Uruguay turns to green hydrogen

Uruguay, the country with the second-highest percentage of variable renewable energies (such as solar and wind) in the world’s electricity generation, was one of the special guests at the most recent international conference on renewable energies, which was held in Madrid at the end of February.

Physicist Ramón Méndez, Uruguay’s national energy director between 2008 and 2015, tells América Futuro that “Europe is very lost with the energy issue and they see the Uruguayan case as a very strong model to follow” after exposing in Madrid the peculiarities of the process that managed to decarbonize the Uruguayan electricity matrix above 95% in less than ten years.

Méndez recounts that in 2008, the 3.4 million-person nation of Uruguay, which lacks resources like gas, oil, or coal, had a “perfect storm” brought on by high fuel prices, rising electrical demand, and inadequate local infrastructure that resulted in a crisis in the provision of energy. We had to hunt for alternative routes since we lacked funding, he says.

The adoption of the energy transition toward domestic and renewable sources as State policy through a multiparty agreement reached in 2010 ensured its execution and continuity. Since then, the nation has seen a significant transition in the way it generates power, switching from the importation of fossil fuels to a mix of water, sun, and wind. The latter, in particular, rose to prominence: 700 wind turbines were constructed, dispersed among 41 public and private wind farms, with a total generation capacity of 1,500 megawatts, covering more than 30% of the local electricity need.

According to Marcelo Mula, president of the Uruguayan Association of Renewable Energies, Denmark is the country with the highest penetration of solar and wind energy worldwide, with Uruguay coming in second. In a year with average rainfall, renewable energy sources like the wind (32%), biomass combustion (17%), solar (3%), and traditional and seasoned hydroelectric (45%) cover 97% of the nation’s electrical consumption. The remaining portion relates to the electricity produced by thermal fossil fuel power plants, whose consumption rises when weather conditions interfere with the performance of other clean sources, as has been the case due to the “exceptional” drought that has affected the nation since 2020.

On a global basis, these figures are drastically different, according to the International Energy Agency: only 24% of the electricity consumed worldwide is generated by renewable sources, while more than 75% of electricity is still dependent on coal and other fossil fuels.

Uruguayan model

Méndez affirms that the “essential role” performed by the State in the planning and management of the procedure is what allowed for the quick transformation of the Uruguayan electrical matrix. In this sense, power purchase agreements for a 20-year period were used to construct the public-private collaboration. Private electricity producers are so required to sell their products only to UTE, the state-owned utility that generates, transmits, and distributes electricity in Uruguay. The public firm committed to purchasing all of the nation’s electrical production, which it either uses for exports or domestic use.

The former energy director said that with this technique, the nation’s average annual generation cost decreased from 1,100 million to 600 million dollars. Méndez claims that the company is spending $500 million less than before. He continues by saying that during this procedure, the economy received 2,000 million dollars, 50,000 jobs were generated, and 99.9% of the territory was electrified. For instance, Uruguay was the first nation in Latin America where all rural schools have access to the electrical grid.

Mula emphasizes the building of an energy conversion plant at Melo (east of the country), which improved the interconnection with Brazil, as one of the projects completed during the energy transition. “Since 2018, Uruguay has been a net exporter of energy, surpassing cattle companies as one of its primary exporting companies,” he claims.

He explains, though, saying that since that year, “no more renewable electricity has been installed and that is a significant concern since the economy has increased and the demand for energy as well.” We need to restart using renewable energy, he asserts.

The commitment to using green hydrogen

Although it is widely acknowledged that the transformation of the electrical sector in Uruguay has made a substantial contribution to the decarbonization of the economy, there are still other activities that depend on polluting fossil fuels. 40% of the nation’s total energy use, according to Ral Vias of the Movement for a Sustainable Uruguay, comes from oil. He further notes that the burning of diesel, which is utilized in transportation (such as freight trucks and buses) and industries, is the primary source of 50% of CO2 emissions. According to Vias, the energy transition has a crucial role to play in the transportation system.

The second energy transformation that the current government is promoting specifically targets this highly polluting industry. In its roadmap for 2040, the government suggests local production of green hydrogen, an energy vector produced from the electrolysis of water using renewable sources, which is promoted as a non-polluting substitute for the use of fossil fuels.

Omar Paganini, the industry minister, told América Futuro that Uruguay is confident that meets the requirements to participate in the hydrogen economy, which aims to completely eliminate carbon emissions from production by 2050. He claims that the Uruguayan government is currently considering a number of suggestions to create small-scale pilot projects for the use of green hydrogen and its derivatives in domestic markets like cargo transportation.

Parallel to this, larger-scale export projects aimed at producing hydrogen-based alternative fuels like green methanol or sustainable aviation fuel are attracting interest from foreign investors, says Paganini. He continues, “The government is seeking private investments to take these risks.

The roadmap states that some of these risks are related to the expensive technology for creating green hydrogen and the still-sluggish uptake of this good by nations and companies. Furthermore cited are social impediments, such as some Uruguayan regions’ low acceptance of logistics facilities.

The roadmap mentions the availability of groundwater, but we haven’t measured how much water we can actually take, claims Vias. The locals of Tambores, a little village in Tacuarembó (in the country’s center-north), who the German business Enertra proposes to settle to create green hydrogen and its derivatives, share this worry with the environmentalist. In order to produce 15,000 tons of green hydrogen annually, the project, if finished, will build wind and solar power plants as well as an on-site electrolyzer. Vias claims that there are concerns over the quantity of drinking water needed for the electrolysis process in order to produce the product.

As the amount of water used in these projects is the same as the five liters per second used by any traditional national enterprise, Minister Paganini thinks it is important to “demystify” its use. He says, “Our aquifer foundation can be distorted; it is not a crazy consumption.

But the issue of using water to create green hydrogen is still up for dispute, and not only in Uruguay. For the people of Tambores, the problem is even more serious: they argue that by implementing initiatives of this kind, the nation will further its “purely extractive” model, which involves obtaining natural resources from this region in order to transform and export them without having a positive effect on local sustainable development.

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