Despite Financial Crises, Argentina Charged Ahead With Renewables

(Bloomberg) -- Despite endless financial difficulties, Argentina has seen a remarkable increase in clean energy over the past decade. It has gone from practically zero to almost 18% of its electricity sourced from renewables. In doing so, Argentina has overcome a challenge faced by many countries that are considered uninvestable by major financial institutions. Sebastian Kind, former undersecretary at the ministry of energy in Argentina, joins Akshat Rathi on Zero to tell the story of Argentina’s renewables blitz.

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Akshat Rathi  0:00  

Welcome to Zero. I am Akshat Rathi. This week: How Argentina got money for renewables.

Akshat Rathi  0:18  

Around the world, there is a quiet revolution taking place. Day after day, more and more renewable energy is being installed. And yes, it's happening in the US too. But the reality in 2025 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.

Newsreader Montage  0:44  

Argentina's central bank has raised the country's interest rate to 60%. President Trump welcoming his political ally Argentina's President Javier Milei to the White House to announce a $20 billion 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 $7 billion on top of the $50 billion that it agreed in June.”

Akshat Rathi  1:10  

Still, over the past decade, Argentina has undergone a remarkable clean energy transformation, going from practically zero in 2015 to almost 18% 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 unanimous support in the Senate in 2015. 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 him what's made Argentina's renewables drive possible, whether President Javier Milei is still in favor of renewables, and how Argentina's relations with the US and China are playing out.

Akshat Rathi  2:18  

Welcome to the show, Sebastian. 

Sebastian Kind  2:19  

Thank you very much, Akshat. Thanks for having me. 

Akshat Rathi  2:22  

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 10 countries in per capita income at the start of the 20th century, richer than Italy, than Japan, than even Argentina's colonial master Spain. Now it ranks 70th in the world in terms of GDP per capita. What happened to Argentina?

Sebastian Kind  2:49  

Wow, that's an amazing question. I mean, just  for the audience to understand, Argentina is a country almost as big as India, with only 45 million inhabitants. It was a flourishing country, definitely, that's why my grandparents came to Argentina at the beginning of last century. I think that 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 for what we can do, what we could do, and with what we will be 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.

Akshat Rathi  3:44  

So a lot of Argentina's wealth was built through agriculture in the late 19th, early 20th century. You know, very fertile lands. But of course, you talk about natural resources, there's oil and gas, there's metals. But if you come to this century, you say it's been mismanagement over the past few decades — 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?

Sebastian Kind  4:22  

It's super complex. I mean, I remember being a kid in the 80s, and remember my father in the supermarket with me, telling me, ‘hurry up and get the milk before the person that was marking prices comes to the shelf where the milkweed is’. So imagine living in that kind of concept. And that kind of environment definitely teaches you a lot of things and shapes you in the way we live. And I think most of the things that are done, or we've done as a team in the energy sector, came through those kinds of experiences that we had. The country has had, I would say, very difficult times in dealing with inflation and fiscal 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, the so-called tax on the poor, right? And also in terms of how difficult it is to solve it. I mean, the main problem behind this fiscal deficit is, I would say. What the government today is aggressively tackling. But for the audience to understand, a fiscal deficit means that you spend more than you receive, something as simple as that. And at the national level, this has been happening for decades. So eliminating the inflation is not easy in a country where almost half the population currently lives 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 diverging spiral.

Akshat Rathi  6:09  

So you have spent most of your career in the renewable energy industry. Specifically, building things in Argentina since at least 2006 What drew you to renewable energy?

Sebastian Kind  6:22  

I'm an engineer by training, and I have been researching renewable resources since the late 90s, 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. We were importing fossil fuels, while at the same time the country is super rich in natural resources. So since the very beginning of my career, that was something that blew my mind, saying, ‘Okay, we should do something to put two things together?’ All the economic strains that the country was into, combined with this use of natural resources, we have to cut basically all the imports and all the dependency on external people.

Akshat Rathi  7:29  

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 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 and the sun. But getting the government, especially at a time of financial crisis and as a result of which, political crises, to agree on a forward looking clean energy plan that requires years, if not decades, of planning, is hard. And yet you found a way to get a renewable energy law passed in 2015. How did that come about?

Sebastian Kind  8:15  

The benefit is so clear, Akshat. Imagine that when you build, as a nation, you have the chance to build your power system. You say, Okay, we can go to build fossil fuel power plants or combined cycles, or whatever. In that sense, that's quite easy. You put little capital, and little means when you compare it to other sources like renewables. And then you feed the machine, right? You put fossil fuels 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 of 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 it is capital intensive, and you need to find a way to structure them in the long term. Otherwise it will not be competitive. But once you can do it, you resolve many things at once.

Akshat Rathi  9:21  

And so you work on this renewable energy law, which has received support from all political parties, it became law in 2015. And yet that in itself is still not enough to actually start building renewables. You needed other financial tools. Why was that the case?

