Uruguay - Energy

Energy

Last published date: 2025-08-15

Overview

Uruguay is globally recognized for its significant achievements in renewable energy development. As the country transitions to the second stage of decarbonization of its energy matrix and looks to increase energy exports, there will be new opportunities for companies that can provide solutions related to energy generation, transmission and storage, hydrogen production (using wind and solar energy), e-fuels, electric transportation and energy efficiency.

In 2005, Uruguay initiated a dramatic shift in its energy strategy, moving from petroleum-based electricity generation to renewable sources. In 2024, Uruguay generated 99 percent of its electricity from renewable sources using hydropower (42 percent), wind (28 percent), and biomass (26 percent). Solar and fossil-based generation accounted for 3 percent and 1 percent, respectively, according to the Ministry of Industry, Energy, and Mining (MIEM). According to preliminary 2024 data from Uruguay’s Ministry of Industry, Energy and Mining (MIEM), national energy production reached 17,202 GWh, marking a rebound from the downward trend observed in 2023. Of the total production, 15,175.8 GWh was used to meet domestic demand, while 2,026.2 GWh was exported.

Uruguay’s oil and gas sector is relatively underdeveloped, as the country does not produce hydrocarbons domestically and relies entirely on imports to meet its fossil fuel needs. State-owned ANCAP (Administración Nacional de Combustibles, Alcohol y Portland) oversees the sector, managing imports, refining, storage, and distribution of fuels. The country imports crude oil and refined products primarily from countries such as Nigeria, the United States, and Argentina. ANCAP operates the La Teja refinery in Montevideo, Uruguay which has a modest processing capacity (around 50,000 barrels per day) and supplies most of the domestic market with gasoline, diesel, and other petroleum products. At this moment, Uruguay is actively exploring its offshore potential for oil and gas due to increased interest in offshore oil and gas exploration, particularly after discoveries in the analogous geological basins of Namibia.

Uruguay generally has a surplus of electricity due to excess wind-power installed capacity. The country seeks to identify additional domestic uses for excess electricity and potentially increase exports to Argentina and Brazil. In 2024, UTE, the state-owned company in charge of managing Uruguay’s electrical grid, officially reported exporting 2.026 GWh for approximately $104 million in energy exports.

One of the limiting factors for electricity exports to Brazil are the number of cross-border connections, currently 570 MV from Melo and 70 MV from Rivera. The connection to Argentina has historically been transmitted through the binational Salto Grande hydroelectric plant.

The CO2 emission factor of the National Interconnected System (SIN) was 7 tons of CO2 per GWh of electricity generated and supplied to the grid. This marks an 88% reduction compared to 2023 and is the lowest level recorded in the past decade. The significant decrease is primarily attributed to increased biomass energy production following the startup of new pulp mill operations.

Opportunities

Further investments in power generation are linked to the expected increase in electricity demand due to a combination of organic GDP growth and strategic projects related to hydrogen and e-fuels production. The government is actively promoting the development of green hydrogen, both as a final product and as a key input for e-fuels and heavy-duty transportation. There are also plans to position Uruguay as an exporter of green hydrogen. To support these initiatives, upgrades to Uruguay’s power grid will be necessary, creating significant opportunities in transmission infrastructure, smart grids, and energy storage solutions.

The government has a number of incentive plans in place for the use of renewable energies, in both the industry and the transportation sector. This includes tax incentives encouraging companies to invest in energy generation, energy efficiency and to transition to electric vehicles fleets. Additionally, electric vehicles, renewable-energy generators and capital equipment can be imported into Uruguay duty free. In comparison, an average of 14 percent duty applies to conventional equipment that are not products of Mercosur countries.

UTE has developed a network of electric vehicle charging stations distributed around the country. In May 2025, there were more than 300 charging stations distributed in every department of the country. The electric vehicles sold in Uruguay have Type 2 connectors according to UNIT standards (UNIT – IEC 61851-1:2017 and UNIT – 1234:2016). The Government of Uruguay is also providing incentives and subsidies to increase the fleet of electric taxis and buses in the country. The Government of Uruguay is actively promoting the electrification of public transportation through incentives and subsidies aimed at expanding the fleet of electric taxis and buses.

The Municipality of Montevideo had set a goal of reaching 150 electric taxis by 2025. As of June 2025, there is no official confirmation on whether this target has been achieved. In terms of electric buses, Uruguay’s national strategy has set ambitious targets of 300 electric buses in operation by 2025, as part of a broader effort to decarbonize the transport sector. This effort includes expanding electric public transport in major urban areas, supported by national and municipal-level policies. Uruguay’s efforts create substantial opportunities for investment and development in the EV charging network, including the installation of new charging stations, upgrades to existing infrastructure, and the integration of smart charging solutions.

