Uruguay Continues Investments In Renewable Energy Sector

The Uruguayan government recently announced 30 percent of the nation’s electricity would come from wind energy by the end of 2016, the latest in the government’s push for more renewable energy.

This is the latest in a series of public and private investments where Uruguay believes it is able to derive its electricity from wind to the point where it can share with its neighbors, Argentina and Brazil.

Two-thirds of electricity comes from renewable energy, specifically from hydroelectric power. Although, the government is turning toward more solar and wind investments.

Gonzalo Casaravilla, head of the state-owned firm known as UTE, told Bloomberg in June this year the country aimed to be a leader of wind power in Latin America:

When someone calculates the percentage of wind power in our energy matrix, we’ll surely rank among the leaders in the world.

Uruguay, one of the smallest countries in Latin America, is placing major bets on renewable energy because of the lack of fossil fuels in the country and, recently, low oil prices.

Indeed, because of low prices, BP left three offshore oil blocks in early August in the hands of ANCAP, Uruguay’s state-owned energy enterprise. The company believed the rate of return from the project did not compare to other production sites, which led to its exit.

Uruguay could even potentially surpass European nations, like Denmark, in percentage of electricity derived from wind. Of course, as a result of these ambitious plans, the country is promoting itself as a place where foreign companies could invest into its renewable energy sector.

At the Milan Expo in Italy earlier this year, Uruguayan officials pitched private companies on the advantages Uruguay holds with renewable energy projects. Guillermo Moncecchi, Assistant Secretary of Industry, Energy and Mining, highlighted the benefits Uruguay offered as a place of investment for renewable energy companies:

We guarantee a solid infrastructure in expansion and well-prepared human resources.

In addition, the country is benefiting from the declining costs associated with renewable energy. The International Energy Agency, tied to the Organization for Economic Cooperation and Development, estimated solar energy costs to be cheaper by 2020.

At the same time, the government announced plans to reduce energy use throughout the country.

Yet Uruguay is still open to fossil fuels with its “ambitions of becoming a new Atlantic frontier.” The country opened bids for offshore gas exploration earlier this year, but low oil prices made that an impossibility.

Still Uruguay’s renewable energy policies worked out for the best as the country; according to former energy official Ramón Méndez, the mix between responsible institutions and a clear plan helped proliferate renewable investments in Uruguay:

We realized that investors wouldn’t be willing to bet on the country without knowing the risks behind their investment. The energy sector doesn’t have many clear rules and that’s exactly what investors are looking for. Public policies are what provide more certainties, no matter if the state’s role is larger or smaller, followed by a clear legal framework and stability. A government that’s clear on what path it will take is the paradise for investors.

Uruguay, bordering Argentina and Brazil, is dependent on both countries, politically and economically. Indeed, the 2001-02 financial crisis in Argentina affected Uruguayan banks as well. Plus, recent Brazilian woes affected Uruguayan ambitions for liquefied natural gas.

Still, Uruguayan energy helps fulfill demand in both countries where their power supply is not enough for the citizenry.

It should be noted both countries mostly depend on fossil fuels. Argentina, for example, is cited, outside of North America, by the U.S. Energy Information Administration for major shale gas development.

Although, Méndez felt Argentina’s reliance on fossil fuels prevented it’s turn to renewable energy. In fact, he called Argentina “a country based on fossil fuels and because of that it continues to exploit those resources.”

Uruguay hopes to boost its dependence on wind and solar energy and push for more more public and private investment. Indeed, a recent injection of $4 billion by the leftist government into the renewable sector highlights the government’s commitment to alternative fuels.

Although, labor groups in Uruguay want to take one step further and democratize UTE. Considering labor in Uruguay is incredibly strong relative to labor in the U.S., their goal is not easy to dismiss.

As Méndez told Wind Power Monthly last year, the country’s dedication to renewable resources, not just wind energy, is possible in spite of its small size:

The speed of that transformation is an important driving force for our economy and, at the same time, what is more important, we are showing that it is possible to install renewable energy at lower costs and without subsidies

Uruguay, of course, anticipates more investments to become the “Atlantic frontier” in Latin America.

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