Molly Ayala
Electricity prices in Argentina are billed in Argentine pesos and are some of the cheapest in the world. The country's power sector is one of the most competitive and deregulated in South America, with 75% of total installed capacity in private hands. Natural gas is the primary source of electricity in Argentina, with the country producing the highest amount of natural gas in Latin America. In addition, the country's electricity sector has been bolstered by the development of its nuclear power capabilities and renewable energy sources.
| Characteristics | Values |
|---|---|
| Electricity prices in Buenos Aires | 5c per kWh before taxes, 10c with taxes and fixed costs |
| Electricity prices in smaller cities | 33c |
| Electricity prices in Salta | 0.066 USD per kWh before taxes, 0.11 USD per kWh effective rate |
| Electricity prices in 2015 | 7 cents |
| Electricity generation capacity in 2019 | 38,922 MW |
| Total generation in 2005 | 96.65 TW·h |
| Percentage of nuclear power in Argentina in 2015 | 10% |
| Percentage of nuclear power in energy mix in 2022 | 5.22% |
| Percentage of hydroelectric power in energy mix in 2022 | 16.76% |
| Percentage of wind power in energy mix in 2022 | 9.81% |
| Percentage of solar power in energy mix in 2022 | 2.03% |
| Percentage of fossil fuels in energy mix in 2022 | 66.17% |
| Household electricity rates as a percentage of world average price | 84.76% |
| Household electricity rates as a percentage of business rates | 78.18% |
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What You'll Learn
Electricity subsidies
Electricity prices in Argentina are among the lowest in Latin America and are heavily subsidised. In 2019, the price of electricity in Buenos Aires was around 5-10 cents per kWh, while in smaller cities with less infrastructure and access to energy generation plants, prices could be much higher. The country's electricity sector is highly competitive and deregulated, with 75% of generation capacity owned by private utilities. However, the transmission and distribution sectors are highly regulated and less competitive.
The Argentine government has made efforts to promote renewable energy sources, such as wind and solar power, through the "National Wind and Solar Energy Rules" enacted in 1998. This legislation introduced a mechanism that provided an additional payment for each generated kWh, resulting in a 40% premium over the market price at that time. It also offered tax exemptions for 15 years. Despite these initiatives, wind and solar power still account for less than 1% of the country's energy mix, with fossil fuels, particularly natural gas, dominating the market at 60-66%.
The low electricity prices in Argentina can be attributed to a combination of factors, including the country's competitive and deregulated energy market, government subsidies, and the abundance of natural resources for energy generation, such as natural gas and shale oil reserves. However, the reliance on fossil fuels has led to concerns about sustainability and the potential for supply issues. In recent years, Argentina has started to address these challenges by investing in clean energy technologies and exploring new extraction projects for its shale oil and gas reserves.
While electricity prices in Argentina are low compared to other countries, there are variations within the country. The prices in Buenos Aires, the nation's capital, are significantly lower than in smaller cities with less infrastructure. This discrepancy has been attributed to political motives, as subsidising electricity prices in the capital can help gain support in elections. Nonetheless, even with the subsidies, the residential electricity price in Argentina as of December 2024 was recorded as ARS 0.000 per kWh or USD, indicating that the country's electricity remains affordable for its citizens.
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Deregulation of the energy sector
The Argentine power sector is one of the most competitive and deregulated in South America. The generation, transmission, and distribution functions are open to the private sector, with 75% of total installed capacity in private hands. However, there are restrictions on cross-ownership between these three functions.
The deregulated nature of the Argentine energy sector can be attributed to the country's response to economic crises in 2001 and 2003-2004. In 2002, electricity tariffs were converted to the Argentine peso and frozen, leading to high levels of debt for companies in the sector due to stable revenues and increasing costs. This resulted in underinvestment and an inability to meet rising demand, contributing to the 2003-2004 energy crisis.
Since 2003, the government has been introducing modifications to allow for tariff increases, with industrial and commercial consumers' tariffs raised by nearly 100% in nominal terms and 50% in real terms. The residential tariffs, however, have remained unchanged.
In December 2023, a new political coalition took office, advocating for the deregulation of activities within the public sector and promoting private sector investment. This government has already made significant changes to the energy sector, including amending the National Hydrocarbons Law to open it up to international trade and deregulate the sector.
The deregulation of the energy sector in Argentina aims to facilitate energy exports and attract foreign investment. The RIGI scheme, for example, is expected to bring in additional investments, with Shell already investing between $500 million and $600 million annually and planning to increase its production of oil in the country.
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Low taxes
One of the reasons electricity is cheap in Argentina is the low taxes on electricity. The country has a competitive and deregulated power sector, with 75% of the generation capacity owned by private utilities. The generation function occurs in a liberalized market, while the transmission and distribution sectors are highly regulated and less competitive.
