Uruguay, Latin America’s renewable champion

Uruguay, Latin America’s renewable champion

Uruguay lies between Argentina and Brazil on the Atlantic Ocean and is home to about 3.5 million people. But this small country has made it to the top 5 in wind and solar energy producers worldwide. 

The International Energy Agency (IEA) announced in October that the country is in fourth place globally, producing 36 percent of its electricity from wind and solar energy. First place in the IEA ranking list goes to international renewables champion Denmark (50 percent), followed by Lithuania (41 percent) and Luxemburg (37 percent).

Including hydropower, Uruguay now produces more than 97 percent of its electricity from renewable energy sources. The country has undergone a remarkable change in its energy sector in recent years: only twenty years ago, oil accounted for almost 30 percent of Uruguay’s imports and large bulks of electricity were imported from neighboring Argentina.

The rapid diversification of its electricity sector began under former President Mujica who led the country between 2010 and 2015. For him, renewables, especially wind energy, were a way to cut electricity generation costs. Already by 2016, a year after his reign, wind farms across the country had lowered these costs by more than 200 million US dollars annually.

Mujica’s motivation was rational rather than ideological. His success can be attributed to transparent decision-making, a supportive regulatory environment and the strong partnership between the public and private sector. Stable wind conditions of about 8 miles per hour and low maintenance cost as well as a fixed twenty-years feed-in tariff guaranteed by the public utility provided a flourishing investment climate.

This policy has triggered more than 7 billion US dollars in investments in the country’s renewable energy sector so far and is responsible for more than 15 percent of its GDP. It also allowed Uruguay to reduce its greenhouse gas emissions by a staggering 88 percent by 2017 against the 2009-2013 average.

The shift to renewables has also enabled a more diverse electricity generation, thus making the country’s energy sector more resilient to a changing climate. Whereas a large number of Latin American countries get a predominant share of their electricity from hydropower plants – and pride themselves as green champions – Uruguay can spare its water resources for the rare times when the wind is not blowing. As such, it allows dams to hold water for longer in their reservoirs which has helped to reduce droughts by up to 70 percent.

This impressive success story was built on a growing public acceptance that the conventional energy growth model is no longer sustainable. The Uruguay example demonstrates that it is possible to diversify and base large parts of electricity generation on wind and solar without a dirty energy back-up in a relatively short time and that this change visibly benefits both economy and society as a whole.

But the Mujica way also offers another, no less important lesson for South American renewable expansion as a whole: it will succeed only through transparent decision-making and a stable regulatory environment. How many of Uruguay’s neighbors are ready to learn it?

Image credit: Andrew Schultz