Planet Money - A man, a plan, wind power, Uruguay

Episode Date: October 6, 2023

In 2007, Uruguay had a massive problem with no obvious fix. The economy of this country of 3.5 million people was growing, but there wasn't enough energy to power all that growth.Ramón Méndez Galain was, at the time, a particle physicist, but he wanted to apply his scientific mind to this issue. He started researching different energy sources and eventually wrote up a plan for how Uruguay's power grid could transition to renewable energy. It would be better for the climate, and, he thought, in the long run it would be the most economical choice Uruguay could make.Méndez Galain shared his plan online and in a series of informal lectures. Then, one day he received a phone call from the office of the president of Uruguay, inviting him to put his plan into action.Countries all over the world have announced lofty goals to reduce the emissions that cause climate change. But Uruguay actually did it. In a typical year, 98% of Uruguay's grid is powered by green energy. How did it get there? It involved a scientist, an innovative approach to infrastructure funding, and a whole lot of wind.Today's show was hosted by Erika Beras and Amanda Aroncyzk. It was produced by Willa Rubin with help from Emma Peaslee. It was engineered by Maggie Luthar, fact-checked by Sierra Juarez and edited by Keith Romer. Alex Goldmark is our executive producer.Help support Planet Money and get bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This week, NPR is doing something new, dedicating an entire week to stories and conversations about the search for solutions to climate change. Today, we are bringing you a story about a giant environmental revolution in a tiny country. This is Planet Money from NPR. Last month, we traveled thousands of miles to Uruguay, this tiny country tucked in between Argentina and Brazil, to hear a pretty wild story from a man named Ramon Mendez Galán. We met him at his house in Montevideo. Hola. Hola, Ramon. Mucho gusto. Hola, mucho gusto. Erika.

Erika, bienvenida. Ramon says the story starts back in 2007. His little country had a massive problem, one that had no obvious fix. The economy of this country of three and a half million people was growing and there wasn't enough energy to power all of that growth. So it was difficult for us to cope. It was difficult to get electricity. There was energy rationing.

For some time, we were beginning to have blackouts. People's electricity bills? They'd gone way up from just a few years earlier. Ramon, at the time, he worked as a particle physicist. I worked for many years trying to understand what happened after the Big Bang, what was the physics after the Big Bang, what was the physics of the Big Bang, and how matter was organized in the universe and these kind of things. When I hear the Big Bang Theory, I just think of the TV show now.

Absolutely. Ramon is the kind of guy who, when he gets interested in something, whether it's the Big Bang or, you know, his country's energy crisis, has to look at everything from every angle and never stops looking until he figures it out. So he starts thinking about where Uruguay gets its energy from and where it could get its energy from. When you are trained as a scientist, you are trained to see an unsolved problem

and trying to find an explanation and a solution. So I use, if you wish, my scientific skills I had developed in order to face this difficulty with the same strategy. He starts jotting ideas down in notebooks while he's at work, at home. I mean, just informally, very informally. He starts researching different sources of energy. He reaches out to experts he knows in other countries. And he ends up writing this whole plan about how Uruguay should just switch to renewable energy.

There would be less pollution. It would be better for the climate. And in the long run, it might even be the most economical choice Uruguay could make. And then one day, he's in his office and his phone rings. This is what he hears. He said, oh, hi, Ramon. I've been reading what you said. I'm talking with the president and we wanted you to implement that strategy. The president, as in the president of Uruguay. He'd seen Ramon's plan and he now wanted Ramon to become Uruguay's new national director of energy.

He now wanted Ramon to become Uruguay's new national director of energy. We want you on the team. I mean, we need to do different things because in the way we are right now, I mean, we are not getting a solution. We have a more and more deep crisis. This whole conversation, it was under three minutes. So it was a total surprise. What did you say? I said, thank you.

I don't know. He's like, I've already got a pretty good job. Do I really want to give that up? And how badly do I want to be the person who tries to completely remake my country's entire energy system? He thinks about it for 15 days. But at the end of the day, I say yes. Yeah, he said yes. Yeah, I said yes. I realized that it was absolutely impossible to predetermine what would happen at the end of this experience,

but I wanted to do it. So I said yes. Hello and welcome to Planet Money. I'm Erika Barris. And I'm Amanda Aronchik. Countries all over the world have spent the last decade announcing lofty goals to reduce the emissions that cause climate change. Like, you know, we want to power our country using 50% renewable energy by 2035. But Uruguay, they actually did it. In a typical year, 98% of Uruguay's grid is powered by green energy. Today on the show, the story of how that happened. How Uruguay went all in on Ramon's plan to keep the lights on

and managed to do it without wrecking the planet at the same time. Ramon lives in this nice neighborhood in Montevideo. Lots of houses set back from the road behind gates. We're standing outside his house on the sidewalk. All right, so we are off. Where are we going, Erica? We are going to, where are we going? I think we're going to Caracoles.

