Uruguay’s energy transition is celebrated worldwide. Nearly all of its electricity comes from renewables, and the country presents itself as a pioneer of sustainability. Yet behind the applause lies a pattern that repeats the logic of dependency: energy policy designed to guarantee profits for investors, while the public assumes the costs.

Long-term contracts at fixed prices

The core of Uruguay’s renewable model is the Power Purchase Agreement (PPA). According to international studies, these contracts are typically signed for 20 years, priced in US dollars, and guaranteed by the state utility UTE. Private generators of wind and solar enjoy “take-or-pay” clauses, ensuring that UTE must buy all electricity delivered to the grid, regardless of demand conditions (Norton Rose Fulbright, 2015; Earth.org, 2023).

This structure greatly reduced investor risk and opened the door for an impressive renewable boom. But it also locked UTE into paying prices that are now well above current generation costs, as renewable technologies became cheaper over the past decade (SOAS case study, 2020). Investors celebrate, while consumers and taxpayers face a heavy bill.

Payment even when not dispatched

In 2015, Uruguayan regulations confirmed that UTE must also pay renewable generators who can demonstrate capacity to produce, even if their energy is not dispatched (Recharge News, 2015). This further strengthened the security of investor returns, shifting demand and grid-balancing risks entirely onto the public sector.

UPM2: industrial power with guaranteed buyer

The pattern extends beyond renewables. As part of the 2017 Investment Agreement with Finnish paper giant UPM, Uruguay committed that UTE would buy up to 1 TWh of surplus electricity annually from the new Paso de los Toros pulp mill (UPM2) at a fixed price of US$72.5 per MWh for 20 years (UPM, 2017; Presidencia de la República, 2019). Once again, the state utility bears the obligation, ensuring a steady revenue stream for a multinational investor.

Dependency in green disguise

For the outside world, Uruguay looks like a green success story. For investors, it is a paradise of predictable returns. But for citizens, it is another case of dependency painted green. Long-term fixed contracts, compulsory purchases, and risk transfer to the public mean that the benefits of the transition are highly skewed.

Instead of lowering costs and building productive autonomy, the system creates a rent machine. Investors capture profits, the state pays the bill, and Uruguayans are told to be proud of their “uniqueness.”

Real energy sovereignty will only come when contracts stop privileging capital security over public benefit—when autonomy, not dependency, defines the transition.

References

Earth.org. (2023, April 13). The Uruguay way: Achieving energy sovereignty in the developing world. Earth.Org. https://earth.org/the-uruguay-way-achieving-energy-sovereignty-in-the-developing-world/

Norton Rose Fulbright. (2015, November). Renewable energy in Latin America: Uruguay. Norton Rose Fulbright. https://www.nortonrosefulbright.com/en-id/knowledge/publications/c7fa4c24/renewable-energy-in-latin-america-uruguay

Recharge News. (2015, February 4). Uruguay’s UTE to pay for RE power not dispatched. Recharge News. https://www.rechargenews.com/wind/uruguays-ute-to-pay-for-re-power-not-dispatched/1-1-870259

SOAS University of London. (2020). The nuts and bolts of Uruguay’s transition: Case study for the DLD project. https://www.soas.ac.uk/sites/default/files/2025-07/SOAS%20DLD%20case%20study%20Uruguay%20renewables.pdf

UPM. (2017, November 7). UPM and the government of Uruguay sign an investment agreement to establish a competitive operating platform. UPM. https://www.upm.uy/siteassets/documents/growth/investment-agreement-in-short.pdf

Presidencia de la República. (2019, July 15). Complementary agreement with UPM (English translation) [Resolution No. 840]. Presidencia de la República Oriental del Uruguay. https://medios.presidencia.gub.uy/legal/2019/resoluciones/07/cons_min_840_anexo_ingles.pdf