One small Latin American nation is making the transition to clean energy look easy.
In only a few years, Uruguay has succeeded in shifting almost entirely to renewable energy to meet its electricity needs. Uruguay now sources about 94.5 percent of its electricity from a combination of wind, hydro, solar, and biomass. It suffers from fewer blackouts, which runs contrary to the common narrative that renewable energy tends to destabilize the grid.
And here is the kicker: Uruguay’s electricity prices are now lower than they have been in the past, adjusting for inflation. In fact, electricity generating costs have declined by 30 percent. Not only that, but the South American nation has achieved all of this without heavy government spending.
The Guardian reported on Uruguay’s successes in early December, as the country sent its proud delegation to the climate change negotiations in Paris. Held up as a shining example of how to make the energy transition, Uruguay doubled down on its success in Paris, pledging to cut carbon emissions by 88 percent by 2017 compared to the 2009-2013 average, no doubt one of the most aggressive targets in the world. Related: OPEC Members In Jeopardy, How Long Can They Hold Out?
How did Uruguay achieve all of this? The Guardian says that it did not need costly public spending, and it did not involve any new massive dams, a prime source of renewable electricity that is common in neighboring Brazil but is also associated with controversial impacts on the environment. Instead, Uruguay’s success came down to more mundane business conditions: a stable investment climate, clear regulatory policy, decisive and strong decision making from the public, and cooperation between the public and private sectors.
Uruguay now attracts $7 billion for its energy industry, or about 15 percent of GDP. Most of that goes into renewables. Uruguay sources over 90 percent of its electricity from renewable energy and also has lower energy bills and enhanced grid stability than it did in the past. All of that was possible without backup baseload power from coal or nuclear power. And it took the nation less than a decade to pull it off. Related: How Much Oil Is Needed To Power Santa’s Sleigh?
Uruguay is not alone in its aggressive shift to clean energy. In Chile, solar power is now the cheapest source of electricity. Recent power auctions saw solar developers bidding at the low rates of $65 per megawatt hour (MWh), according to Forbes. That beat out coal developers who bid at $85 per MWh. About 1 GW of new solar is expected to be installed in Chile in 2015, a sharp jump from the 220 MW installed in 2014. Moreover, there are 8 GW of new solar approved for construction. Solar is now one of the cheapest sources of unsubsidized power in Chile.
For heavy mining operations in Chile’s north, companies are turning to solar, which enables them to cut out expensive diesel consumption. Ernst & Young estimates that mining companies in Latin America alone will invest $1 billion in renewable energy through 2022. Related: Is The Russian-Turkish Standoff An Opportunity For The West?
Costa Rica is about to close out 2015 having generated 99 percent of its electricity from renewable energy. A combination of mostly hydro but also geothermal and wind allowed the Central American nation to go 94 consecutive days of 100 percent renewable energy this year. That is 94 days without needing a drop of fossil fuels.
Slashing oil consumption will be a much harder problem to tackle. All of these countries still rely heavily on petroleum-based liquid fuels. Transitioning to clean fuels or electric vehicles will take much longer.
But for the electric power sector, at least, several Latin American nations are providing a template for the transition to clean energy. While many nations, including much richer countries like the United States, debated the pace and extent to which they will shift to solar and wind during the Paris negotiations, developing countries in Latin America are already leading the way. Not only are they rapidly ramping up renewables, but they are doing so without much cost to the public purse, and even are saving on energy costs.
By Nick Cunningham of Oilprice.com
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