Lacking conventional energy sources such as gas, oil or coal, Uruguay faced energy supply challenges and high production costs in 2008-2009, driven by the global increase in fuel prices.
\nIn 2010, the country reached a multi-party consensus and established the transition to renewable and indigenous energy sources as a state policy, ensuring its implementation and continuity in the long term.<\/p>\n
This transition involved an investment of more than US$8 billion in public-private initiatives. The transformation adopted a model where the public sector coordinated the system and managed the auctions, providing security to both domestic and international investors.<\/p>\n
Cont\u00e1ctanos para m\u00e1s informaci\u00f3n<\/span><\/a><\/p>\n The International Renewable Energy Agency (IRENA) has praised the Uruguayan approach, especially the bidding method carried out by the state-owned electricity company, UTE, recommending it as a model in its guide for auction design. The involvement of the private sector was emphasized through innovative promotion schemes that do not depend on direct subsidies.<\/p>\n In a year with normal rainfall, 97% of the country’s electricity demand is met by renewable energies, through a mix of wind (32%), biomass (17%), solar (3%) and traditional hydroelectric (45%).<\/p>\n This first step in the energy transition has placed Uruguay in a leading position in the use of renewable energies, being the second country worldwide in the incorporation of variable renewable sources (such as solar and wind) in its electricity production according to REN21 (2023). It also stands out along with Denmark, Ireland and Portugal in wind energy generation.<\/p>\n The private sector played a crucial role in the shift to renewable energies. One prominent example is Ventus, a Uruguayan company focused on wind energy. Thanks to its experience and achievements at the local level, it was able to expand its operations and offer its services in other countries in the region.<\/p>\n In 2022, Uruguay recorded an energy supply of 5,669 ktoe, marking a historical increase of 27% compared to 2012. This growth in energy production was accompanied by a remarkable transformation in the structure of the country’s energy matrix. The share of energy from fossil sources decreased significantly, from 60% in 2012 to 40% in the 2018-2022 average. On the other hand, sources such as biomass, wind and solar energy saw their relevance increase, with shares of 39%, 9% and 1% respectively in 2022, while in 2012, neither wind nor solar had a notable contribution.<\/p>\n The contribution of hydropower to the energy mix also experienced a decline, from 16% in the 2002-2012 period to 10% between 2018-2022 (and 9% in 2022). This decrease is attributed to the increase in electricity demand in the face of a generation capacity that remained stable. It is important to mention that the country’s most significant water resources are almost fully tapped, and any future expansion of hydroelectric supply will likely come from small hydropower plants.<\/p>\n The extended drought from 2020 to early 2023 had an impact on the contribution of renewable energies to the country’s electricity generation mix. Despite this challenge, renewables made up 56% of the energy matrix in 2022, a significant jump from the 38% recorded in 2012, which is considered an outstanding achievement internationally. In addition, electricity imports showed a decreasing trend during the last period.<\/p>\n Electric power made up 32% of the total energy supply, reaching a production of 1,270 Ktoe in 2022. Ten percent of this production was destined for exports, resulting in an available supply of 1,042 Ktoe for that year.<\/p>\n Cont\u00e1ctanos para m\u00e1s informaci\u00f3n<\/span><\/a><\/p>\n With an investment of more than US$8 billion, Uruguay has undergone a remarkable transition towards the decarbonization of its electricity matrix in the last decade, becoming a benchmark in the adoption of renewable energies.<\/p>\n In 2022, investment in energy infrastructure amounted to US$303 million. Of this total, US$284 million was allocated to the electricity system, totaling US$705 million over the three-year period 2020-2022, which represents 52% of the total investment planned by the government for this period (US$1.367 billion).<\/p>\n For the 2023-2024 biennium, an investment of US$843 million is projected in the energy sector. The state-owned company UTE will lead these investments with a forecast of US$489 million, part of its five-year plan (2023-2027) that contemplates a total investment of US$1.1 billion. Of this amount, 70% will be allocated to the expansion and improvement of the electricity distribution and transmission network.<\/p>\n Additional investments outside UTE’s budget include projects such as the construction of a high voltage line from the Punta del Tigre power plant (San Jos\u00e9) to the Cardal substation (Florida) at a cost of US$60 million; the closure of the northern transmission ring with a 500 kV line connecting Tacuaremb\u00f3 to Salto, with an investment of US$220 million; and the installation of a 30 MW photovoltaic solar park in Punta del Tigre, following a settlement after a dispute with Hyundai over the construction of a combined cycle power plant. In addition, UPM is expected to invest US$70 million to connect its new biomass plant to the national electricity system.<\/p>\n Traditionally, Uruguay has relied on energy imports to cover its domestic consumption. However, in the last ten years, it has managed to improve its electrical connection with neighboring countries and diversify its energy production methods. This has allowed it to generate electricity in a more sustainable manner and at competitive prices, becoming an important source of income thanks to its role as a net exporter of electricity in the region.