Uruguay's energy transition
Tertulia, vol. 67
Hola. This is Barbara, your guide to the latest cultural news from the Spanish-speaking world. This week, I am taking you to where summer is about to start. I am talking about Uruguay and how one man, Ramón Méndez Galain, helped transform the country’s energy system to renewables. Uruguay is at the forefront of advancing green energy in South America.
The man behind the transition
Ramón Méndez Galain is a particle physicist who served as Uruguay's Director of Energy from 2008 to 2015. In this role, he designed the country's Energy Policy for 2008–2030, which all political parties approved. Before being appointed to this function, he had no experience in government. He took responsibility when Uruguay’s growing economy required more energy while prices were skyrocketing. Since Uruguay has no sources of fossil fuels and hydropower can become scarce in dry years, blackouts threatened the country's economic stability. Importing electricity from neighbouring countries has also become very expensive. Méndez Galain led this major transformation of Uruguay’s energy sector, achieving 98% renewable energy in electricity production.
Main aspects of the transition
The transformation, which got its boost under former President Mujica (2010-2015), attracted over $7 billion in investments. By 2016, wind farms across the country had already lowered costs by more than 200 million US dollars annually. It was a political consensus that renewables would allow the government to build reliable power systems that were very cheap and would boost the economy. The transition was based on a mix of renewables that complemented each other: wind, solar, water, and biomass (Uruguay is a country with lots of agricultural waste). The mix worked thanks to software that helps dispatch energy regularly without using battery storage or pumping mechanisms. Once a net importer of energy, Uruguay now exports its surplus energy to neighbouring Brazil and Argentina. The transition also created 50,000 new jobs. How did this happen?
Here are the main aspects of why Uruguay was so successful in transforming into an economy that generates its electricity almost fossil-free.
The transformation was rapid. The country shifted from oil dependence to renewable dominance in less than a decade.
The energy mix is diverse: Unlike some countries in the region, Uruguay has developed a balanced mix of renewable sources: 50% hydropower, 30% wind, 15% biomass, and 3% solar.
The country reduced its greenhouse gas emissions by 88% by 2017 compared to the 2009-2013 average.
In this TED talk, Méndez Galain explains how he achieved the goal of having his country run on 98% renewable electricity.
Factors contributing to the success of the transition
Of course, there are favourable natural conditions for wind energy and hydropower that helped transform the energy mix of the country. Still, more factors were equally decisive and contributed to the success which invite for imitation elsewhere.
The transformation was based on a long-term, adaptable policy framework, which got strong political support.
The decisions were evidence-based and transparent rather than ideological. Méndez created the successful narrative that renewables are the cheapest form of energy without creating new dependencies and harm. The new energy policy should work for all.
Public-private partnerships were encouraged. Long-term contracts (Purchase Power Agreements) with investors secure commitment, reliability at agreed rates, priced in US dollars. It is the key factor ensuring that the transition is socially viable and capital keeps flowing in.
Key challenges
However, as the country moves forward with its second energy transition, it faces several key challenges that have to be overcome to make the transition sustainable. These challenges require long-term investments.
First of all, infrastructure has to be improved, e.g. facilities for green hydrogen production and power-to-X technologies need to be built. The construction of a first green hydrogen/e-fuel plant is expected to be finished in 2025 (main investor: HIF Global from Chile, 4 billion USD). Distribution networks for hydrogen and its derivatives have to be developed, and efficient storage solutions have to be established. Second, Uruguay will have to learn how to navigate volatile and immature market mechanisms for green hydrogen. Significant investment is needed for scaling these young technologies. Third, to complete the transition, specific sectors will have to de-carbonize as well. Especially the transport sector, the largest consumer of petroleum derivates, needs to move to clean energy. Despite government initiatives and tax incentives, the adoption rate of electric vehicles needs to increase further.
Méndez Galain has a broad agenda
Méndez Galain’s latest professional challenges also underline that he is not only interested in climate change solutions, but that he has a broader agenda including economic and social welfare. In order to showcase Uruguay’s successes and work jointly on the challenges, he has shared his experience and knowledge internationally. To name an example, he was Uruguay’s chief negotiator for the Paris Climate Agreement. Between 2016 and 2019, he was the General Director of Planning for the Government of Montevideo, overseeing medium- and long-term strategic planning focusing on the Sustainable Development Goals (SDGs), resilience, territorial planning, and managing strategic projects. To date, Ramón Méndez Galain heads the Latin American non-profit organization Asociación Ivy, which works with governments, multilateral organizations and the private sector to promote sustainable change in the region. It is to be hoped that his experience and wisdom can be used in other areas of the world.
This is all for today. What to do you think about Uruguay’s energy transition? Where do you see its strengths and perhaps flaws? What can your country learn from it? Do you have any other showcases for a successful energy transition?