Less than two decades ago, Uruguay was facing a predicament that would feel familiar to people in many countries today. Global oil prices were spiking. The small but growing country’s economy now depended on more imported fossil fuels to meet rising demands for electricity.
The weather at the time wasn’t helping either. Drought conditions in 2008-09 meant that Uruguay’s hydropower plants were falling short. Power outages were a problem, and so was the skyrocketing price of electricity for consumers.
The situation was “a nightmare,” says Ramón Méndez Galain, the man who was tapped by the government in 2008 to lead Uruguay out of the crisis as energy secretary.
Why We Wrote This
Uruguay bet big on renewables and pulled off a genuine energy transformation. As the closure of the Strait of Hormuz became a wake-up to nations around the globe, many could learn from Uruguay’s success.
Dr. Méndez, a particle physicist with years of experience working on nuclear energy technology, “was the closest thing to a nuclear engineer in the country.”
“I rapidly understood that this was not the solution for us,” Dr. Méndez says. Thanks in no small part to his vision, renewables became the focus of Uruguay’s remarkable energy transformation.
These days, up to 98% of Uruguay’s electricity comes from a combination of wind, solar, hydropower, and biomass. The nation of about 3.4 million people even exports surplus energy to neighboring Argentina and Brazil.
Discussions around energy transitions today tend to frame the move as an environmental issue, but in Uruguay in the 2000s, the concern was primarily energy sovereignty. The country’s green transformation could hold some clues for others looking to reduce their reliance on fossil fuels, as a newly volatile energy market due to the Iran war has driven up oil and gas prices in the United States, Europe, and beyond.
“It was a tsunami,” says José Cataldo, a professor at the University of the Republic in Montevideo who was responsible for the country’s pilot wind project in the early 2000s. “We added 1,500 megawatts of wind power,” he says. That is roughly enough energy to power almost every household in Uruguay.
Renewables drive economic growth
Part of what made this transition possible in Uruguay was the consensus among its four main political parties. An agreement brokered in 2010, when José “Pepe” Mujica was president, ensured that energy policy would not change with each new government.
“This was the most important, the definition of a long-term state policy,” says Marcelo Mula, vice president of the Uruguayan Association for Renewable Energy (AUDER).
Uruguay’s success is replicable in other countries, he says, if they can establish the same kind of broad political agreement. But that is no easy feat.
“Each country has a driver that makes [adopting renewables] interesting beyond the climate issue,” says Dr. Méndez, who founded a nongovernmental organization that advises other governments about how to follow in Uruguay’s footsteps. Mexico, for example, is heavily reliant on imports of natural gas from the U.S.
Under Dr. Méndez’s leadership as energy secretary from 2008 to 2015, Uruguay ended its dependence on fossil fuels for electricity production by investing in renewable energy plants, especially wind turbines. On a recent windy weekday, for example, 56% of the country’s electricity was coming from wind power, 13% from solar, 17% from biomass, and 14% from hydropower.
The switch to renewables brought down the costs of electricity production, created 50,000 new jobs, and more recently attracted companies looking to reduce their emissions, such as Google.
“The transition [had] a tremendously positive impact on the whole economy, not just the power sector,” says Dr. Méndez.
But the positive impression was not universally felt when the move toward renewable energy began. For Dr. Cataldo, who worked on mapping Uruguay’s wind potential before anyone thought renewables were an option, the biggest challenge was changing people’s minds.
“There were some meetings where people would look at me with a face that said, ‘This guy is crazy,’” he remembers.
Adriana Inthamoussu, born in the 1970s, remembers the blackouts in Uruguay’s past. “We had to go to bed early,” she recalls while waiting to plug in her car – a Chinese model – at an electric-vehicle charging point near Montevideo’s La Rambla promenade. “That doesn’t happen anymore.”
Constance Malleret
“It was something brand new”
Uruguay helped set the conditions for renewable energy plants to compete with traditional energy sources by adapting policy and government regulations. Most of the new investment came from the private sector, as the state didn’t have the resources to fund a $7 billion transition.
Private companies built the wind farms and signed contracts to sell power to the state-owned utilities company, UTE, which controls electricity distribution here. Long-term contracts at fixed prices helped make the arrangement attractive, Mr. Mula says.
“It was something brand new. Uruguay didn’t have the knowledge of how to build such big wind and solar farms, but we did in just a few years,” explains Mr. Mula, who worked for UTE during the first years of the transition and later co-founded an energy consultancy.
A common barrier to adopting renewables worldwide is the intermittent nature of solar and wind power. Batteries are one way of getting around this. But Uruguay took another route, by combining diverse energy sources and using its established, and more consistent, source of hydropower as a “big battery,” says Mr. Mula.
“We use biomass, wind, and sun the whole time. If there is no wind or sun, we use the reserves from the hydroelectric dams. If for some reason, there isn’t any water, our third backup is the gas-fired power plants,” he says.
Uruguay’s energy wins do come with costs for consumers. Ms. Inthamoussu, who’s back charging her EV, says she sees the clean electricity matrix as something positive. But she also has a common complaint about her electricity bill: “At home, I pay more than 4,000 pesos [$100], it’s extremely expensive.”
That is because the government decided not to pass on the entire reduction in energy costs to consumers. Instead, it is keeping UTE’s revenue as a source of state revenue.
Uruguay is now going through a second energy transition: adding more solar power, decarbonizing its primary energy matrix, and working toward producing new clean energy sources, such as green hydrogen. Yet on the streets of Montevideo, where EVs are ubiquitous, most Uruguayans aren’t fully aware that their country is seen as a model internationally.
“I know we have [hydroelectric] dams, and when you head out of Montevideo, you can see the big turbines, but I don’t actually know how efficient they are,” says Keila Trinidad, a real estate agent who drives an electric car because it’s cheaper.
But that is why renewables make sense, argues Dr. Méndez. Even before the Iran war, they were much cheaper than fossil fuels, he says – and that is what people really care about.