The electricity sector of Uruguay is largely based on domestic hydropower along with thermal power plants, and is reliant on imports from Argentina and Brazil at times of peak demand. Diversification efforts have led to large investments in wind power and smaller investments in biomass power generation and photovoltaic solar power projects which may turn Uruguay into a regular net exporter of electricity by 2016.
Ferrostaal and juwi Wind jointly planned and developed a 50 MW onshore Wind Park regarding its siting, management,engineering tasks as well as financial structure. After the successful participation in the competitive bidding process of the national energy supply company UTE, in which the project received a Power Purchase Agreement, Ferrostaal sold its stake at the beginning of 2012. If the onshore Wind Park will be completed on an area of 150 hectares, it will produce about 200,000 megawatt hours of electricity per year.
The Melowind Onshore Wind Farm Greenfield Project meant an important shift towards Uruguay’s aimed goal.
| Project: | Onshore Wind Farm Project |
| Customer | UTE (UTE (Usinas y Transmisiones Eléctricas) |
| Cooperation: | juwi Wind GmbH CCC Machinery Uruguay Ltda. |
| Location: | Arbolito, Uruguay |
| Capacity | Nominal output: 50 MW Yearly output: 210 000 MWh |
| Provided Scope: | Siting incl. wind measurements, land securing, TSA and EPC contractual management, authority engineering, financial structuring (equity and debt) |
| Est. Completion: | 2015 |
Enel Green Power has announced that it has completed and commissioned its first wind energy in Uruguay.
A 50 MW wind energy project was operationalised in the Cerro Largo area, about 320 kilometres from the capital city of Montevideo. Enel Green Power invested $98 million into the the wind farm, which is expected to generate more than 200 GWh of electricity each year, with an impressive load factor of 47%. The project will generate enough power in a year to fulfil the equivalent of the needs of about 74,000 households, and also offset greenhouse gas emissions equivalent to 62,000 tonnes of carbon dioxide emissions.
The power generated from the wind energy project will be sold to state-owned power company UTE (Administración Nacional de Usinas y Trasmisiones Eléctricas) through a 20-year power purchase agreement.
Several other companies are also working on wind energy projects in Uruguay, all of which will make a significant contribution to the country’s target to source 90% of its total electricity needs from renewable energy sources by the end of this year. The country seems well on track to achieve this target, considering that last year the country’s national energy director announced that 84% of the electricity consumed was sourced from renewable energy sources.
Uruguay has attracted significant investments in the wind energy sector in recent months. Earlier this year the Inter-American Development Bank and China Co-financing Fund for Latin America and the Caribbean announced debt financing worth $216 million for two wind energy projects of 70 MW capacity each.
Enel Green Power has a substantial footprint in South America, operating over 2 GW of renewable energy capacity across Brazil, Chile, Costa Rica, Guatemala, Mexico, Panama, and Uruguay.
CHILE/URUGUAY: South America is a hot market for wind power, but after some years of rapid growth, installations in both Uruguay and Chile are set to slow beyond 2016.
Few countries can compete with Uruguay’s rapid adoption of wind energy. Enzo Coppes, chief operating officer of state-owned utility Usinasy Transmisiones Electricas (UTE), attributes two factors to the breakneck pace of turbine installation: the political consensus that established the national energy strategy a decade ago, and UTE’s position as an integrated power firm that could guarantee demand from wind projects.
This has allowed Uruguay to outpace the government’s ambitious targets. The original target of 300MW was surpassed last year, and installed capacity should hit 850MW by the end of 2015. Next year another 400MW will be added, lifting total capacity to around 1.2GW. But beyond that date, growth will slow dramatically.
“We are reaching saturation point in terms of renewable energy because demand is already sufficiently covered,” says Coppes. From 2017, demand for additional wind turbines is likely to grow only as fast as total electricity consumption rises, a figure closely tied to GDP.”
Utility export
So UTE is looking at alternatives, specifically Brazil and Argentina, two huge energy markets that are struggling to cover internal demand. Uruguay and Argentina are already linked by a 1GW interconnection, although sales have so far been limited to surplus hydropower. Testing has now begun of a 500kV line to Brazil. Despite the competitive terms agreed with Brazilian utility Eletrobras, Uruguay is not planning additional investment to serve cross-border markets. “For the moment our investments are to cover our demand, not those of our neighbours,” he says.
One issue is the company’s limited capacity for investment. Most of the wind farms built so far in Uruguay have been funded through project finance with UTE providing 30% of the resources and the rest through project finance loans.
