Uruguay has already completed the part of the renewable energy transition that many countries are still trying to begin. Its electricity system is now supplied almost entirely by renewable sources, with hydropower, wind, biomass and solar working together across a relatively small but highly interconnected national grid.
The country’s next challenge is therefore not simply to construct more renewable power plants. Uruguay must use its clean electricity to reduce fossil-fuel consumption in transport, industry and other parts of the economy. Electric mobility, additional solar capacity, green hydrogen and synthetic fuels are becoming more important as the country moves from cleaning its power supply to decarbonizing energy use more broadly.
Four Renewable Sources Support Uruguay’s Power System
Renewable sources produced 99% of Uruguay’s electricity in 2024. Hydropower accounted for approximately 43% of generation, followed by wind at 28%, biomass at 24% and solar at 4%. Fossil-fuel generation supplied only a small remaining share.
This balance is important because Uruguay does not depend on one renewable technology. Its hydroelectric dams can adjust production according to water availability and electricity demand. Wind farms provide large volumes of power without consuming reservoir water, while biomass plants offer generation that is less dependent on daily weather conditions. Solar remains smaller but can supply electricity during daylight hours, when commercial and industrial demand is often strong.
The technologies also operate on different time cycles. Wind conditions, river flows, sunlight and biomass supplies do not rise and fall at the same time. That diversity makes the system more resilient than a power mix based almost entirely on either hydropower or variable wind and solar generation.
Uruguay’s hydroelectric system includes major plants on the Río Negro and its share of the binational Salto Grande complex on the Uruguay River. Hydroelectric production can vary sharply between wet and dry years, which means annual percentages do not remain fixed. In years with strong rainfall, hydropower may lead the system. During droughts, wind, biomass, imports and thermal backup become more important.
Wind Power Changed Uruguay’s Energy Economics
Uruguay’s large-scale wind development was central to the transformation of its electricity sector. The country expanded wind capacity rapidly during the 2010s through a combination of public investment, private development and long-term electricity-purchase arrangements with the state utility UTE.
Wind offered a way to reduce two major risks. The first was exposure to drought, which had previously forced Uruguay to replace lost hydropower with expensive imported fossil fuels. The second was exposure to international oil prices, because thermal generation costs could increase quickly when fuel markets tightened.
Instead of replacing hydropower, wind made the reservoir system more valuable. When wind production is high, water can remain stored behind dams. Hydropower can then be used when wind output falls or demand increases. This relationship gives Uruguay a form of flexibility that countries without reservoirs often need to obtain through battery storage or gas-fired generation.
The scale of wind development also changed the country’s investment model. UTE remained the main buyer and system operator, but private capital helped finance the rapid construction of new capacity. Uruguay was therefore able to transform its generating fleet without fully privatizing the electricity system or abandoning central planning.
Future wind investment may not repeat the same rapid expansion. Electricity supply is already highly renewable, and new projects will increasingly depend on additional demand from industry, transport, green hydrogen or exports rather than on the replacement of fossil power alone.
Biomass Connects Renewable Power With the Forestry Economy
Biomass has a larger role in Uruguay than in most national electricity systems. Its importance is closely connected to the country’s forestry, pulp, wood-processing and agricultural industries.
Pulp mills generate electricity and heat from wood residues and black liquor, a by-product of the pulping process. These facilities can use part of the energy internally and deliver surplus electricity to the grid. The full operation of Uruguay’s third major pulp mill contributed to a strong increase in biomass generation during 2024.
This industrial structure gives biomass a different role from wind and solar. It is not simply a power-sector investment. It forms part of a larger production system in which forestry resources are converted into pulp, industrial heat and electricity. Biomass generation can also provide more predictable output than weather-dependent renewable sources.
However, biomass growth is tied to industrial expansion and sustainable resource management. New capacity cannot be separated from questions about forestry development, land use, transport infrastructure and the location of major processing plants. The future of biomass power will therefore be shaped as much by industrial policy as by electricity demand.
Solar Power Is the Main Candidate for the Next Expansion
Solar remains a relatively small part of Uruguay’s electricity mix, but its position is likely to strengthen. Photovoltaic generation can be developed at several scales, from utility-owned solar parks to rooftop systems installed by businesses, farms and households.
