The purpose of this article is to describe a process of transformation which, much like in other areas of Argentina’s infrastructure, has taken place within the electric power industry from its transfer to the private sector in the early 1990s to the present day, and to explore what may lie ahead.
This process of change is not primarily concerned with the evolution of the regulatory framework, but rather with the changing roles of the industry’s participants: those who were there at the outset, those who are active today, and those who may—or may not—emerge in the future. This transformation is far more than a matter of terminology. It entails a profound redefinition of functions, whereby nearly every participant has had to relinquish, at least in part, the activities they traditionally performed in order to undertake new ones, with the resulting regulatory and economic consequences. The same is likely to occur for existing participants going forward, as well as for those entering the sector, whether as a consequence of past shortcomings and structural limitations or as a result of technological progress.
In this sense, every participant has been—and will continue to be—required, whether through action or omission, to contribute something of its own. Yet the story does not end here. We are currently in the midst of a transition in which the “spinning top” continues to rotate with an unprecedented dynamism. It is nevertheless fair to anticipate that transmission and distribution systems are the segments that have relinquished—or will ultimately be required to relinquish—the greatest share of their traditional roles.
Back in the 1990s, when I was a young attorney working for an electric utility company (then publicly owned and vertically integrated), a handful of bulky devices—later colloquially known as “bricks”—began to appear, allowing people to communicate wirelessly with one another. Thus began the story of the mobile phone.
Those early mobile phones weighed approximately one kilogram, measured nearly thirty centimeters in length, required eight hours to recharge, and offered only thirty minutes of battery life. What fascinated me most at the time was that no cable or physical connection whatsoever was needed to communicate. I remember thinking to myself: “That could never happen with electricity. Electricity will always require wires—lots of wires.”
Today, I am no longer so certain. Let us examine why.
Law No. 24,065, together with its implementing decree and The Procedures (Los Procedimientos), not only established a Regulatory Authority and transferred Argentina’s electric power industry to the private sector; with respect to the market participants responsible for operating the sector, it also vertically unbundled the existing electric utilities, transferred the resulting business units to private ownership, formally consolidated cogenerators and self-generators, and created Large Users as market participants within the Wholesale Electricity Market (Mercado Eléctrico Mayorista – MEM).
Considering the system from which Argentina was transitioning, these reforms amounted to a genuine revolution. Large Users—later classified as Major Large Users (GUMA), Minor Large Users (GUME), and subsequently Demand Management Users (GUDI)—were not generators. Nevertheless, they effectively participated in electricity trading by transacting surplus energy balances. Self-generators operated in much the same way: they sold electricity whenever they produced more than they required and purchased electricity whenever their own generation proved insufficient.
It is worth emphasizing that the emergence of Large Users throughout the provinces brought about the first significant shift in the functions of industry participants.
Provincial distribution companies, adversely affected by the tax treatment applicable to direct transactions between Large Users and MEM generators (since a Large User purchasing directly from the MEM incurred Gross Turnover Tax only once, whereas purchasing through the local distributor resulted in the tax being applied twice—once when the distributor acquired the electricity from the MEM and again when the Large User purchased it from the distributor within its concession area), gradually witnessed the migration of their largest customers.
As physical bypasses of the distribution network were generally prohibited—with only a few limited exceptions, excluding the well-known case of Minera Alumbrera—distribution companies effectively became mere carriers of electricity purchased by Large Users in the MEM. In exchange, they received a wheeling charge and, for those specific transactions, assumed the role of Additional Providers of the Technical Transmission Function (Prestadores Adicionales de la Función Técnica de Transporte – PAFTT).
In other words, within these arrangements they were no longer exclusively monopoly distributors and retailers within their concession areas; they had also become, in practical terms, transmission service providers.
Following the 2001 crisis, the framework established during the 1990s underwent a series of substantial and fundamental modifications, primarily concerning economic matters such as electricity tariffs and their conversion into pesos, tariff components (including the cost of unserved energy), dispatch rules (with the abandonment of the short-term marginal pricing system), and other related issues. However, the roles performed by the industry’s participants remained largely unchanged. Much has already been written about that period, and since it falls outside the scope of this article, there is little value in revisiting it here.
