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Argentina electricity exports soared due to drought in Brazil

RIO DE JANEIRO, BRAZIL – According to Energy Secretariat data, in the first 9 months of the year, 2,876 GWh were exported to Brazil, surpassing the 2020 annual record of 2,618 GWh. The average export price during 2020 was US$205 per MWh.

In September alone, US$258 million in electricity was exported to Brazil. Projected exports to the country for 2021 stand at approximately US$1 billion, according to official data.

Due to the severe drought it is experiencing, Brazil has been forced to import an increasing amount of electric energy, a situation that has benefited Argentina. (photo internet reproduction)

“Electric energy is invariably exported to Brazil, but the drought issue has resulted in favorable prices for Argentina. Brazil is experiencing its worst drought in 90 years. And hydroelectricity is of great importance. Without the capacity to generate it, Brazil was forced to import a great amount, especially at high prices,” said Argentine Institute of Energy (IAE) General Mosconi economist Julián Rojo.

The economist pointed out that the cost of generating energy in Argentina is approximately US$70 while the average export price in 2020 was US$205 per MWh.

However, in order to make investments in energy infrastructure to guarantee supply and reduce the Energy System’s operating costs, the Energy Secretariat, through Resolution 1037 (published last October 31) created a special export account that enables the proceeds from electricity exports to Brazil to be collected in a separate fund whose specific purpose is the execution of energy infrastructure works.

“The measure will enable a regulatory tool that guarantees the financing of strategic energy works in the context of financial restrictions that affect the country’s economy insofar as they have a special impact on the Wholesale Electricity Market (MEM),” it said.

The Resolution creates the MEM Stabilization Fund Export Account. Thus, the revenues collected by Cammesa from electric energy export operations – discounting the generation costs incurred to supply these exports, such as fuels, remuneration to generators, transportation, among others – will be accumulated in this account from September 2021.

“The funds collected will be specifically used to finance energy infrastructure works. They will be allocated as established by the Secretariat of Energy based on infrastructure development needs,” it explained.

Due to increased demands on the system, an additional transitional payment to generators was also established, with the exception of the Yacyretá and Salto Grande Binational Hydroelectric Power Plants. “The goal is to preserve the net income from exports and prevent it from being diluted among current expenses. A decision that seeks to expand the infrastructure,” the Energy Secretariat stated.

Currently, there are bilateral agreements in force with neighboring countries. Through these agreements, Cammesa conducts electricity export exchanges for the supply of countries in the region.

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