Sierra Caracoles. Sierra de los Caracoles. We're going to take a little road trip with Ramon. He's going to show us what Uruguay's energy landscape looked like when he was offered his new job back in 2007. But first... So you're going to sit in the front, Amanda. Yep.

We all have to squeeze into this teeny tiny little car. What was your official title in government? What was it at that time? It was Director Nacional de Energía. Has the Director Nacional de Energía ever been in the back of a Suzuki Solerio for two hours? You don't know me. I'm a simple guy.

Very good. Okay. Okay. Ramon is going to walk us or drive us through the options that were available to him back then. The different sources of energy that he could have used to power the electric grid. Option one, natural gas. A few years before Ramon started his new job, Uruguay and Argentina had built this fancy new pipeline. At first, the road we're taking out of the city of Montevideo actually runs sort of parallel to it. But the pipeline turned out to be a little bit of a bust. And Argentina didn't end up exporting a whole lot of natural gas to Uruguay. So we were having strong infrastructure with no capability of using it. And Ramon says Uruguay could have imported liquefied natural gas from other countries, but that would have required building a whole new plant to convert that liquid natural gas.

So this is very costly infrastructure. It's about more than a billion dollars. More than a billion dollars? They didn't have a billion dollars. The next option? Coal. Coal's cheap, right? Is there coal here? Coal? No, no coal at all. We don't have coal. We don't have natural gas. We don't have oil. All of this needs to be imported. So the decision concerning coal was not to import coal in order to power power plants. And they didn't have coal-fired power plants. So they'd have to build them and then they'd have to expand the port to import coal. Ramon, he thought about nuclear too.

And Ramon wasn't totally out on nuclear. But again, there was the cost. And most likely, the country would still have to import something. In this case, uranium. Okay, fine. Now, Uruguay did have hydropower. About a quarter of the energy the country used actually came from hydroelectric dams. But we had already used our large rivers.

I mean, all the possibilities to use water from our rivers has already been used. And when there were droughts in Uruguay, the rivers dried up. Of course, Ramon considered solar. As we're driving, the sun is full on. I mean, the sun is shining. It's a beautiful day. We're here. It's a beautiful day, yeah. But in 2007, solar was way more expensive than it is now. And that is when he came to a solution.

A solution represented by the final stop on our little road trip. Yeah, this is the entrance. Oh, this is the entrance. Oh, this is a dirt road. Yeah. When we get out of the car, the answer to Ramon's problem is whipping and whirling and whooshing around us. It's windy. You will say it's windy. Is it windy? Yes. Oh. It's windy. You will say it's windy. Is it windy?

Yes. Oh, it is windy. We're at the top of one of Uruguay's highest hills. It's one of the windiest places in the country, and you can see all the way out to the Atlantic Ocean. And it's not just that Uruguay is windy. It's that there is so much wide open land in the country. The overwhelming majority of the country is agricultural land, barely inhabited. People here love to share

this stat that there are four cows per person here. That means there's a lot of poop. These are everywhere, literally everywhere. Remember, four cows per inhabitant. Yes, I know. So four cow poos per inhabitant. Yeah, I did the math. So Ramon thought about all of this windy, uninhabited land. And his vision for solving Uruguay's energy conundrum was to cover this land with rows and rows and rows of turbines. He imagined them on the hills, on the cow pastures, east, west, north, everywhere. Wind turbines for everybody.

You will see that almost every place in the country is a windy place. They would have to bring the turbines themselves into the country. But once they were put up, that would be it. From that moment on, everything would come from Uruguay's own resources, from the wind. There'd be nothing left to import. This was the vision Ramon had brought us all this way to see. After an hour or so, we are ready to head back to the city. No, no, no, I'm just holding it out here.