<\/p>\n According to UTE information, in 2022 Uruguay exported a total of 1,368 GWh of electricity, representing 10% of its total energy production. The end of 2022 and most of 2023 were affected by a drought that negatively impacted UTE’s hydroelectric generation. As a consequence, the country saw its electricity surplus available for export reduced, resulting in a 50% decrease in the volume of electricity exported.<\/p>\n During the most severe periods of drought, Uruguay resorted to importing energy from Brazil to meet its domestic demand, thus reducing the costs associated with thermal generation and preserving water resources. In addition, although on a smaller scale, in February 2023 UTE imported energy from Argentina.<\/p>\n In 2021, Uruguay managed to export 2,844 GWh of electricity, which allowed it to obtain revenues worth US$525 million, equivalent to 5% of total exports of goods that year, marking a relevant contribution to the national economy. Of these sales, 78% went to Brazil, while the remaining 22% were exported to Argentina. However, in 2022, exports were exclusively oriented towards Argentina, generating revenues of US$164 million.<\/p>\n Why choose green hydrogen in Uruguay?<\/p>\n The transition to green hydrogen represents a logical evolution in Uruguay’s strategy to reduce its dependence on fossil fuels and advance in the decarbonization of its energy demand. In addition, Uruguay has significant competitive advantages that position it as an important producer of green hydrogen and its derivatives, both for domestic consumption and export.<\/p>\n Outstanding potential for renewable energy generation and resource synergies Cont\u00e1ctanos para m\u00e1s informaci\u00f3n<\/span><\/a><\/p>\n By 2030, it is estimated that wind and solar renewables in Uruguay could achieve levelized cost of energy (LCOE) between US$16 and US$19 per MWh. Offshore wind energy could cost between US$26 and US$28 per MWh. By 2040, these costs are projected to drop to $11 per MWh for solar, $15 per MWh for wind and $21 per MWh for offshore wind. The western regions of the country are the most suitable for solar energy generation, while the northern and central regions present medium quality potentials for this generation.<\/p>\n The strategy of integrating wind energy as a renewable and competitive source has been remarkably successful in Uruguay. Prior to 2008, the country had no large-scale wind farms. Today, there are 41 operating wind farms with a total installed capacity of 1,514 MW, an achievement reached thanks to the diversity of business models implemented.<\/p>\n Regarding the creation of medium-scale wind farms, since 2014 Uruguay has allowed consumers to produce their own electricity using any energy source, without affecting their consumer status. This legal framework does not impose voltage restrictions for connection to the grid and prohibits the injection of electricity into the national grid. Under these conditions, 9.1 MW of wind power capacity has been installed through 2020.<\/p>\n Regarding wind farms financed by the local capital market, the creation of financial trusts for the Pampa and Arias wind farms has captured the interest of retail and institutional investors, demonstrating a strong appetite for including these assets in their investment portfolios.<\/p>\n Uruguay has made significant progress in the use of solar energy and currently has 19 large-scale photovoltaic plants that contribute energy to the electricity grid, with a total capacity of approximately 229 MW. These installations range from a few MW to 50 MW, with the “La Jacinta” and “El Naranjal” plants in Salto, in the northwest of the country, being the most important.<\/p>\n In parallel, small-scale grid-connected solar generation has grown from 0.04 MW in 2011 to 30 MW in November 2021, and off-grid PV capacity has also increased, reaching 5 MW installed by 2020.<\/p>\n The drive for bioenergy, particularly from non-conventional biomass sources, has advanced hand in hand with the growth of forestry and the pulp and paper industry, as well as agricultural production in sectors such as soybeans, rice and wheat. This development has been supported by an institutional framework that promotes the energy use of by-products from forest biomass and other sectors. The main sources of bioenergy generation (both thermal and electric) include black liquor, forest residues, firewood, bagasse, rice husks and biogas from dairy waste, wool production and urban waste.<\/p>\n Bioenergy facilities represent 9% of the country’s installed capacity (425 MW), a figure that is expected to increase with the start-up of a new pulp mill that will contribute more than 150 MW of renewable energy to UTE’s grid by 2023.<\/p>\n The main challenge for the future development of bioenergy in Uruguay lies in the low cost of electricity production from other renewable sources, suggesting that future bioenergy projects could be integrated into industrial processes (such as biorefineries). Other development avenues for bioenergy include the production of advanced fuels (renewable diesel, green hydrogen, methanol, renewable natural gas, aviation and marine biofuels) and solid biofuels (pellets).<\/p>\nComposition of the electrical matrix:<\/h2>\n
Energy supply<\/h2>\n
Electric power<\/h2>\n
International electricity trade<\/h2>\n
\nUruguay stands out for its capacity to generate renewable energy, especially through wind and solar sources. The optimal combination of wind and solar resources in the country facilitates obtaining high capacity factors in the electrolyzers, resulting in low hydrogen production costs.<\/p>\nInvestment Opportunities<\/h2>\n
Wind Farms<\/h3>\n
Solar Parks<\/h3>\n
Bioenergy Plants<\/h3>\n