Analysis - Uruguay, the next big South American market

URUGUAY: Uruguay is fast emerging as one of the near-term stars of Latin America. Government energy agencies are now talking about 400MW of new capacity to be connected in 2013 alone while Vestas and Enercon are among those to have picked up orders recently. This is all part of a 1.2GW wind target to 2015, set in 2010.

Total installed capacity stagnated at 52MW between 2011-2012. But state-run grid operator Usinas y Trasmisiones Electricas (UTE) made calls for 300MW and 450MW of new wind capacity late 2012 and January 2013, respectively. Since early 2011, UTE has signed provisional power purchase agreements (PPA) for 22 wind projects totalling over 900MW.

"The market locomotive is on fast forward and developers and state agencies are totally focussed on laying down the tracks ahead of it," confided an advisor to German turbine manufacturer Enercon.

He also told Windpower Monthly that Enercon is braced to start building on the 100MW "Esperanza I & II" wind complex in Peralta by autumn this year using 2MW machines. Enercon, a partner of Agua Leguas, the developing consortium behind the project, also has permits to set up a mobile concrete tower manufacturing unit for the turbines making up the wind complex. Enercon itself said it "prefers not to comment until building actually starts."

Also in June, French developer Akuo Energy started building its 42MW "Minas" project, scheduled for connection this year, using 3MW turbines from Vestas. Vestas had earlier announced a 90MW turbine deal for local developer Cofusa's 90MW "Pintado" project in the Florida region, for connection 2014.

In January, Germany's Nordex clinched two turbine supply deals in Uruguay for 2.4MW machines totalling 107MW. The first is for Akuo's 50MW "Florida" project (close to "Pintado"). The other is for the 67.2MW Artigas development in the Colony of Juan Pablo Terra, developed by UTE itself.

UTE's direct involvement as developer is increasingly considered symptomatic of the problems of trying to deploy too fast. The grid operator recently announced its intention of doubling its 200MW wind development portfolio to 400MW. "That is because UTE's clout can cut through the barriers that affect some private projects," according to the Enercon advisor.

"The central government and decentralised departments have shown amazing effort and resolve in hiring and training civil servants to process projects over the past three years but now they are coming against administrative bottlenecks," he said. "Additionally, infrastructures and supplies of heavy duty machinery like cranes are not yet up to speed," he adds. There are still far more authorised projects nowhere near building stage than authorised ones.

But even if targets are not reached by 2015 the ground swell of interest means they will probably be met sooner or later, according to Brian Gaylord, at wind consultants Make Consulting. Among market drivers are high winds across the country coupled with an annual 3% growth rate in electricity demand. Hydro, which provides 60% of Uruguay's electricity has long since reached saturation. Most remaining power generation comes from expensive gas.

And while the $64/MWh paid for wind power might seem prohibitively low for developers, fiscal measures for wind producers makes investment "very attractive", said Enercon's advisor." For a start, direct business tax for operators is slashed by 90% for the first four years", he says. Import tax does not apply to wind turbines and there is a series of other breaks that, combined, effectively bring the wind sales rate closer to $80/MWh.

Have you registered with us yet?

Register now to enjoy more articles
and free email bulletins.

Sign up now
Already registered?
Sign in

Partner content