For the last decade, Argentina’s energy sector has been a burden for its citizens and investors, and for many, the solution to the country’s energy shortages is simple; it is time to make renewables the main focus.

President Cristina Fernández de Kirchner speaks at the Energy Summit (photo courtesy of Casa Rosada)

Earlier this year, president Cristina Fernández de Kirchner signed a memorandum of understanding with the United Arab Emirates to strengthen co-operation in the area of renewable energy. That same week, president Fernández made a speech at the World Future Energy Summit in Abu Dhabi to emphasise the Argentine government’s efforts to improve its renewable energy sector.

“It is important to eradicate poverty,” president Fernández said. “We are trying to achieve universal access to energy for the year 2030. It is very important to use renewable energy. We have an obligation to the quality of life. We are all responsible.”

It is about time that Argentina stepped up to the plate. As the country’s gas reserves have continued to dry up and both the economy and the demand for energy have kept on growing, Argentina’s energy sector has fallen into decline. In 2011, for the first time in 27 years, the country became a net importer of energy, and landed itself a US$9.4bn import bill for oil and gas. It is clear that the government needs to revisit many of its energy strategies, and as the country’s demand for electricity is estimated to keep growing at an annual increase of 6% a year, the pressure is mounting.

Government Action

So far, all of Argentina’s renewable energy sources have been left unexploited. According to advisory group Ernst & Young, wind energy sources in Patagonia are using only 45% of its potential capacity; the installed capacity is at 32MW, although the government is aiming for 1.2GW by 2016. For solar, only 10MW has been installed so far, and the government’s target is set atgenerating 3.3GW of solar power by 2020. Meanwhile, biomass energy has been overlooked the most due to the country’s focus on biofuel. According to Ernst & Young figures, 80% of the country’s annual six metric tonnes of forestry biomass could be used to generate electricity, and Argentina’s Planning Ministry has accepted bids to construct 104MW worth of biomass capacity.

Wind turbine (photo courtesy of Enarsa)

Some efforts from the government are already underway. In 2006 a law came into action that required 8% of the country’s electricity demand to be generated by renewable sources by 2016. Argentina’s Official Plan of Renewable Energies Programme (GENREN) and Argentina’s state-owned energy company, Enarsa, have together agreed to contract 1GW minimum of renewable energy capacity. And so far construction on 17 wind farms with a combined capacity of 955MW is underway, and 20% of the programme is already built.

However, due to a lack of financing, some of the projects have already stalled, Juan Pablo Zagorodny, project research and development officer at ENARSA confirms. Although he adds that “as soon as they receive financing they will carry on building”.

“Finding capital in these times is difficult, and at this time Brazil is getting more financing than us because they have a national [development] bank, BNDES. For Argentina it’s difficult, we’re getting money from China, but it’s normally attached to some particular technology as they want to sell machines, and in our case it’s turbines,” Zagorodny said.

Access to financing is indeed Argentina’s biggest stumbling block and since the financial crisis of 2001, after which energy tariffs were frozen, foreign investment has almost dried up. However, one country that has stepped up to offer its financial services is China, which has already financed 5MW of Argentina’s renewable energy projects. However, Chinese financing comes with compromises and stringent lending conditions.

“The interest rates (on the Chinese loans) can be decent, we get rates of 8-9% Libor, they can be very convenient agreements, but they can also be very difficult to close. Warranty issues are tricky, and all in all China is not an easy country to make financing arrangements with,” Zagorodny noted.

However, as both financing from Europe and the US is, for the moment, out of the question, Zagorodny explains that the government is not left with a great deal of options. He also stresses that ENARSA’s main priority when finding financing for its projects is to ensure that it is coming from a known source, eliminating funds that are backed by terrorist or money laundering groups.

“There is a lot of money circulating but it’s not clean, so of course we get lots of offers, but we can’t make a wind project with this sort of financing, the state cannot accept it. And once you rule out those obvious constraints, we’re left with a small pool of capital. Such as financing from Brazil, but again, like the Chinese loans, it is unfortunately attached with the purchase of Brazil-made technology.”

