Uruguay in energy crisis amidst potential abundance

Jul 07, 2004 02:00 AM

Scarce rainfall and the subsequent drop in water level in the rivers that feed Uruguay's hydropower plants has compounded the cuts in natural gas and electricity imported from Argentina, and this country has been forced to turn to ageing thermal plants that run on costly petroleum by-products.
This South American country is highly dependent on rainfall in the basins of the Uruguay and Negro rivers; on neighbouring Argentina, which is in the grip of a severe energy crisis; and on the volatile global oil market.

Uruguay remains at risk of an energy collapse due to lack of a strategic plan, and that lack of foresight has been a problem for at least three decades despite abundant existing and potential energy resources, say researchers at the public University of the Republic and opposition politicians, who advocate diversification and the development of alternative sources.
Engineer Martin Ponce de Leon, a parliamentary deputy with the leftist Progressive Encounter-Broad Front (EP-FA) coalition, told that the same thing is true with respect to both the energy sector and the economy: if timely measures are not taken to deal with eventual crises, the country remains vulnerable to external circumstances outside of its control.

Uruguay has reached the limits of its capacity to generate electricity, due to the shortage of rainfall.
"A drought wasn't even needed" to plunge the country into problems, said Ponce de Leon, the main adviser on energy issues to the EP-FA, the front-runner for the October general elections.
Aggravating the problem of scant rainfall are the energy crisis in Argentina -- Uruguay's traditional provider of electricity in times of scarcity, and also a supplier of natural gas over the past decade -- and the steady rise in the price of oil imports.

As part of policies to promote industrial development in Uruguay, the country's first hydropower plant -- Rincon del Bonete on the Negro River -- was built and the state oil refinery ANCAP was founded in the 1930s. Inthe 1940s and 1950s, "wind chargers" -- windmills -- became common all over the countryside, in an early experiment in the use of wind energy, and the Salto Grande dam began to be planned, although it was not built until the 1970s.
Salto Grande, a joint Uruguayan-Argentine venture, is located on the Uruguay River and is this country's largest power plant, with an installed capacity of 1.89 mm kW and average annual generation of 6.7 bn kWh. There are also two other hydropower plants on the Negro River: Rincon de Baygorria and Palmar, built in the late 1950s and late 1970s, respectively.

Uruguay depends on the energy generated by these four plants, which cover 75 % of consumption, and on imports of electricity and gas from Argentina. The only alternatives are two older thermal plants fired by fuel oil, on which the country has had to depend almost exclusively so far this year as the hydropower turbines have ground to a halt due to the shortfall of rain.
In the first five months of the year, the country spent $ 10 mm in unbudgeted funds to purchase extra electricity from Argentina and even Brazil, and oil to fire the thermal plants. Salto Grande is run by an Argentine-Uruguayan commission, the rest of the power plants belong to the state power monopoly UTE, and the gas company is in the hands of a French public utility.

The privatisation of the production and distribution of the gas purchased from Argentina led UTE to compete, encouraging the use of electricity instead of gas for cooking and heating purposes, without taking into account the energy crisis that a drop in rainfall could trigger, engineer Jose Cataldo told.
"Over 50 % of the energy consumed corresponds to residential areas, because the steady decline of the national industrial sector means it no longer presents a high level of demand," said Cataldo, director of the Institute of Fluid Mechanics and Environmental Engineering in the University of the Republic.

Uruguay utilises 2.5 mm tep (tons equivalent to petroleum) of energy a year -- 0.83 tep for each one of its 3.4 mm inhabitants. That is the lowest level of consumption in the Mercosur (Southern Common Market) trade block, which also includes Argentina, Brazil and Paraguay, according to a 2002 study by the National Office of Science, Technology and Innovation, which points out that consumption stands at nearly twice that level in Argentina and Brazil.
Consumption basically remained steady between 1965 and 1990, and increased by 2.6 % a year until 2000, the report adds.

Due to the energy crisis that spread from Argentina to the rest of the subregion, energy saving measures have become necessary in Uruguay. If Uruguay had an adequate policy of industrial development, demand should increase by 5 % a year, said Ponce de Leon, who added that plans for dealing with crises and diversifying the country's sources of energy should be adopted.
He said that if the left makes it to the government for the first time ever in 2005, energy integration with Brazil will be expanded, generating plants will be built in northern Uruguay with lower-cost equipment, and a combined-cycle facility run on gas and oil will be installed, like the one projected in western Uruguay that would use a gas pipeline that has already been put in place, connecting Uruguay and Argentina.

In addition, the connections will have to be created to make Salto Grande an energy bridge for the Mercosur, and small wood-fired power plants, windmill farms, and solar panels should be incorporated, he said. Nor should prospecting for oil be ruled out, although that would be a longer-term goal, due to the investment required, said Ponce de Leon.
It does not make sense that Uruguay "would lack such resources," when in nearby areas of Argentina and Brazil there are rich deposits of hydrocarbons, and new ones continue to be found, like the natural gas reserves in southern Brazil, he said. It is essential to diversify, developing wind energy and especially biomass based on wood, which complement hydropower and would grant Uruguay's energy sector sustainability and allow this country to become not merely a buyer but an exporter of energy within the Mercosur, said Cataldo.

Uruguay has enormous wind power potential. Its capacity to generate wind energy is potentially similar to the capacity of the three dams on the Negro River, and it is cheaper to produce, he said, pointing out that "it costs an average of $ 80 per MW to generate hydroelectricity, while it costs half that to produce wind energy."
Wind power is the best complement for hydroelectricity at times when rainfall is scarce, or to export potential surplus energy, he said. Cataldo complained that the rural electrification schemes of the 1980s and 1990s wiped away the rich experience of the wind chargers that mushroomed on farms in the 1940s and 1950s. Back then, the costs and difficulties of maintenance discouraged the use of windmills, but today's technology is far superior and eliminates those inconveniences, he explained.

Cataldo is also in favour of solar power for small-scale rural electrification. Moreover, Uruguay has great potential, as well as the technology, to use both wood biomass residue and hydrogen, said Ponce de Leon.
But for now, the conservative government of Jorge Batlle is staking its bets on integration with Brazil's power grid. The planned construction of a high-tension line between the Garab dam in the southern Brazilian state of Rio Grande do Sul and Salto Grande would provide Uruguay with 500 MW-hours, and a similar amount to Argentina. The agreement, which would cover half of Uruguay's electricity needs, is the first step towards a kind of Mercosur energy bank, Foreign Minister Didier Opertti told, referring to a proposal for regional energy integration.

Source: IPS/GIN
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