A Uruguayan physicist cracked a major code for renewable energy
JUANA SUMMERS, HOST:
There's a lot of talk about converting energy grids to renewable energy in an effort to fight climate change. Well, the South American country of Uruguay has successfully done it. In an average year, 98% of the energy used to run its power grid comes from renewable sources - hydropower, biomass, solar and lots of wind. Erika Beras from the Planet Money team interviews the architect of the plan that made this possible.
ERIKA BERAS, BYLINE: Back in 2007, Ramon Mendez Galain was a particle physicist with big ideas about renewable energy. Despite not having any government experience, he was tapped by Uruguay's president to remake the country's energy system.
RAMON MENDEZ GALAIN: So it was a total surprise.
BERAS: What did you say?
MENDEZ GALAIN: I said, thank you. I don't know.
BERAS: (Laughter) Thank you. I don't know. Yeah.
He eventually agreed. At the time, the small country of 3.5 million people didn't have enough energy to power its growing economy. Instead of relying on global energy markets, Uruguay wanted energy independence. But making that happen was going to be challenging because Ramon Mendez Galain wanted to expand into wind. And he and his colleagues had never built a nationwide network of wind turbines.
MENDEZ GALAIN: We didn't have the capacities in order to do that. We didn't have the experience. We didn't know how to do it.
BERAS: And they didn't have the money to do it.
MENDEZ GALAIN: The size of our economy was about $50 billion, and we needed more than six.
BERAS: Six billion dollars. Uruguay's finance minister was very clear that the government couldn't fund this. If it added $6 billion to the national debt, Uruguay would never be able to get decent terms on a loan again. One model that other countries had used to fund infrastructure projects? Public-private partnerships, where traditional electric utilities were partly run by the government and partly run by private companies. Mendez Galain thought maybe something like that could work in Uruguay. They'd invite wind companies from around the world to bring their expertise and put up turbines.
MENDEZ GALAIN: They do their business. They know how to do it.
BERAS: The cost of putting up those turbines would be mostly paid for by the companies. And most importantly, to get the companies to want to take on that huge upfront cost, the Uruguay public utility would agree to buy whatever energy they produced at a set price for 20 years.
MENDEZ GALAIN: I mean, investors need to have the security that they will - that their investment will be paid back. And for that, they need a certain amount of time.
BERAS: Initially, Uruguay planned to sign these contracts little by little over several years. But at the third auction they held to sell wind licenses in 2011, they got eight times more bids than they needed. They decided, let's just do it. Let's take all the bids.
MENDEZ GALAIN: So we are going to give contracts to those that have won. But then to those that - apparently, we didn't need them, we tell them, if you accept the price of the winner, you will also receive a long-term contract. And almost all of them, more than 80%, accepted the price of the winner. And so they also got a contract.
BERAS: Mendez Galain thought those prices were good and they may not see them again.
MENDEZ GALAIN: So it was the occasion - we jumped on it.
BERAS: Within a few years, 98% of the energy used in Uruguay was renewable.
MENDEZ GALAIN: There was an absolutely and complete transformation, a complete transformation. Many people say that - they talk about what happened as Uruguayan revolution, energy revolution.
BERAS: Public-private partnerships like this, they get mixed reviews. In other countries, there have been problems with quality, with accountability, with corruption. The wind project in Uruguay didn't suffer from those, but it does have some critics. In the last 12 years, the price for wind energy has gone down. It's now 30 to 40% cheaper than it was then. But the utility companies signed contracts that locked in those higher rates for 20 years. Mendez Galain says he still thinks it was the right move.
MENDEZ GALAIN: Either we did what we did, or we waited for 10 extra years to have electricity at the present cost. And if you compare the two options, the one that we did was the best one.
BERAS: And other governments have followed suit. His model for getting private companies to set up renewable energy infrastructure by guaranteeing long-term contracts is now used all over the world. Today, when you drive through the Uruguayan countryside, you don't see tankers of gas, train loads of coal, power plants spewing black smoke into the air. What you do see? Hundreds of turbines harnessing the power of the wind.
For NPR News, I'm Erika Beras.
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