By Liam Whittington
The weighty challenge the Uruguayan government faces in securing sufficient energy supplies was brought into stark relief as a dispute began in July 2011 between Argentina and Paraguay over the sale of Paraguayan electricity to Uruguay. During this ongoing impasse between its neighbors, the Uruguayan government has expressed its frustration over Argentine President Cristina Fernández de Kirchner’s refusal to allow the transportation of surplus Paraguayan electricity to Uruguay via the Argentine power grid. Uruguay and Paraguay claim that the Fernández de Kirchner administration effectively blocks such a transfer by charging almost five times the prevailing regional rate of USD 10 per Megawatt (MW) hour for power transmitted through the Argentine grid, because Argentina wishes to maintain its status as the sole purchaser of Paraguayan surplus power. Prompted by this disagreement, in July 2011 Paraguayan delegates at the Mercado Común del Sur (Mercosur) Parliament called on Argentina to pay more for the surplus energy generated from Yacyretá, Argentina and Paraguay’s shared hydroelectric dam. The delegates went on to describe the current situation as “a brilliant deal for our partner [Argentina] and a heavy burden for Paraguayan national interest [to have to bear].”
While this latest dispute is illustrative of apparent difficulties in the relationship between Paraguay, Uruguay, and Argentina, it also highlights the important challenge that Latin American nations confront in securing sufficient energy supplies. As a country with limited hydrocarbon energy resources, Uruguay faces the difficult task of ensuring its supply will continue to meet demand in the future. Nevertheless, the nation is now in the process of establishing the foundations for the production of viable, clean, and cheap sources of energy that will reduce reliance on foreign energy imports. Uruguay is attempting to secure its future through a progressive policy based on sustainability and self-sufficiency, which would be step towards making it a leader in sustainable Latin American energy security. Uruguay’s plan provides a potential model for its neighbors, which tend to sacrifice environmental issues in prioritizing economic development.
Where Are All the Hydrocarbons?
Uruguay is plagued by a lack of fossil fuel resources. As Uruguay’s Secretary of Energy Ramón Méndez explained to the Clean Energy Congress in March 2011, Uruguay has “no oil, no natural gas, no coal.” Between 2003 and 2007, 68 percent of Uruguay’s energy needs were met by hydroelectric dams on the Uruguay River. The largest of these impoundments, the Salto Grande, a facility shared with Argentina, has generated up to half of Uruguay’s electricity in the past. Imported oil makes up a majority of the remainder of Uruguayan energy, accounting for 27 percent of the country’s total imports in 2010, a costly endeavor when world oil prices are high. Thus, when there has been a shortfall in energy generation in Uruguay, it has been necessary to import not only oil, but also electricity from neighboring Argentina and Brazil – a policy which could be economically unsustainable over the long term.
This imported electricity is a vital source of energy for Uruguay when hydroelectric generation falls short of demand during periods of protracted drought. For example, following three consecutive unusually dry months in 2008, Uruguay suffered an energy crisis which led former President Tabaré Vázquez to implement a “National Plan to Save Energy” and to impose restrictions on the use of energy in homes. The lack of rainfall forced the Vázquez administration to compensate through an investment of over USD 500 million in fossil fuel power generation. This incident clearly demonstrates the financial implications of drought and of insufficient hydroelectric energy generation on the Uruguayan state.
As world temperatures rise due to the inexorable industrial and economic growth of countries such as China, India, and Brazil, it is likely that incidences of extreme weather and drought will become more frequent in Uruguay, as well as in the rest of the world. However, undaunted by the challenges associated with energy security, the current Montevideo administration under José Mujica has begun to undertake a series of measures that will hopefully free it from oil dependency. If successfully implemented, these measures could provide a blueprint for other Latin American nations as fossil fuel supplies continue to be depleted.
New Solutions to Old Problems
As demand for electricity increases and the industrial sector continues to grow, Uruguay’s large-scale hydroelectric power projects do not appear to have the capacity to meet the needs of future Uruguayans. To address these challenges, Montevideo is creating an energy plan designed both to secure the future of energy generation up until 2030, and to replace hydrocarbons with renewable resources. At the center of this plan is Uruguay’s most abundant natural resource: wind. Uruguay’s strong wind currents make it a prime location for wind power generation, leading the Mujica administration to set a target of installing 500MW of wind power capacity by 2015. Earlier this year, Méndez commented that while the government’s official target is to generate 15 percent of its power from wind and biomass sources by 2015, it may actually be able to generate 25 to 28 percent, almost double. The goal, Méndez said, was to “go as high as possible” in the production of renewable energy, with Montevideo awarding contracts to energy technology companies such as the Spanish firm, Abengoa SA, to build large-scale wind farms. He also stressed that the energy generated by wind farms is significantly cheaper than that produced at fuel and diesel oil thermoelectric plants, which range between USD 81.15 and USD 86.26 per megawatt hour from wind generation as opposed to USD 135 and USD 140 per megawatt hour from oil generation. If these savings are passed on to the Uruguayan consumer, ordinary Uruguayans will have access to cheaper, more sustainable power.
