Uruguay - Country Commercial Guide
Renewable Energy Equipment
Last published date:

Overview

Uruguay is globally recognized for its significant achievements in renewable energy development.  As the country transitions to the second stage of decarbonization of its energy matrix and looks to increase energy exports, there will be new opportunities for companies that can provide solutions related to energy generation, green hydrogen, e-fuels, electric transportation, and energy efficiency. 

In 2005, Uruguay initiated a dramatic shift in its energy strategy, moving from petroleum-based electricity generation to renewable sources.  Even with increased fossil generation in 2022 due to severe drought, Uruguay is one of the leading countries in renewable energy in the world.  The country currently generates over 98 percent of all electricity from renewable sources, primarily wind and hydropower.  According to energy generation data from the Ministry of Industry, Energy, and Mining’s (MIEM) National Balance Report, the distribution of the whole energy matrix in 2022 included 31 percent hydro, 31 percent wind, 24 percent fossil, 8 percent biomass and 6 percent solar.  According to 2022 data from MIEM, Uruguay generated 14,759 GWh of electricity, 13,343 GWh for internal demand and exported 1,416 GWh to Brazil and Argentina

Typically, Uruguay generates a surplus of electricity due to an excess of wind-power capacity.  The country seeks to identify additional domestic uses for excess electricity and potentially increase exports to Argentina and Brazil.  In 2022, exports of electricity represented $222 million which was less than 50 percent of the total amount of electricity exported in 2021.  This decrease was primarily due to a severe drought which adversely affected the generation in Uruguay.  Even with increased fossil generation in 2022 due to severe drought, Uruguay is one of the leading countries in renewable energy in the world. 

One of the limiting factors for electricity exports to Brazil are the number of cross-border connections, currently 570 MV from Melo and 70 MV from Rivera.  The connection to Argentina has historically gone through the binational Salto Grande hydroelectric plant.

Opportunities

Further investments in power generation are linked to the expected increase in electricity demand and future projects related to hydrogen production.  The government is strongly encouraging the production of green hydrogen and plans to make Uruguay a green hydrogen exporter.  The need to upgrade Uruguay’s power grid will create opportunities in the transmission, smart grid, and battery storage sectors.

The government has a number of incentive plans in place for the use of renewable energies, in both the industry and the transportation sector. This includes tax incentives encouraging companies to invest in energy generation, energy efficiency and to transition to electric vehicles fleets.  Additionally, electric vehicles, renewable-energy generators and capital equipment can be imported into Uruguay duty free.  In comparison, for conventional equipment an average of 14 percent duty applies to products that are not products of Mercosur countries.

Related to electric transportation, the company UTE has developed a network of electric vehicle charging stations distributed around the country.  In May 2022, there were 89 charging stations and 122 chargers, distributed in most departments of the country.  The electric vehicles sold in Uruguay have Type 2 connectors according to UNIT standards (UNIT – IEC 61851-1:2017 and UNIT - 1234:2016).  The Government of Uruguay is also providing incentives and subsidies to increase the fleet of electric taxis and buses in the country.  The municipality of Montevideo is planning to double the number of electric taxis on the road by 2023.

Leading Sub-Sectors

Hydrogen

In 2021 the Government of Uruguay (GOU) developed a National Green Hydrogen Strategy that made green hydrogen a key component of its overall sustainability program.  Since the National Green Hydrogen Strategy was launched, large hydrogen projects have been announced to produce hydrogen and e-fuels for the local market as well as export.  The Strategy committed the GOU to developing a regulatory framework, streamlining the permitting process, creating attractive incentives, and analyzing the necessary infrastructure needs.  The government estimates the green hydrogen industry could potentially generate $2.1 billion per year by 2040 from the sale and export of green hydrogen and derivative products.  As part of the Strategy, Uruguay launched a Green Hydrogen Roadmap in which the national research and innovation agency (ANII) called for a production-focused green hydrogen R&D pilot project. 

In May 2023, the GOU selected a $44 million USD project and awarded a $10 million USD grant, which will include production, distribution, and off-take of green hydrogen.  The project stipulates use of 1.5+ MW capacity electrolyzers and heavy-duty fuel cell trucks and it must be in operation before 2025. 