The Argentine government has introduced several laws and incentives to promote renewable energy sources, such as wind and solar. The "National Wind and Solar Energy Rules," enacted in 1998, established tax exemptions for 15 years and introduced a mechanism that provided an additional payment per generated kWh. This law increased the cost of renewable energy generation by 40% over the market price. The 2007 Law built upon this by declaring the generation of electricity from any renewable source to be of national interest. It also set an 8% target for renewable energy consumption within 10 years and mandated the creation of a trust fund to subsidize electricity produced from renewable sources.
In addition to tax exemptions and incentives for renewable energy, Argentina's electricity sector benefits from the country's abundant natural resources. Argentina has the highest natural gas production among Latin American countries and possesses one of the largest shale oil and gas reserves globally, Vaca Muerta. However, the country's gas distribution pipeline infrastructure needs improvement to better connect production sites with urbanized areas.
While the combination of low taxes, competitive markets, and renewable energy incentives has contributed to relatively low electricity prices in Argentina, it is important to note that prices vary across different cities. Buenos Aires, for example, has been described as the cheapest, with rates of around 5 cents per kWh before taxes and about 10 cents after taxes and fixed costs. Smaller cities with less infrastructure and access to energy generation plants may experience significantly higher rates, up to 33 cents per kWh.
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Competition in the energy market
The Argentine electricity market is one of the most competitive and deregulated in South America. The electricity sector was unbundled into generation, transmission, and distribution by reforms in the 1990s, creating a competitive environment. Private and state-owned companies compete in a liberalized market, with 75% of total installed capacity in private hands. However, the Energy Secretariat's veto power over CAMMESA could impact the competitive dynamics.
Generation is the most liberalized and competitive sector, with various fuel sources contributing to the energy mix. Natural gas is the primary source of electricity, with thermal plants fueled by natural gas being the leading generator. Fossil fuels, including natural gas, account for the majority of the energy mix, with a significant share of 60%-%66%. Hydropower is the second-largest source, contributing 16.76%-%36 of electricity, with nuclear power making up 5.22%-%7 of the mix. Wind and solar power currently have a minimal share of less than 1%-%2.03%, but there are incentives for renewable energy sources.
The transmission and distribution sectors are highly regulated and less competitive. Argentina has two main wide-area synchronous grid systems: SADI in the North and center-South, and SIP in the South. The country faces a tight supply-demand scenario, with reserve margins declining and distribution services deteriorating. To meet rising demand, Argentina has imported electricity from neighboring countries.
The competitive market dynamics in Argentina's electricity sector have contributed to keeping prices relatively low. As of December 2024, the residential electricity price was USD 0.05-0.11 per kWh, varying across different cities. Business electricity rates are lower than the world average, and household rates are slightly higher than business rates.
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Natural gas production
Argentina's natural gas production has been steadily increasing, with the country now ranking among the world's top five holders of shale crude oil and natural gas resources. As of 2015, Argentina produced 1,518,545 million cubic feet (MMcf) of natural gas per year, ranking 23rd in the world. From January 2021 to September 2024, natural gas production rose by 27%, bringing output near the records set in the early 2000s. This growth is driven by increasing output from the Vaca Muerta shale formation, which accounts for more than 70% of the country's natural gas production. In September 2024, the Vaca Muerta formation produced an average of 5.0 billion cubic feet per day (Bcf/d) of natural gas, a 5.2% increase over the same period in 2023.
The development of key infrastructure projects is supporting the expansion of natural gas production in Argentina. For example, the Perito Francisco Pascasio Moreno gas pipeline has a capacity of 0.7 Bcf/d, and the Gasoducto Norte pipeline is being reversed to transport natural gas from southern to northern Argentina. These projects are expected to facilitate natural gas exports to Chile and Brazil, reducing the country's liquefied natural gas (LNG) imports.
Despite its increasing production and exports, Argentina still imports 23% of its natural gas consumption, according to data from 2015. As of 2017, the country holds 11 trillion cubic feet (Tcf) of proven gas reserves, ranking 39th in the world. These reserves are equivalent to 6.5 times Argentina's annual consumption, ensuring a stable supply for the coming years.
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Frequently asked questions
Electricity in Argentina is cheap due to government subsidies, a competitive and deregulated energy market, and an abundance of natural gas and oil reserves.
The cost of electricity in Argentina varies depending on location and usage. In Buenos Aires, electricity costs around 5-10 cents per kWh, while in smaller cities with less infrastructure, it can be as high as 33 cents per kWh.
Argentina generates electricity primarily from fossil fuels, with natural gas being the leading source. Other sources include hydroelectric power, nuclear power, wind, and solar power.
Argentina has some of the least expensive electricity prices in South America. Business electricity rates are 82.46% of the world average and 98.97% of the South American average. Household rates are slightly lower in comparison to business rates.
Argentina faces a tight supply-and-demand scenario as reserve margins have decreased, and distribution company services have deteriorated. To meet increasing domestic demand, Argentina has imported electricity from neighbouring countries. The country has also started to invest in renewable energy sources and energy efficiency measures to reduce its power demand.
