his career as Associate at Tavarone Rovelli Salim & Miani since October 2016, helping to build the energy powerhouse practice at the Firm. Also, during 2021-2022 he worked as an International Visiting Associate at the Latham & Watkins office in New York, as part of the corporate and project finance practice, and successfully rejoined the firm after that.
Mr. Constanzó holds a Postgraduate Degree in Finance and Corporate Law from the Universidad del CEMA, a Master’s Degree in Public Law and Economics from the Pontifical Catholic University of Argentina, and is a qualified lawyer from the University of Buenos Aires.
In addition to his private practice, Javier has been a visiting professor of energy and public law in several universities.
“In the current context, under a new Administration in Argentina, we see great potential for new business in the energy, infrastructure and natural resources industries. Javier will add tremendous expertise to our platform and strengthen one of our leading practices”, said Marcelo R. Tavarone, Managing-Partner of the Firm.
“Constanzó is a strong team player and a commercially focused lawyer, who has helped to build a robust practice. I am extremely proud for his promotion to the role of Partner, and he will definitely help to continue growing our market share and delivering outstanding legal service to our clients”, added Nicolás Eliaschev, Partner at the Energy and Infrastructure practice.
Tavarone, Rovelli, Salim & Miani stands out as one of the prominent full-service law firms in the Argentine legal market, with a substantial track record of providing comprehensive advice to corporate and financial clients, as well as active participation in complex transactions and litigation. With this promotion, the Firm will add relevant firepower to the already well-known energy, infrastructure and natural resources practice.
Media Contact: Paula Cafferata - paula.cafferata@trsym.com
Establishment of the Environmental Protocol for Massive Events
On December 7, 2023, the Ministry of Environment and Sustainable Development published Resolution No. 465/2023 (the "Resolution"), that created the Environmental Protocol for Massive Events (the "Protocol"). Organizers of massive events are invited to adhere to such Protocol.
The Protocol is framed in the 2030 Agenda and the Sustainable Development Goals (SDGs), as an additional public policy to achieve observations of the SDGs and to reduce the negative impact that urban life has on the environment, especially in managing mass events. It aims to provide tools that contribute to the reduction of the environmental impact produced before, during and after the development of mass events, through concrete actions and indicators to measure the performance of the environmental management of the event.
Thus, in order to carry out a correct management of environmental impacts in a mass event, it is important to consider all the impacts derived from the procurement of raw materials, production, transportation, and end of life of all the elements used for its realization.
The Protocol identifies the following lines of action for the sustainable management of mass events:
- Waste;
- Responsible consumption;
- Communication and environmental education;
- Sustainable mobility;
- Energy;
- Water; and
- Inclusion and Diversity.
Based on these, the Protocol proposes certain qualitative and quantitative indicators to monitor and have metrics that serve to set goals and improvements in the future.
For additional information, please contact Nicolás Eliaschev, Pablo Arrascaeta, Milagros Piñeiro, Rocío Valdez and/or Victoria Barrueco.
News in the hydrocarbons sector: The establishment of the National Program for the Measurement and Reduction of Fugitive Emissions Derived from Hydrocarbon Exploitation and Production Activities
On December 1, 2023, the Secretary of Energy published Resolution 970/2023 (the “Resolution”) that establishes the “National Program for the Measurement and Reduction of Fugitive Emissions Derived from Hydrocarbon Exploitation and Production Activities” (the “Program”).
The Program aims to:
- Promote actions for detecting, measuring, quantifying and validating fugitive emissions in hydrocarbon exploration and production activities;
- Organize and systematize the information obtained from the measurements made; and
- Encourage the implementation of plans for mitigation and reduction of fugitive emissions derived from hydrocarbon activities.
The obligated parties -individuals and/or legal entities- must submit to the Undersecretary of Hydrocarbons of the Nation:
- An Annual Fugitive Emissions Measurement Plan; and
- A five (5) year Comprehensive Plan referred to the reduction of fugitive emissions, in order to implement specific measures that prioritize the efficiency and use of the gas resource.