Thank you very much. I think we are good to get going on the road. So, great. 2007 Ramon had settled on what he thought was the best kind of energy for Uruguay. But back at his house the next day, he tells us that making his vision a reality, that would be way more difficult. Because, remember, Ramon, he was a particle physicist building a nationwide network of wind turbines. That was all new territory for him and for all the people working with him in that new government job. 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. But Ramon knew there were all these companies around

the world who didn't know how to do it. All he had to do was figure out a way to get them to share that expertise with the Uruguay. Ramon starts thinking about how they dealt with electricity across the border in Brazil. Some electric companies there were partly run by the government and partly run by private companies. Ramon's like, maybe something like that could work in Uruguay, but with wind companies? Which would be great, but it wouldn't solve the much larger problem. Money. The size of our economy was about $50 billion, and we needed more than six. Six billion dollars. Ramon's budget to run his entire office was just $10 million. And Uruguay's finance minister was very clear with Ramon. We are not going to fund

this project. We can't just add $6 billion to our national debt. We would never be able to get decent terms on a loan ever again. And this is the moment when Ramon came up with his big innovation. What if they took the public-private partnership model Brazil used and put a Uruguayan twist on it? This is how he thought it could work. Uruguay would invite companies from around the world, companies with expertise in wind energy, to cover his country with turbines. They do their business. They know how to do it. Whatever energy they produced, the Uruguay public utility would agree to buy from them. They sell everything that they are producing to the public utility. The vast majority of the

billions of dollars it would cost to put up all of these turbines, that would be paid by the companies, not by the Uruguayan government. And to get the companies to want to take on that huge upfront cost, the government would agree to buy all of the energy a company produced at a fixed rate. So even if the market for energy fell apart, the companies would be guaranteed that the price they got would stay the same for the full length of their contract. I mean, investors need to have the security that their investment will be paid back. And for that, they need a certain amount of time. Ramon and his team settled on contracts that would last for 20 years.

Over the next several months, Ramon set out to convince lawmakers that his plan would work. And he got so much buy-in that they even ended up changing laws for him. Like one about who owned the wind. I mean, the wind, it does not belong to the land owner. The wind is a public good. Yes, according to a new law, all the wind in the country now officially belonged to the Uruguayan people. Which was helpful, because a lot of the wind Ramon wanted to use to power the grid was blowing over privately owned land.

Now, the wind companies would have a legal right to capture the wind. So, if you have a property with enough wind, you cannot say, I don't want a wind farm to be installing my land. If your property was selected to get turbine, yeah, you'd get some money. But the wind turbine would go up whether you wanted it there or not. In 2009, Uruguay started holding auctions where different wind companies from around the world came to bid

on how cheaply they'd sell renewable energy to the country. In 2011, they had an auction where they wanted 150 megawatts of new wind power, which would have represented about 5% of the country's energy generation. More than 20 different companies threw in their bids. And after many ups and downs, we made the almost last bidding process.

And there we got eight times what we needed. And even better, the bids were coming in lower than they had before. The original plan had been to keep doing these auctions for four more years. But Ramon and his team decided, let's do it all right now. Let's take all the bids. So we are going to give contracts to those that have won. But then to those that we apparently 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.

This auction that was supposed to add about 5% to Uruguay's capacity to generate electricity, ended up adding more than 40%. Ramon was like, these prices, they're pretty good. We may not see them again. We realized that that was the moment. I mean, everything that we had been working for for three years ended up exactly what we wanted. So it was the occasion. We jumped on it. After the break, how did Ramon's plan work out?

And is it the sort of plan that other countries should be trying to emulate? 21, The Social Network, and now Dumb Money. All films based on books written by Ben Mesrick. My dream was never, you know, win a Pulitzer or win a National Book Award. My dream was always having a tie-in paperback that said, now a major motion picture. Mesrick takes flashy true stories and turns them into books that can be made into movies. For the past 10 years, every one of my books has a movie deal before I present it to the publishers.

In our latest bonus episode, a business model that feeds Hollywood's hunger for true life stories. That's for Planet Money Plus listeners. If that's you, thank you for your support. If it's not, it could be. Sign up at plus.npr.org. If it's not, it could be. Sign up at plus.npr.org. Within a few years of Ramon getting that life-changing phone call inviting him to become the National Director of Energy,

he'd done the thing he had set out to do. Uruguay generated its own renewable energy and, adjusted for inflation, consumer prices had gone down. Today, there are more than 700 wind turbines whooshing away. In fact, the country is now making so much energy, it's actually exporting to its neighbors. And the rate it's paying for energy has fallen by over 40%. Best of all, at least from a climate perspective, in a typical year, 98% of the energy used to run Uruguay's power grid comes from renewable sources. Hydropower, biomass, solar, and a whole bunch of wind. Today, Uruguay's energy grid contributes almost nothing to greenhouse gas emissions.

