Snapshot: Uruguay’s power generation state of play, hydrogen projects

Clean energy champion Uruguay has emerged from a crippling drought that impacted potable water supply in capital Montevideo and hydroelectric output between September 2022 and August this year.

Amid abundant rainfall, water inflows into the key hydropower asset Salto Grande – which accounts for 19% of Uruguay’s installed capacity – have rebounded, registering in October a level not seen since January 2019.

During the drought, almost the worst on record, over eight consecutive months average output from Salto Grande was down 70% compared with expected levels, local energy consultancy SEG Ingeniería told BNamericas. In the Río Negro basin, home to Uruguay’s three other hydropower dams, production was down 88% compared with average readings, it added.

Nevertheless, renewables output over the period, chiefly thanks to heavy investment in wind parks, accounted for 89% of production. Thermoelectric output accounted for 11%, down from 48% during Uruguay’s March 2008-July 2009 drought, prior to the country’s wind capacity buildout.

November saw renewables produce 99.3% of power, with wind accounting for 44.2%, hydropower 39.1%, biomass 12.1% and solar PV 3.9%. Uruguay’s 2022 annual energy report states that fossil fuel-fired thermal capacity stands at 1.18GW, hydropower 1.54GW, wind 1.52GW, biomass 417MW and solar PV 280MW.

BNamericas asked SEG Ingeniería founder Fernando Schaich for a snapshot of some other aspects of the country’s energy sector. With offices in Montevideo and Chile’s capital Santiago and renewable/green hydrogen projects in Mexico, Colombia, Peru, Argentina, Brazil, Chile and Uruguay, SEG offers consulting and other services across the energy efficiency, renewable energy, electromobility, plant management and green hydrogen segments.

BNamericas: Regarding the future expansion of the generation park, the central pillar of state utility UTE’s plan continues to be solar PV? 

Schaich: Yes, and in fact UTE announced a few months ago the construction of solar PV plants: about 25MW in the south and about 75MW further north – the location is still uncertain. The idea is to launch tenders for the civil works and assembly, but they will be operated and managed by UTE. Perhaps in the future and maybe depending on the political color of the next government, more generation could be added – at least 100MW per year would be needed – from private companies or a mix between private and UTE.

BNamericas: What’s the situation regarding the regulation of private power purchase agreements? For example, last year there were announcements about the possibility of recognizing the firm capacity of renewables plants. 

Schaich: A few months ago, the decree that recognizes the firm capacity of renewables emerged. The calculation is complex and is based on critical system hours. ADME [Uruguay’s power market administrator] must do the calculation for each case but, in general, it is expected to be similar to each technology’s capacity factor. 

BNamericas: In Chile, there is a strong focus on battery storage systems. In Uruguay, is there a need for batteries today, or a future need for them?

Schaich: In the short-term, I don’t think there will be much traction in Uruguay. Indeed, there was a tender but it was announced that it was not clear whether this system will be installed. It’s worth noting the fact that having a hydropower base accounting for around 40% of generation via three plants means that hydro can play a battery role, first dispatching solar and wind – with marginal costs equal to zero. In Chile, it’s much more justified on account of the high levels of solar PV curtailment there is in the system, especially in the north.

BNamericas: What’s the current situation in Uruguay regarding green hydrogen projects? For example, are there pilots under construction or when could we see the start of construction, etc?

Schaich: For now, there’s nothing under construction. There are about three or four projects announced. In order of seniority in their development they are the following:

• Tambor, about three years under development and involving about 140MW of electrolyzer capacity. It already has land secured, over a year and a half of wind measurements, and the environmental viability, or VAL, of its proposed location approved, along with various water, environmental and social studies. It will produce green methanol.
• H24U, in development for about 10 months. It is a pilot-scale project of between 2.5MW and 7MW of electrolyzer capacity powered by a solar plant with grid connection, or there may be some variants of that. It will produce green hydrogen for fuel cells in timber-transport trucks.
• HIF, in development for about four months. It is the largest project announced, about 1GW of electrolyzer capacity, and will produce e-fuels. It is still in the feasibility analysis stage and negotiating conditions with [state biofuels company] Alur which will supply biogenic CO2.
• There is also a project, in the north, that has its VAL approved. It’s not clear what product they will market but the VAL speaks of 310MW of wind and 300MW of solar PV. It is from a well-known economic group in Uruguay but for now I understand that they prefer not to make big announcements.