Absent Policy, Uncertain Future: The Decline of Argentina's Clean Energy Law

Author: Ana Victoria Domínguez Britos

This article was originally published and produced with the support of Climate Tracker América Latina

As incentives expire, national policy falters, and provinces experiment with their own decentralized strategies, Argentina’s energy transition faces one of its greatest challenges with the looming expiration of Law 27.191. In the meantime, local initiatives are stepping in to confront the national uncertainty.

The Palace of the Argentine National Congress, where the Renewable Energy Law 27.191 was passed in 2015 (Photo: Felipe Restrepo Acosta)

At a moment when the urgency to confront the climate crisis should be accelerating the energy transition, Argentina is moving in the opposite direction. With an energy matrix built on a fossil foundation, oil and gas account for more than 80% of national consumption—a decades-long dependence that limits any attempt to change course.

The approval of National Law 27.191 in 2015 was a watershed moment. It set binding targets to diversify Argentina’s energy mix, created legal predictability, and offered fiscal incentives. Today, however, only 16% of electricity generation comes from renewables, far from the 20% mandated by the law. With the Second Stage of the framework set to expire, both the legislation and the renewable sector face an uncertain outlook. Lacking financing tools, under a government that denies climate change, and with an extension focused narrowly on economic incentives, the challenges for non-conventional renewables are mounting.

But Argentina is more than its national government. For nearly a decade, several provinces have been experimenting with decentralized models and policies grounded in their own resources, capabilities, and local priorities. With no certainty about the future of legal backing for renewables, a question emerges: can these subnational models temporarily lead the energy transition? And how far can a national agenda be sustained when its engine lies in scattered provincial initiatives?

A Legal Framework Falling Behind, and a New One That Doesn’t Accelerate

Argentina's energy transition faces one of its greatest challenges with the looming expiration of Law 27.191. In the meantime, local energy initiatives are taking on national uncertainty. Photo: Mark Stebnicki/ Pexels

When passed in 2015, Law 27.191 marked a major step forward, setting national targets for renewable energy development. Structured in two stages, the Second Stage established a goal of 20% renewable participation in Argentina’s electricity mix by December 2025, supported by incentives to spur growth, an objective that remains far from being met.

The law came after earlier attempts. Law 25.019 (1998) and Law 26.190 (2006) set precedents but delivered limited results, hampered by weak financial mechanisms and reliance on state funds in a volatile macroeconomic context. With a high country risk rating, steep capital costs, and unreliable legal frameworks, investors in large projects lacked guarantees of returns. As Marcelo Álvarez, from the Argentine Chamber of Renewable Energy (CADER), told Climate Tracker: “Investing in renewables requires intensive capital, which is extremely expensive in Argentina. Without payment guarantees, without backup funds, and with currency volatility, the perceived risk makes many projects unviable.”

Law 27.191 sought to address these gaps. Beyond mandatory targets, it created clearer rules for investors and mechanisms like the Renewable Energy Development Fund (FODER), which offered payment guarantees, loans, and project investments. It also included tax benefits such as early VAT refunds, accelerated depreciation of capital goods, exemptions on profits and dividends, and tariff relief for importing equipment. These tools provided predictability, enabling large users to meet consumption obligations through secure contracts and reference prices, while diversifying the energy mix. In 2017, Law 27.424 on distributed generation allowed households, SMEs, and cooperatives to become “prosumers” (both consumers and producers of electricity) by installing solar panels and feeding surplus energy back into the grid, broadening small-scale participation in the transition.

But since President Javier Milei took office, renewable institutions have weakened. FODER has been left practically inactive, while Law 27.424 lost key provisions through Decree 70/2023, undermining implementation. Meanwhile, Law 27.742 of 2024 granted tax breaks and currency benefits to the hydrocarbons sector, reinforcing fossil fuel dominance.

In the absence of a clear state strategy, renewable development now depends on private actors prioritizing profit maximization. For Álvarez, this logic is unsustainable: “Nowhere in the world—whether under planned economies, capitalist economies, or mixed systems—is the energy mix left for the market to decide. Political decisions set the course. Private players then compete to deliver more efficiently and at lower cost, once the strategy, technology, and sources have been defined. It’s never just about picking the cheapest option based on present KWh value alone.”

