Welcome to zero.

I'm akshatrati.

This week, how Argentina got money for renewables Around the world, there's a quiet revolution taking place.

Day after day, more and more renewable energy is being installed.

And yes, it's happening in the US two, but the reality in twenty twenty five is that it's happening faster in developing countries.

Today we'll look at the transition from Argentina's perspective.

A country known for its epic landscapes, superstar footballers, and endless financial troubles.

Argentina's central Bank has raised the country's interest rate to sixty percent.

President Trump welcoming his political ally Argentina's president Javier Mile to the White House to announce a twenty billion dollar bailout for his country.

It's going to be the biggest ever bailout that the IMF has ever issued.

In fact, Argentina is to receive an extra seven billion dollars on top of the fifty billion that has agreed in June.

Still, over the past decade, Argentina has undergone a remarkable clean energy transformation, going from practically zero in twenty fifteen to almost eighteen percent of its electricity coming from renewables.

Now, in doing so, Argentina has overcome a challenge faced by many countries that are considered practically uninvestable by major financial institutions.

How did this happen?

To tell us that story.

Joining me on zero this week is Sebastian Kind, a former undersecretary at the Ministry of Energy in Argentina who helped draft the country's renewable energy law, which was passed with the unanimous support in the Senate in twenty fifteen.

Since then, he has gone on to found an organization called RELP that helps advise governments around the world on expanding their renewable energy sector.

I wanted to ask what's made Argentina's renewables drive possible, whether President Javia Mila is still in favor of renewables, and how Argentina's relations with the US and China are playing out.

Welcome to the show, Sebastian.

Thank you very much, Absha, thanks for having me.

So Before we talk about clean energy in Argentina and your work there, I'd like to go back a century.

Argentina used to be among the top ten countries in per capita income at the start of the twentieth century, richer than Italy, than Japan, than even Argentina's colonial master Spain.

Now it ranks seventieth in the world in terms of GDP per capita.

What happened to Argentina.

Wow, that's an amazing question.

I mean, just so for the audience to understand, Argentina is a country almost biggers India.

We only for five million inhabitants.

It was a flourished country, definitely.

That's why my grandparents came to Argentina the beginning of last century.

I think what happened after that is that we had decades and decades of I would say bad management.

This is my fair approach to what had happened in Argentina.

I mean, the country is full of natural resources, and that's amazing what we can do, what we could do, and what we were able to do.

But mismanagement is really taking the country in a difficult situation, I would say, And one of the most perhaps difficult situations we have is to deal with inflation.

So a lot of Argentina's wealth was built through agriculture in the late nineteenth early twentieth century, you know, very fertile lands.

But of course you talk about natural resources as oil and gas, as metals.

If you come to this century, say it's been mismanagement over the past few decades that have you know, politically or militarily that have involved poor use of the natural resources that Argentina has.

This century specifically, though, it's been financial crisis after financial crisis.

What has it been like living through it as a citizen.

It's super complex.

I mean, I remember being a kid in the in the eighties and remember my father even in the in the supermarket with me telling me hurry up and get the meal before the you know, the person that was marketing prices come to the shelf where the milk were.

So imagine leaving in that kind of concept and that kind of environment definitely teaches you a lot of things and shapes you in the way we will leave.

And I think most of the things that are done or we've done as a team in the energy sector came through that kind of experiences that we had.

The country has i would say, very difficult times in dealing with inflation and physical deficits.

So this is one of the most complicated issues in the country.

I mean, both in terms of its effects on the real economy so the so called tax on poor right, and also in terms of how difficult it is to solve it.

I mean, the main problem behind this physcal deficit is I would say what the government today is aggressively tightling, but for the audience to understand, the physical deficit means that you spend more than you received, something as simple as that.

And at national level, this has been happening for decades.

So eliminating the inflation is not easy in a country where almost half the population currently leaves below the poverty line.

The more poverty there is, the more money you need to provide for basic needs, which generates a higher deficit.

It's like how can I say, like a diverge in spiral.

So you have spent most of your career in the renewable energy industry, specifically building things in Argentina since at least two thousand and six.

What drew you to renewable energy?

I'm an engineer by Trenning, and I was researching renewable resources since late nineties, and I knew that even though the country didn't have renewables almost at all at the time, that was something super important.

