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An Energy Revolution is Underway in Uruguay

With no known oil reserves, tiny Uruguay is harnessing alternative energy sources and bringing down energy costs for consumers.

by Anahi Aradas
Sep 10 2014, 11:05am

Photo by Anahi Aradas

As if Uruguay's legalization of marijuana wasn't progressive and revolutionary enough compared to the rest of the world, the small South American nation is coming close to realizing a goal of complete energy independence — in a place with no known oil reserves.

A massive national endeavor is underway to construct wind farms, and Uruguay's private and public sectors are investing heavily in energy alternatives in an effort to generate electricity that is not dependent on petroleum. The changes have already reduced energy costs for consumers.

In a wide-ranging interview with VICE News, Ramon Mendez, director of Uruguay's energy administration, said that 84 percent of the country's electricity was generated from natural resources like wind, water, and agricultural waste (also known as biomass) in 2013. That pace is holding this year, and Mendez said he expects that rate to hit 95 percent in 2015.

As a result, the country managed to cut energy bills for consumers by 5.5 percent as of this July. Authorities have promised that more reductions are on the way.

"[Uruguay] will never again use oil to generate electricity," Mendez told VICE News. The progress will mostly be thanks to a source of energy that Uruguayans enjoy in abundance — the wind.

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A wind farm in Uruguay. All photos by Anahi Aradas.

The mostly flat nation of 3.3 million inhabitants is buffeted constantly by strong winds, the result of a collision between tropical heat from the Amazon rain forests north of Uruguay colliding with freezing gales from Antarctica to the south. Seven years ago, the country decided it would be an ideal place to develop wind farms, which it then fed with a $7 billion investment, part of a 25-year energy plan backed by all of the country's political parties.

Since 2005, Uruguay has invested more than 3 percent of its GDP each year in transforming its energy system. These measures have made the country a world leader in renewables investment relative to its GDP, according to the Global Status Report, which monitors the renewable energy industry. 

The country has poured part of this investment into a sophisticated energy infrastructure that efficiently combines the power of rain and wind, using wind turbines and stored water in hydroelectric plants. By 2016, the installed wind capacity is expected to help meet the national electricity demand, supplying around 1,200 megawatts of power to consumers.

Because wind is unpredictable, there are challenges when it comes to storing the energy it produces. The country's grid will switch to hydroelectric systems as needed, tapping into water reservoirs when winds die down, Mendez explained.

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Sheep roam past a power grid, in the province of Maldonado, at R del Sur — the country's first wind farm.

Overall, the achievements are considerable for a country without any known oil and gas reserves. Uruguay has traditionally been dependent on fuel imports from neighboring countries like Argentina. But Argentina's economic instability has affected its reliability as a supplier, and high oil prices make reliance on on imports undesirable.

"We have a large dependence on imported oil," Mendez said. "Prices increased six-fold in four to five years. It was an untenable situation."

This dependency also eats deep into the pockets of regular Uruguayans. Electricity is outrageously expensive in Uruguay because it is not subsidized, as is the case in Argentina, for example.

The average monthly household income is $1,900 in Uruguay, but residents told VICE News that their electricity bill can reach more than $200 a month if electric heaters are used.

"Energy independence in Uruguay is not ideology, but rather economic survival," said Mendez, a physicist and former employee of the Atomic Energy Commission in France, who spent years designing Uruguay's national energy plan.

To achieve its goals, Mendez said that Uruguay opened its doors to foreign companies. Two-thirds of the $7 billion investment in renewable energy sources comes from public-private joint ventures. The state-owned utility has the support of experts from a host of other countries, including Spain, Italy, Germany, Denmark, the US, China, India, and France.

"Renewables are also creating lots of jobs in rural areas," Hugo Lucas, an energy expert and former member of the International Renewable Energy Agency, told VICE News. "Alongside agro-industry, renewable energies are one of the more promising sectors in rural Uruguay, which is a country with most of the population concentrated in its capital, Montevideo."

Still, Uruguay keeps a contingency plan based on natural gas, and hasn't ruled out striking oil.

Foreign companies such as Exxon, BP, and Petrobras have so far spent $2 billion in offshore exploration for oil. In Punta del Tigre, about 20 miles away from Montevideo, the government expects to open a new combined-cycle plant — a type of plant that uses mechanical energy to power electrical generators — that will run on imported liquefied natural gas.

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The drive for an energy revolution in Uruguay doesn't stop there. The country now intends to transform its Carrasco International Airport into the world's first sustainable airport. At a cost of $10 million, the airport will use both solar and wind generators to power the modern facilities.

Uruguay is also seeking to transform how its inhabitants consume energy. Montevideo is testing its first electric taxis, and by 2030 the government aims to have all of its public transport powered by electricity. Businesses and homeowners who apply energy efficiency measures to reduce consumption can also soon look forward to seeing additional cuts reflected on their electrical bills, Mendez said.

Many would point out that all of these achievements have been possible because Uruguay is a small country with a relatively small population. The point is valid. But in a region where other countries are often hampered by corruption and inefficiency in their energy markets, it's difficult to not to applaud Uruguay's successful and tangible efforts toward achieving total energy independence.

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Follow Anahi Aradas on Twitter: @anahibcn