Sparks Fly Between Power Companies and Government

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Buenos Aires during a blackout. (photo: Fede Salvo/Flickr)

Buenos Aires during a blackout. (photo: Fede Salvo/Flickr)

After six days of rolling blackouts, power companies have defended themselves in response to Cabinet Chief Jorge Capitanich’s threat to nationalise them if outages continued.

A spokesperson for energy company Edesur Alejandra Martínez today blamed the national government for discomfort caused by the blackouts, which have affected thousands in recent days, indicating that the current tariff and subsidy policy prevents serious improvement in delivery of electricity.

“The actual rate [charged for power] in Capital Federal and Greater Buenos Aires is the lowest in Latin America, showing there is a difficulty. It is very difficult to be able to provide a quality service and maintain it,” Martínez told Radio 10 this morning.

Martínez confirmed that the subsidies provided by the government to keep the price of utilities low, do not go to the distributors and said Edesur had invested $900m this year in capital.

After meetings with executives from power companies Edesur and Edenor – responsible for providing power to Buenos Aires City and Province – at the Casa Rosada yesterday, Capitanich threatened to nationalise the companies.

“If you are not able to provide the service, then the Government is willing to do so directly and immediately… There are no excuses,” Capitanich said.

Capitanich told the press he anticipated fines would apply for breach of concession contract.

The head of the power workers union, Rafael Mancuso, said he supports nationalisation.

“As a union and philosophically we always think public services should be controlled by the state. If the government decides to nationalise, we will accompany them,” Mancuso told Radio La Red today.

He said there needed to be greater investment and more staff to improve the service and to “sit down to seriously discuss the issue” once the immediate problems have been resolved.

Last night a spokesperson from Edesur said “almost 99% of customers have electricity” and promised by the weekend there would be no costumers without electricity.

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8 Responses to “Sparks Fly Between Power Companies and Government”

  1. Kevin says:

    The utility companies could tap another source of energy but fail to do so because of Menem-era legislation. Unlike in Europe and North America, utilities can (and do) refuse to accept excess electricity produced by homeowners via solar panels. If Argentina could have a few million panels producing at peak times, feeding the excess back into the grid, it might alleviate the shortages leading to blackouts. A program that let customers get credit for their excess production could also reduce the need for more gas and oil consumption.

  2. Werner Almesberger says:

    Kevin, things to consider (I’m assuming you’re talking about photovoltaic systems): 1) here we have every year at least one severe hailstorm. The sort that wrecks a car. Pictures from a nasty one a few years ago: [1]. Not sure if regular panels are up to that.

    2) the current problems are in the local distribution network, not (yet) generation, not (yet) long-distance distribution. Especially in cities, decentralized energy generation may thus not help to address the current issues.

    3) Who pays for it and how ?

    Given that Argentina is full of vast areas that don’t see much use, solar thermal power (with a closed water loop) may be attractive. This kind of power plant would be similar to traditional projects and it would thus be easier to get financing. (E.g., via an IDB credit or such.) Plus, there is already a lot of experience in the country with thermal power (nuclear and fossil) in general.

    Since a single plant (using [2] for comparison) could only provide around 1-2% of the country’s power needs, you’d still get a few of them nicely distributed.

    [1] http://www.lanacion.com.ar/1255621-una-tormenta-con-granizo-cayo-sobre-la-ciudad-y-el-conurbano
    [2] http://en.wikipedia.org/wiki/List_of_solar_thermal_power_stations

    - Werner

  3. Kevin says:

    Werner, in response to your response:

    1) International standards for PV panels include hail resistance for typical hail, about 4cm in diameter or less. Manufacturers of higher quality panels offer resistance for hail as large as 8cm travelling at speeds up to 175 kph! So it should not be a problem

    2) PV solar can be useful whether the issues are generation or distribution. Any generation that doesn’t use fossil fuels is good for the country and the environment. Generation by PV panels at peak periods, when everyone is running their air conditioning, reduces stress on the distribution grid if that power is used in the homeowner’s property in lieu of sucking more electricity in through the grid.

    3) I think you’re talking about solar farms, large commercial production facilities. I was talking about individuals putting some PV panels on their roofs, to reduce their use of the electric grid during daylight hours. Every watt produced by sunlight on someone’s roof is one less watt produced by burning oil, coal, or gas and one less watt to plan for possible future fossil fuel plants that will be needed as electricity demand increases with population.

  4. Werner Almesberger says:

    Kevin, good, they seem sturdier now than I expected.

