The "promising future" that awaits Uruguay and the three projects in its sights

Redacción El País

The Uruguayan business sector and government agree that a "quite promising" future awaits the country in relation to the development of the second energy transition. Although there is awareness that the path is not free of economic, regulatory and even political challenges, they agree that the country must reach a consensus to make this a State policy.

"The future that awaits us seems to be quite promising. Uruguay is going to start going through a very interesting stage that will not be easy but neither was the first energy transition" and the country today "is already on the map of green hydrogen worldwide," said Fernando Schaich, founding partner of SEG Ingeniería and vice president of the Uruguayan-German Chamber of Commerce and Industry yesterday, while participating in the First Green Hydrogen Forum.

In his speech, Schaich mentioned the projects related to green hydrogen that have already been announced in Uruguay and said that these will be "next milestones" in order to advance in the country's second energy transition.

Although many aspects have yet to be defined, there are three green hydrogen projects that were announced by the business sector and government authorities. The first of them is Tambor Green Hydrogen Hub, a project of the company Enertrag and SEG Ingeniería that will consist of the production of 15,000 tons per year of green hydrogen.

The second refers to the pilot project H24U -winner of the Green Hydrogen Sectoral Fund of the Ministry of Industry, Energy and Mining (MIEM) and formed by the companies Saceem, CIR, Air Liquide and Fraylog-, which seeks to convert some 17 trucks of the forestry sector, which will switch from diesel to green hydrogen.

And thirdly, the project of HIF Global, a company selected by Ancap to produce 180,000 tons per year of synthetic fuels, from the capture of carbon dioxide from the combustion of biomass and distillation of alcohol from cereals from Alur in Paysandú, which also foresees the production of 100,000 tons of green hydrogen per year.

"That today Uruguay is talking about green hydrogen is a natural step in what has been its process of transformation of its electricity matrix", because it should be remembered that "10 or 15 years ago, we had four hydro and a thermal plant, while today we have a fully distributed generation of wind, solar, biomass, hydro and a thermal plant now in another place of combined cycle much more efficient," recalled yesterday María José González, coordinator of the green hydrogen project of the MIEM.

In her opinion, this first energy transition that the country "managed to make in a very short time", is what allows "today to be able to talk about green hydrogen", said the environmental advisor of the MIEM.

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Conditions to take care of as a country

In terms of financing for this type of projects, the Guyer & Regules lawyer said that as a country at least three conditions must be taken care of that will be "essential" for when the need for financing actually materializes.

The first of these, he said, is the rule of law and compliance with the rules of the game. The second has to do with taking care of Uruguay's investment level.

"These are very capital-intensive projects, so without investment grade, I would almost say that this whole exercise is purely theoretical," said Mercant.

And thirdly, the lawyer said that it is "necessary" to maintain and continue accentuating the political consensus regarding the fundamental variables of these projects.

Challenges

While there is consensus that Uruguay should take advantage of the potential of new renewable energies and products such as green hydrogen, private and public stakeholders also agree that the road ahead presents some challenges.

According to Juan Manuel Mercant, a lawyer and partner at Guyer & Regules, there is currently "a temporary tension" because the costs of these types of projects "may not be competitive today. However, he said that the actors involved "should ask themselves how these costs will evolve in the medium or long term", in order to know where the country will be when this demand is confirmed and exists.

"That is where the balance and tension lies, and I humbly believe that as a country we are handling it very well, in terms of trying to encourage, promote and prepare the ground for these projects, but also not committing scarce resources before their time," said Mercant.

However, the lawyer acknowledged that this tension and balance are "very difficult to maintain", because "to imagine that one has to make a decision today, when all the relevant variables are not in place and when it is not confirmed that there will be a buyer, is very difficult", he admitted.

In this sense, Mercant suggested managing this tension "with a lot of intelligence". This consists of "preparing the ground, dictating some legal norms that set certain rules of the game and regulating what can be done", however, he warned about the fact that the State grants subsidies for this type of projects. "We must be very careful not to get too far ahead in this process and commit resources that are scarce," he said.

Regarding the issues and challenges faced by these new projects, Fernando Jiménez de Aréchaga, lawyer and partner at Dentons Jiménez de Aréchaga, pointed out that in these cases "it is always important that there is a clear regulatory framework" and said that the other challenge has to do with the cost of these projects. "Companies have sustainability issues on their agenda and are willing to pay some surcharge to boost this industry, but that has a limit and promotion policies are needed" from the State, he said.