As time went by, and in line with an international trend driven by growing concern over the harmful effects of excessive carbon dioxide emissions, renewable energy sources emerged with remarkable momentum.
At first glance, it could not be said that renewable energy sources—some of which have their own environmental impacts while others are inherently intermittent—had, by themselves, altered the roles or prerogatives of the industry’s participants. They initially appeared to constitute merely a complementary market to the one already in existence, differing only in the primary source of generation involved. However, reality proved to be somewhat more complex.
To begin with, if Large Users choose not to purchase electricity from generators producing renewable energy, they may instead satisfy their renewable energy obligations through self-generation.
Moreover, many large industrial companies, going beyond the legal requirements and often motivated by the desire to demonstrate their environmental commitment, have installed extensive wind farms and large-scale photovoltaic parks within their own premises. As a result, they have withdrawn a significant portion of demand from both the distribution and transmission systems, producing corresponding technical effects on network loading while simultaneously reducing tariff revenues, even though the Distribution Added Value (Valor Agregado de Distribución – VAD) remains essentially unchanged.
One might argue that distributors and transmission companies would still transport any surplus electricity sold by renewable self-generators, or supply them whenever their own generation proved insufficient. In practice, however, every renewable self-generator seeks to produce, on-site, an amount of electricity as close as possible to its own consumption requirements. Consequently, the volume of electricity flowing through the public grid is substantially reduced.
Nor is this the end of the story.
Distributed generation has also developed, creating a situation similar to that of self-generation, albeit on a much smaller scale.
Although distributed generation was initially introduced in Argentina to increase electricity production during periods of peak demand—including projects based on fossil fuels, such as the Plan Verano—and to relieve congestion at heavily loaded transmission nodes, its fundamental concept is to transform an ordinary customer into a customer-generator capable of producing and selling electricity generated from renewable sources.
The system operates in a relatively straightforward manner. A customer, typically a residential consumer, installs generation equipment—most commonly rooftop solar photovoltaic panels—and uses the electricity produced to satisfy household consumption. Any surplus electricity is sold to the distribution company, whereas any shortfall is purchased from it.
Once again, demand is effectively being withdrawn from the traditional electricity network.
Not long ago, I came across an article raising a particularly troubling scenario. It argued that, in a region of northern Brazil characterized by exceptionally high levels of solar radiation, if distributed generation continues to expand at its current pace, the regional transmission system could become incapable of operating for approximately four hours each day—most likely around midday—by 2029, simply because insufficient load would remain connected to the network.
Should such a situation materialize, the consequences would extend far beyond tariff-related issues. Part of the population would continue to enjoy the benefits of refrigeration, air conditioning, and other electrically powered comforts through their own generation systems, while another segment of society would be exposed to the sanitary and health-related consequences of lacking access to those same essential services during periods of extreme heat.
At this point, I would like to turn to two technologies that have not yet fully entered the public debate but which, in my view, may play a significant role in the years ahead: Battery Energy Storage Systems (BESS) and Small Modular Reactors (SMRs).
Let us begin with BESS.
Conceptually, a Battery Energy Storage System operates through a relatively simple process. Large battery units—typically housed in containers—are charged whenever the generation system, and in some cases the transmission system, has sufficient available capacity. The stored electricity is subsequently discharged whenever the available generation is insufficient to meet demand.
In Argentina, the deployment of BESS began through two government programs and competitive tenders, one covering the Buenos Aires Metropolitan Area (AMBA) and the other the rest of the country. Their primary objective was to relieve congestion at critical transmission nodes during periods of peak demand, typically between 7:00 p.m. and midnight.
Under this model, generators sell electricity to storage operators—who effectively become generator-marketers and represent a new category of participant within the electricity industry. These storage operators subsequently inject the stored energy into the system during periods of network congestion, thereby supplying demand that distribution companies would otherwise be unable to serve.
The response to these initiatives greatly exceeded initial expectations.
The second program, dedicated to transmission nodes located throughout the country’s interior and whose results became available only recently, proved particularly successful. While the tender sought to award 700 MW of installed capacity, thirty-seven companies submitted 235 projects totaling 8,335 MW—approximately twelve times the capacity being procured. Even more remarkably, the average prices offered by the successful bidders were roughly thirty percent below the maximum ceiling price established in the tender specifications.
