Uruguay Plans Wind Farms Worth $1.3 Billion to Cut Power Costs

Uruguay may build $1.3 billion of wind farms in the next four years after developers said they could provide electricity cheaper than conventional energy sources.

National power company Usinas Y Transmisiones del Estado may purchase electricity from 600 megawatts of projects that participated in an auction for new wind farms, four times more than expected, Ramon Mendez, director of energy at the Ministry of Industry, Energy and Mining, said in a telephone interview.

Companies including Spain’s Enerfin Sociedad de Energia SA offered to provide power for as low as $62.35 a megawatt-hour, prompting the government to consider buying more wind power. Aeolic energy is beating conventional power sources on price in head-to-head contests elsewhere in South America. Wind was the cheapest source of energy in a similar auction in Brazil last month.

“The bids are amazing,” Mendez said. “I was quite surprised when I first saw them.”

The average cost of electricity generation in Uruguay is $73 a megawatt-hour and this may drop to $45 in 2015 as the country gets more of its energy from wind, biomass and liquefied natural gas-fueled power plants, Mendez said today in an e-mail.

A stagnant market for new wind farms in Europe and the U.S. has offered Uruguay an opportunity to install cheap power projects as turbine makers try to outbid each other for supply contracts, he said. This has allowed developers in Uruguay to offer their electricity at unprecedented low prices, Mendez said.

Falling Prices

“We’re very happy to get this energy as soon as possible,” he said. “It’s possible costs will rise in the future” as the global market for wind energy picks up elsewhere, he said.

Uruguay may have as much as 850 megawatts of wind farms online by 2015, about a third of what’s currently installed in the country, he said. It has about 100 megawatts commissioned or under construction, he said.

Turbine prices in the first half of 2011 have fallen to 940,000 euros ($1.3 million) a megawatt-hour, 7 percent lower than the average for 2010, according to information compiled by Bloomberg.

For some of these Uruguayan projects to be viable turbine prices, which comprise about 75 percent of a project’s cost, will have to fall to $1.2 million, Maria Gabriela da Rocha Oliveira, an analyst at Bloomberg New Energy Finance in Sao Paulo, said in a telephone interview today. It costs about $1.7 million to roll out one megawatt of wind farm in Uruguay currently, Mendez said.

Auction Bids

Seventeen companies proposed 1,097 megawatts of wind farms in last month’s auction, Usinas Y Transmisiones del Estado said on its website. The auction was originally seeking 150 megawatts of wind farms.

Bids were as much as 28 percent below those offered in a separate auction for 150 megawatts of wind farms completed in January, when prices varied between $85 and $87 a megawatt hour, UTE said in a statement.

Uruguay produced 51 percent of its electricity from hydroelectric dams in 2008, the International Energy Agency said on its website. About 39 percent came from oil imports and the remaining from biomass, the IEA said.