Hydroelectric

Uruguay’s hydroelectric generation capacity is 1,500 megawatts (MW) from 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 and renovation processes for its Baygorria and Salto Grande hydroelectric facilities.  It is the first full renovation and modernization undertaking of the two facilities since their constructions in 1960 and 1979, respectively. 

The main binational hydroelectric dam Salto Grande is going through a major renovation process that started in 2019 and will last until 2049.  The first stage of modernization will be concluded by 2024 and IDB has already approved a credit line of up to $800 million to support the implementation of the strategic investment plan for the next stages of the modernization process.

Wind

Uruguay is one of the world leaders in wind power production, alongside Denmark, Ireland, and Germany with generates 31 percent of total power generation from wind.  Uruguay has more than 1,525 MW of installed wind capacity.  Uruguay has strong constant winds, with an average speed of the wind is 6 to 9 meters/second at the towers’ maximum heights of 90 meters.  

The state-owned energy company UTE does not plan to invest in additional wind infrastructure for electricity generation in the short term, however, has plans to start new wind investments in 2032 via modules of 50MW.  The company then expects to develop 60 wind modules before 2049.  However, there are plans to invest significantly into new on and offshore wind generation for green hydrogen production.  In 2021 the Uruguayan state-owned oil refinery, ANCAP, launched its “H2U Offshore” project to facilitate the production of green hydrogen from renewable sources, particularly offshore wind farms.  The project seeks to further position Uruguay as a leader in green energy as the country looks to achieve carbon neutrality by 2050.  ANCAP plans to offer between 8 to 16 blocks off the coast of Uruguay for the development of wind farms.  The first block is located more than 10 km from the Uruguayan coast at a depth of between 10 and 30 meters.  The second block is located more than 100 km from the Uruguayan coast with a maximum depth of 50 meters.  The concession of the blocks will be for a term of 25 years and include the installation of the platform, the hydrolyzer, and green ammonia plant.  ANCAP is interested in meeting multinational companies and private investors with experience in this field, as well as large oil companies with experience in hydrogen production.  Companies must present a scope of work, that includes ANCAP participation in the project.  When ANCAP believes it has enough interested parties, it will release a tender with bidding lasting from 8 months to a maximum of 2 years.  The total cost of this project is estimated to be between $1 and 3 billion USD.  In addition, private companies have announced large investments in wind and solar for hydrogen production. 

Solar

Legislative support for solar power has existed since 2013 and the total installed capacity of distributed solar generation reached 270 MW in 2022.  Uruguay receives an average 1,700 KW per square meter of sunlight a year, on a par with Mediterranean countries although solar represents only a fraction of the country’s total electricity production.  Benefits are available under the Investment Promotion Law which offers incentives for investing in solar manufacturing, systems implementation, and solar energy utilization.  The state-owned electricity company UTE announced investments by 2025, adding nine hundred megawatts of solar power via modules of 100MW.  The company expects to build 18 solar photovoltaics modules by 2049.

Due to incentives for the development of solar projects, private companies, such as industrial facilities, are considering solar microgeneration.  These projects complement battery storage systems, which are a way to store solar power generated during the day for later use during peak demand electricity hours when prices are high.  There is a strong emphasis on own-generation and rural areas, particularly remote schools, hospitals, hotels, sports clubs, and new public buildings.

Information on the government’s solar plan is available here. 

Biomass

In 2021, biomass represented 41 percent of the total energy supply in Uruguay, while oil and its derivatives were responsible for 42 percent.  Uruguay’s high percentage of biomass energy generation is a result of cellulose industry expansion where energy is generated from wood waste products.  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 other biofuels.

Although forestry is the main source of biomass, Uruguay has other feedstock sources available from the beef industry and edible oils.  Investments in biomass generation increased considerably in 2013, reaching more than 400 MW of installed power generation and has not increased since then.  According to the 2021 annual report of Uruguay’s Electricity Regulation Unit (URSEA), biomass represented 7 percent of the total amount of electric generation.

E-fuels

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, or synthetic fuels that are produced using renewable energy.  In 2022, the country’s state-owned oil company, ANCAP, announced a $4 billion project to build a green hydrogen and e-fuels plant in the Paysandú department.  The plant is expected to be operational by 2026 with the capacity to produce 100,000 tons of green hydrogen and 180,000 tons of e-gasoline per year.

Uruguay plans to use its future e-fuels to decarbonize its transportation sector as well as for exports to meet the growing demand for e-fuels around the world.

Resources