Nevertheless, when viewed from the perspective of the traditional electricity model, BESS represents, at least to some extent, a substitute for expanding the transmission network and, depending on where the storage facilities are located, potentially the distribution system as well.
If this technology continues to expand with the momentum it has demonstrated thus far—which is not necessarily undesirable—electricity storage will emerge as an entirely new segment of the power industry. Consequently, the physical expansion of the transmission grid will likely be considerably smaller than would otherwise occur under the conventional expansion methodology established in Annex 16 of The Procedures, notwithstanding the Argentine Government’s decision to incorporate the mechanisms of Law No. 17,520 governing toll-financed public works, a framework originally conceived for highways and road infrastructure.
Ironically, however, this was never the original purpose of BESS.
Battery Energy Storage Systems were developed and are now deployed worldwide primarily to compensate for the sudden fluctuations in generation associated with intermittent renewable energy sources. They provide electricity whenever solar irradiation declines abruptly—including, naturally, after sunset—when wind speeds decrease unexpectedly, or, in the case of small hydroelectric facilities, when drought conditions reduce water availability.
Under these circumstances, electricity systems can continue operating without immediately resorting to fossil-fuel generation.
In that sense, BESS may well represent the beginning of a decisive shift in the long-standing competition between renewable energy and fossil-fuel-based generation.
For descriptive purposes, it is worth highlighting several of the principal technical characteristics of Battery Energy Storage Systems, together with some of the world’s leading projects currently under development.
The principal technical features of BESS include the following:
- Discharge duration. Most utility-scale systems are designed to discharge continuously over periods ranging from two to four hours.
- Service life. Because batteries undergo continuous charging and discharging cycles, together with the associated chemical degradation, their expected operational life generally ranges between ten and fifteen years.
- Energy source flexibility. Batteries can be charged using electricity generated from virtually any primary energy source, including nuclear power.
- Energy density. Although their energy density is moderate, utility-scale installations are highly compact and are generally deployed in modular containerized units.
- Capital investment. Initial capital expenditures (CAPEX) are relatively moderate compared with many conventional generation technologies.
- Public acceptance. Unlike nuclear facilities, BESS projects generally face little or no public opposition.
- Modularity and scalability. Storage units may be installed almost anywhere, allowing exceptional flexibility in system planning and expansion.
- Operational versatility. Depending on their size, BESS installations can supply electricity to heavy industry, entire urban areas, or simply provide peak-shaving services.
Finally—and perhaps most importantly—Battery Energy Storage Systems possess an unmatched response speed. Their ability to inject or absorb power almost instantaneously enables them to mitigate the rapid fluctuations characteristic of intermittent renewable generation. When installed adjacent to renewable generation facilities, BESS effectively prevent the costly voltage fluctuations and network flicker that would otherwise affect transmission and distribution systems.
Among the most significant BESS projects currently under development or already in operation worldwide, the following deserve particular mention:
1. Australia–Asia Power Link (Australia).
This is the world’s largest energy storage project. It is supplied by a massive solar generation complex located in northern Australia and supported by a Battery Energy Storage System with a storage capacity ranging between 36 and 42 GWh. (For reference, 1 GW equals 1,000 MW.) In addition to supplying Australia’s domestic grid, the project is designed to export electricity to Singapore through an extensive submarine cable system.
2. Al Aseezah BESS (United Arab Emirates).
This project is integrated with a large photovoltaic solar facility from which it receives electricity for charging. Its purpose is to provide a continuous and reliable 1 GW supply of electricity regardless of fluctuations in solar generation.
3. Green Energy Corridor – Ladakh (India).
A project specifically designed to facilitate the integration of renewable energy resources in one of the world’s most geographically challenging high-altitude regions.
4. Darden Clean Energy (United States).
5. Khavda BESS (India).
Finally, I would like to mention the project that is perhaps of greatest relevance to our region: Oasis de Atacama (Chile).
The Atacama Desert in northern Chile—home to the country’s copper mining industry, which accounts for approximately half of Chile’s exports—receives some of the highest levels of solar irradiation on the planet. There, the Battery Energy Storage System is charged throughout daylight hours and subsequently discharged during the night, allowing solar energy generated during the day to satisfy electricity demand after sunset.