Another factor hindering Argeintina’s overseas investment in renewable energies is the huge debt of the Compañía Administradora del Mercado Mayorista Eléctrico (CAMMESA), the administrator of the wholesale electricity market. CAMMESA, which is only 20% state-owned, manages all of the energy transactions in Argentina between the buyers and sellers, and so any economical problems here inevitably have a detrimental impact on the country’s energy sector. The debts of the company have been racking up since the crisis of 2001, when the government the year after enabled a policy that froze consumer tariff prices. The intention to help the economy recover from collapse was achieved, but the continued economic growth and inflation have left Argentina’s energy market laden with debt and severely unbalanced. Argentine consumers pay four times less for electricity than those in Brazil, while Cammesa’s debt stands at around US$600m.

“The customers are paying a cheap price for electricity, which of course doesn’t cover the cost for the generators, so we have the government injecting money into the system just to make the final tariff for the customer low. It is a social policy, although it is the wrong one,” Zagorodny said.

Solar panels (photo courtesy of Enarsa)

He explains that the inevitable first question that investors ask when looking to finance renewable projects in Argentina is who will be responsible for the debt payment, “and when the answer is CAMMESA, there’s your problem,” he states.

“It’s too risky. So in order to attract investors you have to make special promises to get the investors interested, such as assuring them that renewable energy payments are our top priority. But it’s often the case that we don’t actually have these guarantees to offer, and we have to ask the government to negotiate guarantees on each case that comes to us. Every government has different ideologies of how to deal with these issues. And it’s our problem that the government doesn’t want to make long term policies, a lot of the administrations are thinking in the short-term, say four years, because after that they don’t care.”

The Local Use of Renewable Energy

However, it is not all doom and gloom. FOVISEE (Housing Sustainability and Energy Forum) is a Buenos Aires-based NGO which is working on a programme to install renewable energy facilities, particularly solar, in low income communities across Argentina, whilst educating residents about the use of these applied systems.

Project 100 is Argentina’s first programme that promotes energy efficient neighbourhoods. State-built homes are crying out for accessible sources of sustainable energy; many houses are built without access to the country’s gas network which makes a relatively simple task, such as heating water, challenging. Ashley Valle, international assistant at FOVISEE, says that to make life easier, some residents invest in electric water heaters, although these too pose their own problems. As well as being expensive to run, these heaters can be dangerous, as they are installed directly above the shower head in the bathrooms. For social housing residents, getting access to natural gas is also a problem. The gas, which is bought in bottles, is heavy to carry and expensive to buy, and as a result, residents will typically pay up to five to six times more for energy than the middle and upper classes.

“Looking at the necessity for people in social homes to gain easier and cheaper access to energy, and Argentina’s abundant solar power resources, we thought it would be a great idea to combine these factors. What we’ve seen so far is that our homes, compared to other homes in the neighbourhood, consume 25% less electricity,” Valle confirmed.

The modular barrio of La Perla, on the outskirts of Moreno provides solar energy for its residents with the help of FOVISEE. (Photo: Brian Funk)

FOVISEE is also working hard to educate the communities’ residents on the cultural changes of renewable energy in order to maximise the potential benefits of their newly-installed systems. “We also try to have a continued presence in the neighbourhood after the installations to make sure everything’s working smoothly. We wanted to show people that running a sustainable home isn’t rocket science,” Valle added.

Unlike government-backed projects, financing for these programmes are piquing interest from Germany and Finland, whose embassies here in Buenos Aires have issued grants to show their support.

“Sustainable and renewable energies are a top priority in Germany and Finland, and that’s what we’re trying to do here now in Argentina, we’re trying to really push the cultural change, to install sustainability in the rhetoric of the public, as well as government officials, architects, and engineers. We’re developing some other projects with the US Embassy in Buenos Aires too, which will be providing financial support, as well as helping us set up meetings and make contacts.”