    Regarding reducing the load on the distribution networks, what I mean is that the main problems appear to be in very densely populated areas. This also means that you’ll have very little available surface for placing solar panels – in absolute terms and even more so in relation to the number of consumers. I would therefore not expect much potential there.

    The situation is of course very different in areas with lower population density. Another consideration would be use for emergency power. E.g., keeping a water pump running may not require a large installation and would already prevent one of the most feared effects of a prolonged power cut. At the level of individual households, the fridges would be a similar “essential” asset.

    One issue with using it mainly for emergency power is the cost. In Argentina, photovoltaic installations [1] seem to have about 10-20x the per Watt cost of fuel-burning generators [2, 3].

    For reducing the power drawn from the net, the calculation is not too great either. The 10 kpesos installation from above [1] can produce about 1 kWh per day on average. In CABA the kWh without subsidies and with taxes is about half a peso (EDESUR, this month). Even if we assume the prices will be un-frozen and let to thaw at about 10-15% p.a. plus inflation, the price would thus be around 3 pesos of 2013 in ten years, it would take more than that decade to break even. And that assumes there are no further costs, like repairs, battery replacement, etc.

    If you include a good portion of idealism in the calculation, then it may still make sense. But economically, the numbers don’t work, and merely allowing reverse-feeding wouldn’t really change that.

    [1] http://articulo.mercadolibre.com.ar/MLA-482166012-generador-solar-para-pequenos-comercios-_JM
    [2] http://articulo.mercadolibre.com.ar/MLA-482842197-yamaha-ef2000-is-insonorizado-oportunidad-_JM
    [3] http://articulo.mercadolibre.com.ar/MLA-488430759-grupo-electrogeno-gamma-2500-generador-garantia-envios-_JM

    - Werner

  5. Kevin says:

    Werner,

    I agree that the core urban areas are not very suitable for rooftop PV. The potential is with the more surburban and country areas where people live in individual houses with their own rooftops.

    Yes, PV is not cost competitive in Argentina right now. Unlike most European and North American countries, Argentina does not subsidize alternative energy. It does, however, heavily subsidize conventional fossil fuel energy and that subsidy will only increase over time as 1) fuel costs go up and 2) population expands. It would make more sense long-term to subsidize PV, solar water heating, and wind turbines because they continue to produce without further subsidies. In other words, give a tax credit or direct payment for a rooftop 1Kwh PV array and that one-time subsidy will continue producing for 25-30 years. Give a subsidy to fossil fuel production of 1Kwh and you will have to pay that or a higher subsidy every year for 25-30 years because the resource is immediately burned up.

    Also, the price of fossil fuel energy does not include its externalities. As the saying goes, “privatize the profits, socialize the costs.” Argentina as a whole will pay for health and environmental problems caused by burning more fossil fuels as time goes on. The looming disaster of gas fracking has the potential to destroy the country as aquifers become contaminated with the highly toxic billions or trillions of liters of water that will be used to frack gas wells. When water wells and aquifers become poisoned, crops wilt, livestock dies, and communities become unlivable. Those externalities will not be paid for by the energy producers, it will be left to the people and the government to somehow try to cope and partially clean up the mess.

    Alternative energy makes sense economically if one takes the long view.

  6. Werner Almesberger says:

    Kevin, I agree that some moderate tax incentives for investing into decentralized energy production could be beneficial. Alas, the current government does not understand the fine art of controlling through incentives and it strongly prefers to deal with a small number of “big players” than having to handle a large number of small ones. These two issues are of course interconnected.

    Given that buying on credit is insanely popular here, setting up some credit lines may also work. The city will offer credits for decentralized energy (supposedly without any bias on technology), so that could already be an opportunity for whose who are willing to take that step.

    The problems with the government’s excessive subsidies go deeper than you describe – it’s not only in questionable forms of energy but also not into anything durable at all. That’s what led to the energy crisis of 2013 in the distribution networks and we can be reasonably sure that it will continue with a production crisis in 2014 when people come back from the beach.

    Ironically, the collapse of the distribution network may have saved the generation from redlining, but there are numerous indicators that suggest that there is not enough margin to absorb the demand some unfavorable days could create.

    Regarding fracking, well, if you’re the ugliest girl in the bar and someone tries to chat you up, chances are it won’t be Prince Charming on his white charger. Argentina has been rather successful in making itself extremely unattractive to any investors. Which means only the seriously troubled ones will come knocking: the scavengers and the ones who are not welcome anywhere else on the planet. You’d think the dance with the “vulture funds” had taught the government a few lessons, but apparently not.

    - Werner

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