Having examined energy storage, it is now appropriate to turn our attention to Small Modular Reactors (SMRs).
I believe this discussion is particularly worthwhile because, in light of the substantial increases in electricity consumption that can reasonably be anticipated over the coming decades, these small nuclear reactors may well play a decisive role in the future development and expansion of the electric power industry.
It should not be forgotten that Argentina possesses one of the world’s most advanced nuclear sectors, supported by highly qualified technical professionals whose expertise enjoys international recognition.
At present, Argentina’s domestic SMR development program is reportedly somewhat more than sixty percent complete. At the same time, INVAP is developing the design for four 300 MW Small Modular Reactors—known as ACR-300—envisioned for the Atucha nuclear complex.
From a technical standpoint, SMRs generally fall within a capacity range of approximately 20 MW to 300 MW and possess a number of highly attractive characteristics.
First, unlike conventional nuclear power plants, they do not necessarily require proximity to large rivers, lakes, or other abundant water sources. Depending upon the reactor design, cooling may be achieved through relatively small quantities of water, passive cooling systems (such as those employed by NuScale reactors), or alternative technologies using gas, molten salts, or liquid metals.
This exceptional flexibility regarding plant location undoubtedly constitutes one of their greatest advantages.
Second, their compact size considerably expands the range of suitable deployment locations.
SMRs may be installed in remote areas with relatively weak electrical networks—whose capacity they do not overwhelm—as well as adjacent to, or even within, industrial parks, manufacturing complexes, and large-scale data centers.
To illustrate this point, a 300 MW SMR, such as those proposed by NuScale or Rolls-Royce, typically requires between two and fourteen hectares for the complete facility.
The reactor itself—the nuclear island where fission actually occurs and which appears in photographs as the characteristic semi-cylindrical containment structure—may occupy a footprint of approximately 200 by 150 meters.
By comparison, a photovoltaic installation capable of delivering an equivalent amount of continuous electricity (approximately 300 MW of effective output) would require roughly 1,500 hectares because of the intermittent nature of solar radiation and the comparatively low energy density of photovoltaic panels.
Third, unlike large conventional nuclear power stations, SMRs are capable of load following.
For technical reasons beyond the scope of this discussion, traditional nuclear generating stations operate almost exclusively as baseload plants, producing electricity at essentially constant output. They cannot simply reduce their generation, for example, from 500 MW to 300 MW; doing so generally requires shutting the reactor down altogether.
In practical terms, conventional reactors are either operating at essentially full rated output or not operating at all.
Small Modular Reactors, by contrast, are capable of adjusting their power output to accommodate changing system requirements.
Although they cannot modulate generation as rapidly as Battery Energy Storage Systems, they are nevertheless well suited to regulating the electricity they deliver to the grid.
Fourth, a standard 300 MW SMR is capable of supplying electricity to approximately 650,000 households, equivalent to roughly 2.1 million people under typical residential consumption patterns. If the electricity is devoted primarily to industrial use, the number of end users that can be served is, naturally, substantially lower—approximately half that figure.
Fifth, another noteworthy technical advantage is the exceptionally long operating cycle between refueling outages. Certain advanced SMR designs are capable of operating for periods ranging from seven to twenty years without requiring refueling, thereby significantly reducing operating interruptions and maintenance requirements.
Sixth, the fuel used in conventional SMRs may be recycled—albeit only once—and the volume of high-level radioactive waste generated during an entire year of operation is remarkably small, fitting within a container of less than one cubic meter.
Collectively, these characteristics make SMRs particularly well suited for installation within industrial parks, manufacturing complexes, mining operations, or large-scale data centers, allowing them to operate independently of the traditional transmission and distribution systems while avoiding transmission losses and enhancing supply reliability.
This configuration is commonly referred to as a behind-the-meter system.
Under this model, the reactor is connected directly, through medium-voltage lines, to an internal substation serving the industrial park, production facility, or data center. The entire installation operates as an electrically isolated system, independent of the interconnected grid.
Consequently, traditional generators, transmission companies, and distribution utilities play virtually no role in this arrangement.
Given the characteristics of this technology, two additional developments deserve special attention.