There was an absolute and complete transformation. A complete transformation. There was an absolute and complete transformation, a complete transformation. Many people say that they talk about what happened as the Eurovision revolution, energy revolution, because it really was as a revolution. And Ramon got all this attention. He's been invited to speak in all these different countries. One year he was in Fortune magazine's World's 50 Greatest Leader list alongside Tim Cook, Ruth Bader Ginsburg and the Pope. Yes, in some cases I feel like a rock star because, yes, it's incredible because people want to talk with me, take a picture with me. And, you know, it is incredible.

Now, in a lot of cases, public-private partnerships get mixed reviews. In other countries, there have been problems with quality, with accountability, with corruption. But Ramon's model for getting private companies to set up renewable energy infrastructure for long-term contracts is still going strong. It's been used all over the world, the Dominican Republic, South Africa, Thailand. It's become kind of a new Uruguayan export. Still, what Ramon did, it does have some critics. Relying so much on wind energy means there is not always enough energy when people want it. Sometimes the wind just doesn't blow enough.

And it's hard and expensive to store energy for when you need it. So, like in other parts of the world, if you live in Uruguay and you want to get the best rates on your energy, you have to sign up for this metering program, where for the busiest hours every day, any energy you use in your home will cost more. People plan their whole days around this. Like, they don't cook dinner between, say, 5 and 9 p.m., so they can save money.

And the price saving for consumers? It wasn't amazing. Just about everyone we talked to in Uruguay says, yeah, their energy bills came down a little bit, but they're still higher than what people pay across the border in Argentina and Brazil. Some people, they tie this directly back to Ramon's decision to accept all of the bids, all at the same price, all at once. To sign up to buy way,

way, way more energy than they had originally planned to. Because since Ramon pulled that wildcard move, the price for wind energy has kept going down. It's like 30 to 40 percent cheaper per megawatt now than it was then. But that lower price does not matter because the utility companies signed contracts that locked in those higher rates for 20 years. Ramon has heard this critique a lot. But at the same time, the country was paying nearly $600 million a year for energy. And he says it still didn't have enough. Either we did what we did or we waited for 10 extra years to have electricity at the present cost. Like what people are paying for energy at home.

He says that actually has nothing to do with what he did. Because of Ramon's plan, the government is now paying around 40% less per year for energy than when he started. But he says most of those savings aren't passed on to customers. This was perhaps the worst day when I was in office, when I realized that all these tremendous efficiencies that we were getting in the electricity production would not go entirely to the electricity sector. Instead, the government decided to use that savings to fund all of their other priorities. I mean, it's OK. I mean, because with this money, with this tremendous cost reduction,

we are financing now education and health care. So it's fine. But it's not what I was expecting. But there's no denying the impact of what Ramon did. When you're driving through the Uruguayan countryside, you see rows and rows of turbines stretching out into the sky, harnessing the power of the wind. What you don't see? Tankers of gas, trainloads of coal, power plants spewing black smoke into the air. In terms of limiting climate pollution and keeping the Earth's temperature from rising even more, limiting climate pollution and keeping the Earth's temperature from rising even more, what Uruguay has achieved doesn't amount to all that much.

It's a small country. Only three and a half million people live there. It was never a giant polluter. But Ramon says that Uruguay is important as a model to show that with a bold enough plan, any country can remake its relationship to the planet. There's no chance of continuing doing the same in this 21st century. So when there is a success case, these success stories show that the new, call it green economy, call it whatever you want to call it, but this new economy is possible. It's not just a dream. It's not just a dream. Uruguay, it's the proof. Today's show was produced by Willa Rubin with help from Emma Peasley.

It was engineered by Maggie Luthar, fact-checked by Sierra Juarez, and edited by Keith Romer. Alex Goldmark is our executive producer. Alex Goldmark is our executive producer. For more on climate change solutions, check out the other stories that are part of NPR's Climate Week at npr.org slash climate week. Thank you to Kiel Mocarra, Marcelo Cafera, Natalia Diagosti, Ignacio Estrada, Walter Berry, Oscar Ferreño, Nicolas Saldias, and Carrie Kahn. I'm Erica Barris. And I'm Amanda Aronchik. This is NPR. Thanks for listening. I have actually never been very close to a windmill at all.

So do they make a lot of noise? Yes, yes. What does it sound like? Oh, it's like a windmill. It's like the effect of the blades interacting with wind. And so it's kind of, you will see it. And a special thanks to our funder, the Alfred P. Sloan Foundation, for helping to support this podcast.