I think I should use that quote from Macri for all my Argentine posts.
So what explains the high electricity prices from the new generation tendered in 2017 and 2018? Short version: these were peaker plants intended to provide capacity when demand spiked. (Why demand spiked in the dead of winter, August is winter in Argentina, is another story. Pasaron cosas, I suppose.)
Consider. In the U.S., the capex per MWh for a natural gas combustion plant is around $882,000. In August 2018, natural gas prices in Argentina spiked up to 5,931 pesos per thousand cubic meters. That is the equivalent of $7.25 per mmbtu, in American terms. If you assume that peaker plants run about 8% of the time, that gives you a cost per kilowatt-hour of 21.7¢!
Now, reading under Resolution 21/2016 makes it look like these guys intended to provide power for more than just peak demand. In fact, these plants provided 6% of Argentina’s power demand, which is twice what you’d expect peakers to provide. So let’s assume that they run 30% of time, which does happen. Costs would come to around 11.5¢. The chart to the right shows the calculations for coal and natural gas, using Argentine fuel prices in August 2018. (For nerds: I have not included cycling costs for a coal plant operating at 30% of capacity, so the real figures for an equivalent coal plant would be much worse. The $35/ton carbon tax does not exist, which is why it is transparent.)
In short, the high prices are not a scandal; they are just the cost of peakload electricity in Argentina.
Macri could have been more up front about this and he could have protected poorer Argentine consumers more. But he made a bet that the economy would do well and preferred to rip off the band aid. It is hard to blame him, but as he said, things do happen.
It is going to be a tough election this year.
Comments