As both government and private companies continue to push on with their plans for renewable energy, the question of whether Argentina is on track to meet its 8% renewable energy objectives is still up for debate. Valle believes that Argentina is not on the path to reaching its 2016 target and feels that more of a concerted effort towards renewables needs to be made, one that can only come from a cultural change within the country.

Enarsa’s Zagorodny, on the other hand, says that the government has made huge progress with its renewables campaign, putting in more effort than “all of the other governments together”. He believes that if the GENREN tender is successful and it completes its 1GW contract, it will be a historical moment for Argentina.

“Although many of the wind projects are delayed for now, as soon as they’re built they will be strongly contributing to this 8% renewable energy goal, new tenders are also being published as we speak so we’re hoping for some good results.”

Do Argentines think the government is doing enough in terms of renewable energy? Click here to find out.

After ten years of economic growth, Argentina’s energy generation capabilities have not lived up to the expectations and have struggled to meet demand, forcing the country to import energy. As gas reserves dry up, many think that renewable sources could be the answer to revitalise Argentina’s declining energy generation market.

Although Argentina has enacted some measures towards a more sustainable future in terms of energy, some say it remains behind in efforts towards renewable energy. The Argentina Independent asked a few locals what they think about the government’s efforts towards sustainable energy.

Franco Fernandez, 24, Administrator

There is not a lot of information about alternative energy available to the public. I know, for example, there are coal mines in the north but other than that, not much. I don’t think there is a lot of political action to push for more sustainable energy. I think [the government] should do more, like other countries in the region. Ecuador, Venezuela, and Brazil for instance, invest a lot more in solar, and invest a lot more in wind. In Argentina, these sources exist but is not thought of as that important. I think solar would be the best source for Argentina to begin investing in. There is a lot wind in some regions as well.

Odra Madrid, 18, Teacher

Many people do not know about what the government is doing, if anything, towards sustainable energy. They should do more, or at least inform the public if they are doing something. I think they must be doing something but most people are not aware of it. I think the public should be encouraged to use more sustainable energy at home, like solar.

Cesar Benitez, 48, Lawyer

I think the government should do a little bit more because Argentina is one of the most backwards countries in South America regarding sustainable energy. I think it isn’t just a question of where the energy comes from, but also how the government helps it. The government invests more in some areas and less in others.

Gabriel Shermer, 30, Unemployed

I don’t know if this country has a sustainable alternative at the moment. I think we will continue using oil and keep fighting to use it because I haven’t heard of a change. I think Argentina should have an alternative because many other powerful countries do. I think the fact that it hasn’t changed has a lot to do with money and politics. It is expensive to change, but I think the government should invest more in hydroelectric and other forms of sustainable energy.

Abigail Toniolo, 18, Student

I don’t think the government does anything. I think they should care more about sustainable energy in Buenos Aires like they do in cities far away. They pay attention to solar and wind in the countryside and in other cities in Argentina, but not as much here in Buenos Aires. It seems like only private companies take the inititive, and the government does not do much to aid the development of alternative energy sources.

Lucas Vitali, 19, Student

I am not very informed about be topic, but I think the government should do more. I think that hydroelectric is the most important form of energy for Argentina. They should expand this and other forms, as well as inform the public on the topic.

President Cristina Fernández de Kirchner announces plans for YPF under the leadership of Miguel Gallucio. (courtesy of CFK Argentina)

When President Cristina Fernández de Kirchner signed off last month on the 51% renationalisation of Argentine oil company YPF, the political and economic shockwave must have fractured legibility of the writing on the wall.

From 2001-2010, oil production in Argentina dropped by more than 22%, according to data from the Argentina Oil & Gas Institute (IAPG). Similarly, natural gas production plummeted 15% since 2004, with proven reserves depleted 43% since 2000. In fiscal terms, Argentina’s 2011 fuel imports surged to US$10 billion, absorbing a national energy deficit of US$3 billion.

For the first time since the discovery of hydrocarbons in 1907, Argentina recorded a decade of declining production, yielding barely two-thirds the level of national output at the time Spain’s Repsol took majority control of YPF in 1999.

