Argentina: The government will pay large companies to reduce energy consumption

After raising rates by up to 500% in the year the Government launched a emergency plan to avoid massive power outages in the summer due to increased energy demand and a reduction in supply from Brazil. In this context, The Energy Secretariat made progress in developing preventive measures including the programming of “voluntary” cuts in large companies, which generates tensions with the industry.

The “Summer Emergency Program 2024-2025” aims to Resolving bottlenecks which they identify in electricity generators, transporters, distributors and large energy users (industries and businesses), without affecting households in principle. “We are working on a plan for the summer which aims to take preventive measures to avoid outages, there will be no scheduled outages,” government sources said.

The Deputy Minister Coordinator of Energy, Daniel González, had already warned that there may be “a complicated summer”And this Monday, the Chief of Staff, Guillermo Francos, took a further step.There will be a lack of power generation and some power cuts will have to be scheduled, Above all, we need to make some agreements with the productive sectors, the industrial sectors,” he said in statements to Radio Mitre, while pointing to the “lack of investment.”

At this time, the secretariat headed by Eduardo Rodríguez Chirillo Evaluate incentive mechanisms for the installation of control and/or compensation systems to avoid voltage collapses, in the case of distributors so that they have smart meters installed in their networks, and for large non-residential users, remuneration for the reduction of their consumption.

According to official sources, the measure aims to ensure that businesses and industries with an average consumption of more than 300 kW make “voluntary” cuts in electricity. The idea is that these companies stop taking energy and Cammesa pays them. for the supply not provided, which is generally valued at a high price and is defined by regulation in many cases. But the initiative caused unrest in the Argentine Industrial Union (UIA), where the details are unknown.

Two emissaries from the top management of the factory transmitted this to Chirillo and the Undersecretary of Electric Energy, Damián Sanfilippo, three weeks ago during a meeting at the Ministry of Economy. There, they were asked if they endorsed the “risk report” published by Cammesa in July, where power outages were anticipated, and requested that a table be set up to manage any emergency.

“What are these measures? Guys, if the industry starts to recover, how will demand be met?” one of the industrialists asked the officials. They also asked if the Government had a survey of the power generators to cover the blackouts in the industry. In turn, the Energy Department supported the Cammesa report, although it toned it down, and promised incentives to agree to the cuts.

The main administrator of the wholesale market predicted in July the persistence of high temperatures in the summerafter the peak in March 2023, when average weekly temperatures in Buenos Aires were 30 degrees. And estimated a 19% probability of supply restrictions due to a lack of supply to cover an expected peak of more than 30,000 MW in 2025, 1,000 MW more than in February of this year.

One of the main problems is the lack of expansion of energy transport projects, a situation that has been dragging on since the 1990s and which worsened this year with the cutbacks in public works. “Our concern is that this goes beyond the summeraccording to meetings we had with electricity transporters, if the works are not done, this will continue into the winter in 2026 and 2027,” they said at the UIA.

The most critical is the AMBA region, especially Greater Buenos Aires, where a deficit in the transport system is expected to meet demand during peak hours. This is the case of the lines and transformers of the high-voltage network, which would work with high loads after the record demand of March 2023 (requiring 11,200 MW) and which require a large part of the capacity of thermal power plants.

Energy expects lower energy supply due to drought in southern Brazilwhich reduces hydroelectric generation (20% of the energy matrix). Argentina imports energy from that country through the Garabí converter station (up to 2100 MW) and can import from Brazil via Uruguay (another 500 MW). The Government, in turn, has been paying off debts with Paraguay so that it does not take additional energy from Yaciretá and there is more surplus for Argentina.

According to Cammesa, Conditions are becoming more critical due to increased demand, the gradual withdrawal of thermal generation, the prolonged unavailability of Atucha I (it will stop operating at the end of the month), the expectation of less power available for Argentina, the variability of renewable supply, the lack of firmness in imports and the absence of transport infrastructure works and new generation of major importance in the period 2025-2027.

The other open front is with the generators, a sector where investments are delayed while waiting for a resolution from the Energy Department to update the cost of energy and the end of the restrictions. There is still mistrust over the dollar bond with a 50% discount that Caputo gave them in May to settle part of Cammesa’s debt. And they are closely following the internal dispute between Chirillo and the minister over the management of the “cash” and the pace of the rate increase.