UTE has begun expanding its solar portfolio as electricity demand rises and the country prepares for greater electrification. Solar generation can complement wind because its production profile is different, while new projects can often be constructed faster than large hydroelectric facilities.
Distributed solar also allows electricity users to produce energy for their own consumption and, under the relevant arrangements, deliver surplus power to the grid. This is particularly useful for agricultural operations, industrial sites and commercial buildings with suitable land or roof space.
Solar growth will still require careful system planning. A higher daytime supply does not automatically meet evening demand, and seasonal differences remain important. Transmission investment, flexible demand, storage and coordination with hydropower will determine how much solar can be absorbed efficiently.
The larger issue is demand. Uruguay does not need to add renewable capacity simply to improve an electricity mix that is already almost completely renewable. New solar and wind projects will be most valuable when they support electric transport, industrial growth, data infrastructure, green fuel production or stronger regional electricity trade.
Regional Connections Help Balance a Small Electricity Market
Uruguay’s connections with Argentina and Brazil provide an important source of flexibility. The country can export surplus electricity when renewable production is high and domestic demand is limited. It can also import power when local supply is reduced by drought, maintenance or unusual demand conditions.
These connections are especially valuable because Uruguay has a small domestic electricity market. A large wind farm, pulp mill or industrial project can have a noticeable effect on the national system. Cross-border trade creates a larger market for surplus production and reduces the need to balance every short-term change entirely within Uruguay.
Regional electricity trade is not automatic. It depends on market conditions, transmission capacity, technical compatibility and political agreements with neighboring countries. Brazil and Uruguay use different electrical frequencies, requiring conversion infrastructure for some exchanges. Argentina’s market conditions can also influence when and how much electricity is traded.
Even with these limitations, interconnection improves energy security. It allows Uruguay to benefit from its renewable surpluses while maintaining access to external supply when domestic conditions become less favorable.
The Second Energy Transition Extends Beyond Electricity
Uruguay’s electricity achievements can create a misleading impression that the entire energy economy has already been decarbonized. Renewable sources represented 64% of the country’s primary energy supply in 2024, but petroleum products remain important, particularly in transport.
The government describes the next stage as a second energy transition. Its focus includes electric vehicles, industrial electrification, energy efficiency, green hydrogen and renewable fuels for activities that cannot easily operate directly on electricity.
Electric mobility is one of the most immediate opportunities. Replacing petrol and diesel vehicles with electric alternatives allows transport to use Uruguay’s low-carbon power supply. Public charging infrastructure, vehicle costs, fleet replacement and electricity tariffs will influence the speed of adoption.
Green hydrogen represents a longer-term industrial strategy. Uruguay’s roadmap considers using additional wind and solar generation to power electrolysers, producing hydrogen that could be used locally or converted into ammonia, methanol and synthetic fuels for export. The national roadmap has outlined potential investment of about US$18 billion and more than 30,000 jobs through 2040, although actual development will depend on financing, export contracts, environmental approvals and international demand.
Several large projects have been proposed, including e-fuel and green methanol developments that would require dedicated renewable generation. These projects could create a new market for wind and solar far larger than current domestic electricity demand. They would also require new transmission, water management, industrial facilities, port capacity and clear rules for land use and community consultation.
Uruguay’s Renewable Future Depends on New Uses for Clean Power
Uruguay has moved beyond the basic question of whether renewables can supply most national electricity. Its power system has shown that wind, hydropower, biomass and solar can operate together at very high renewable shares.
The next phase will be more complex. Success will depend on converting clean electricity into lower petroleum use, competitive industrial production and reliable export opportunities. Additional renewable capacity must be connected to real demand rather than developed only to raise an already high renewable percentage.
Solar expansion, electric transport and regional power trade offer near-term opportunities. Green hydrogen and synthetic fuels could create a much larger market, but these industries will require major investment and long-term buyers. Uruguay’s renewable position is therefore strong, but its future growth will depend on how effectively it turns a clean electricity system into a wider economic advantage.