Sebastian Kind  9:40  

Because imagine 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 trip. In this case, the law was more than just the desire. There were a couple of interesting things put in 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 or in the States, in this regard, it's pretty much the same. It's quite uncommon to have enemies in the Congress to vote in favor of 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 suffered by my own words, but that's another story.

Akshat Rathi  11:01  

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

Sebastian Kind  11:07  

Interestingly, the most important thing we built is what I always like to call the worst 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 call the revolving energy payment guarantee, which is like a liquidity facility. Or, let's say money 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, couldn't cover for whatever reason, right? So basically, we said to the investors that if there is any delay in payment, they can get the payment on the due date anyway. Why is this important? Because when you want to structure your project in let's say, project finance, non recourse, as is one of the most common ways of structuring 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 20 years of contract you're about to sign, you will not get into that right? 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 had many crises, 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 payers risk, which was again, the independent system operator in Argentina, like the national utility might be, into the sovereign risk.

Akshat Rathi  13:10  

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

Sebastian Kind  13:15  

Exactly. Why? Because the company might have problems to pay, but that doesn't mean that the government, the national government, cannot pay, cannot cover those obligations, right?

Akshat Rathi  13:28  

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

Sebastian Kind  13:34  

Exactly in the past, the government of Argentina frequently halted currency conversions and restricted money transfers abroad. So of course, we knew that. And we said: okay, 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 down, 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 give that restriction to them, and they will get the investment back. So we decided to offer a third step guarantee, what we call the early termination payment guarantee, which is a guarantee that we structured through a negotiation that we had with the World Bank as ultimate guarantor. It 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?

Akshat Rathi  14:55  

So there's three layers of guarantees that help a foreign investor 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 2015, less than 2% of Argentina's power came from renewables, and then you set a target to reach 20% by 2025 Yeah. How has it worked out?

Sebastian Kind  15:37  

Okay, this week we reached an amazing number of over 44% of peak coverage in the country. And we are reaching the 18% average by the end of the year, so almost in line with the crazy ambitions that we set in the law 10 years ago.

Akshat Rathi  16:00  

But at the same time, the amount of gas in the system has gone up as well?

Sebastian Kind  16:04  

Well, you know, Vaca Muerta 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 importing fossil fuels because the capacity we have 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 have been exporting oil for a long time, and now there are many projects to export gas in LNG ships.

Akshat Rathi  16:45  

So by one count, about $11 billion 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?

Sebastian Kind  16:57  

Wow, a lot of them. Imagine, that's a lot of money. So we have different kinds of banks all over Europe, the States, some banks in Latin America, and some Argentinian banks as well. We have DFIs, commercial banks, multilaterals, all kinds. 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 AES or Total in France, 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 get into this game. But $11 billion is a lot of money. So investment from all over the world.

Akshat Rathi  17:47  

You didn't mention China, but China has made a lot of investments in Argentina, and we know China is the largest maker of a lot of electricity generation or transmission equipment. How big has the Chinese influence been?

Sebastian Kind  18:00  

It was important, but was not the main one in terms of direct investment as a power producer, though it was significant. And of course, the solar business is mainly supplied by China, not just in Argentina, but in the world. And some of the wind turbines as well, with some important turbine manufacturers working in the country, not only supplying but also developing renewable projects. So definitely important, but not the main one, which was quite scattered all around the world.

Akshat Rathi  18:34  

This year, there's been other news about more financial problems that Argentina is facing, and Javier Milei, who is the president now, is being bailed out by the US. But regardless of the politics side, one thing that Scott Bessent, the Secretary of Treasury in the US, said is that they are keen on supporting Argentina to get China out. What does that mean?

Sebastian Kind  18:56  

Well, who knows? We should ask him. I think it's quite obvious what the US is doing in the West in general terms. I mean the presence of China in Latin America, but also 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, though it is painful, because many people will 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 US.

Akshat Rathi  19:39  

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 you need 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 in 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?

Sebastian Kind  20:09  

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 where transmission exists for projects that do 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 bringing those electrons to 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 help 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 building new infrastructure. So if you ask me, ‘how can you deal with new transmission, and why and what happened that China put money into transmission in different markets and not in Argentina?’ So far, we didn't need it in the last 10 years. And 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?’

Akshat Rathi  21:40  

After the break, I ask Sebastian whether President Milei 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 write a review on Apple Podcasts and Spotify, and we appreciate every single one. Thank you.

Akshat Rathi  22:21  

Let's come to the now, right? You were in government trying to set this goal and then trying to create these guarantees from 2015 to 2019. 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 2017 there's a rapid rise, and yes, it's reached 18% by the end of this year, not quite 20, but close. But it has plateaued in its rise over the last few years. Do you think under Milei there is support for renewables?

Sebastian Kind  22:53  

I wouldn't say there is support, or there's not support. In general terms, there is a market that was built at a time that has its own life, no matter who comes in power, unless someone wants 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.

