Renewable Energy News: Draft Resolution on PPAs between Private Parties
The Laws No. 26,190 and No. 27,191 (and its regulatory Decree No. 531/2016) created the Renewable Energy Promotion Regime (REP Regime), setting mandatory targets for all users through the obligation to gradually increase their renewable energy quote consumption (8% by 31 December 2017; 12% by 31 December 2019; 16% by 31 December 2021; 18% by 31 December 2023; and 20% by 31 December 2025).
The REP Regime’s targets shall be complied through the renewable energy joint purchase that CAMMESA (a governmental company in charge of managing the Argentine power market) must perform in representation of all of the users (Joint Purchase Regime).To such effect, the Ministry of Energy and Mining (Ministry) launched the RenovAr Program, allowing CAMMESA to tender renewable energy PPAs through successive rounds and pass-through the PPAs’ costs to the users. In 2016, CAMMESA tendered RenovAr’s Rounds 1 and 1.5, and is currently preparing Round 2.
Users with an energy average demand in the last calendar year equal or larger than 300 KW (Large Users) are obliged to comply individually with such goals. In that sense, they may choose to (i) stay in the Joint Purchase Regime; or (ii) opt-out of the Joint Purchase Regime and generate their own renewable energy (through self generation or co-generation), or sign private renewable energy PPAs directly with the generators, through a distributor or traders (Private PPAs). The REP Regime indicates that large users PPAs shall have a maximum average price of USD 113/MWh until 31 March 2018 and then pricing will be revised.
On 6 June 2017, the Ministry published a draft resolution (Draft Resolution) with the specific regime to promote the renewable energy market between private parties for a three weeks consultation period (which expires on the last days of June) to allow interested parties to make their comments and suggestions about the proposed regulation and the best way to put this large users’ obligations into practice.
II. The Draft Resolution main features are:
- Renewable Energy’s Registry. All renewable energy generation, co-generation and self-generation projects must be register at the Renewable Energy Generation Projects’ Registry.
- Dispatch Priority Order. Creates a Dispatch Priority Order to solve congestion in the transport capacity, taking into consideration, as a general rule, a first come - first served criteria, but considering certain exceptions (hydroelectric plants; transport capacity expansion costs included in the project); and a registry to record dispatch priority.
- Joint Purchase Regime. Any Large User will be included in the Joint Purchase Regime unless it decides to opt out. Such users shall acquire–as minimum– the mandatory consumption quote for each year and once such consumption quote is accomplished, they are free to satisfy their demand form renewable (jointly with CAMMESA or not) or non‑renewable sources. Large Users that decide to stay in the Joint Purchase Regime shall pay CAMMESA: (i) the "commercialization charge" to cover the costs caused by the opt out of the Large Users which is a progressive charge from USD 4/MWh in 2017-2018 to USD 20/MW/h in 2025; and (ii) an "administrative charge" equal to USD 0.1/MW/h.
- Opting-out of the Joint Purchase Regime. Large Users that opt out from the Joint Purchase Regime shall acquire through private PPAs or self generation or co-generation –as minimum– the mandatory consumption quote for each year. Once such consumption quote is accomplished, they are free to fully satisfy their intake from renewable or non‑renewable sources.
- Effects of the opting-out. Large Users that decide to opt-out:
- are subject of a specific control mechanism;
- shall not pay the "commercialization charge" and "administration charge" indicated in II. 3 above; and
- can not return to the Joint Purchase Regime (or must stay in the private PPA regime) for at least 5 years (counted from the date in which is excluded), and for this purpose shall request its inclusion a least 3‑months in advance to the expiration of the 5 year term.
- Procedure to opt-out. Large Users shall inform such decision to CAMMESA within a 12-month counted from the date in which CAMMESA publishes a list with the large users in conditions to opt-out of the regulated market (which shall be published in February of each year). However, such option shall be exercised in two opportunities per year. Otherwise, CAMMESA will assume that large users decided to stay in the Joint Purchase Regime.
- Renewable Energy Generation Projects. To be able to operate, renewable energy generators must:
- comply with certain requirements included in the Draft Resolution (obtain commercial authorization after 1 January 2017; registration with the Renewable Energy Generation Projects’ Registry, among others);
- submit their dispatch priority request (including granting of an insurance bond until the projects' commercial authorization of USD 250,000 per MW).
- Private PPAs. Private PPAs may be executed between (i) generators, co-generators, self generators and traders; and (ii) generators/co-generators/self generators with large users. The Draft Resolution grants flexibility to establish the contract terms (such as the term, assignment priority and price), including the possibility to negotiate mid/short‑term PPAs with no limitations.
- Breach and Sanctions. The Draft Resolution includes control mechanisms to verify that the Large Users comply with their renewable energy quote consumption through private PPAs or self generation or co-generation, the potential sanctions and the procedure to apply them in case of breach.