But for the 140MW Pampa wind farm scheduled to come online in 2016, UTE decided to finance 10% of the costs by raising around $80 million on equity in the project from individual and institutional investors on the Montevideo Stock Exchange. To the company’s surprise, the raising was oversubscribed three times with small investors (limited to up to $20,000) buying parts of the issue originally reserved for pension funds.
“It reflects the demand for this type of product,” says Coppes. UTE is now considering a similar mechanism to fund the Colonia Arias and Valentines projects now in development, each at 70MW. After this success, the government is considering using this model to finance other public infrastructure, such as highways and ports.
Wind VS Solar in Chile
While demand for renewables in Uruguay may be flattening out, in Chile the renewables boom is just beginning. Since the country implemented an obligatory 5% quota in 2010 for renewables, more than 2.2GW of alternative renewables energy has been installed, with wind turbines accounting for almost
40% of the total.
Although Chile offers no subsidies for renewables projects, it does have some of the region’s highest electricity prices. A tender for long-term contracts last December secured an average price of $108/MWh, a considerable improvement on previous auctions.
After the government raised the target for renewable energy to 20% by 2025, investment in the sector soared. Last year, Chile added 500MW of new wind turbines and total capacity now stands at almost 900MW.
But since that surge, interest in wind energy has waned as developers switch their attention to Chile’s other huge resource: the sun. The Atacama Desert is the world’s driest, offering solar firms guaranteed 300 days of sunshine. A government report estimates the country could support more than 1.3TW of solar capacity.
Tempted by this potential, developers have lined up plans to carpet the arid north of the country in photovoltaic panels. According to Chile’s energy ministry, there are currently almost 2GW of solar energy plants under construction, compared with just 212MW of wind turbines. And authorities have granted licenses for another 9GW of solar capacity, compared with 5GW of planned wind farms.
Lack of transmission
A key barrier to the development of both technologies has been the lack of transmission capacity, especially between the sun-drenched desert and windy coasts of the north and the major cities of Central Valley. As a result, solar plants have been selling electricity at close to zero on spot markets due to the lack of local demand.
Plans to connect the two main grids with a new 500kV line from 2017 should unlock that potential. But whether wind or solar energy will take the lead is in the hands of the market.
“It’s very difficult to make forecasts because there is no model which explains how this market moves,” says Carlos Finat, executive director of Chile’s renewable energy association, Acera. Any small adjustment to the investment costs or project capacity factor could allow either wind or solar to dominate, he says.
The clean energy sector in Uruguay has received a $216 million with two wind energy projects securing key financial backing.
The Inter-American Development Bank (IDB) has approved loans to support two wind energy projects in the South American country.
The Colonia Arias and the Valentines wind farms will each receive $72 million from IDB and the projects will have a generation capacity of 70 MW each.
The two projects will also receive $36 million each from the China Co-financing Fund for Latin America and the Caribbean.
The projects will generate a combined 615 GWh worth of electricity when fully operational and will offset more than 366,000 tonnes of CO2 emissions.
The energy will be sold to the government through a long-term power purchase deal.
In 2007, the GEF, in conjunction with the UNDP and the National Energy Directorate, embarked on a three-year mission to mitigate greenhouse gas emissions by implementing large-scale, grid-connected wind energy systems in Uruguay.
Through the Uruguay Wind Energy Programme (UWEP), the GEF allocated $950,000 and co-financed $6.01 million with the UNDP for the development of a system, including wind farms, such as the Caracoles Wind Farm in the Caracoles hills of Uruguay.
The project’s goals are to reduce the barriers that had previously stalled the development of such a wind energy system in Uruguay, thus allowing for commercial development of wind energy in the country and the establishment of a viable showcase and basis for future replication. Through this GEF programme, the Government of Uruguay expects that wind energy in Uruguay will play an important role for energy diversification, greenhouse gas reductions, and to create many new market opportunities in the economy.
The UWEP is targeted primarily at strengthening the existing institutional and human capacity by enhancing manpower, facilitating training, streamlining intra- and inter-institutional processes. The project also addresses the lack of specific information needed to initiate and develop wind energy in the country by implementing a sustainable wind measuring programme and executing supporting studies.
Prior to the start of this project, no specific action had been taken to move forward towards the effective and sustained introduction of renewables in Uruguay. Also, the primary supply of energy in Uruguay had depended mainly on hydro power and imported fossil fuels. For this reason, the GEF supports this development in the hopes that the use of domestic, renewable, energy sources will directly translate into a reduction of the consumption of imported, fossil fuels and bring along important, long-term benefits to the global environment and the local economy.
Today, as the programme is nearing its completion date, it is possible to see its successes in Uruguay by visiting the Caracoles Wind Farm in Sierra de los Caracoles, where Uruguay’s first-large scale newest generation wind farm was designed, built, and commissioned with support from GEF funds.
