This is a best prospect industry sector for this country. Includes a market overview and trade data.
An absence of tapped fossil fuel resources, coal, and natural gas has made Uruguay historically dependent on hydroelectric power, imported oil, and imported electricity from its neighbors Argentina and Brazil. The fact that 15 percent of Uruguay’s imports are energy products, primarily petroleum, makes the economy vulnerable to external shocks as oil prices rise and fall. Uruguay is pursuing increased electricity interconnectivity in the Southern Cone Region as a strategy to maintain energy supplies in the medium term.
In the last 10 years, Uruguay has shifted dramatically to electricity from renewable sources. Currently 97 to 100 percent of electricity comes from renewable sources compared to just 40 percent as recently as 2012. At times, Uruguay has surplus electricity that it exports to Argentina and Brazil. Uruguay has become one of the leading countries in renewable energy generation, primarily from hydro (60 percent), with the remainder from wind, solar, and biofuels. In less than 10 years, the country has slashed its carbon footprint and lowered electricity costs, without government subsidies. A driving force behind the diversification of Uruguay's energy sector is a desire for energy security and independence.
Alternatives such as wind, biomass, and solar have become cost competitive. Aided by aggressive power purchasing agreements (PPA) to promote renewables, the country has gone from being an importer to an exporter of electricity in just a few years.
Uruguay is one of the most electrified countries in the hemisphere, with 99.4 percent of homes receiving electricity. The government’s objective is to reach 100 percent by 2030.
Uruguay also moved away from petroleum-based generation. As of 2016, hydroelectric capacity was 1,500 MW, but this is unlikely to grow significantly given that the country is already exploiting all its large-scale hydro resources. Uruguay also has more than 1,331 MW of installed wind capacity, which is expected to grow to over 1,650 MW by mid-2018. At that point, there will be 42 wind farms operating in 13 of the country’s 19 departments (states). This conversion will allow Uruguay to use wind energy for base power and hydroelectric to meet peak demand. This will allow the country to keep hydroelectric reservoirs at near-maximum capacity. When needed, the reservoirs could be opened with as little as 15 minutes’ notice to meet additional demand.
Uruguay has discussed developing a liquefied natural gas (LNG) terminal for many years but the government’s projects have not advanced. The government is now evaluating a specific private proposal to develop a LNG terminal. If Uruguay develops such a project, the country will have an LNG reserve as back-up energy source, in case hydro-resources are reduced due to drought.
As the GOU continues to promote greater energy independence and improved efficiency from renewable sources we expect a favorable market for new opportunities.
Investments in wind, solar and other renewables have outpaced other energy projects. The National Director of Energy noted that in 2016 renewable sources provided 63 percent of Uruguayan energy while 37 percent came from fossil fuel resources. The government is also strongly encouraging the production of bio-diesel and ethanol in addition to its focus on wind, biomass, and solar energy.
Per government reports, since the beginning of the government’s “2005–2030 Energy Plan,” the total investment in renewable energy (public and private) has been 17 percent of GDP or approximately $7 billion. This ratio quintuples the average Latin America GDP investment ratio in renewable energy. Uruguay, Mauritania, Morocco, and Jamaica were among the top countries for investment in new renewable power and fuels relative to annual GDP according to the 2016 Renewables Global Status Report.
Uruguay has potential for the development of renewable energies from biomass; 30 percent of which currently comes from agricultural residuals (from agro industries and forestry). Although forestry is the main source of biomass, Uruguay has other sources available from the beef industry and edible oil. Investments on biomass increased considerably in 2013, when it reached more than 400 MW of installed power generation. By 2016 biomass represented 18 percent of the total amount of electrical generation, behind hydro and eolic sources.
In 2016 between 97 and 100 percent of the electricity consumed in Uruguay came from renewable sources and of this amount, 25 percent was from wind power. The potential to harness wind energy in Uruguay is significant. Average wind profile measures at heights of 90 meters show speeds of 6 to 9 m/second. Adequate sites for wind energy in the country have exceeded expectations and there are opportunities for further investments in eolic energy, if there is an increase in demand due to electricity exports to Argentina and Brazil. The government designed a wind map. Further information is available (in Spanish only) at Energía Eólica.
Imports of wind energy equipment soared in 2013 and continued to increase significantly in 2015. Wind equipment is mostly imported from Spain, Denmark, and China. The increase in U.S. energy equipment imports to Uruguay in 2013 was primarily due to EU companies’ shipping from their manufacturing plants in the U.S. Both EXIM and OPIC financing contributed to sourcing equipment from the United States.
The potential for solar power in Uruguay is encouraging; Uruguay receives an average of 1700 KW/m2 of sunlight a year. This puts it on a par with Mediterranean countries and makes solar energy a viable option. Legislative support for solar power has existed since 2013, through a law that promotes the use of solar energy. Benefits are also available under the Investment Promotion Law that offers incentives for investing in manufacturing, implementing, and utilizing solar energy. There is a strong emphasis on local production, and the priorities for solar energy include rural areas—particularly rural schools far from the grid, hospitals, hotels, sports clubs, and new public buildings.
Uruguay’s solar map
GOU’s solar plan
Up to 2017, there were investments of more than 100 million dollars in solar projects, which provides a maximum capacity of 84 MW to the power system. There are 14 new projects being developed, which will increase the amount of energy supply by 150 MW. These projects are all located in the west of the country.
Uruguay is committed to moving forward rapidly on setting up biodiesel, ethanol, and solar plants as well as continued investments in wind energy. There are opportunities in the development of transmission lines that Uruguay has been working on during the last five years. Import duties are applied to Incoterm CIF (Cost, Insurance, and Freight) values. For renewable energy, generators and equipment (if classified as capital goods) do not pay import duties. In other cases, a 14 percent duty is applied to products that are not from the MERCOSUR member countries. (Note: Argentina, Brazil, Paraguay, and Uruguay suspended Venezuela from MERCOSUR in December 2016).
Uruguay is a good market for both new and used/refurbished equipment and machinery. When making purchase decisions, Uruguayan buyers consider quality, price, payment terms, delivery time, after-sales servicing, and compatibility with existing systems.
U.S.-manufactured products are regarded as high in quality but occasionally lose price competitiveness vis-à-vis regional products. Sometimes U.S. products rate poorly when it comes to financing, an important factor in sales in Uruguay. U.S. manufacturers offering flexible, innovative, and competitive credit terms will have an advantage.
Embassy Contact: Office.Montevideo@trade.gov
Ministry of Industry, Energy and Mining
National Directorate of Energy
National Electricity Utility - UTE