The information arising from the above-mentioned plans will be published on the website of the Secretary of Energy.
The regulated entities that have new facilities shall tend to the incorporation of good practices and management actions, appropriate for minimizing fugitive emissions produced from the planning and design stage of such facilities.
It is important to mention that the deadlines for compliance as well as any other aspect related to the implementation of the Resolution shall be subject to the regulation to be issued accordingly.
For additional information, please contact Nicolás Eliaschev, Pablo Arrascaeta, Milagros Piñeiro, Rocío Valdez and/or Victoria Barrueco.
The Secretary of Energy establishes new charges for large consumers
On December 5, 2023, the Secretary of Energy published Resolution 976/2023 (“Resolution 976”), which establishes new charges for the Large Users of the Wholesale Electricity Market (“WEM”) and the Wholesale Electricity Market of Tierra Del Fuego System (“WEMSTDF”), that are supplied by the respective distribution companies.
The most relevant aspects of Resolution 976 are outlined below:
I. Scope and effectiveness
Resolution 976 is applicable to Large Users of the WEM and WEMSTDF that are supplied by the relevant distribution company. Resolution 976 shall come into effect starting on February 2024.
II. Charges included in Resolution 976
- Stabilized Charge
The Stabilized Charge will be calculated as the difference between the Average Energy Price of the WEM and the sum of the Power Reference Price (POTREF), the Stabilized Energy Price (PEE) and the Stabilized Transportation Price (PET) established by Resolution 884/2023, applicable to the whole demand characterized as GUDIs, except for public education and health establishments.
- Capacity Adjustment Charge
The Capacity Adjustment Charge will be determined based on the difference between the Monthly Reserve Price and the stabilized Power Reference Price (POTREF) and applied to the difference between the maximum and average requirement of Large Users.
III. Undersecretary of Electric Power to adopt complementary measures
The Secretary of Energy empowers the Undersecretary of Electric Power to dictate any complementary regulation that may be required to apply Resolution 976.
For additional information, please contact Nicolás Eliaschev, Javier Constanzó, Daiana Perrone, Luciana Tapia and/or Victoria Barrueco.
Relevant aspects on the Guidelines for the development of Environmental Impact Reports and Public Participation in Environmental Impact Assessments
On November 30, 2023, the Secretary of Climate Change, Sustainable Development and Innovation of the Ministry of Environment and Sustainable Development released the “Guideline for the development of Environmental Impact Report” (the “EIR Guideline”) and the “Guideline on Public Participation in Environmental Impact Assessment” (the “PP Guideline”), both approved by the Resolution No. 23/2023 (the “Resolution”).
The most relevant aspects are detailed below:
I. Guidelines for the development of Environmental Impact Report
The EIR Guideline is intended to professionals responsible for the development of the Environmental Impact Report (“EIR”) and to the agencies involved in the technical review and environmental licensing of the projects.
It also promotes the integration of the climate change variable in the different phases of the EIR, incorporating information throughout the Environmental Impact Assessment (“EIA”). The inclusion of the climate change variable in the EIA is suggested through two approaches:
- Adaptation: evaluates how climate change may influence the project, considering possible climate scenarios and risks that could affect the expected life cycle; and
- Mitigation: considers how the project may influence the emission of greenhouse gases ("GHG"), regarding actions by the proponent to avoid or reduce GHG emissions or even increase their absorption through reservoirs or sinks.
II. Guide on Public Participation in Environmental Impact Assessment
The PP Guide seeks to broaden and diversify the mechanisms for public participation in environmental matters. It is mainly intended to the proponents, promoting agencies, professionals responsible for the elaboration of EIR and other offices of the Public Administration involved.
