This is a best prospect industry sector for this country. Includes a market overview and trade data.
During the period from 2000 to 2020, Uruguay dramatically shifted its energy matrix from petroleum-based electricity generation to renewable sources. The country currently generates over 98 percent of all electricity from renewable sources, primarily wind and hydropower. Uruguay is currently one of the most electrified countries in the hemisphere, with 99.9 percent of homes receiving electricity.
Uruguay has become one of the leading countries in renewable energy generation consisting of hydro power generation (60 percent), with the remainder from wind, solar, and biofuels. According to data from the Ministry of Industry and Energy installed capacity in 2020 was 4,924MW. Hydroelectric plants generated 1,538MW, followed by wind plants (1,514MW), thermoelectric plants (1,190MW), biomass generation (425MW) and solar plants (258MW).
Uruguay often generates an electricity surplus due to an excess of wind-power. The country is seeking to identify additional domestic uses for the excess electricity and potentially increase exports to Argentina and Brazil. In the first semester of 2021 Uruguay exported $125 million, which is a near-record amount, with record levels reached in 2017 when $133 million in electricity was exported. Recent export increases were primarily due to a severe drought in Brazil. Electricity exports to Brazil are limited by the interconnection capabilities, which are 570 MV and 500 MV from Melo and 70 MV from Rivera. The connection to Argentina has historically gone through the binational hydroelectric plant, Salto Grande.
In 2021, Uruguay’s Ministry of Industry, Energy and Mining (MIEM), together with the state oil and gas company (ANCAP), the state electricity company (UTE) and other public entities developed a National Strategy for Green Hydrogen. Uruguay’s strategy is to become a green hydrogen exporter, to develop hydrogen as a natural gas substitute, a resource in fertilizer production and to produce ammonia as fuel for water vessels. As part of this plan, MIEM launched a pilot project for hydrogen production, storage, and distribution to be used in the transportation sector. The main objective of this project is to further reduce Uruguay’s carbon footprint by decarbonizing the transport system. To achieve this, the government intends to test long-distance hydrogen vehicles, such as passenger buses and heavy-duty trucks.
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 to its Baygorria and Salto Grande hydroelectric facilities. It is the first full renovation and modernization undertaking of the two facilities since their respective 1960 and 1979 construction.
Salto Grande is the larger of the two projects and the renovation will have three stages that span thirty years. The first stage covers 2019-2023, with an expected investment of $80 million, an amount confirmed by the IDB. The subsequent stages represent an estimated $880 million investment.
State-owned electric company, UTE, launched the Baygorria hydroelectric plant modernization project in November 2019. The total budget of the project is $50 million.
Wind generation is also a significant source of electricity in Uruguay. With maximum heights of 90 meters, the average speed of the wind is 6 to 9 meters/second. Uruguay has more than 1,525 MW of installed wind capacity representing 30 percent of the country’s total electricity generation. Today, Uruguay is one of the world leaders in wind power production, alongside Denmark, Ireland, and Germany. Wind energy development exceeded initial projections and the country currently has a surplus of wind generation capacity. The Government does not expect to increase wind infrastructure in the short term, although wind offshore operations are being evaluated for the future development of the green hydrogen industry, The government designed a wind map available here: Wind Map. Further information is available (in Spanish) at http://www.energiaeolica.gub.uy/).
Legislative support for solar power has existed since 2013. Benefits are also available under the Investment Promotion Law that offers incentives investing in solar manufacturing, systems implementation, and solar energy utilization. There is a strong emphasis on local production and the priorities for solar energy include rural areas, particularly rural schools far from the electric grid, hospitals, hotels, sports clubs, and new public buildings. Uruguay receives an average 1,700 KW per square meter of sunlight a year, on a par with Mediterranean countries although in 2019, only solar represents only a fraction of the country’s total electricity production.
The installed capacity of distributed solar generation was 2.69 MW in 2014 however it reached 25 MW in 2020, up from 21.3 MW in 2019. The commercial segment was responsible for 15 MW of solar generation and industry of around 5 MW. The remainder was related to the agricultural and residential sectors.
Due to the fiscal benefits approved for the development of solar projects, private companies, such as industrial facilities, are considering solar power microgeneration. These projects complement battery storage systems, which are a way to store solar generated electricity during the entire day for later use during peak demand electricity hours when prices are high.
For Uruguay’s solar map see: http://snip.state.gov/itr. Information on the government’s solar plan is available (in Spanish) at http://www.energiasolar.gub.uy/
In 2019, biomass represented 41 percent of the total energy (versus solely electricity) supply in Uruguay, while oil and its derivatives were responsible for 36 percent. The high percentage of biomass energy generation is a result of cellulose industry expansion in Uruguay where biomass energy generation uses wood waste to generate electricity. 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 sources available from the beef industry and edible oils. Investments in biomass increased considerably in 2013, reaching more than 400 MW of installed power generation and has not increased considerably since then. In 2019, biomass represented fifteen percent of the total amount of electric generation, behind hydro and wind.
Further investments in power generation will link to increases in electricity demand, which the government estimates to be two percent annually. It is not likely that Uruguay will invest in further generation capabilities in the short term. With a considerable oversupply of electricity, state-owned utility company UTE will prioritize investment in expanding and upgrading the national power grid versus increasing power generation capacity. The need to upgrade Uruguay’s power grid will create opportunities in the transmission, smart grid, and battery storage sectors. The government is also strongly encouraging the production of green hydrogen, with ambitious plans of making Uruguay a green hydrogen exporter.
According to the Ministry of Industry, the Uruguay’s electricity surplus can be used for electric or hydrogen-powered transportation and the government created incentive programs around green energy. There are tax incentives encouraging companies to transition vehicle fleets to electric vehicles. Additionally, electric vehicles can be imported into Uruguay duty free. Companies also do not pay import duties on renewable-energy generators and equipment (if classified as a capital good). In comparison, for conventional equipment a 14 percent duty applies to products that are not from the MERCOSUR countries.
UTE also developed a network of electric vehicle charging stations distributed around the country. In July 2021, there were fifty charging stations in sixteen of the nineteen departments of the country. Uruguay’s near-term plan is to have at least one charging station in each department. The electric vehicles which are sold in Uruguay have connectors type 2, according to UNIT standards (UNIT – IEC 61851-1:2017 and UNIT - 1234:2016).
- Embassy Contact: Office.Montevideo@trade.gov, https://www.trade.gov/uruguay
- Ministry of Industry, Energy and Mining
- National Directorate of Energy
- National Electricity Utility – UTE