I mean, the people in Argentina were struggling with all the difficulties of getting fossil fuels out of the ground while the wind was extremely strong and super annoying for them.

And I said, this is completely crazy.

I mean, and we were important fossil fuels while at the same time the country is super rich and natural resources.

So since the very beginning in my career, that was something, you know, that blowed my mind saying, okay, we should do something to put two things together.

Right, all the economic strains that the country was seen to combined with the use of natural resources, we have to cut basically all the imports and all the dependency on external people.

So there is a common refrain that says energy is destiny, that countries that command great energy resources can become great powers.

And Argentina used to have a lot of oil and gas and then it's found more oil and gas through what are called unconventional resources or shale.

But you have been focused on renewable energy because there are also renewable resources like the wind in the sun.

But getting government, especially at a time of financial crisis and as a result of which political crisis, to agree on a forward looking clean energy plan that requires years, if not decades of planning is hard, and yet you've found a way to get a renewable energy law passed in twenty fifteen.

How did that come about?

The benefit is so clear.

Actually, imagine that when you build you know nation, you have the chance to build your power system.

You say, okay, we can go to build fossil fuel power plans or combined cycles or whatever.

In that sense, that's quite easy.

You put little capital and little means when you compare to other sources like renewables, and then you feed the machine.

Right, you put fossil fuel for the decades that you want to run your facility.

But the point here is that you are sticking to something that you don't know.

You are linked to the use of resources that you don't know the price or those volatile prices will drive your economy for the future.

Instead of that, you can use your own renewable resources.

And using renewable resources means that it is true that is capital intensive and you need to find a way to structure them in the long term otherwise will not be competitive.

But once you can do it, you resolve many things at once.

And so you work on this renewable energy law which has received support from all political parties.

It becomes low in twenty fifteen, and yet that in itself is still not enough to actually start building renewables.

You needed other financial tools.

Why was that the case.

Because imagine is that if together in this conversation we say we want to go to the moon, I mean that's not enough.

You need a rocket, right, and you need something really put in place for that trick.

In this case, the law was more than just the desire, was a couple of interesting things putting place.

And the first and the main was the political consensus for the long term, which is not common, I would say at all in the world, not only in Argentina.

If we look at what is going on in Europe or in the States in this regard, it's pretty much the same.

It's quite uncommon to have both enemies in the Congress to vote on favor for something.

So when you have the basic things which are not simple but basic perhaps, which is not the same, in place, then you need to build the other things that the market requires for this long term view.

As we mentioned before, and this is exactly what happened after the law and not within the law.

The law was good for marking the basic things, the certain things that we needed at the time, and then someone has to get the law and put it into practice.

Unfortunately, or fortunately that was me, So I suffer about my own words.

But that's another story.

So what were the financial tools that you had to build to actually get money to build these renewable projects.

Interesting, the most important thing we built is what I always like to call the worlst case waterfall of guarantees, which is basically a waterfall of three steps that we decided to provide as part of the procurement program to foster the investment opportunity in the capital market.

The first one was what we called the involving Energy payment guarantee, which is like a liquidity facility or let's say many that in the case of Argentina, the government put in an account to cover the payments of the electricity.

In case the buyer of the electricity that was the independent system operator in Argentina the case couldn't cover for whatever reason, right, So basically we said the investors that if there's any delay in payment, they can get the payment under date anyway.

Why this is important because when you want to structure your project in let's say project finance non recourse, as it is one of the most common ways of structure in these long term infrastructure projects.

You need to have certainty on the payments you receive.

If you believe that this will not happen along the twenty years of contract you're about to sign, you will not get into that.

So that was the first step.

We said, Okay, this is good, but it's not enough because we knew that in the past.

Of course, the country has many crisis as you mentioned before, and we went through different difficult situations and investors knew that.

So we decided to bring that contract, that obligation, that thing out of the payer's risk, which was again the independent system operator in Argentina like the national utility, might be into the sovereign risk.

Right, So it went from a company risk, even if it was a state owned company, to a government risk.

Exactly why because the company might have problems to pay.

That doesn't mean that the government, the national government cannot pay, cannot cover those obligations, right.

But then you also had to go one step further because the government also gets into trouble in Argentina and far too frequently.