While many first perceived the government’s expropriation of Repsol as a swift rejection of resource privatisation, immediate fears that Argentina will mimic Venezuela’s statist grip on energy ignore the unconventional picture beneath the surface: shale energy, the country’s most abundant untapped resource, will be a far tougher project than building the case against Repsol’s mismanagement.

Between a Rock and a Hard Place

In April 2011, the United States Energy Information Administration (EIA) published a report based on its analysis of 48 basins in 32 countries. The EIA found that Argentina, behind only China and the United States, represented the world’s third largest geological potential for unconventional shale gas reserves.

Buried thousands of metres underground, trapped inside multimillion year-old rock formations, shale energy has taken centre stage in the global crisis over fossil fuel dependence, economic relief, environmental sustainability, and the much maligned practice of hydraulic fracturing, also well known (fingers-to-chalkboard) as “fracking”.

Citizens Assembly of Río Gallegos

For Eduardo D’Elia, an environmental engineer, professor, and renewable energy advocate with the Citizens Assembly of Río Gallegos, the discovery Argentina’s shale jackpot poses a critical new energy paradox.

“It seems that we’re prepared to make huge expenditures on exploiting shale gas and oil, classing them as ‘resources’ without analysing the problem of externalities. Worldwide, it is a desperate effort to meet rising demand for an energy matrix that is unsustainable from every point of view.”

While D’Elia feels the transition to renewable technologies—in particular, hydroelectric, wind, and solar—missed a precious opportunity to accelerate in the 1970s, he adds that people have been insufficiently ready to understand the magnitude of the long term challenge. When an unforeseen prospect of massive short-term gain becomes technically feasible, the bigger dilemmas of finite energy and ecological hazard recede behind excitement and the lure of economic security.

Unconventional Plays

Argentina’s new hope for energy self-sufficiency still hinges on tentative assumptions, particularly concerning industrial expertise and capacity, regulatory measures, and strategic plans for YPF’s mixed-capital structure. Though offering immediate promise in a country whose energy mix utilises 50% natural gas, the shale solution is fraught by links between financial, social, and serious environmental health risks.

Unconventional shale reserves in Argentina are concentrated in the oil-producing, Patagonian province of Neuquén, with significant sites in the Chaco, Austral, and Golfo San Jorge basins as well. With an estimated 21.9 trillion cubic metres of gas—60 times the amount of conventional reserves in Argentina—speculation about investment, exploration, and exploitation of shale has skyrocketed since YPF’s structural shake-up.

The term “unconventional”, in fossil fuel extraction, refers to the necessity of deploying technically complex methods where costs and retrieval rates provide less certainty than in conventional reservoirs. Zones projected to contain shale gas, aided by 3D seismic imaging, are therefore referred to as “resource plays”, in which vast geological variability inhibits application of a single, universally proven industrial design.

Schematic depiction of hydraulic fracturing for shale gas, showing main possible environmental effects. (Image by Wikipedia user Mikenorton)

Fracking, the economic marvel and lightning rod of geo-engineering, involves the high-pressure propulsion of water, sand, and chemical solvents deep below the earth’s surface. Targeted shale formations, accessed by vertical and horizontal drilling techniques, are fractured to stimulate the flow of trapped oil or gas, which is then recovered by creating vacuum-like conditions in wells below ground.

“This extraction entails significant impacts to the land, on water supplies, and to air quality—all of which could have profoundly negative effects on surrounding communities and ecosystems,” says Mauro Fernández, a vocal campaigner against nuclear energy for Greenpeace Argentina.

“The biggest problem is that, so far, too little has been established for certain about the science and technology of fracking. We are still determining the real consequences this could have. While the EPA [US Environmental Protection Agency] has yet to publish its major study expected late this year, here in Argentina, unthinkably, we are investing in a high-risk industrial enterprise. How can we see what the consequences are and what can be done to improve standards? This is a crucial reason for our opposition to exploring and exploiting unconventional fuels.”