The Second Stage of Law 27.191 is set to expire on December 31, 2025, the deadline for renewables to reach 20% of national electricity consumption under Article 5. While key provisions like tax incentives, access to renewable sources, and FODER remain in place, other promotional benefits tied to projects under the Second Stage will also lapse. Projects launched between January 2018 and December 2025 qualify for VAT refunds, accelerated depreciation, and other incentives. Beyond that date, new investments lose access to these advantages.

Without an extension or a Third Stage, new renewable projects will face a policy vacuum, eroding market conditions for large-scale development.

Despite this “every-project-for-itself” scenario, renewables remain attractive as investment vehicles and sources of foreign currency, a dynamic that aligns with the current government’s non-interventionist vision. So attractive, in fact, that in August 2025, more than twenty ruling coalition lawmakers introduced a bill to extend Law 27.191 until December 2045.

The proposal seeks to preserve national, provincial, and municipal tax exemptions, fees, and royalties, ensuring legal security so renewable use does not affect project profitability. It also includes structural changes, such as eliminating the obligation for large consumers to purchase renewable energy through CAMMESA, relaxing price caps in contracts, and enabling regime modifications to promote technological and geographic diversification, smart metering, and demand management.

These reforms aim to provide more freedom and predictability for private investment, facilitating large-scale renewable projects, though not necessarily amounting to a comprehensive energy transition policy. As Camila Mercure, Climate Policy Coordinator at Fundación Ambiente y Recursos Naturales (FARN), explains: “For renewables to play a strategic role in the energy mix, you need to bring more actors to the table, define demand, and build a shared narrative on what types of energy you want to promote, not just leave it to megaprojects.”

Álvarez also shares her concern: “This continuity project for Law 27.191 is limited to securing tax benefits and contract intangibility until 2045. It serves one sector of the industry, those investing in large-scale parks requiring big capital, but in terms of sectoral policy, it’s not enough. We need a real transition plan, with an associated roadmap.”

A country trapped in fossils and disorder

Why, if renewables are cheaper and Argentina has abundant solar and wind resources, has the country failed to carve a path toward transition? The answer is complex, rooted in structural fossil dependence that constrains any attempt at change.

Part of the explanation lies in subsidies that reinforce inertia. In the first quarter of 2025 alone, the state allocated more than ARS 420 billion to fossil fuel companies, compared to just ARS 2.889 billion for renewables and efficiency, the lowest level in five years, according to FARN’s Budget Monitor.

Fossil fuel subsidies in Argentina (2017-2023). Source: Author's elaboration based on Ministry of Economy Data

The imbalance is also about the infrastructure underpinning it. Argentina’s national transmission network has seen little expansion over the past two decades. Without new lines, renewable power generated in Patagonia or the northwest cannot be dispatched. As Elisabeth Möhle, investigator at the think tank Fundar, notes, “Without a modernized transmission grid, the energy transition gets trapped in promises that fall on deaf ears.”

Möhle also points out that while the Large Investment Incentive Regime (RIGI) has worked for some big projects, it fails to address structural barriers: “RIGI doesn’t solve infrastructure gaps or the political question of whether there’s real demand to keep advancing the transition. With better infrastructure, more renewable projects would come in, because they require large investments.”

In this context, experts argue that the key to transition is not just macroeconomics, subsidies, or infrastructure alone, but a legal framework that can rebuild political consensus. “What matters is having a law, one that provides order and predictability. That consensus we had in 2015 needs to be renewed,” Möhle emphasizes.

Provinces pushing ahead with distributed generation

Argentina is at a crossroads. But even amid an institutional and political eclipse, other dynamics, often sidelined by market logic, are illuminating alternative paths. Even before Law 27.191, several provinces began crafting their own strategies to avoid fossil lock-in. For those without major oil and gas reserves, renewables offer both economic diversification and energy sovereignty.

