URUGUAY PROPOSES NEXT STEPS FOR ALTERNATIVE ENERGY

UNCLAS MONTEVIDEO 000104

SIPDIS

STATE FOR WHA/BSC MDASCHBACH, WHA/EPSC FCORNEILLE, EMBASSY
BRASILIA FOR ABRAGHETTA

E.O. 12958: N/A
TAGS: ECON ENRG PREL SENV UY
SUBJECT: URUGUAY PROPOSES NEXT STEPS FOR ALTERNATIVE ENERGY
MOU


1. SUMMARY. Emboffs discussed the current state of
Uruguay's energy sector and potential next steps within the
framework of the U.S.-Uruguay alternative energy MOU in a
meeting with the Uruguayan National Directorate of Energy and
Nuclear Technology (DNENT) February 18. Uruguay seeks to
reduce its dependence on foreign energy and sees the U.S. as
a valuable partner to advance technology on renewable energy
and energy efficiency. End Summary.

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Uruguay's Energy Sector
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2. Uruguay is committed to increasing the diversification of
its energy sector. It passed a law in November 2007 to
create and regulate the production, commercialization, and
utilization of biofuels, and a presidential decree
implementing this law was published in October 2008. The
majority of Uruguay's energy needs have traditionally been
met by the importation of fossil fuels and domestic
large-scale hydroelectric power plants. Recently, however,
external factors, such as limited rainfall in recent years,
have increased reliance on fossil fuels over hydroelectric
power. For the year 2009, Uruguay's state oil company ANCAP
is on target to meet a legislatively mandated 2 percent
minimum production of bio-diesel/gasoline blends, rising to 5
percent by 2012. In addition, the state utility company UTE
has issued tenders for up to 60MW in alternative energy
projects such as wind, biomass, and small-scale hydroelectric
power plants. Two groundbreaking companies in the field of
biomass production in Uruguay are Weyerhaeuser and ALUR (a
subsidiary of ANCAP).


3. The driving force behind the diversification of Uruguay's
energy sector is a desire for energy security and
independence. Currently, most electrical energy imported to
Uruguay must pass through Argentina; if another country (such
as Brazil) supplies the current, Uruguay must pay not only
the source but also a "toll fee" to Argentina for the use of
its grid. Construction of an electrical grid
inter-connection with a capacity of 500MW between Uruguay and
Brazil is under consideration. The U.S. Trade and Development
Agency (TDA) funded a study of this project. The potential
to expand wind energy production in Uruguay remains great.
Two projects (a private windfarm in Rocha and a
government-owned one in Maldonado) are in operation, with
several more under study for future development.

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Next Steps Within the MOU Framework
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4. Emboffs and DNENT officials agreed to develop plans of
action to implement the MOU's provisions to (1) promote
exchanges, research and development and (2) establish a
binational working group on renewable energy and energy
efficiency. DNENT stressed GOU support of public-private
cooperation and investment in the development of the biomass
sector. An OPIC-partnered project on biofuels may be a
possibility. Another area identified for future
collaboration is technical assistance and policy development
on integration of privately generated power into the national
power grid. Currently, the government-owned electric company
has neither the hardware in place to allow this nor the
regulations to govern it were it possible.

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Comment
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5. The GOU remains enthusiastic on the topic of energy
diversification, and is especially keen to develop further
bilateral cooperation on energy issues. Post will continue
to work closely with DNENT and other GOU energy agencies to
deepen our relations in this area. Post will explore with
Washington agencies possibilities for science fellows,
academic exchanges, and technical assistance in this area.
End Comment.
Matthewman