Before the implementation of the new energy policy, and despite not having oil, natural gas or coal reserves, Uruguay had a significant presence of fossil fuels in its energy matrix, amounting to 56% in the period 2001–2006 (Méndez, 2014). In 2005, renewable energy sources had a share of 37% in the energy supply matrix. This was as the country was using almost its total hydro power potential. Energy imports were concentrated on few suppliers, increasing energy security risks (Energy and Nuclear Technology Directorate, 2008). In addition, average economic growth rates of 5.2% per year in 2006–2014 (World Bank, 2015) led to a sharp increase in energy demand.
To address this situation, an inter-ministerial coordination group was created in 2005 and, in 2008, the government approved a new Energy Policy 2005–2030, stipulating short-, medium- and long-term objectives for the sector.
The short-term objective for 2015 is to reach a 50% share of local renewable sources in the primary energy matrix, resulting in a 90% share of power generation. This target is supported by a set of policies promoting the development of biofuels, solar and wind as well as the elaboration of innovative promotion schemes that grant industries up to 80% tax reductions on investments in RE generation.
The implementation of the policies resulted in significant investments in renewable energy installations, initiating a transformation of the energy sector. To date, this policy has achieved annual GHG emission reductions of approximately 5 million tonnes CO 2 eq.