Extracting Consensus

Despite the EPA’s initial determination in 2004 that fracking does not pose a risk of contamination to drinking water, opponents of the practice remain sceptical of this and other claims about its safety. Last year, two small earthquakes in the town of Blackpool in Northwest England were linked to fracking, though a report published last week by the US National Resource Council cites greater seismic risk in connection to the extraction of conventional fossil fuels.

Also in dispute is shale’s profile on emissions: while many supporters and scientists say natural gas is cleaner than coal, others point to the ozone hazards posed by methane released during fracking operations.

Specifically, enemies of fracking object to the oil and gas industry’s lack of transparency in disclosing the chemicals used in fracking fluids (90% of which are returned to the earth’s surface to be treated at wastewater facilities). Early last month, urged by scientists, US President Barack Obama issued a new rule obligating companies to reveal the chemicals employed in US fracking operations, though only after projects have already been completed.

Anti-Fracking sign in Ithaca, New York. (Photo: Ari Moore)

Caught amid the hype and backlash of recent years, the global scientific community, often itself divided, has proceeded with great caution when weighing the net effect of the shale boom in light of its tempting economic benefits. While France, Germany, and Bulgaria have banned fracking outright, the US shale gas industry has steadily matured, with some estimates suggesting it will account for 50% of the domestic natural gas supply by 2035. Elsewhere, in Canada, China, Australia, Poland, and the UK, the results, public perception, and investment climate have varied.

Perhaps the most acute factor in assessing the risks and rewards of unconventional fossil fuels is the disparity of local conditions at various potential reservoirs. While successful recovery of resources has become a fairly secure bet given proper seismic analysis and project designs, no two sites are exactly alike, and even ensured repeatability at the same wells can prove problematic for scientists, engineers, and investors to predict.

With that amount of risk, critics and alternative energy advocates feel compelled to confront their worst fear: that shale will stifle rather than bridge the investments needed to develop renewable energy, fatally prolonging the logic of these technologies as extensions of a resurrected fossil fuel paradigm.

In a suddenly unconventional world, consensus appears to depend more than ever on emerging knowledge, gleaned precisely from practical experience in countries such as Argentina that are ready, or pressed, to go all in with the risks.

Esteban Álvarez’s inextinguishable fire at Fundación YPF. (Photo by Gabriela Schevach for Juanele AR)

YPF’s “High Impact” Plan

Throughout 2011 and early 2012, still under the primary management of Repsol, shale exploration appeared to be near on YPF’s horizon. Major global companies such as Apache (USA), Total (France), Exxon Mobil (USA), Schlumberger (USA), and Shell (Switzerland) had all either approached the possibility of unconventional operations in Argentina, or had already begun the initial phases of exploration and extraction (including conventional wells where many companies have operated for years).

As the government grew increasingly disenchanted with Repsol’s alleged low investment and focus on premium markets, other options to exploit unconventional reserves arose from the glowing estimates of interested major companies—particularly in the Vaca Muerta (“Dead Cow”), Loma de la Lata, and Los Molles formations.

“The expropriation of YPF, more than a nationalisation, is a change of strategic partners,” argues Greenpeace’s Fernández, going beyond what him and other observers consider effective populist rhetoric.

Now the government has responded decisively to uncertainty among foreign investors, who balked at the expropriation of Repsol, still in arbitration.

Earlier this month, YPF’s new chief executive, Miguel Gallucio, boldly announced the company’s five-year, “high impact” investment plan:

- 746 new wells to be drilled by the end of 2012.

- 1,000 new wells annually from 2013-2017.

- Initial investment of US$1.36 billion in testing for unconventional drilling techniques (with $12 billion in additional funding between 2013-2017).

- Commitment to rework mature fields.

- Strategic partnerships with private companies and investors.

- Emphasis on technology, supplier, and education development, via the Ministry of Science and Technology and research body CONICET.

If successful, YPF’s plan will boost Argentina’s oil and gas production from 159 million barrels of oil equivalent this year to 216 million by 2017, an accumulated annual growth rate of 6%.

