European Wind-Turbine Manufacturers Flock to Booming Argentina
European wind-turbine manufacturers, hungry for growth, have set their sights on Argentina’s booming renewable-energy market .
The latest example is Nordex SE, a German turbine supplier that’s planning its first assembly plant in Argentina. It’s the second time in the past week the country has attracted a European manufacturer.
Argentina offers a bright spot for international turbine companies as the wind industry faces falling prices and slower growth. The country received $1.8 billion in clean-power investments last year, up from almost nothing in 2016, and has some ambitious goals, according to Bloomberg New Energy Finance. That’s especially attractive for Nordex, which expects weak demand this year in its core European market and is seeking to cut costs.
“We intend to be a very active player in Argentina,” Vincent Riedweg, Nordex’s country manager for Argentina, said in an interview. “Localizing production in Argentina is a way to reduce the cost of energy.” The company is in advanced talks with a local industrial partner that will help it set up the facility and expects to formally announce the plant within a few weeks, though he declined to say where.
Argentina got about 60 percent of its energy from fossil fuels in 2016 and almost nothing from renewables. It’s set a goal of boosting clean-energy consumption to 20 percent by 2025, a plan that will include 10 gigawatts of new wind farms — equivalent to about 10 nuclear power plants.
That’s drawing big, international turbine companies like Denmark’s Vestas Wind Systems A/S, which said March 13 it’s building an assembly plant in Argentina. The world’s second-biggest supplier is already the leader in the country, with orders for almost 600 megawatts last year.
Hamburg-based Nordex got its first orders there in December 2016, and in October agreed to supply turbines for a 101.4-megawatt project. About 80 percent of its revenue came from Europe before it acquired Spain’s Acciona Windpower SA in 2016, bring a pipeline of projects in the Americas that reduced that figure to 50 percent. It has installed about 2,300 megawatts of components in Latin America and has production and assembly facilities in Brazil, Chile and Mexico.
‘Promising’ Market
“The fact that the big ones are entering in Argentina is a sign that the market is promising,” said Ana Verena Lima, an analyst with of Bloomberg New Energy Finance in Sao Paulo. A key hurdle will be a lack of transmission infrastructure that’s slowing development.
“Turbine makers are excited about Argentina, but they have to consider the long term view,” said Verena. “They might have a hard time in signing contracts in the future if new transmission lines aren’t built.”
Financing may be another barrier in Argentina, which has a history of nationalizing foreign-owned companies and a below-investor-grade credit rating.
A key mechanism for boosting the wind and solar power in Argentina has been its RenovAr renewable-energy auction program. To spur confidence, the government created a loan-guarantee mechanism that lowers risks. And Nordex spokesman Ralf Peters said the company has relationships with international banks and may be able to help customers access financing.
“The country needs to install new capacity and has a lot of potential, with excellent wind resources,” Riedweg said.
Source: Bloomberg L.P.
