Uruguay Energy

Uruguay has emerged as a model of national resolve in modernizing its electricity sector. In just over a decade, it has significantly expanded its renewable energy capacity to reduce reliance on fossil fuels. Today, over 98 percent of Uruguay’s electricity is generated from hydro, wind, solar, and biomass. This was driven by focused public policy, the attraction of private capital, and a consistent commitment to long-term energy security. With this foundation in place, Uruguay is now taking steps toward deeper decarbonization through smart grid modernization and the buildout of a green hydrogen and e-fuels economy. Moreover, in the next five years, Uruguay is expected to receive historic investment in offshore oil and gas exploration, including seismic studies and exploratory drilling, as part of a broader effort to assess the country’s deepwater hydrocarbon potential.

ELECTRICITY MATRIX & GRID INFRASTRUCTURE

Uruguay’s electrical grid is centrally managed by UTE, the state-owned electric utility. The system is fully interconnected nationwide and equipped with smart grid features, including advanced metering and fiber-optic communications. Hydropower from major dams—Salto Grande (shared with Argentina), Rincón del Bonete, and Baygorria—provides reliable, on-demand power. These natural storage systems reduce the urgency of deploying large-scale battery storage, though complementary technologies are being explored for industrial and residential use.

Uruguay’s modern grid infrastructure, supported by over 90% broadband penetration and extensive fiber-optic deployment, creates strong potential for smart grid technologies, predictive maintenance, and real-time grid optimization. Projects involving intelligent metering, automation, and data analytics are underway and receiving support from multilateral financing institutions such as the Inter-American Development Bank (IDB).

At the same time, Uruguay faces a growing need to increase and modernize its high-voltage transmission infrastructure. As large-scale hydrogen and e-fuels projects are announced—many in remote areas with limited existing grid capacity—reinforcing and expanding the electricity transmission lines becomes critical. Strengthening the transmission network will be essential to evacuate new generation capacity efficiently, ensure grid reliability, and unlock the full potential of upcoming green hydrogen and e-fuels initiatives.

BATTERY STORAGE & SMART GRID

Battery and smart grid solutions are gaining traction as Uruguay moves toward full decarbonization. While hydropower reduces immediate needs, the growing scale of renewable power and e-fuels initiatives are pushing investment in flexible storage. Tax incentives under Uruguay’s Investment Promotion Law are drawing interest in smart infrastructure and energy storage when integrated with clean generation projects.

HYDROGEN and E-FUELS INITIATIVES

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.  The country’s Green Hydrogen Roadmap, led by the Ministry of Industry, Energy and Mining (MIEM), targets 20 GW of additional renewable generation and 10 GW of electrolyzers by 2040. Major hydrogen initiatives are moving forward. The H2U Offshore Project, spearheaded by ANCAP, is preparing to auction up to 16 offshore blocks for wind-to-hydrogen production. The HIF Global facility in Paysandú, a $6 billion investment, aims to produce 256 million liters of e-fuels annually while adding 2,000 MW of new wind and solar. Northern Uruguay will host the Tambor Hub, a hybrid plant producing hydrogen and methanol for export, developed by Germany’s Enertrag and local firm SEG Ingeniería. A pilot-scale station—H24U—is also advancing with public support and private capital. Meanwhile, Kahirós, a fully private venture, will supply hydrogen fuel for industrial transport in Fray Bentos, targeting a production of 75.8 tons of hydrogen per year. The U.S. company Syzygy Plasmonics has announced a pioneering project in Uruguay to develop one of the world’s first fully electrified biogas-to-sustainable aviation fuel (SAF) plants. Powered entirely by renewable electricity, the facility will convert cow manure and captured CO₂ into jet fuel. This first-of-its-kind deployment combines circular feedstocks, cutting-edge light-driven catalyst technology, and an ultra-low carbon footprint, positioning Uruguay at the forefront of next-generation clean fuel innovation.

The path ahead is not without obstacles. The capital intensity of electrolyzers and storage systems, environmental constraints, an evolving regulatory landscape, and the cost-competitiveness gap between hydrogen and fossil fuels all require attention. However, the opportunities are clear. Uruguay is positioned to become a regional supplier of green hydrogen and synthetic fuels. Its modern, digitally enabled grid supports this ambition. A growing domestic market for hydrogen mobility and favorable tax treatment under the country’s investment framework are also accelerating development.

U.S. companies have a competitive edge in this market. Providers of smart grid hardware and software, residential and industrial battery systems, electrolyzer technologies, and hydrogen logistics services will find demand. Opportunities also exist for project developers and engineering firms in wind and solar infrastructure.

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.

CONTACT

For additional information, including market analysis, trade events, and U.S. Commercial Service offerings, please contact:
Alicia Machado
Commercial Specialist, U.S. Commercial Service
Email: Alicia.Machado@trade.gov