Though primarily self-financed by the company’s flow of operations, eventual contracts with strategic partners will be the news to watch for as the domestic energy sector kicks into high gear. Talks with potential partners are reportedly underway already, however some sources such as Forbes Magazine, market consultant ICIS, and the University of Pennsylvania’s Wharton School have all pointed to lingering reservations. With Argentina’s history of price controls, low incentives for investment, and barriers to profit repatriation, foreign investors may think twice about the risks. Proponents of free trade tend to believe that these are the real reasons for Argentina’s lagging investment over the past decade.

Domestically, cheap and plentiful natural gas will eliminate industry-crippling winter shortages and possibly enable conditions to ease energy subsidies. Coupled with employment growth, the national strategy figures to play well among the president’s popular base.

Local Rights: Fair or Foul Play?

Lost in all of the speculation about Argentina’s energy future are the rights and concerns of indigenous communities in resource rich territories. According to Fernández and D’Elia, ignoring their interests is an illegitimate stance that can no longer be tolerated, whether by private corporations or the national and provincial governments.

Patagonia coal plant in Río Turbio (Photo: Greenpeace)

“Energy policy must be formed in an agreement among all political, social, and technical sectors,” D’Elia maintains. “Community rights will be respected to the extent that these communities demand respect.”

For several days last November, the Mapuche community of Gelay Ko occupied a compressor plant of the Apache Corporation, slowing capacity to 70%. The Mapuche have flatly rejected drilling on indigenous lands without prior consultation, as well as water contamination and desertification of an already scarce supply.

One oft-cited advantage of the law governing land ownership in the US —a significant contribution to shale’s success in that country— is that unlike in the UK, for instance, mineral rights belong to landowners rather than the government.  While some argue that divided communities still reap the common benefits of economic activity, opposition to fracking in the US has spiked in many states and communities where the scale of operations deteriorates roads and raises doubts about property value.

As yet, no framework for local compromise exists in Argentina, and communities opposed to the imposition of national and private interests have been excluded from the debate.

“There are many ongoing conflicts,” says Fernández, “specifically the resistance in Loma de la Lata, or those from Loncopué who voted in a referendum against mega-mining. The government has adopted a false belief that whatever it decides, the people will accept. That’s not the case, and yet there remains no formal inclusion of the communities in a constructive debate.”

While the relief provided by job creation in Neuquén has been a cause for celebration (provincial governor Jorge Sapag lauded Schlumberger’s positive impact in April), far too often the attitude toward local communities encourages their alienation and distrust.

Define Crisis

As Argentina takes action to revive its ailing energy sector, the fundamental threats of fossil fuel depletion and climate change remain, despite smug certainty that the earth is just fine (one form of hubris fighting another).

“It’s not about ‘green’ being the fashion of the day,” says Fernández, visibly sick of the shallow accusation. “We are realistic about shale having a place in the transitional phase toward renewable energy, but it is an error to proceed only as the government now plans.”

Natural Gas burn off at Marcellus Shale in New York. (Photo: Dustin Gray)

Argentina is at a crossroads, Fernández argues. “Far from offering more of the same, fossil shale gas exploitation is worse than the same. Greenpeace has demonstrated that technology and natural conditions exist to achieve 85% renewable energy by 2050, mainly through wind and solar. It only takes vision and political courage to abandon the policies of the last century and open the door to new opportunities.”

This would be a far better solution than continuing to push ecosystems worldwide to their limits, Fernández says, or exposing populations to the risks of nuclear energy.

With the application of rigorous standards and mandated assessments, industries based in shale, new and existing, may well mature into responsible, technically sound providers of affordable energy. Many are betting on it, just as many project hope for successful deployment of carbon capture and sequestration.

But if you ask Eduardo D’Elia, the crisis and solution always come down to one blazing source.

“Undoubtedly, the greatest challenge for those who participate in the extraction of hydrocarbons is finding a way to stop using them as the heating source for millions of products we depend on daily. The sun is and remains our sole source of energy—only we must learn to leave the ground and raise our eyes to the sky.”

