The first solar energy project for Agro to receive Argentina’s fiscal benefits is operational in San Luis
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The first “behind-the-meter” solar power plant for an agricultural establishment in Argentina is already fully operational. Though the project required more than three years of analysis while the energy laws, regulations and policies were evolving, once the corresponding scopes were defined, approvals obtained, and materials delivered, the two-hectare solar project was completed in one month and has been operational since the beginning of September 2019.
The solar plant was developed for a cattle ranch operation located near Quines, in the northeast of the San Luis province. The ranch consists of 9,000 hectares, of which 1,100 are dedicated to agricultural production under irrigation by central pivots.
“It is an area where the use of irrigation is mandatory, that is, it is not complementary, and where the cost of energy is very high. The rains in this area do not exceed 450 millimeters per year, and are concentrated during the summer with very high evaporation that makes rainfall agriculture impossible,”says Howard Foy, director of MWh Solar, the Argentine energy company responsible for developing and installing the project.
The farm was acquired in 2009 to develop livestock operations (currently 7,000 head) and agriculture under irrigation to feed the herd. Initially, the energy to pump the water and move the pivots was produced with diesel generators, but the high cost of fuel plus the logistical problems derived from the large volume of consumption led them to replace the diesel generators with cheaper electricity from the grid.
“However, with the passage of time and significant tariff increases, electricity expense has now become the farm’s second highest operational cost, and has contributed to an additional problem: while farm sales are taxed at 10.5%, energy is taxed at 27%, which increased the problem of the farm’s unrecoverable tax credits held by the federal government. Basically, the 27% VAT and other related energy taxes are treated as expense because they are almost impossible to recover,” says Foy.
This was when the farm directors, at the end of 2015, began evaluating alternatives to generate the electricity they required. Because of the high winds in the area, wind power was initially considered, but it was quickly discarded due to the high cost of the investment, the corresponding maintenance and the irregularity in the winds.
It was then that the MWh Solar proposal began to take shape. The solar irradiance in this region of San Luis is high, and the available space in the farm near its internal 33kV Medium Tension(33MT) lines close to the 10 irrigation pivots provided an ideal location for the solar site. Also, without space constraints, the solar site was designed with the ideal panel inclination and row spacing needed to maximize energy production and simultaneously minimize overall project costs.
“Even though it had never been done before for a “behind-the-meter” solar project, the decisive factor in advancing the project was the prospect of recovering the VAT of the investment as part of the fiscal benefits package defined under Argentina’s new Renewable Energy Law 27.191,” says Foy. “In that aspect, our proposal needed to include accompanying the farm directors throughout the arduous and time consuming process of presenting all requirements to the pertinent organisms to qualify for the fiscal benefits. It was this requirement by the farm’s directors that proved to be the most challenging; the technology was by far the easiest part,” says Foy.
About Alejandro Cabrera
Alejandro's expertise fits well with his Special Projects position within GTSA. His cross-cultural international business experience working along aside large foreign companies in Argentina, Brazil, Chile and Uruguay giving expert advice related to M&A and Joint Venture negotiations. He is fluent in English, Spanish, French and Portuguese
Post available in: English Español