Public participation has different scopes depending on the type of involvement promoted by the evaluating authority or the proponent. Thus, at least four levels of participation can be identified (information, consultation, dialogue, and decision making) that can take place at various points in the project cycle, depending on the size of the project and the strategy defined for stakeholder involvement.
The PP Guide also proposes the qualitative technique of "stakeholder mapping", which makes it possible to identify stakeholders, understand their interests and how each one can affect the viability of the project.
Consultation mechanisms may include multisectoral workshops, virtual consultations, co-creation events, dialogue tables, mediation, or negotiation hearings, direct (door-to-door) visits to communities, participatory management tables, monitoring, and follow-up committees, among others.
The PP Guide proposes the presentation of a disclosure document to optimize access to environmental information and participation in effective decision-making and facilitate the understanding of EIR for the general non-specialized public.
For additional information, please contact Nicolás Eliaschev, Pablo Arrascaeta, Daiana Perrone, Milagros Piñeiro, Rocío Valdez and/or Victoria Barrueco.
Argentina’s National Strategy for the Use of Carbon Markets
On November 14, 2023 the National Ministry of Environment and Sustainable Development published Resolution 385/2023 that approved the “National Strategy for the Use of Carbon Markets” (“ENUMeC” for its Spanish acronym, Estrategia Nacional para el Uso de los Mercados de Carbono).
ENUMeC aims to promote the implementation of carbon markets as one of the carbon pricing mechanisms to contribute to the adaptation and mitigation of climate change in the national territory.
As of today, Argentina does not have a national legal framework to implement the use of carbon markets. In line with this, the ENUMeC establishes 9 key points and 63 actions necessary for the implementation of carbon markets and establishing a framework that encourages and promotes the development of these markets.
The ENUMeC reaches subnational, national and international carbon markets, new and existing carbon markets, as well as regulated and voluntary carbon markets and covers all sectors and greenhouse gases of the National Inventory.
The implementation of ENUMeC is based on the following key points, from which the specific actions are derived:
- Climate financing;
- Participation in regulated carbon markets under Article 6 of the Paris Agreement;
- Promote participation of the private sector in voluntary markets;
- Generate Non-Commercial Approaches under the scheme of Article 6.8 of the Paris Agreement;
- Assist subnational governments in the implementation of market schemes for their climate change mitigation plans;
- Contribute to strengthen and finance climate change;
- Develop national and sub-national abilities for the implementation of carbon markets;
- Promote environmental integrity in the implementation of carbon markets; and
- Guarantee national and regional interests within international negotiations.
ENUMeC is considered a road map for the effective and coordinated implementation of carbon markets in Argentina. Its implementation will require consensus and agreements among national, provincial, public and private actors.
For additional information, please contact Nicolás Eliaschev, Daiana Perrone, Rocío Valdez and/or Victoria Barrueco.
Argentina launches call for expressions of interest for energy storage proposals
The Secretary of Energy has launched a call for expressions of interest for battery energy storage systems (“BESS” and the “BESS EOI”).
The announcement was made by Resolution 906/2023, published on November 8, 2023.
The BESS EOI is framed within the energy transition plans to 2030-2050 recently approved by the Government (for remarks on these documents, click here), which, among other targets, aims to continue developing the renewable power share and promote the installation of new BESS facilities.
With Argentina being a major source of lithium carbonate for lithium-ion batteries, and one of the largest global lithium supplier, BESS EOIs which propose ways to integrate a national supply chain into project delivery will be “valued”.
BESS EOIs shall be submitted no later than 120 days following the enactment of Resolution 906/2023 (i.e., March 7, 2024), and interested parties are being invited to propose projects encompassing the financing, construction and management of BESS facilities in the wholesale electricity market. The projects could be for optimizing generation dispatch, providing power reserve services or other mechanisms proposed.
Moreover, the BESS EOI sets forth that the Secretary of Energy will approve specific regulation addressing pricing of energy and availability, as well as charge and discharge cost hedging, and other ancillary services included in each BESS.