The first is the extraordinary growth of energy-intensive activities based on large-scale data centers, including artificial intelligence, cloud computing, and cryptocurrency mining.
The second is Argentina’s evolving investment framework, particularly the Large Investment Incentive Regime (RIGI) and its proposed expansion through the legislative initiative currently known as RIGI-NI—more informally referred to as the “Super RIGI“—which is intended to promote new strategic investments.
With respect to the first development, the issue is straightforward.
Modern data centers consume enormous quantities of electricity on a continuous basis. A single large data center may require a permanent supply ranging from 100 MW to 300 MW, with virtually no interruption.
I have personally become aware of one project in which the data center constituted such a critical component that the proposal included the construction of a 1,200 MW combined-cycle thermal power plant dedicated exclusively to serving its electricity requirements—roughly equivalent to the installed generating capacity of either Central Puerto or the El Chocón hydroelectric complex.
Projects of this magnitude will inevitably require dedicated generating facilities of their own. Should transmission infrastructure become necessary, it will most likely consist of private lines constructed exclusively for the project itself.
Such developments will effectively become isolated self-generators, operating even outside the Argentine Interconnected System (SADI), simply because the existing network will lack the capacity to supply the enormous electrical loads involved.
The world’s leading technology companies whose businesses depend heavily upon large-scale data centers—including Google, Amazon, Meta (Facebook and Instagram), Microsoft, and others—have already entered into strategic agreements with major energy developers and nuclear technology providers such as Energy Northwest, X-energy, Oklo Inc., Constellation Energy, and the Crane Clean Energy Center, either for the deployment of Small Modular Reactors or for the long-term supply of carbon-free electricity generated by existing nuclear facilities whose operating lives have been extended.
Furthermore, recognizing that this dramatic increase in electricity demand could significantly increase electricity prices for residential consumers, several major technology companies—including Amazon, Google, Meta, Microsoft, OpenAI, Oracle, and X (formerly Twitter)—have entered into agreements with the United States Government under which the companies committed themselves to financing, with private capital, the additional nuclear generating capacity and supporting infrastructure required to satisfy the energy needs of their own data centers.
Once again, confronted with the limitations of the traditional electricity model that has prevailed for decades, it is no longer merely the roles of existing market participants that are evolving.
Entirely new, autonomous systems are emerging to address highly specialized—but rapidly expanding—forms of electricity demand.
Although these systems remain part of the broader electricity industry, they increasingly reduce dependence upon extensive transmission and distribution networks. Where transmission infrastructure is required, it is substantially shorter, resulting in lower electrical losses, reduced capital investment, and significantly lower maintenance costs.
In short, fewer wires—far fewer than I ever imagined possible—and electricity services that are safer, more reliable, less expensive, and environmentally cleaner.
This phenomenon is no longer confined to other parts of the world.
It is already beginning to reach Argentina.
A final observation should be devoted to electric mobility.
As the market for electric vehicles continues its sustained expansion, the electricity system as a whole—and the distribution sector in particular—will inevitably require substantial reinforcement in order to accommodate this additional demand without adversely affecting existing consumers.
(In this regard, the participation of Edenor’s controlling shareholders in the acquisition of Shell’s service station network may well reflect a long-term strategic vision aimed precisely at this emerging market.)
One possible solution would involve constructing charging stations supplied by relatively small SMRs—perhaps around 20 MW each—which, in turn, would charge multiple Battery Energy Storage Systems. Since BESS installations may be charged using electricity generated from virtually any primary energy source, these storage systems could then recharge electric automobiles and heavy-duty vehicles safely and, quite possibly, more rapidly than current technologies allow.
Looking back over the evolution described throughout this article, one can clearly observe how an electricity sector that once operated under a comparatively rigid institutional structure is gradually undergoing a profound transformation.
The traditional identities and functions of its participants are changing; new participants continue to emerge; and the industry is acquiring a degree of dynamism unprecedented in its history.
This transformation, however, is not without cost.
Every participant—both old and new—must relinquish something in order to accommodate the new technological and commercial realities.
If it were possible to capture a single image of this spinning top that never ceases to rotate, the inscription on its side would read:
“Everyone Has to Chip In.”