Uruguay’s renewable energy revolution

The South American nation spends 3 percent of its GDP on renewable energy infrastructure

Windmills in Sierra de Caracoles, Uruguay.
Windmills in Sierra de Caracoles, Uruguay.ANDRES STAPFF (REUTERS)

The introduction of renewable sources into Uruguay’s electrical grid was – until a short time ago – just a recurrent theme in the media that specializes in the field, the dream of a success story with spectacular numbers. Until the month of July, when that dream was made tangible in the form of lower electricity bills for Uruguayans.

This change is due to the heavy rains that filled reservoirs this year and to the fact that 84 percent of the country’s energy comes from its own natural resources: wind, sun, rain and the burning of agricultural waste. Green sources will soon cover 40 percent of Uruguay’s energy use. The worldwide average is no more than 17 percent.

Starting in July, homeowners will pay 5.5 percent less on electricity bills and small and mid-size companies will pay 6 percent less – a relief for a country where energy prices are high. The cost of electricity has stayed below inflation rates in the last few years – which translates into savings for the consumer – but now these advances will result in a more direct cut in prices.

This country of 3.2 million residents has no oil or natural gas resources and – until not long ago – its high energy prices were dragging down productivity. These costs left a segment of the population out in the cold. Conveniences such as dishwashers and clothes dryers were considered luxuries.

This country of 3.2m residents has no oil or natural gas resources and its energy costs dragged down productivity

Montevideo is the southernmost capital in Latin America. Even though its winter lasts four months, sea winds and humidity that sometimes reaches up to 98 percent makes it feel endless.

Uruguay’s average household income is 41,000 pesos (€1,300) and a family’s monthly electricity bill could easily reach more than 5,000 pesos (€160) when it has to use heating. The more modest homes – about one-third of the population (and with minimum salaries at 9,000 pesos) do their best to deal with inclement weather. People in schools, universities and public offices often go without heat.

But the situation is changing rapidly. “We are talking about a long-term policy here in Uruguay – that’s the main point – because few other countries have one,” says Ramón Méndez, national director of energy since 2008. “All the political parties agreed on this policy.”

Méndez is a physicist and he has spent 25 years designing revolutionary energy policies. “The introduction of renewables increases our energy independence. It’s about economic survival. All this allowed us to guarantee access, something that has been no small issue in Uruguay. So much so that last summer we exported the equivalent of 50 percent of our domestic consumption to Argentina.”

Since 2008, Uruguay has spent 3 percent of its GDP on building renewable energy infrastructure. The country’s model has some singular characteristics. Unlike its neighbor, Argentina, or Spain and the European Union, “we do not subsidize energy,” Méndez says. The public sector and private businesses work under the national energy office, or Dirección Nacional de Energía. The bureau holds auctions and contests and it chooses the most advanced, profitable technology for the country.

Windmills, for example, have been one of Uruguay’s great successes. “Wind is more stable than rain. It comes around every year. It’s a lucrative business,” Méndez says.

In 10 years, this small South American country that once depended heavily on imported oil might be self-sufficient

Javier Tirado, project manager at the Spanish firm R del Sur, confirms Méndez’s assessment of windmills. “Pretty stable in the long term but very inconsistent in the short term.” His company has built the largest windmill installation in the country. It has 25 Spanish-made wind turbines and cost $100 million. Uruguay plans to build another one of the same size.

“The majority of companies working in Uruguay are from Spain because we are pioneers in renewable energy,” Tirado says. “Uruguay’s case is pretty unique. It’s small and so it’s the ideal place to take on these challenges in a way the state can control.”

The state-owned monopoly, Uruguay’s National Utility Company (UTE), is a key factor in energy distribution in Uruguay. The country uses renewable sources “like no other place in the world. It is an interesting invention and we are excited to see how they manage it.”

In 10 years, this small South American country that once depended heavily on imported oil might be self-sufficient and even become an energy exporter. An environmental revolution as silent as windmills.

Translation: Dyane Jean François

Government seeks consensus on oil exploration

M. M.

An oil exploration expedition on Uruguay's Atlantic coast will begin drilling its first well in July. Major oil companies have invested $2 billion to search for hydrocarbons in an area similar in geography to Brazil's Libra field where pre-salt oil deposits were found offshore. In exchange for initial exploration, the government offers companies a 30-year contract.

Uruguayan leaders are hoping to sign an oil-pact similar to the 2008 agreement that led to the introduction of renewable energy sources. The sitting government and its ruling party, Frente Amplio, are seeking consensus to make sure this hypothetically profitable oil industry does not put an end to the development of green energy sources. Others want to prevent the government from using the deposits to provide service to the consumer at almost no cost, as is the case in Venezuela.

It will take at least five more years to know whether Uruguay will become an oil-producer – a condition as advantageous as it is dangerous for the future of the country.

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