Click here to find out what Argentines think about the exploitation of shale gas deposits.

In this crazy world of climate change, alternatives to fossil fuels are high on government agenda.

Using biodiesel as an environmentally-friendly form of energy is an increasingly popular option, but using crops for fuel can have implications for food supplies and prices. With inflation in Argentina already a serious problem, how enthusiastic are the general public for the government enforcing more biodiesel energy?

The Argentina Independent went out to find the opinion on the street. Photos by Beatrice Murch.

Diana Maingand, 47, assistant producer, Retiro

“Food is really expensive at the moment. I do not know a lot about biodiesel but I feel like it is more complicated than just food prices rising. Food depends on the countries; some countries have an abundance where as others do not. There are no answers so far, the whole thing is still in process.

“The problem with food varies with the people, the decision is not easy. Some people can pay that little bit more but many cannot and for this there no easy solution. To say for example we have the right to eat meat, but rearing animals takes up a lot of land, whereas if everyone were vegetarian, we would all have a lot more food. To be more sustainable, we have to change a lot more than just biodiesel.”

Franco Marcese, 50, builder, Quilmes

“In reality, I know almost nothing about biodiesel. I know it is not petroleum, it is a fuel made from vegetables, it is the future. But food prices are high. Everything is expensive, everything. Compared to other countries that have higher incomes than Argentina, it is more expensive.”

“There are other measures for sustainability, like electric cars, things like this that also serve as alternatives. The first thing is that food prices do not rise, because if that is not a country’s first priority, there will be problems.”

“There are countries that have higher production levels, ones with fields especially for biodiesel. But look, every farmer is going to try and earn more so if they can produce a crop for biodiesel which earns more than selling to shops, they will. And for this, we must control such things.”

Robina Olazar, 29, cleaner, Barrio Norte

“I know nothing about biodiesel but it is important that food prices do not change. We are living in difficult times, there is a lot of poverty, lack of jobs and everything is expensive. The environment is beautiful, and you learn a lot from interacting with the environment; it’s the best. But it [deterioration] is inevitable, it is inevitable.”

Pablo Mesedes, 26, technician/access control, La Plata

“The price of food in this changing economy is relative, it varies a lot, and we must get used to this. I know of biodiesel, I do not know about the exact process but there are a lot of campaigns about implementing it.”

“But I agree with biodiesel, if we do not have a healthy planet, we will not have a house, if we do not have a house we will not have anywhere to live. I am in agreement with alternative fuel, we need to have the right politics, to make change even if it does change the price of food.”

Martin Cabral, 27, voice actor, Las Floras

“I know a little about biodiesel and the environment is definitely the most important thing to worry about.  I want the world to be inhabitable for my children as well as my grandchildren.  Prices are high but Mother Earth is more important, we have nothing if we do not protect the world we live in.”

Transportation of Biodiesel (Photo: Nuno Morão)

Its supporters say the industry helps the environment, creates jobs, and boosts economic growth. But biodiesel fuel remains a polemic issue, especially in South America, where its use has grown considerably in recent years.

In Argentina, the industry has grown by 2250% since 2006 and has become the world’s fourth largest biodiesel producer, according to the Argentine Chamber of Renewable Energy. Growth is expected to be propelled further by a law approved last year stating that all petroleum derived fuel in Argentina should include 7% of biodiesel. Investors, drawn to Argentina’s large agricultural sector, relatively cheap land and inexpensive labour, are ploughing millions into biodiesel production.

According to Roberto Urquía, the former senator and owner of the Aceitera General Deheza (AGD), one of the biggest producers of biodiesel in the country, by 2015 biodiesel production in Argentina will reach 7million tons, almost triple the current output.

Carlos St James, CEO of Rubenius Argentina SA and president of the Argentine Renewable Energies Chamber, believes the government is starting to pay more attention to cleaner forms of energy with the development of wind and solar panels and of course, the biodiesel industry.

