Alejandro Sruoga, Secretary of Energy Policy : Interview

Interview : Alejandro Sruoga

How are the state, private players and society contributing to the transition towards innovation?

ALEJANDRO SRUOGA: Since 2016 we have gone from a situation of energy emergency to a state of normalisation. Looking to the future, we are committed to innovation in the sector, with this paradigm change being driven by technology. More renewable energy, electric mobility and the use of smart grids are good examples of interesting areas to develop. The final goal is to reduce energy prices and boost service quality. Here, the role of private activity is extremely important, and there needs to be a clear division of roles between the state as the regulator and companies as executors of innovation.

In this transition process, both companies and the state find themselves at the centre of great public and political exposure, in which social acceptance of necessary change is paramount. System-wide adjustments always depend on the acceptance of society, but a move away from populism is causing a cultural reorientation towards greater efficiency for the state and users. We are now betting on competition, not to benefit specific local or foreign companies, but to achieve lower prices and improve service, whilst developing the local market.

What is the strategy for regional integration?

SRUOGA: We are not seeking to reach agreements at the country level, but rather wish to see each country, with its own characteristics and particularities, apply the most effective methods by which its companies can achieve commercial agreements. The links at the political level will be based more emphatically on overcoming existing challenges to ensure a continuous supply of energy, while business opportunities will arise on their own for technical and commercial reasons.

In this sense, the development of renewables, with its economic and environmental benefits, is causing a paradigm shift in regional systems, with a readjustment of the entire intra- and international power transmission network, and an update of regulatory standards.

What is the role of the Wholesale Electricity Market Management Company (Compañía Administradora del Mercado Mayorista Eléctrico, CAMMESA)?

SRUOGA: CAMMESA should be the operator, the dispatching agent and the entity completing transactions, acting as a guarantor of coherence across the entire system. From the year 2025 onwards, private agents will be making independent decisions to ensure their own energy supply, at their own risk.

In terms of distribution, the regulator will be responsible for stipulating tariffs, and our 75 distributors will guarantee their clients’ supply, removing the state’s responsibility. This will take time, not only because of the changes required in both the private and public sectors, but also because each company will have to manage long-term contracts, which does not yet fully happen, even though we are on that path. CAMMESA must guarantee a safe, reliable and economic operation, while companies must guarantee supply.

How is the state changing the responsibilities for expanding the transmission network?

SRUOGA: The expansion of the power transmission system was previously market-led, but this model is now obsolete. We are therefore transitioning towards the centralised management of the transmission network, defining necessary works to avoid bottlenecks that may limit economic development. Financing is the only missing part of this equation. We have already identified seven urgent renewable energy works to be finished by 2021, and are applying a public-private partnership model – whereby the state defines the work, and the private sector executes and finances it based on a scheme of investment recovery – in the execution of these projects. The role of private players is therefore essential, and the opportunities for them to invest in the transmission system will be very interesting to follow in the medium term, since the state will not be allocating further resources to finance transmission projects.