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Uruguay's Government Plans to Develop as Much Wind Energy `as Possible'

Uruguay, South America’s third- cleanest country in terms of carbon emissions, plans to develop as many wind farms as its electricity grid can support to diversify energy supplies beyond fossil fuel and hydropower.

The country has 500 megawatts of wind projects in the works, and Ramon Mendez, director of energy at the Ministry of Industry, Energy and Mining, said Uruguay may generate 25 percent to 28 percent of its power from wind and biomass in 2015. That’s almost double its official goal of 15 percent.

“The idea is to go as high as possible,” Mendez said in a telephone interview from Montevideo, Uruguay’s capital.

Uruguay has reached the limits of its hydroelectric resources and is looking to tap low-cost wind power to bolster its supplies of electricity.

The government invited in December developers to submit proposals for an auction of 150 megawatts of wind power. The national power company Usinas Y Transmisiones del Estado has said it plans to develop 200 megawatts of wind farms. Mendez said all of those projects may be in operation by 2015.

The country in January named the winners of another auction for 150 megawatts of wind farms. Three developers including Spain’s Abengoa SA received contracts to sell wind power at rates between $81.15 and $86.26 a megawatt-hour.

Those prices are about 40 percent cheaper than the $135 to $140 it costs to buy electricity generated at fuel oil and diesel oil thermoelectric plants, Mendez said.

Such plants produced 39 percent of the country’s power, according to the most recent data from the International Energy Agency, a Paris-based intergovernmental research group.

Overproduction Risk

Mendez said the country must be careful not to install too much capacity and burden the power grid with an excess of wind energy.

On a blustery summer night, for example, he said the planned 500 megawatts of wind farms may, at peak moments, produce as much as 60 percent of the country’s electricity. When demand is low this surging supply may be a problem.

Overproduction can stress a country’s electricity infrastructure and lead to blackouts, James Cox, principal consultant at Vantaa, Finland-based engineering company Poyry Oyj, said in an interview.

“Wind generation is not controllable, you get what you’re given,” he said.

The risk is higher for small grids that are not well- connected to neighboring countries, he said. Ireland, for example, won’t permit wind energy to furnish more than 75 percent of the nation’s power at any time, he said.

Good Investment

Uruguay is considered an appealing investment target for foreign developers because it’s “low risk,” Mendez said. Loans for projects, however, can be expensive and carry annual rates of 10 percent, twice what they cost in Europe, he said, which can slow development.

Mendez said the wind is strong in Uruguay, which helps make wind farms exceptionally productive. Capacity factors, which measure how often turbines are working at full power, can reach 40 percent there, he said.

That’s about twice what some of the best-placed wind farms in Europe achieve, according to Eduardo Tabbush, an analyst at Bloomberg New Energy Finance. It makes wind power less expensive in Uruguay than in other countries.

Argentina signed contracts for wind farms in a similar renewable energy auction last year for an average price of $127 a megawatts hour, about 50 percent higher than recent prices in Uruguay, according to Energia Argentina SA, the national energy company.

Weaned from Oil

Uruguay wants to wean itself off oil completely by 2013 by converting its existing thermoelectric power plants to liquefied natural gas and developing its renewable energy resources, Mendez said.

Hydroelectric facilities provided just over half of Uruguay’s power in 2008, according to the IEA. “The problem is we are dependent on the Nino-Nina climate pattern,” a warming and cooling of the tropical eastern Pacific Ocean every five to eight years that can effect rainfall, he said.

Two years ago there were weeks when the country only had enough water in its reservoirs to operate 3 percent of its 1.6 gigawatts of hydroelectric plants, he said.

And there’s little chance to expand Uruguay’s hydroelectricity resources. “We’ve exhausted all our main rivers,” he said. “There’s no room for anything larger than 10 megawatts.”

Uruguay is the third-cleanest country in South America in terms of carbon emissions per gross domestic product, according to the World Resources Institute. Mendez said he wants to “maintain this label” as a carbon efficient economy, The country’s 2005 to 2030 energy plan set a goal of generating 15 percent of its electricity from renewable sources.

“After we complete work on this 500 megawatts, we should have more information on,” how much wind energy the grid can cope with, Mendez said.

To contact the reporter for this story: Stephan Nielsen in Sao Paulo at snielsen8@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net.

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