St James believes Argentina has an extremely efficient production of biodiesel and right now figures show the country can produce 2.5 million tons by the end of this year, which will bring US$3bn to the economy. “It is good for the environment and will also create many jobs,” he says.

Food vs Fuel

Despite the supposed economic and environmental benefits of increased biodiesel production, the industry has its critics, largely due to its potential impact on food supply.

99% of the biodiesel produced in Argentina is the first generation type, which means it is made out of food-producing plants like soybeans, canola and palm trees. The national production focuses mainly on the oil derived from soybeans.

The use of first generation biodiesel divides opinion since the biodiesel and food industries will be competing with each other to get the material for their final products. If more crops are processed as biodiesel, fewer are harvested for food, causing prices of basic foods to rise.

Soy Plant (Photo: UGA College of Ag)

“In a world with hunger it is unjust to use food to produce fuel”, states St James. On the other hand, he says that “the food vs. fuel debate doesn’t apply to the soybean biofuel,” which is the one mainly produced in Argentina. The reason is that the sectors require different parts of the soybean plant: 85% is protein and used to produce food, whereas soy oil is used for the production of biodiesel is the rest. “Argentina is producing more and more soy, which complements food production. This means the more soy you have, more food you get.”

However, even if most of the soybean biodiesel crops will also supply the food industry, it does not mean that there will be no shortage of agricultural production in the long run.

There are two potential soy crops per year and the ideal to have a healthy soil is to alternate crops, since the soybean plantation takes a lot of nutrients out of the soil. The farmers in Argentina are planting soybean crops over and over again, which might lead to infertile lands and scarcity of agricultural products for both food and biodiesel in the future.

Furthermore, Argentina only consumes a small fraction of its national soy crop (most is exported to China), so increased soy production at the expense of other crops such as wheat and corn can affect national food supply.

Efforts are being made to lessen the food vs fuel debate. A second generation of biodiesel is made out of non-food products such as leaves, husk and stems as well as other non-food crops, such as grass, though this accounts for just 1% of biodiesel production in Argentina at the moment.

Meanwhile, so called “advanced biofuels” are being developed, promising to provide more effective and renewable energy without diminishing food crops. For example, the Gliocladium roseum, a fungus found in a Patagonian forest in 2008, has in its composition several different molecules of hydrogen and carbon, which are also found in diesel. According to professor Gary Strobel from the Montana State University, “this is the only organism that has ever been shown to produce such an important combination of fuel substances.”

This means Argentina might have a great economic advantage in the next few years with the development of clean energies. “This fungus can even make these diesel compounds from cellulose, which would make it a better source of biofuel than anything we use at the moment,” adds the scholar.

Prioritising the Domestic Market

With these new forms of biodiesel still undeveloped, first generation biodiesel production is set to continue growing in Argentina. Indeed, despite concerns about use of food crops for fuel, for now, biodiesel producers in Argentina are more worried about overcoming barriers to trade.

AGD's Exportation Figures for 2010 (Photo courtesy of AGD)

Santiago Sanchez, one of the researchers at AGD, says that the company exports more than 80% of their output to over 80 countries, especially the EU. According to Sanchez “the constant changes to the commercialising laws of agricultural products is the main concern of the company when it comes to the internal market.”

In addition, some European countries such as Spain are trying to defend their domestic market by adopting protectionist measures against Argentine soy and biodiesel.

With this in mind, the government is trying to prioritise the internal market. According to Javier de Urquiza, coordinator of the National Bio-fuel Programme. “The message now is ‘less exports and more domestic market’. This is the big challenge for the sector,” stated Urquiza. Minister of federal planning, Julio De Vido, also declared last month that “the profits generated by the bio-fuels should stay [in the country] to sustain growth.”

One idea to stimulate local demand is to again increase the minimum amount of biodiesel in petroleum-derived fuels to 10%, something currently under consideration in government. However, St James says if there is more than 7% of biofuel some vehicles might suffer from engine problems. “The automotive industry is not ready for that” as the engines are not prepared to receive over a certain amount of biodiesel. “That is their dirty little secret.”

Lead Photo by Michele Molinari