For additional information, please contact Nicolás Eliaschev, Javier Constanzó and/or Rocío Valdez.
New option to offset penalties imposed by CAMMESA under PPAs through investments in new renewable power generation projects
On November 1st, 2023, the Secretary of Energy enacted Resolution 883/2023 (“Resolution 883”) which establishes the possibility of offsetting penalties imposed by the Compañía Administradora del Mercado Mayorista Eléctrico Sociedad Anónima (“CAMMESA") through investments in new power generation projects from renewable energy sources.
The measure is intended for renewable energy generation projects that entered into Power Purchase Agreements with CAMMESA, including those under the RenovAr Program (Rounds 1, 1.5, 2 and 3), Resolution 202/2016 of the ex- Ministry of Energy and Mining, and Resolution 36/2023 of the Secretary of Energy that implemented the "RenMDI" call for proposals (the "Projects").
Eligible penalties to be offset are related to non-compliance with: (i) Scheduled Commercial Operation Date; (ii) Contracted Energy Supply; and/or (iii) Declared National Component (CND), as well as other penalties that may be reported by CAMMESA to the Secretary of Energy and that could be offset under the scheme approved by Resolution 883.
Projects that have already been notified of penalties will have time until November 30 to adhere to this regime.
Commercial operation date of the new renewable power generation projects shall be accomplished within a 36-month term from the execution of an agreement with CAMMESA, period under which penalties will be suspended.
The price of the energy supplied by the new installed capacity will be established in twenty U.S. dollars per megawatt hour (US$ 20 MWh) and will be remunerated by CAMMESA according to the regime chosen by each Project owner, among the following alternatives: (i) one hundred percent (100%) of the generated energy for a period of sixty (60) months; or (ii) twenty percent (20%) of the generated energy for: (a) a period of one hundred and twenty (120) months, or (b) one hundred and eighty (180) months, having the possibility to use the eighty percent (80%) left for self-consumption or purchases under the Spot market.
If the Project’s owner does not comply with the proposed investment once the established term has expired, an additional interest of ten percent (10%) will be applied on the remaining amount of the penalty accrued at the time the request was issued.
For additional information please contact Nicolás Eliaschev, Daiana Perrone, Rocío Valdez and/or Victoria Barrueco.
Argentine Government releases Hydrogen Guideline
The Argentine Government has released the National Strategy for the Development of the Hydrogen Economy (the “H2 Strategy”). The Strategy was released pursuant to the Energy Transition Plans to 2030 and 2050 (see our remarks on these documents, here), and bills of law currently being analysed in the Congress (see our remarks on these documents, here (available in Spanish)).
The H2 Strategy provides greater detail on the Government planning framework for H2 development and related activities. The key takeaways of the H2 Strategy are:
- Investment in H2 and associated industries of ≈US$ 90 billion.
- Deployment of electrolysis facilities aggregating 30 GW and 55 GW of new renewable power generation plants.
- Total hydrogen production around 5 MT per year, which will be destined to exports (≈3.75 MT) and for domestic use (≈1.25 MT).
- Creation of 5 new production hubs and construction of new ports.
- Levelized cost of green H2 ≈1.4 USD/kg.
Further, the H2 Strategy includes measures aiming at positioning Argentina as a global exporter of H2, embedded in a global and regional cooperation agenda, with the end-goal of supplying H2 to markets like Japan and Germany.
In turn, the H2 Strategy proposes actions to foster the local demand for H2, aiming for 100,000 tons per year by 2035, 500,000 tons per year by 2045 and 1 MT by 2050.
Finally, the H2 Strategy considers H2 in relation not only for exports and local use, but also for transport, industrial use, gas networks, electricity systems, and cross-cutting issues such as safety, skills, and environmental impacts.
For additional information, please contact Nicolás Eliaschev, Javier Constanzó, Luciana Tapia Rattaro, Rocío Valdez and/or Victoria Barrueco.