The Uruguay Blueprint: How Countries Can Follow in Uruguay’s Footsteps and Transform into Global Clean Energy Leaders

It is widely understood that for countries to reduce their greenhouse gas emissions and achieve their Paris Agreement climate action goals, they must revamp their energy sectors by transitioning from fossil fuels to renewable energy.  For many nations, decarbonizing their energy sources appears as a daunting task, since fossil fuel infrastructure has powered all their energy needs for decades.  On top of that, renewable energy has high upfront costs and complex political connotations, which can serve as a barrier to implementation for low-income countries or nations where fossil fuels are a major economic export. However, there are examples of unexpected countries making fast and profitable shifts to a clean energy economy, proving that large scale renewable electricity generation is both good for the environment and a successful financial investment.

Located on the Atlantic Ocean in South America, Uruguay is a small country that is commonly overshadowed by its neighbors Brazil and Argentina, but that has not stopped Uruguay from emerging as a global leader in renewable energy.  At the beginning of the 21st century, Uruguay relied on hydropower along with imported oil and electricity from Argentina (primarily stemming from fossil fuels) to power its entire energy sector.  The high cost of importing both oil and Argentinian electricity coupled with increased drought affecting hydropower made Uruguay seek out new energy alternatives.  Over the next 20 years, Uruguay engineered a remarkable transition to renewable energy to drastically transform its energy sector.  Now, Uruguay generates over 97% of its electricity from clean energy sources.  In the span of two decades, Uruguay’s wind and solar generation rose from less than 1% to a staggering 36% of the country’s total electricity, making Uruguay the 4th largest producer of combined wind and solar energy in the world.

Uruguay is an outstanding example of a country harnessing its strong wind and solar energy potential to yield financial and environmental benefits.  Uruguay’s clean energy transition has lowered the country’s electricity generation costs by $200 million dollars per year and reduced greenhouse gas emissions by 87% in 2017 compared to 2007-2013 averages.  There are a plethora of nations across the globe that have similar wind and solar potential to Uruguay, but are not currently reaping the financial and environmental benefits that result from a successful transition to a clean energy economy. Listed below are energy profiles for two countries, South Africa and Mongolia, that are currently hamstrung by lackluster fossil fuel energy infrastructure, but have massive amounts of untapped renewable energy potential that can unlock financial and environmental benefits similar to Uruguay. 

South Africa

Electricity Generation Key Stats: 70% Coal, 16% Oil, <5% All Renewables

Flaws in Current Structure: For over a decade, South Africa has dealt with a nationwide energy crisis, as electricity demand continues to exceed the country’s ability to supply power.  The inability of South Africa’s fossil-fuel energy systems to generate enough power to meet demand has led the country to administer frequent rolling blackouts as a way to prevent the national power grid from collapsing

Renewable Energy Potential: South Africa has tremendous renewable energy potential for both wind and solar power.  With over 2,500 hours of sunshine per year in locations such as the Kahlari Desert and strong, constant winds all across the southern coastline, South Africa has strong potential for both solar and wind energy.  South Africa is estimated to have over 6,700 GW of wind energy potential and its radiation level of4.5-6.6 kwh/m^2, a direct predictor of solar potential, is among the top 3 countries in the world.

Mongolia

Electricity Generation Key Stats: 70% Coal, 23% Oil, 3% All Renewables

Flaws in Current Structure: Mongolia is overwhelmingly dependent on burning coal, which has created a plethora of air pollution and public health problems.  For example, Mongolia’s capital of Ulaanbaatar has particulate matter concentrations 6 to 10 times higher than the World Health Organization’s recommended levels for safe air quality.  In addition to the dangerous pollution from large quantities of coal burning, Mongolia’s fast growing population and infrastructure is outpacing Mongolia’s ability to provide electricity, leaving many rural areas of the country to burn solid fuel for heating and other energy needs.