Exactly in the past, the government of Argentina frequently held the currency conversions and restricted money transfers abroad, So of course we knew that and we said, okay, but if we want to bring international investors into the game, as we wanted to, because of course we wanted to create a heavy competition to get prices done and to get the best out of what we were offering, we needed to convince international investors.

And to convince international investors, you need to provide something extra that can let them feel that once again, if something happened, the government of Argentina will not get that restriction to them and they will get the investment back.

So we decided to offer a third step guarantee is what we call the early termination payment guarantee, which is a guarantee that we structure through a negotiation that we had with the War Bank as ultimate guarantor that offers that possibility to pay you in the currency of your choice wherever you decide to get that non amortized value of the asset, which is basically what the guarantee covers.

Right, So there's three layers of guarantees that help a foreign to feel confident to put money into Argentina because there is a law that sets a clear target because there is a payment guarantee at the company level, then there's a payment guarantee at the government level, and if nothing else, then there's a payment guarantee coming all the way from the World Bank.

And that results in Argentina starting to build its renewable portfolio.

So before twenty fifteen, less than two percent of Argentina's power came from renewables, and then you set a target to reach twenty percent by twenty twenty five.

Yeah, how has it worked out?

Okay, this week we reach an amazing number of over forty four percent of pick coverage in the country and we are reaching the eighteen percent average by the end of the year, so almost in line with the crazy ambitions that we set in the law ten years ago.

At the same time, the amount of gas in the system has gone up as well.

Well.

You know, Wakamorta is an interesting reservoir that we have, with the second largest shale gas reserve in the world and the fourth largest shale oil reserve in the world.

But still Argentina is important in fossil fuels because the capacity we have in both in pipelines and the seasonality of the demand cannot be fed by our own resources.

So it is true that the country has a lot of gas and a lot of oil as well.

We are exporting oil for a long time and now there are many projects to export gas in an LNG shape.

So by one count, about eleven billion dollars worth of investment has come into solar and wind projects.

A lot of that investment has come from foreign investors.

What type of foreign investors?

Wow, a lot of Imagine that's a lot of money.

So we have different kind of banks all over Europe, the States, some banks in the same Latin America, some Argentinian banks as well.

We have the advice commercial banks, multilaterals, all kinds of and in terms of the equity, we have local companies, international companies, companies from the US, companies from Spain, from Germany, from France, big ones like as or Total in France or you know, big organizations, and some I wouldn't say small ones because the rule was clear that you need to have certain things in place as a track record to head into this game.

But eleven billion dollars a lot of money.

So investment from all over the world.

You didn't mention China, but China has had a lot of investments also in Argentina, and we know China is the largest maker of a lot of electricity generation or transmission equipment.

How big has the Chinese and and spin.

It was important, was not the main one in terms of direct investment as power producer though, although it was significant, and of course the solar business is mainly supplied by China, not in Argentina but in the world.

And some of the wind turbines as well, with some important turby manufacturers working in the country not only supplying but also developing reneable projects.

So definitely important, but not the main one.

Was white scattered all around the world.

This year there's been another news about more financial problem that Argentina is facing and Javier Mile who is the president now, is being built out by the US.

But regardless of the politics side, one thing that Scott bess In, the Secretary of Treasury in the US said is that they are keen on supporting Argentina to get China out.

What does that mean?

Well, who knows, We should ask him.

I think it's quite over use what the US is doing in the West in general terms and means the presence of China in Latin America, but in the world is increasing and there is a kind of commercial war behind.

But that's in parallel to the problems that Argentina is facing today, which is this concept that we mentioned before about ending the fiscal deficit, which is the right move.

I mean, though it is painful because you know, many people fall out of the system.

It is unpopular to do it.

And the situation that the government has today is that they needed someone to support them, and they found it in the In the US.

There is an aspect of the renewable story that starts to play out in every country where a certain amount of solar and wind power is built, which is unique transmission lines to make sure it is taken to the places where it is consumed from the places where it's being generated.

China has made huge investments in transmission and distribution of electricity in Brazil and Chile, Argentina's neighbors.

Why has it not done so in Argentina where there is clearly a lot of need for transmission.

Okay, that's perhaps a question that has not just one answer.

The main thing to understand here actually is that there's no place in the world that transmission exists for projects that does not exist.