Akshat Rathi  23:30  

Yeah, 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 2015 law 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…

Sebastian Kind  23:54  

Well, those things will not go away, because there are two things that we built here years ago. One is what we call the purchases of the national state, which was the RenovAr program, and the other one was 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. It’s because of the market rules that were built in that sense.

Akshat Rathi  24:39  

But the government program also was important in getting renewables going. So what do you think happens if the government side is not renewed and there's no new target to meet renewables? How much do you think, in the next 10 years, just based on private forces, could you build renewables? You've got almost 20%, where does the next 10 years go?

Sebastian Kind  25:03  

That's very interesting. The program from the government might not be needed if the market forces as they are built in the corporate side 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.

Akshat Rathi  25:39  

So you're making the case that maybe the government will not come through, and there'll be no extension, and the government anyways is in financial crises of all sorts, but that now renewable story is in 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 batteries. But if 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 100 megawatts of distributed power production. Why has there not been a ground up desire for this clean, cheap energy, if you think markets can help?

Sebastian Kind  26:32  

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, because it's subsidized. So when someone is giving something for free, which is never for free, right? I mean, we know it. There's not really a clear convenience for you to go for that. I mean, this is going out, is phasing out, as the government is making huge efforts to reflect the real prices. Which brings another problem, which is, now you start charging for the use of electricity that for decades, nobody has paid. 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 something that 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 emerging markets, and not only in Argentina. That to build long term infrastructure you need long term rules, and the long term investors need to feel confident in this.

Akshat Rathi  27:38  

It's true that government subsidies can distort markets. Sometimes they are distorting markets for the reasons the 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 when it was subsidizing diesel that people used in generators to produce power. But then there are also ways in which these distortions 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, if subsidies for electricity are cut and real prices are visible, people will probably deploy rooftop solar to make cheap, clean electricity.

Sebastian Kind  28:21  

We brainstorm a lot about that. And of course, you can imagine that a person that was born in the early 2000s almost never paid the electricity in his life. So suddenly, with a country that has 50% of the people below the line of poverty, it is not easy to say overnight, ‘You know what? You have to pay for the electricity.’ But electricity was like the air, right? I mean, I breathe, I don't pay for what I breathe. So that concept is something that makes you open the window when your room is warmed up, rather than turn off. The heating definitely is not efficient 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. Someone has to pay, right? I mean, the point is, who's going to pay? But this is not what has 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, wind you can get out of a wind turbine or a solar panel, is peaking in the world. We have wind farms that are above 60%, 65% capacity factor. Solar business above 34-35%. This is crazy. It's 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 the situation that most emerging markets have. You can imagine what it means in Africa to have people  paying twice the price for their own electricity than what they can pay.

Akshat Rathi  30:42  

So you have, since stepping down from government role in Argentina, 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?

Sebastian Kind  30:59  

First to say is that we created RELP a few years ago, inspired by our own experience, basically to offer others what we would have loved to have when we were 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 emerging markets in Southeast Asia, in Africa, and in Latin America and the Caribbean, where governments really need 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 a cooperation agreement that hopefully will go online with Senegal, with South Africa, with Kenya. We are working in the Caribbean, in Jamaica, in Barbados, and in these last two we supported the government directly with a design. In the case of Jamaica, the Renewable Energy Auction was fully supported by RELP to the government. We are now working in the second round of auctions to keep on incorporating renewables and batteries as well in the country. In Barbados, we have been working together with the government, with a ministry of the government of Mia Mottley to support them in the design and implementation of the batteries — the BESS (battery energy storage systems) auction — the first auction they’ve ever run. So that's the kind of thing that we do. We work hands on with the governments.

Akshat Rathi  32:37  

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

Sebastian Kind  32:55  

Exactly, RELP embeds technical policy and financial expertise directly within national governments to design competitive auctions and to integrate the de-risking instruments we bring. I would say, a distinct focus on delivery and effective implementation of that concept of the hands on. So we have people in the field, in the countries, working together with the governments to help them run the things.

Akshat Rathi  33:23  

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.

Sebastian Kind  33:32  

Thank you so much, Akshat, for having me. Really, thank you very much.

Akshat Rathi  33:40  

And thank you for listening to Zero, now for the sound of the week. That's the call of the endangered Florida panther, which lives in Florida's Big Cypress National Preserve. The Preserve is just one of many places in the US that may lose protection as part of President Donald Trump's plan to trim the National Park Service. The White House is proposing a cut of $1.2 billion to the Park Service's budget. Read more about it on bloomberg.com/green. If you liked this episode, please take a moment to rate and review the show on Apple Podcasts and Spotify. This episode was produced by Oscar Boyd, with help from Anna Mazarakis. Our theme music is composed by Wonderly. Special thanks to Sommer Saadi, Mohsis Andam, Laura Millan and Sharon Chen. I'm Akshat Rathi, back soon.

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