Santa Fe, for example, has been advancing a homegrown transition model that does not rely solely on large investors. “We are working to position a subnational energy transition model that can lead to a national one,” Cecilia Mijich, Undersecretary of Renewable Energy and Energy Efficiency in Santa Fe, told Climate Tracker.

In 2006, the provincial legislature passed Law 12.692, creating a promotional regime for research, development, and use of non-conventional renewables. It laid the legal groundwork for solar and wind projects, offering 15 years of tax benefits. Since then, Santa Fe has continued to build momentum, consolidating the process with additional frameworks like Law 14.259, which established a stable regulatory floor.

Today, the Prosumidores 4.0 program allows installations up to 1.5 MW and guarantees differential tariffs for eight years, providing predictability for investors. “Any user who signs up has guaranteed incentives for five years. Even if the government changes, that can’t be reversed,” Mijich notes. The program, evolving since its pilot in 2016 and a major overhaul in 2020, has enrolled hundreds of households, SMEs, cooperatives, and municipalities. By August 2025, the province counted 1,407 active generator-users and more than 10,277 kW of distributed renewable capacity across programs, reflecting steady growth year after year.

The scheme is supported by tools like the Renewable Energy Fund, provincial credit lines with subsidized rates, and agreements with banks, which facilitate access to solar and wind equipment. “For us, renewables is a public policy with a long-term horizon. In Santa Fe we have a provincial framework, our own financing, and the actors to sustain the transition,” Mijich stresses.

She highlights the province’s technical and scientific capital: over 160 renewable energy and efficiency suppliers, trained managers, building energy raters, and specialized graduates from public universities. This local ecosystem ensures that the policy survives political turnover, enabling projects from 3 kW household systems to multi-megawatt private solar farms selling directly to the provincial utility. “It’s a virtuous cycle: users install, companies supply, universities train, and the state coordinates. That’s the real meaning of transition.”

Is Decentralization the Path Forward?

Where the national state retreats, provinces can temporarily fill the void. But can local initiatives sustain a broader transition?

“Distributed generation in Argentina is far behind Brazil,” Möhle notes. “We have much less installed capacity, which affects transport, investment, and financing. Even the lack of clear targets is, on its own, a critical obstacle. Electricity remains very cheap compared to other countries, which discourages individuals and businesses from installing their own systems.”

She explains that while provinces are moving forward, small-scale solutions alone cannot transform the national energy mix. “In many southern provinces, where the technological choice is less obvious, governors prioritize economic efficiency over climate concerns.”

Álvarez adds that provinces do have an opening to lead on distribution networks and decentralized generation, but warns of risks: “It’s not desirable for each province to ‘save itself.’ Santa Fe, Córdoba, and Mendoza can move forward, but others in the center or north will miss out. The gap will widen, and provincial individualism could deepen.”

While provincial leadership cannot replace a national framework, it generates technical expertise, regulatory tools, and evidence that could inform stronger national policies.

For Mercure, decentralization alone won’t guarantee the transition, but local initiatives are essential amid national uncertainty. “When Milei’s administration came in, we focused first on national climate policy, but quickly saw nothing would happen. So we shifted to provinces, many of which had distributed generation plans. Coordination with energy, agriculture, or industry remains a challenge, but there is will to act, and we must seize it.”

“These local experiences aren’t perfect, but they’re worth amplifying when the national government is absent,” Mercure continues. “Provinces can play a bigger role. We need to listen to them, support their ideas. Distributed generation can also address social and environmental issues, foster inclusion, and drive local development. At the very least, we need to try, and sustain, the transition despite the uncertainty.”

As for the extension of Law 27.191 currently before Congress, it could secure incentives until 2045, though it lacks renewable participation targets. For Álvarez, the absence of goals is a dealbreaker: “Without clear targets, provincial and community action cannot make up for national inaction. We have the opportunity to turn this situation around through a transition law with a roadmap that opens doors to international climate finance, lowers local energy costs, and creates more jobs per unit of energy generated. That’s what we have, and we need to make use of it.”