So you build transmission when you have the need, either because you have the demand that is requiring that transmission or you have the supply that in order to be deployed to be installed, you need of course wires to get the electrons out of that place and you know, bringing those electrons into the demand.

In the case of Argentina, at the time when I took office, the government, the country had enough transmission, so we didn't have to build those transmission lines.

The more you fill those spaces, of course, the more you need to create more transmission.

Today we have another thing which is batteries, which helped us a lot in terms of the transmission need.

I mean, the first thing you need is to use as much as you can the things you already have instead of build new infrastructure.

So if you ask me, I mean, how can you deal with new transmission and why?

And what happened?

The China put money into transmission in different markets and not in Argentina.

So far we didn't need it.

In the last ten years.

Now is the question of okay, how can we get more and more not only renewables but electrons anyway out of the places where we produce them.

After the break, I asked Sebastian whether President Milee is still in support of renewables and whether the sector needs more support to keep up the momentum.

While I have you, please take a moment to read and review Zero.

It helps new listeners find the show.

You can review on Apple Podcasts and Spotify, and we appreciate every single one.

Thank you.

Let's come to the very now, right.

You were in government trying to set this goal and then trying to create these guarantees from twenty sixteen to twenty nineteen.

You've left government roles.

Since then, there's been a bunch of political changes in Argentina.

If you look at the renewable story post twenty seventeen, there's a rapid rise, and yes it's reached eighteen percent by the end of this year, not quite twenty but close, but it has plateaued in its rise over the last few years.

Do you think under Mila there is support for renewables.

I wouldn't say there's support or there's not support.

In general terms, there is a market that was built at the time that has its own life no matter who comes in power, unless someone want to kill it on purpose.

If you want to kill something, of course you can do it, but you need to first of all understand why and if you want to do that.

That means that if renewables become the cheapest option, you are killing the cheapest option, which is not convenient for you and your own accounts.

And the deficit that we were talking about.

Yeah, the politics can sometimes overcome economics, as we are seeing in the US where they are trying to attack what are the cheapest sources of power, even as the country is looking to build a lot of electricity infrastructure.

But in Argentina, the twenty fifteen law itself is set to expire this year, and that means the legal target and the fiscal protections that you built, those might go away.

There are conversations about extending the law.

Well, those things will not go away, because there are two things that we build here your ago.

One is what we call the purchases of the national state, which was the renovair program, and the other one was the what we call the corporate ppa, the corporate power purchase agreements between large consumers and free producers in the market.

That channel is a super free market driver that is building over a gigawatt of power every year since the beginning.

And this is not because of this government or because of the previous one.

Is because of the market rules that were built in that sense.

But the government program also was important in getting renewables going.

So what do you think happens if the government site is not renewed and there's no new target to meet renewables?

How much do you think in the next ten years, just based on private forces, could you build renewables?

You got to almost twenty Where does the next ten years go?

That's very interesting.

The program from the government might not be needed if the market forces as they are built in the corporate site are strong enough.

As they are, so in my view, they were super needed at the beginning.

And you know, I'm more market oriented, so I truly believe that the market can keep on doing amazing things in that second channel that already for a long time, for years, have been demonstrating being super efficient in this build.

So you're making the case that, you know, maybe government will not come through and there will be no extension, and you know, the government anyways, and financial crises of all sorts, but that now renewable stories and sort of the private market space.

There is the fact that it is cheaper to build and so you'll get more momentum.

Maybe you don't need to rely on the government for transmission lines.

Maybe you can get to batteries.

But that's the case, then are you seeing a ground up desire for these products?

So take the case of Pakistan where there's been a huge boom in solar panels on rooftops in one year and now they're buying batteries.

In Argentina there is almost no rooftop solar less than one hundred megawards of distributed power production.

Yeah, why is there not being a ground up desire for this clean, cheap energy If you think markets can help.

Well, there are a couple of things here.

The reason why we don't have rooftop solar as other markets is because we have very cheap electricity yet because it's subsidized.

So when someone is given something for free, which is never for free, right, I mean we know it, there's not really clear deconvenience for you to go for that.

I mean, this is going out, is facing out as the government is making huge efforts for reflecting the real prices, which brings another problem, which is now start charging for the use of electricity that for decades nobody pay.

So that's another kind of concept, I would say.

But in terms of the transmission and the need for that transmission, the transmission is of course it's something that it will be built according to the need you have, and it's a long term infrastructure project in the same way as many others.

