Small country, big ambitions

Uruguay is looking to export green hydrogen.

In May, the UN announced the launch of the Renewable Energy Innovation Fund (“REIF”) to finance renewable energy projects in Uruguay. The idea is that much of the funding will be directed towards the development of green hydrogen infrastructure. Uruguay’s Ministry of Industry, Energy and Mining, the Planning and Budget Office and the National Administration of Power Plants and Electric Transmissions and the Uruguayan Agency for International Cooperation will oversee the USD 10 million fund. 

Markets and investors are increasingly viewing Uruguay – politically and economically stable – as an attractive destination to deploy capital in such projects.  

An energy and environmental adviser to the Ministry of Industry, Energy and Mining explained, “Uruguay is in a good position to gradually increase the production of green hydrogen. With the help of the REIF fund, Uruguay could see revenue of some USD 2 billion for 2040, around 2% of GDP. The country has a significant pool of water resources and 97% of its energy production is generated from renewable sources. All this bodes well to produce green hydrogen.” 

“Uruguay is in a good position to gradually increase the production of green hydrogen. With the help of the REIF fund, Uruguay could see revenue of some USD 2 billion for 2040, around 2% of GDP.”

Whilst the quality of transport infrastructure including roads and train networks connects well with the main locations of renewable energy sources, those networks could be better and should be better if local companies are looking to get their product to market quickly. Indeed, Uruguay is already in an enviable position with its long Atlantic coastline. In addition, the country enjoys easy access to biomass which is a critical component in the production of competitive synthetic fuels including e-methanol and e-jet fuel.   

Keen to position itself as a reliable energy infrastructure development partner, Uruguay is actively courting investment in the renewable sector. The administration of president Luis Lacalle Pou (“Pou”), has pursued cooperation with other countries and several multilateral institutions – doing so will provide legal and regulatory certainty for Uruguay to emerge as a regional player when it comes to green hydrogen exports.  

It is not just energy infrastructure per se that will benefit from increased investment but the whole supply chain gamut that supports getting such exports to market, not least transportation where Uruguay faces a real challenge in upgrading road and port networks.  

An engineering professor at the country’s University of the Republic explained, “The aim of the country for the production of green hydrogen (with installed 10 GW capacity electrolysers by 2040) implies multiplying the wind and photovoltaics energy by 10 to enable the electrolysis plants to run. An extra 20 GW of renewable will be needed to achieve this 2040 green hydrogen production goals.”

Montevideo has been taking large steps towards decarbonisation for some years now. In addition to REIF, a Germany-based energy company is building a green hydrogen hub in the department of Tacuarembó in partnership with a local company. The green hydrogen produced at the plant will be converted into e-methanol, which will replace about 10% of the methanol that is produced in Germany. Although this is the most advanced project for green hydrogen, other energy companies are currently evaluating similar investment projects, which showcases growing international appetite for Uruguay’s hydrogen industry.  

A company specialised in raising capital for renewable energy projects opined, “Uruguay is the ideal place to run small or medium scale projects of companies wishing to develop  green hydrogen. The race to lower the price of hydrogen, will be, as in other countries, conditioned by new technologies and the reduction of prices both in the components for generating the renewable energy that is used in the electrolysis process, and the components of electrolysers themselves.”

“Uruguay is the ideal place to run small or medium scale projects of companies wishing to develop green hydrogen.”

However, Uruguay will still have competitive advantages in its rule of law. A serious legal framework, outstanding from most of the region, makes clear for companies that there are no surprises in Uruguay either to purchase the available land needed for the installations of wind and solar parks, or for the plants to operate, and therefore no additional uncertainties are added to projects. 

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