This is a best prospect industry sector for this country. Includes a market overview and trade data.
In the last 10 years, Uruguay has dramatically shifted its energy matrix from petroleum-based electricity generation to renewable sources; and currently generates between 98 to 100 percent of all electricity from renewable sources, primarily wind and hydropower. 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. Uruguay is also one of the most electrified countries in the hemisphere, with 99.9 percent of homes receiving electricity.
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 2019, Uruguay exported its highest amount of electricity in the country’s history. Uruguay exported 2,994 KWH of electricity to Brazil and Argentina. This amount is equivalent to 27% of Uruguay’s annual electricity demand.
Hydroelectric capacity is 1,500 megawatts (MW), with 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 processes in its hydroelectric plants in Salto Grande and Baygorria to renovate the facilities.
Salto Grande’s modernization project will have three stages, spanning the next thirty years. The first stage covers 2019-2023, with an expected investment of USD $80 million, an amount confirmed by the IDB. The subsequent stages represent an estimated USD $880 million investment.
State-owned electric company (UTE) launched the Baygorria hydroelectric plant modernization project in November 2019. The total amount of the project will be USD $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% of the country’s total electricity generation. Wind energy development exceeded initial projections and the country currently has a surplus of wind generation capacity. The government designed a wind map available here: Wind Map. Further information is available (in Spanish) at http://www.energiaeolica.gub.uy.
In 2019, biomass represented 41% of the total energy supply in Uruguay, while oil and its derivatives were responsible for 36%. The high percentage of biomass energy generation is a result of the cellulose industry expansion in Uruguay where biomass 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 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.
Legislative support for solar power has existed since 2013. 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 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. In 2019, one percent of total energy production came from solar.
Uruguay’s Ministry of Industry, Energy and Mining (MIEM), the state oil and gas company (ANCAP) and the state electricity company (UTE) are implementing a pilot project for electrolysis hydrogen production to be used in the transportation sector. The main objective of the project is to decarbonize Uruguay’s transport system. To achieve this, the government needs long-distance hydrogen vehicles, such as passenger buses and heavy-duty trucks. There are also private initiatives to develop hydrogen production to incorporate hydrogen trucks to service the cellulose industry.
According to the National Energy Balance, Uruguay has an installed capacity of 4,920 MW, having completed most of its renewable energy generation projects. 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-backed utility UTE will prioritize investment in expanding and upgrading the national power grid in the coming years, rather than 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 hydrogen, biodiesel and ethanol.
According to the Ministry of Industry, the Uruguay’s electricity surplus can be used for electric or hydrogen-powered transportation. The government created tax incentives encouraging companies to transition vehicle fleets to electric vehicles. Additionally, electric vehicles can already be imported into Uruguay duty free. Uruguay’s government-owned power company, UTE, developed a network of electric vehicle charging stations distributed around the country. By February 2020, there were fifty charging stations in sixteen of the nineteen departments of the country. Uruguay plans to have at least one charging station in each department.
Companies also do not pay import duties on renewable-energy generators and equipment (if classified as a capital good). For conventional equipment, a 14 percent duty applies to products that are not from the MERCOSUR countries.