However, using wind to produce energy is accompanied by a number of challenges. Due to the unpredictability of wind strength, wind generation alone cannot be used to power Uruguay. On very windy days, farms may produce a surplus of energy that far exceeds demand, placing pressure on the country’s electricity infrastructure; on very calm days, turbines may not generate sufficient electricity. In several countries, such as the United States, United Kingdom, and Canada, wind farm development has been met with some resistance, and protestors argue that turbines damage the natural landscape, reduce property values, and cause health problems. Furthermore, initial construction of the wind farms will require a massive investment of Uruguayan state capital, costing an estimated USD 100 million per farm, placing a financial burden on a country whose GDP in 2010 was estimated to be a relatively small USD 40 billion. Despite these drawbacks, which require careful calculations and comprehensive management, Uruguay is in a prime geographic position for taking advantage of wind power. According to Eduardo Tabbush, an analyst with Bloomberg New Energy Finance, Uruguayan government figures suggest that wind turbines in the country work at full power almost twice as often as the best placed wind farms in Europe. Uruguay would be remiss not to harness such a plentiful renewable resource.
Alongside its investment in wind power, Uruguay is also trying to increase the amount of energy generated by means of biomass. The nation’s agricultural sector produces a large quantity of agro-industrial waste, which the Mujica administration hopes to use to produce biofuel. In March 2010, Uruguay already had installed ten biomass power plants, and plans to have 200MW of installed biomass generation capacity by 2015. In conjunction with its hydroelectric generation, investment in these green, renewable energies will enable Uruguay to completely wean itself off foreign oil energy imports, a goal which Méndez hopes can be achieved by 2013. In attempting to ensure long-term energy security through these initiatives, Uruguay is addressing significant economic and energy challenges through environmentally sustainable means. At a time when many of its Latin American neighbors appear much less concerned with their impact on the environment, Uruguay has developed a progressive energy policy. Although motivated at least in part by necessity, the sustainable energy policy of the Uruguayan government shows laudable foresight which is normally absent from the calculations of a number of Latin American governments.
A Blueprint for Latin American Energy Sustainability?
By adopting clean, renewable energy technologies, Uruguay has constructed a model by which other Latin American countries can reduce their use of fossil fuels and lessen their environmental impact. The fact that Uruguayan citizens have traditionally used less energy per person than their Latin American neighbors is a factor which, alongside Uruguay’s geology and its lack of a serious endowment of hydrocarbon resources, makes the transition to entirely renewable energy generation easier. As a small nation with relatively few resources and low energy demands, the use of renewables makes eminent economic sense.
Although Uruguay is naturally endowed with renewable energy resources, other Latin American nations, which may not be as fortunate, might also follow its lead in sustainable energy development. Brazil, for example, generates most of its electricity through hydroelectric dams. In 2009, hydroelectricity accounted for 84 percent of power generation, with the remaining 16 percent produced by other renewable sources or conventional thermal and nuclear energy. The adoption of a focused strategy and investment in renewables in a similar fashion to Uruguay could lead Brazil to become completely sustainable as well as self-sufficient in its electricity generation as well. Venezuela, Peru, Colombia, and Paraguay all generate more than 65 percent of their electric power via hydroelectricity, and should also attempt to generate the rest through other renewable sources.
Although many other Latin American countries are larger, more populous, and have different renewable resources, geographical features, and levels of demand, the entire region should study the Uruguayan model and be prepared to adapt its principles to suit their needs. The support and development of environmentally-friendly sources of energy is a crucial issue for the hemisphere’s future, particularly as fossil fuels continue to be rapidly discovered, extracted and depleted, and as deforestation worsens in Brazil and Ecuador. Unfortunately, because hydrocarbon resources are extremely valuable as well as profitable, it is unlikely that Latin American countries will be able to renounce their use of oil and gas overnight. After all, oil remains the pillar of the Venezuelan and Ecuadorian economies. These resources are finite, however, and oil exploration and production is demonstrably damaging to the environment and contributes to increased and worsened instances of extreme weather conditions, which can be devastating, not just in Latin America, but all over the globe.
It would be unrealistic to portray Uruguay as the most environmentally beneficent nation, considering that a large part of its agricultural sector is comprised of livestock farming which produces huge amounts of methane. However, its plan to ensure long-term energy security does demonstrate a clear consideration of future energy requirements. Other Latin American nations should follow Uruguay’s lead and exercise a concerted effort to adopt renewable sources of energy that will secure the energy demands of the future.
Energy security will be one of the pre-eminent global challenges of this century. As Latin America’s economic development progresses, and the demand for energy increases throughout the region, alternatives for traditional fossil fuels must be found. Latin America, and South America in particular, has a varied geographical landscape of surging rivers, high mountains, fertile plains, and dense forests that present myriad possibilities for renewable energy technologies. Uruguay is taking the lead with a progressive, environmentally sound energy strategy, which, if ultimately successful, will benefit the Uruguayan economy and its energy consumers. Latin America may currently be reaping the rewards of fossil fuels, but it cannot do so indefinitely. As hydrocarbons are depleted, global competition for energy will increase, and most Latin American nations will need to find alternative sources of energy. Uruguay’s current energy policies could provide a model that other Latin American countries can adopt and apply. By acting now, the entire region can at least partially protect itself from future instances of energy insecurity.
References for this article can be found here.