Can you imagine politicians from every party coming together to solve a national crisis, and then leaving the solution untouched for a quarter century, no matter who won the next election? That's Uruguay.
Pulling Off An Ambitious Project
Uruguay was never as industrialised as other South American countries. It didn't have oil reserves to start with. Only after hydroelectric power emerged at the end of the 19th century could it harness its rivers to generate electricity. From the 1940s onward, it relied on hydroelectric dams and oil-fired thermal plants. It imported all the oil and fuels. As the economy grew, things became tricky to manage. Higher imports, fuel shortages and droughts created blackouts.
In 2008, President Tabaré Vazquez appointed physics professor Ramon Mendez Galain as national director of energy. Within five months, Méndez submitted an ambitious plan, proposing a complete shift to renewables by 2020. Uruguay had abundant wind, and that wind blew across vast stretches of less populated agricultural land. So, he wanted to power the country through wind energy.
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The cabinet approved the plan. But when José Mujica became president in 2010, he insisted on building cross-party consensus even though he enjoyed a majority. His reasoning was simple: "Governments pass, and people remain." He believed that a capital-intensive project like this would go on for decades and need political stability.
He also brought his philosophy with it. He felt that the consumption-led growth model is a Western cultural trait and that Uruguayans must embrace simplicity. In a way, he was not in favour of a more consumption-more production-more energy usage kind of growth model.
Man With A Plan
The government cleared most bureaucratic problems, except financing. The World Bank and the IMF denied support. According to them, this plan could succeed by offering large subsidies, which the country couldn't afford.
That restriction created a new mechanism.
Normally, the state or public sector retains control of power generation while privatising the distribution. In Uruguay, it was the other way around. Private companies built and maintained wind turbines, while the state-owned utility continued distributing power. Méndez offered long-term contracts at guaranteed prices.
He told the power-generating companies (also the investors) that the electricity they produced wouldn't belong to them, but the state would buy every last unit of it. He even agreed to pay a fixed rate for twenty years. These Power Purchase Agreements (PPAs), now a standard tool used across the developing world, gave private firms the revenue certainty they needed.
And yes, there's a backup plan too. While wind and other renewables power the grid most of the time, thermal is kept as a backup option.
The Results by the Numbers
The payoff has been dramatic. Uruguay's first wind farm, a modest 10-megawatt (MW) project, came online in 2008, a year in which nearly 39% of the country's electricity came from fossil fuels. From 2016 onwards, wind, biomass and solar had displaced oil-fired generation almost entirely, saving more than half a billion dollars annually.
By the end of 2025, the country ran almost the entire grid on renewables. It is 98% renewable, generating 13,040 gigawatt-hours for the national grid. Within that, hydropower supplies 46%, wind 34%, biomass 14%, and solar 4%. Oil consumption fell from more than 65,000 barrels a day in 2012 to roughly 45,000 today, according to state oil company ANCAP.
Economic efficiency improved too. In 2008, the country generated $12.3 in output for every kilogram of oil equivalent consumed. By 2023, that number rose to $19.5. That means the country is getting richer without consuming more fossil fuels.
Electrifying Transport and Daily Life
After fixing the electricity supply, Uruguay is now trying to change how people use energy. EVs are a big part of that push. Tax benefits and more charging stations have helped more people switch to electric vehicles. At the same time, the government is making fossil-fuel vehicles less attractive through higher taxes. Uruguay also has one of the highest carbon prices in the world, at about $185 per tonne of CO2, compared with $65-90 in Europe and around $10 in China.
Cracks in the Model
The system has some flaws, though. Although the state agreed to pay power companies a fixed rate, generation costs have come down substantially over the years. That's squeezed margins for power companies, and to compensate, some consumers are paying higher electricity bills.
Analysts also note that Uruguay's growing dependence on Chinese supply chains for renewable technology and EVs could create friction with the US as it pursues influence in the region.
Final Take
Uruguay is one of the absolute leaders in renewable energy. The country skips the sloganeering, while getting the job done, and fast. Other nations can learn a lot from this journey. For me, the biggest takeaway was: lock in politics before you lock in contracts.
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