And that's the problem we face always in emergent markets, and not only in Argentina, that to build long term infrastructure you need long term rules and the long term investors needs feeing confidence.

It is.

It's true that government subsidies can distart markets.

Sometimes they are distorting markets for the reasons government chooses to, which is to make renewable energy cheaper than it was in the past.

Sometimes it does it to ensure that people have access to energy, which is what Nigeria did whenever subsidizing diesel that people use as generators to produce power.

But then there are also ways in which these stortions can be fixed, and we've seen that in Nigeria when subsidies got cut for diesel, suddenly there was a boom for solar and so maybe in Argentina have subsidies for electricity are cut and real prices are visible, people will probably deploy prooftop solar to make cheap clean electricity.

We brainstormed a lot about that, and of course you can imagine that a person that was born in the early two thousand never almost never paid the electricity in his life.

So suddenly with the country that has fifty percent of the people below the line of poverty, it's not easy to say, okay, overnight, you know what, you have to pay the electricity.

But electricity it was like the air, right, I mean a breath.

Don't pay for what a breath.

So that concept is something that makes you open the window when your room is warm up rather than turn off the heater.

Definitely is not a few at all, I would say, but it's difficult, and subsidies are also a way of acting in populism, and that's something that we need to cut it.

Definitely, someone has to pay it, right, I mean the point is who's going to pay?

But this is not what have happened in Argentina.

For decades, rich people didn't pay electricity.

It's not only that the poorest didn't.

So there are a lot of cross subsidies here.

So poor people are paying the cheap electricity to the rich people, and this is something crazy that you need to stop immediately, particularly with the natural resources we do have.

I mean, Argentina perhaps is one of the top in terms of the natural resources of wind or solar, everything is there.

Everything.

The capacity factor, which is the measurement of how much let's say, when you can get out of a winter binner or a solar panel, is picking among the podium in the world.

We have we in firms that are above sixty percent sixty five percent capacity factor, solar business about thirty four thirty five percent, this is crazy, is twice what you can get in Europe.

And still under that condition, the lack of possibility to structure long term infrastructure projects, which is not only the case for renewables, it is the case for long term infrastructure projects, highways, hospitals, everything is killing the same country.

So that's a situation that most of emerging markets have.

Can't imagine what it means in Africa to have, you know, people paying twice the price for their own electricity that what they can paign.

So you have, since stepping down from government role in Argentina, have founded an organization to try and create this kind of momentum for renewables in other parts of the world.

Can you give examples of where you've succeeded and how you know?

First to say is that we created WELP years ago inspired by our own experience, basically to offer others what we would have love to have when we've been in government and we didn't have.

So we decided, under this concept of offering others what we would have loved to have, we decided to work across emergent markets in Southeast Asia, in Africa, and in Latin America and the Caribbean, where governments really need about support in designing and structuring renewables at scale.

We're working in the three regions in Southeast Asia, in Pakistan, we've done things.

In the Philippines.

We work in West Africa, in Togo, we are dealing in corporational agreement that hopefully we will go online, with Senegal, with South Africa, with Kenya.

We're working in the Caribbean, in Jamaica, in Barbados, and in this last two we support the government directly with the design.

In the case of Jamaicable energy auction was fully supported by RELP to the government we are now working in the second round of functions to keep on incorporating renewables and batteries as well in the country.

In Barbados, we've been working together with the government, with the Ministry of the Government of Minamoti to support them in the design and implementation of the batteries of the best auction, the first auction they run ever, So that's the kind of things that we do.

We work hands on with the governments.

So it's not copying and pasting what you did in Argentina, but sort of figuring out what is the need for that country at that point in this supply chain that you need to build off all kinds of financial tools and regulations and markets to actually implement renewable energy projects exactly.

Welp and bess technical policy and financial expertise directly within national governments to design competitive auctions and to integrate the risky instruments we bring.

I would say this tined mindset focused on delivery and effective implementation that concept of the hands song, so we you know, we have people in the field in the countries working together with the governments to help them run the six.

Thank you for sharing your story of Argentina and for the story of supporting other developing countries and getting renewable energy.

Thanks for joining the show.

Thank you so much, ak Shat for having me really, thank you very much.

And thank you for listening to zero.

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