Transforming the Energy Sector in Uruguay
Before the implementation of the new energy policy, and despite not having oil, natural gas or coal reserves, Uruguay had a significant presence of fossil fuels in its energy matrix, amounting to 56% in the period 2001–2006 (Méndez, 2014). In 2005, renewable energy sources had a share of 37% in the energy supply matrix. This was as the country was using almost its total hydro power potential. Energy imports were concentrated on few suppliers, increasing energy security risks (Energy and Nuclear Technology Directorate, 2008). In addition, average economic growth rates of 5.2% per year in 2006–2014 (World Bank, 2015) led to a sharp increase in energy demand.
To address this situation, an inter-ministerial coordination group was created in 2005 and, in 2008, the government approved a new Energy Policy 2005–2030, stipulating short-, medium- and long-term objectives for the sector.
The short-term objective for 2015 is to reach a 50% share of local renewable sources in the primary energy matrix, resulting in a 90% share of power generation. This target is supported by a set of policies promoting the development of biofuels, solar and wind as well as the elaboration of innovative promotion schemes that grant industries up to 80% tax reductions on investments in RE generation.
The implementation of the policies resulted in significant investments in renewable energy installations, initiating a transformation of the energy sector. To date, this policy has achieved annual GHG emission reductions of approximately 5 million tonnes CO 2 eq.
GHG emission reduction: In 2005, renewable energy sources had a share of 37% in the energy supply matrix. With a projected 2015 primary energy supply matrix of 55% from renewable sources (wind (4%), hydro power (11%), biomass (28%), wood (12%) and solar (<1%)) the estimated GHG emission reductions achieved by this policy are expected to amount to 5.20 Mt CO 2 e/year (Uruguay, 2015).
Improvement in energy security: A more diversified energy matrix, with strong participation of local renewable sources, increases the energy independence and sovereignty of the country.
Green jobs, new markets and non-traditional exports: The growth of renewable energy projects has led to the development of previously inexistent technology markets in Uruguay. It is estimated that 35% of the investments in wind projects benefits local market activities (i.e. technology, civil infrastructure, logistics) while, for biomass projects, this is estimated to be up to 60%. Know-how of local professionals and companies has also started to be exported to other countries of the region (Mendez, pers. comm.).
Price stability and competitiveness: To date, renewable sources account for 50% of the primary energy matrix, 95% of the electricity generation and 85% of the energy used in industry. A key element in guaranteeing the country’s competitiveness is the fact that renewables are not vulnerable to fluctuating prices in international commodity markets.
Climate vulnerability: Complementary to the previous point, the diversification of renewable sources, beyond hydropower, and including biomass and wind, reduces the vulnerability to climate variability, especially related to water availability in a scenario where extreme weather conditions are expected to increase in frequency.
Private investors now undertake renewable energy projects, framed within contracts with UTE or ANCAP, while public investments are targeted mainly at distribution or grid connection infrastructure, and desulfurisation plants.
- The Ministry of Industry, Energy and Mines, specifically the Energy and Nuclear Technology Directorate leads the process.
- The Ministry of Housing, Land Planning and Environment (MVOTMA), through its Climate Change Unit, complements and coordinates the effort.
Other relevant institutions involved are:
- Ministry of Foreign Affairs
- Ministry of Economy and Finances
- Ministry of National Defence
- Ministry of Livestock, Agriculture and Fishery
- Ministry of Health
- Ministry of Sports and Tourism
- Budgeting and Planning Office
- National Emergencies System
- National Mayors’ Congress