Leading Sub-Sectors

Oil & Gas

Uruguay is actively pursuing offshore oil exploration. The discovery of oil and gas in Namibia in early 2022 renewed the interest of international companies in Uruguay’s territorial waters due to their geological similarities. The state-owned energy company ANCAP has awarded seven contracts to major international energy firms for oil and gas prospecting in all 120,000 square kilometers of Uruguay’s offshore waters, generating over $200 million in investments. Seismic data acquisition commenced in 2025, with exploratory drilling operations planned for 2026. The exploration period is expected to span four years and could be extended by an additional two or four years, depending on each company’s fulfillment of its commitments.

Hydrogen

In 2021, the Government of Uruguay (GOU) developed a National Green Hydrogen Strategy that made green hydrogen a key component of its overall sustainability program. Since the National Green Hydrogen Strategy was launched, multiple large hydrogen projects have been announced to produce hydrogen and e-fuels for the local market as well as for export. The Strategy committed the GOU to developing a regulatory framework, streamlining the permitting process, creating attractive incentives, and analyzing the necessary infrastructure needs. The government estimates the green hydrogen industry could generate $2.1 billion per year by 2040 from the sale and export of green hydrogen and derivative products. As part of the strategy, Uruguay launched a Green Hydrogen Roadmap in which the national research and innovation agency (ANII) called for a production-focused green hydrogen R&D pilot project.

Early pilot projects aim to demonstrate Uruguay’s technical capabilities and readiness to scale up, providing proof-of-concept for larger investments and signaling a maturing hydrogen ecosystem. Located in Fray Bentos, the Khairos project, developed by the Uruguayan company Ventus, is set to become Uruguay’s first green hydrogen plant and a landmark achievement for the country’s energy transition. Notably, Khairos is the first project within Uruguay’s green energy sector to have reached financial closure, signifying that all necessary funding and investment agreements are in place to proceed with development and construction. Scheduled to begin operations in 2026, the plant will use a 2 MW electrolyzer powered by a 4.8 MW solar farm—comprising 8,000 solar panels—to produce green hydrogen for heavy-duty trucks in the forestry sector serving Montes del Plata’s logistics chain. This initiative is expected to reduce CO₂ emissions by 870 tons annually and is designed with minimal environmental impact, including the return of used water to the environment as steam.

Another pilot project is H24U, a pilot project that involves production, distribution, and offtake of green hydrogen, with a $10 million grant from the Uruguayan Government. H24U project will be carried out by a consortium that includes local Uruguayan companies Saceem and CIR, with involvement from Air Liquide. The total estimated investment of $43.5 million will fund the installation of a solar photovoltaic plant, the purchase of an electrolyzer, the construction of a hydrogen refueling station, and the procurement and conversion of heavy trucks to run on fuel cells.

E-fuels

Due to its highly decarbonized energy sector with strong wind and solar capacity, Uruguay is expected to become a leading country in the region in the development of e-fuels – synthetic fuels that are produced using renewable energy. In 2022, HIF Global, announced a $6 billion project to build a green hydrogen and e-fuels plant in the Paysandú department. Once operational, the facility aims to produce approximately 256 million liters of e-fuels per year, including green hydrogen and e-gasoline.

In June 2025, Texas-based Syzygy Plasmonics announced plans to build NovaSAF 1 in Durazno, Uruguay – the world’s first fully electrified biogas-to-Sustainable Aviation Fuel (SAF) facility. In partnership with Estancias del Lago, NovaSAF 1 will use Syzygy’s innovative light-powered reactor technology to convert raw biogas from dairy farms into ASTM-compliant, drop-in SAF. The plant is expected to be fully operational in early 2027. NovaSAF 1 stands out for its direct biogas-to-SAF process; combined with Uruguay’s nearly 100% renewable energy grid, the plant achieves production costs well below traditional SAF pathways and emissions more than 80% lower than conventional Jet-A fuels. As an early-stage, pioneering effort in Latin America, Syzygy’s NovaSAF 1 reflects Uruguay’s global leadership in clean fuels and cutting-edge technology and innovation.

There are other private projects, with different grades of development. The Tambor Green Hydrogen Hub, located in the northern region, is being developed by the German company Enertrag in association with SEG Ingeniería. According to preliminary reports, the project includes installation of wind and solar plants, as well as an electrolyzer, to produce 13,000 tons of hydrogen or 70,000 tons of e-methanol per year. Reports suggest that these outputs will largely be exported.

