The reduction of liquified natural gas (LNG) imports by Argentina will do little to limit the gas power sector’s dominant role in the market’s power mix, as it turns to piped gas from Bolivia for the short term and ramping up domestic production. Our Oil and Gas team expects Argentina to be a market that is vulnerable to fluctuating LNG prices are given their reliance on spot purchases. Driven by the ongoing Russia-Ukraine conflict, the team also remains a bullish outlook on LNG prices. Driven by the ongoing Russia-Ukraine conflict, the team also remains a bullish outlook on LNG prices. In response to this evolving situation, Argentina will look to Bolivia to procure piped natural gas, with both governments having renegotiated gas supply contracts in April 2022. We believe these developments will support gas-fired power developments over the coming years. With the Argentine government’s willingness to explore other methods of procuring natural gas, deviating from the LNG spot purchases, we expect natural gas will be readily available for the market’s electricity generation. Accordingly, gas power generation will grow from 91.1TWh in end-2021 to 111.2TWh in 2031 at an annual average of 2.0%. The sector contributed about 62% of the market’s generation mix in 2021.
Argentina’s hydropower sector will slowly recover over the coming years from the effects of 2021’s drought, eroding the gas power sector’s share of the generation mix. In 2021, we estimate that Argentina experienced one of its sharpest drops in hydropower generation, at a contraction of 18.5% y-o-y from 24.3TWh in 2020 to 19.8TWh. As the market experiences an alleviation of the drought, with wetter weather, we expect hydropower generation to increase from 2022. This growth will persist over the coming years, mainly coming from existing hydropower facilities in Argentina. Supporting this growth to a lesser extent will be new hydropower facilities coming online, such as the 1,310MW Santa Cruz Hydro Complex in 2022 and the 210MW Portezuelo del Viento hydropower project. Overall, hydropower generation will recover in 2022 at a growth of 15.4% y-o-y after contractions from 2019-2021. Growth will remain throughout the coming years ending 2031 at 35.5TWh, up from 19.8TWh in end-2021.
Growth in non-hydropower renewables for Argentina will be robust over the coming years, although still representing a marginal share of the power mix. Argentina’s pipeline for non-hydropower projects is strong, which will support the sector’s growth over the coming years. This will be mainly dominated by the wind and solar power projects that were granted extensions for completion dates and fine reductions. These projects were part of auctions within the RenovAr programme that ran from 2016-2019, which was meant to stimulate investment in renewables, helping the market work towards the goal of 10GW renewables capacity by 2025. Following the suspension of the programme in 2019, by the current Fernández government, we expect risks to the continuation of the RenovAr programme. That said, the backlog of projects coming online will be enough to drive growth in the market. Non-hydropower renewables generation will experience a robust annual average growth of 6.5%, from 15.9TWh in end-2021 to 29.9TWh in 2031. This will be supported by new capacity additions, which will bring the net installed non-hydropower renewables capacity from 5.0GW in end-2021 to 9.3GW in 2031. Regardless, this will only bring non-hydropower renewables' share of the generation mix from 11% in end-2021 to 16% in 2031, paling in comparison to the gas power sector's 58% in 2031.