Uruguay to Develop as Much Wind Energy as Possible

February 17, 2011

Uruguay, South America’s third-cleanest country in terms of
carbon emissions, plans to develop as many wind farms as its
electricity grid can support to diversify energy supplies beyond
fossil fuel and hydropower.

“The idea is to go as high as possible,” Mendez said in a
telephone interview from Montevideo, Uruguay’s capital.

Uruguay has reached the limits of its hydroelectric resources
and is looking to tap low-cost wind power to bolster
its supplies of electricity.

The government invited in December developers to submit
proposals for an auction of 150 megawatts of wind power. The
national power company Usinas Y Transmisiones del Estado has said
it plans to develop 200 megawatts of wind farms. Mendez said all of
those projects may be in operation by 2015.

The country in January named the winners of another auction for
150 megawatts of wind farms. Three developers including Spain’s
Abengoa SA received contracts to sell wind power at rates between
$81.15 and $86.26 a megawatt-hour.

Those prices are about 40 percent cheaper than the $135 to $140
it costs to buy electricity generated at fuel oil and diesel oil
thermoelectric plants, Mendez said.

Such plants produced 39 percent of the country’s power,
according to the most recent data from the International Energy
Agency, a Paris-based intergovernmental research group.

href=”http://energybusinessreports.com/shop/US-Wind-Power-Market.html?v=1&itemid=3430&ref=ebd”
target=”_blank”>See Related Report: US Wind Power
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Overproduction Risk

Mendez said the country must be careful not to install too much
capacity and burden the power grid with an excess of wind
energy.  On a blustery summer night, for example, he said the
planned 500 megawatts of wind farms may, at peak moments, produce
as much as 60 percent of the country’s electricity. When demand is
low this surging supply may be a problem.

Overproduction can stress a country’s electricity infrastructure
and lead to blackouts, James Cox, principal consultant at Vantaa,
Finland-based engineering company Poyry Oyj, said in an
interview.

“Wind generation is not controllable, you get what you’re
given,” he said. The risk is higher for small grids that are not
well- connected to neighboring countries, he said. Ireland, for
example, won’t permit wind energy to furnish more than 75 percent
of the nation’s power at any time, he said.

Uruguay is considered an appealing investment target for foreign
developers because it’s “low risk,” Mendez said. Loans for
projects, however, can be expensive and carry annual rates of 10
percent, twice what they cost in Europe, he said, which can slow
development.

Mendez said the wind is strong in Uruguay, which helps make wind
farms exceptionally productive. Capacity factors, which measure how
often turbines are working at full power, can reach 40 percent
there, he said.

That’s about twice what some of the best-placed wind farms in
Europe achieve, according to Eduardo Tabbush, an analyst at
Bloomberg New Energy Finance. It makes wind power less expensive in
Uruguay than in other countries.

Argentina signed contracts for wind farms in a similar renewable
energy auction last year for an average price of $127 a megawatts
hour, about 50 percent higher than recent prices in Uruguay,
according to Energia Argentina SA, the national energy company.

Weaned from Oil

Uruguay wants to wean itself off oil completely by 2013 by
converting its existing thermoelectric power plants to liquefied
natural gas and developing its renewable energy resources, Mendez
said.

Hydroelectric facilities provided just over half of Uruguay’s
power in 2008, according to the IEA. “The problem is we are
dependent on the Nino-Nina climate pattern,” a warming and cooling
of the tropical eastern Pacific Ocean every five to eight years
that can effect rainfall, he said.

Two years ago there were weeks when the country only had enough
water in its reservoirs to operate 3 percent of its 1.6 gigawatts
of hydroelectric plants, he said.

And there’s little chance to expand Uruguay’s hydroelectricity
resources. “We’ve exhausted all our main rivers,” he said. “There’s
no room for anything larger than 10 megawatts.”

Uruguay is the third-cleanest country in South America in terms
of carbon emissions per gross domestic product, according to the
World Resources Institute. Mendez said he wants to “maintain this
label” as a carbon efficient economy, The country’s 2005 to 2030
energy plan set a goal of generating 15 percent of its electricity
from renewable sources.

“After we complete work on this 500 megawatts, we should have
more information on,” how much wind energy the grid can cope with,
Mendez said.