Hydroelectric

Uruguay’s hydroelectric generation capacity is 1,500 megawatts (MW) from four hydroelectric plants: Salto Grande (Salto), Palmar/Constitución (Rio Negro/Soriano), Rincón del Bonete (Tacuarembó/Durazno) and Baygorria (Rio Negro/Durazno). Hydroelectric capacity is unlikely to grow given that the country is already producing an electricity surplus, however Uruguay has started a modernization and renovation processes for its Baygorria and Salto Grande hydroelectric facilities. It is the first full renovation and modernization undertaking of the two facilities since their constructions in 1960 and 1979, respectively.
The main binational hydroelectric dam Salto Grande is going through a major renovation process that started in 2019 and will last until 2049. The first stage of modernization will be concluded by 2024 and IDB has already approved a credit line of up to $800 million to support the implementation of the strategic investment plan for the next stages of the modernization process.

Wind

Uruguay is one of the world leaders in wind power production, alongside Denmark, Ireland, and Germany, generating 31 percent of its total power from wind. Uruguay has more than 1,525 MW of installed wind capacity. Uruguay has strong constant winds, with average wind speeds ranging from 6 to 9 meters/second at the maximum height of wind turbines, which is 90 meters.
While the state-owned energy company UTE does not plan to invest in additional wind infrastructure for electricity generation in the short term, it plans to start new wind investments in 2032 via modules of 50MW. The company then expects to develop 60 wind modules before 2049. However, there are plans to invest significantly in new on and offshore wind generation for green hydrogen production. In 2021 the Uruguayan state-owned oil refinery, ANCAP, launched its “H2U Offshore” project to facilitate the production of green hydrogen from renewable sources, particularly offshore wind farms. The project seeks to further position Uruguay as a leader in green energy as the country looks to achieve carbon neutrality by 2050.

ANCAP plans to offer between 8 and 16 blocks off the coast of Uruguay for the development of wind farms. The first block is located more than 10 km from the Uruguayan coast at a depth of between 10 and 30 meters. The second block is located more than 100 km from the Uruguayan coast with a maximum depth of 50 meters. The concession of the blocks will be for a term of 25 years and include the installation of the platform, the hydrolyzer, and green ammonia plant. ANCAP is interested in meeting multinational companies and private investors with experience in this field, as well as large oil companies with experience in hydrogen production. Companies must present a scope of work, that includes ANCAP participation in the project. When ANCAP believes it has enough interested parties, it will release a tender with bidding lasting from 8 months to a maximum of 2 years. The total cost of this project is estimated to be between $1 and 3 billion. In addition, private companies have announced large investments in wind and solar for hydrogen production.

Solar

Legislative support for solar power has existed since 2013 and the total installed capacity of distributed solar generation reached 301 MW in 2023. Uruguay receives an average 1,700 KW per square meter of sunlight a year, on par with Mediterranean countries although solar represents only a fraction of the country’s total electricity production. Uruguay’s Investment Promotion Law offers incentives for investing in solar manufacturing, systems implementation, and solar energy utilization. In 2024, Uruguay’s state-owned electricity company UTE inaugurated a large-scale photovoltaic solar park in Punta del Tigre as part of its broader plan to add 900 MW of solar capacity through 100 MW modules. To continue the park’s expansion, UTE issued $27 million in negotiable bonds in December 2024, reaffirming its commitment to increasing renewable energy generation. The company expects to build 18 solar photovoltaics modules by 2049.

Incentives for the development of solar projects have driven private companies, such as industrial facilities, to consider solar microgeneration. These projects enhance battery storage systems, which enable the retention of solar power generated during the day for use during peak demand electricity hours when prices are high. There is a strong emphasis on self-generation, particularly in rural areas, including remote schools, hospitals, hotels, sports clubs, and new public buildings.
Information on the government’s solar plan is available here.

Biomass

In 2024, biomass represented 46 percent of the total energy supply in Uruguay, while oil and its derivatives were responsible for 39 percent. Uruguay’s high percentage of biomass energy generation is a result of the cellulose industry’s expansion, where energy is generated from wood waste products. Biomass energy producing companies not only use electricity for their own consumption but also sell electricity to the state-owned company UTE. Biomass is also used to generate biodiesel, bioethanol, and other biofuels.

Although forestry is the main source of biomass, Uruguay has other feedstock options, including byproducts from the beef industry and edible oil production. Investments in biomass generation increased considerably in 2013, reaching more than 400 MW of installed power generation, and has not increased since then. According to Uruguay XXI, in 2024 biomass represented 8 percent of the total amount of electric generation.