How has a small country with no oil reserves managed to reduce its energy costs, decrease its dependence on crude oil and become a leader in renewable energy?
Over the past 10 years, Uruguay has gone from being a fossil fuel-dependent country to one of the global leaders in generating electricity from renewable energy sources, especially wind power. This astonishing development has not only allowed the country to reduce its energy costs, but also to improve its resilience to climate change and strengthen its energy independence.
Does cheap oil mean the end of renewables?
Currently, more than 30% of Uruguay's electricity comes from wind power, while countries like Brazil barely exceed 6%. The Uruguayan government expects this figure to continue to grow, targeting 38% by 2017, which would put Uruguay very close to the world leader, Denmark, which generates 42% of its electricity from wind.
This progress has been made possible by a combination of favourable conditions for wind energy generation, public and private investment, and long-term energy planning. The policies implemented have not only reduced energy costs but also improved the country's energy security.
Favorable conditions for wind energy in Uruguay
Uruguay has a geographical relief that initially did not seem ideal for wind energy due to its gently sloping topography. However, wind measurement studies carried out since 2005 surprised technicians and scientists:
Uruguay has a stable wind resource throughout the year, This has enabled the installation of wind turbines that reach up to 50% of their nominal capacity. This puts the country in an advantageous position compared to other nations, such as the USA, where wind farms operated at 34% of their capacity in 2014.
The development of cutting-edge wind turbines and greater wind stabilization have enabled a substantial improvement in the efficiency of Uruguayan wind farms, which is reflected in a constant increase in the country's installed capacity.
Long-term energy planning
One of the most important factors that has contributed to Uruguay's success in the field of renewable energy has been long-term strategic planning. The 2005-2030 energy plan, designed and implemented with the support of all political parties in the country, has provided a framework of stability for national and international investors.
Unlike other countries, Uruguay has not relied on subsidies to attract investment in renewable energy. Instead, the government has offered tenders with clear guarantees and transparent regulations, which has helped create a safe environment for investors. Contracts signed with energy companies are valid for up to 20 years, ensuring stable income for investors.
Impact of climate change and droughts
The diversification of Uruguay's energy matrix has allowed more than 90% of its electricity to be generated from renewable sources, including hydroelectric, wind, biomass and solar energy. This change has been fundamental to mitigate the effects of droughts which are becoming more frequent due to climate change.
Hydroelectric dams, which for many years were the country's main energy supply, have been affected by droughts caused by global warming. However, wind power has complemented hydroelectric power, allowing water to be stored in dams during windy periods.
According to several studies, dry seasons will become longer and more frequent in the future, making an exclusive dependence on hydroelectric energy unsustainable. Uruguay has made the right decision by diversifying its matrix towards renewable energies.
Innovation and export of renewable energy
The development of wind energy in Uruguay has not only benefited the country internally, but has also opened up new opportunities for the export of clean energy. Uruguay now exports electricity to neighbouring countries such as Argentina and Brazil, which has allowed it to generate foreign currency and strengthen its economy.
Furthermore, Uruguay has been mentioned in numerous international forums as a model to follow in the energy transition. Other countries in the region and around the world are evaluating the possibility of implementing similar policies to accelerate their decarbonization.
The role of public-private partnerships
One of the key aspects that has facilitated the growth of renewable energy in Uruguay has been the use of public-private partnerships. Under this model, private companies are responsible for the installation and maintenance of wind turbines, while the state-owned company UTE manages the distribution network and ensures the purchase of energy from private companies.
This approach has allowed Uruguay to significantly reduce initial investment costs and accelerate the incorporation of renewable energy into its electricity grid. In 2009, Uruguay initiated a series of international auctions for the construction of wind farms in the country, resulting in fierce competition between companies offering competitive rates to supply the country's grid.
The success of this model has been such that in just a few years Uruguay has managed to completely transform its energy matrix, with more than 38% of its energy coming from wind and 45% from hydroelectric power in 2018.
Green hydrogen: the future of energy in Uruguay
Uruguay is not stopping in its quest for 100% clean energy. The next step is the generation of green hydrogen, considered key to decarbonizing difficult sectors such as heavy transport and industry.
Uruguay is currently evaluating various proposals to carry out green hydrogen pilot projects, with a view to exporting clean fuels such as methanol or ammonia internationally. The Uruguayan government has established a roadmap to become a key player in the global green hydrogen market by 2040.
To achieve this ambitious goal, Uruguay is seeking to attract private investment, both national and international, to finance the necessary infrastructure and thus strengthen its leadership in the renewable energy sector.
With these advances, Uruguay continues to demonstrate that an energy transition towards a sustainable future is not only possible, but also economically viable and beneficial for future generations.