Argentina
Chorriaca Hybrid Wind-Diesel and Cochico Micro-Hydropower Plants
Home » Case Studies » Chorriaca Hybrid Wind-Diesel and Cochico Micro-Hydropower Plants

Project Overview

  • The Projects deliver 24/7 electricity to the off-grid communities of Chorriaca and Cochico using renewable energy sources and zero or low-emitting power generating facilities.  Before the projects, both communities had intermittent supply based on diesel generation.  Now that the projects are completed, the Chorriaca community is connected to a Hybrid 3X25 kW Wind/120 kW Diesel Generating System while Cochico gets its power from a 65 kW Run-of-the-river Micro-Hydropower generating facility.
  • The projects demonstrate that the replacement of fossil fuel generation with renewable energy is financially sustainable, improves service quality and saves GHG emissions while at the same time fostering the economical development of surrounding communities resulting in subsidies reduction.
  • Local public electric utility EPEN (Ente Provincial de Energía del Neuquén) and the Government of Neuquén are committed to provide access to electricity to the entire population of the Neuquén Province.  EPEN has engaged into a renewable resources survey programme and has launched a large scale Solar Home System deployment programme with the help of international development funds.
  • Both Projects were put in commercial operation in early 2014.
  • EPEN signed with GSEP a long-term agreement in which the utility is committed to re-invest the cost savings due to the switch from diesel only generation to hybrid and hydro generation into the development of new renewable energy projects in the region.


Public-Private Participants

Public Sector:

  • Ente Provincial de Energía del Neuquén (EPEN)
  • Provincial Government of Neuquén

Local public electric utility EPEN and the Government of Neuquén are committed to provide access to electricity to the entire population of the Neuquén Province at an affordable cost and using renewable energy sources whenever feasible.

EPEN has engaged into a renewable resources inventory programme which includes a regional wind and micro-hydro site mapping.  The utility has also launched a large scale Solar Home System deployment programme with the help of international development funds.  Wind data has been collected in different sites as from the year 2006 and used to simulate the expected wind penetration and system output.

EPEN supplied and installed the transmission lines to connect the new power plants with the existing villages’ mini-grids. The projects’ assets will be transferred to EPEN within the first two years of operation. Operation and Maintenance is also performed by EPEN under the projects team supervision.

In addition to facilitating the permitting process and issuing a Provincial Interest decree for the Projects, the Government of Neuquén provided logistics support, rehabilitated existing roads and built new ones to allow access to both the sites.

Private Sector:

  • Global Sustainable Electricity Partnership (GSEP)

GSEP members provide funding, expertise and know-how to develop and implement the projects in view of demonstrating and promoting the deployment of renewable energy solutions to provide access to modern electricity services with increased affordability.

Lessons Learned

Energy Policies

  • EPEN’s mission includes providing electrical services with affordable rates for the economically disadvantaged users and electrification programs in rural impoverished areas.
  • Tariffs in these isolated areas usually are set below the cost of service and are financially supported by subsidies. The cross-subsidy between customer classes is straightforward and relies on well-known and understood results from welfare economics and the theory of optimal taxation that advocates lump-sum transfers through the fixed charge portion of the multi-part tariff. This lump sum transfer is independent of per kWh charges, and therefore, the quantity consumed, so that the cross-subsidy between customer classes does not distort the consumption decisions of customers and is efficiency enhancing.
  • EPEN tariff structure includes in some cases cross-subsidies. The customer categorizations are related to the level of consumption and their main activity (residential, commercial or industrial). The EPEN approach contribute to support a sustainable operation and at the same time they comply their objectives of providing electrical services to isolated and impoverished rural areas.
  • The sector is open to private participation with long term PPAs for privately owned assets and Concession contracts such as the ones Duke Energy is performing for thermal and hydropower plants in the region.

Financing

  • Both power generating facilities are funded by GSEP while the transmission lines between the plants’ sites and the mini-grids are financed by EPEN.  Cost of rehabilitating and building access roads were covered by the Neuquén Government Road Department.
  • GSEP created a local foundation (NGO) to allow for money transfers and payments of Argentina contractors.  A tax refund mechanism exists for NGOs and will be tested.  However, actual tax refund is uncertain.
  • Private sector may be reluctant to make energy infrastructure investments due to limited positive signs from government authorities to ensure private stakeholders stable conditions that can provide for long-term investments with returns.

Replicability

  • The financial model cash flow forecast is equivalent to a positive 7.5% IRR (average of the two projects) demonstrating the sustainability of the business and its related financial replicability.
  • Emissions calculation results could not justify the CDM registration (high development cost vs. CO2 credits).  However, an amalgamation of small projects may justify the registration.
  • The Development and Transfer Agreements between GSEP and EPEN include a firm 20 years commitment of EPEN to apply the fuel savings from the diesel displacement to the development of renewables in the region. The agreement sets the calculation method and reporting obligations with non-compliance provisions (repayment to GSEP if the commitment is not complied with);
  • Potential for replicability is high with many similar remote and small off-grid communities elsewhere in the region.  EPEN is already investigating another site for a Hybrid Wind-Diesel (or battery) System.
  • With proper training and adequate implementation planning, the proposed technologies can be implemented in remote areas.

Conclusions

  • Argentina has a very high renewable energy potential (wind, hydro, solar, geothermal, biogas, etc). Nevertheless, it is currently not an attractive region for investment due to economic instability.
  • The transparent framework provided for the project by GSEP was key for the success of the project. GSEP know-how and experience in previous projects provided clear guidance to the local developer throughout the projects.
  • The local developer must carry out a careful and permanent supervision of the supplier’s compliance of the contracts. His role as mediator between all of the parties involved (contractors, financing institution, public entities) is of utter importance in order to solve the conflicts that may arise and ensure a healthy communication between them.
  • All parties must be involved in the decision making process.
  • A close relationship between the local developer and the Neuquén Government proved fruitful during the issuance of all the permits required for the project. In this case, in order for GSEP (foreign entity) to inscribe the Foundation in the Neuquén Province, Public entities needed to create procedures that did not exist before. The Governments support was critical in order for this process to be completed.
  • The public utility was able to provide qualified technicians that assisted the developer during the electromechanical works and commissioning. The public utilities participation during this stage was essential, and the technician’s knowledge related to off the grid electrification was useful. The entity provided tools and know-how for this last stage in the project.
  • The parties involved in the PPP must show flexibility in order to adapt to obstacles that may arise during the evolution of the projects. In this case, the scope of the services accorded initially between the parties had to be changed during the project and the parties where able to cope with this challenge. Close collaboration and coordination as well as open communications are critical.
  • It is expected that the project will draw the Government attention as a way to develop regional and rural electrification in Neuquén and Argentina.
  • During Public Private Partnership, positive synergies are created allowing for the achievement of common goals that otherwise would not be feasible.

 

For More Information Contact:

General Secretariat
Global Sustainable Electricity Partnership

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