Renewables Energy Potential: The Gobi Desert, with its high winds and constant sunny skies, encompasses roughly 30% of Mongolia and provides incredible potential for solar and wind power.  The NREL estimates that Mongolia can produce 2.6 TW of electricity from wind and solar power, which would not only meet all of Mongolia’s energy demands, but also turn Mongolia into a renewable energy exporter for other countries in Northwest Asia.

Analysis: Mongolia and South Africa can follow Uruguay’s policy actions to reduce their dependence on fossil fuel and transform into clean energy economies with substantial environmental and financial benefits.

As discussed in the prior section, it is evident that both Mongolia and South Africa have the capacity to develop a clean energy economy but have yet to make any substantial progress towards decarbonising the electricity sector.  On the other end of the spectrum, Uruguay has taken a variety of policy actions to stimulate the development of renewable energy in the country.  For wind, Uruguay instituted a public-private partnership where the national government facilitates auctioning wind projects to private companies, which created a massive financial investment into wind energy across Uruguay and spurred the country’s dramatic increase in carbon-free wind energy production.  Uruguay also developed a strong regulatory framework that includes various tax exemptions and incentives to prioritize solar and wind energy development.

Obviously, a large-scale transition to renewable energy is easier said than done, and both South Africa and Mongolia have various barriers that currently prevent this transition.  Uruguay overcame their own barriers to implementation by presenting renewable energy as a nonpartisan solution to their own energy problems.  Uruguay stressed to local governments, the energy sector, private companies, and citizens that the country needed to diversify its electricity generation to better meet growing energy demand, increase the resiliency of their electricity grid, and create new jobs, which led to widespread support for the country’s energy plan.  South Africa and Mongolia can provide similar rationale as both countries' fossil fuel infrastructure struggles to meet their current electricity demand.  By framing renewables as a solution to current energy issues, and developing policies and regulatory frameworks that stimulate wind and solar, Mongolia and South Africa can begin the difficult transition away from fossil fuels to clean energy.

Conclusion

Similar to Mongolia and South Africa, there are many countries across the world with untapped renewable energy potential, but for most of them, various barriers prevent the transition to large-scale clean energy implementation. However, the success of Uruguay’s policy actions indicates that there exists a path for countries across the world to follow Uruguay’s lead and revamp their energy infrastructure to bolster their national finances and achieve their Paris Agreement emissions reductions by creating a clean energy economy. 

Bibliography

Image from Shutterstock

Asian Development Bank. “Unlocking Mongolia's Rich Renewable Energy Potential.” Asian Development Bank, Asian Development Bank, 24 July 2020, https://www.adb.org/news/features/unlocking-mongolias-rich-renewable-energy-potential#:~:text=Mongolia's%20clean%20energy%20challenge&text=Residents%20instead%20burn%20solid%20fuel,Asian%20Development%20Bank%20(ADB).

Bertram, Rebecca, et al. “Uruguay, Latin America's Renewable Champion.” Energy Transition, 28 Jan. 2020, https://energytransition.org/2020/01/uruguay-latin-americas-renewable-champion/.

Jain, Shilpi, and P.K. Jain. “The Rise of Renewable Energy Implementation in South Africa.” Energy Procedia, Elsevier, 5 Jan. 2018, https://www.sciencedirect.com/science/article/pii/S1876610217365165.

Rathi, Anusha. “Why South Africa Is in the Dark, Again.” Foreign Policy, Foreign Policy, 8 July 2022, https://foreignpolicy.com/2022/07/08/south-africa-energy-crisis-eskom-power-cut/.

“Renewable Energy in Latin America: Uruguay.” Global Law Firm | Norton Rose Fulbright, https://www.nortonrosefulbright.com/en/knowledge/publications/c7fa4c24/renewable-energy-in-latin-america-uruguay.

“Uruguay: Leveraging Partnerships to Create Green Jobs and Ensure a Just Transition.” World Resources Institute, 1 Apr. 2021, https://www.wri.org/update/uruguay-leveraging-partnerships-create-green-jobs-and-ensure-just-transition.

“Uruguay - Renewable Energy Equipment.” International Trade Administration | Trade.gov, https://www.trade.gov/country-commercial-guides/uruguay-renewable-energy-equipment.