In 2008 Ramón Méndez Galain, a particle physicist with no experience in government, was appointed Director of Energy for Uruguay and proceeded to reimagine the country’s electricity grid. In less than a decade, Méndez’s energy transition plan succeeded in freeing the country’s power sector from its growing reliance on imported oil, and achieved energy independence through a diverse electricity mix, approaching 100% renewables.
Méndez and Noah Gallagher Shannon, a journalist who has written about Uruguay’s energy transition for The New York Times Magazine, discuss the energy crisis that forced Uruguay’s shift to clean energy and the financing structure and political accommodations that made the transition possible. Méndez also discusses his current role as head of an NGO that assists policymakers in other countries with their own energy transitions, drawing upon lessons learned in Uruguay where possible.
Andy Stone: Welcome to the Energy Policy Now podcast from the Kleinman Center for Energy Policy at the University of Pennsylvania. I’m Andy Stone. On today’s podcast, I’m going to be talking with this year’s recipient of the Carnot Prize for Distinguished Contributions in Energy Policy. This year’s prize, which is the eighth to be awarded by the Kleinman Center, goes to Ramón Méndez Galain, who, from 2008 to 2015 served as Director of Energy for Uruguay. By the end of his term, Uruguay’s electricity sector had been fundamentally transformed by Méndez’ plan to achieve energy independence through a nearly complete transition to renewable power. By 2015, Uruguay generated fully 98% of its electricity from renewable sources, marking a dramatic shift for a country that had previously grown increasingly dependent on oil imports and whose economy had been shaken by the volatility of fossil fuel markets.
Joining us on today’s podcast is Noah Gallagher Shannon, a journalist whose recent New York Times Magazine article on Uruguay’s energy transition highlighted Méndez Galain’s role in seeing that transition through. On the podcast we’ll explore the unique set of circumstances that led to Uruguay’s energy crisis early this century and the innovative policies that delivered energy security. We’ll also discuss Méndez Galain’s current work to help other countries in their own transitions to clean energy, and we’ll explore the extent to which Uruguay, with its unique set of resources, might serve as a model for other countries. Ramón and Noah, welcome to the podcast.
Ramón Méndez Galain: It’s a pleasure to be here. Thank you so much.
Noah Gallagher Shannon: Thanks for having me.
Stone: Ramón, welcome to the Kleinman Center, and again, congratulations on receiving the Carnot Prize.
Méndez Galain: Thank you so much. I’m really excited. I never imagined this. I’m a scientist by background, but I was a particle physicist — nothing to do with energy. And so I never imagined to be on this prestigious list of colleagues of women and men to be considered for this kind of award from a prestigious university such as the University of Pennsylvania.
Stone: Well, we’re very honored to have you here. You were Uruguay’s Director of Energy from 2008 to 2015.
Méndez Galain: Yes, during two administrations, in fact.
Stone: Two administrations. And following that, you served as Uruguay’s National Director of Climate Change and as Montevideo’s Director of Planning. Now you run an NGO that seeks to apply your experiences in planning Uruguay’s energy transition to additional countries. Can you introduce us to that NGO, your current work?
Méndez Galain: Yes, it’s a foundation, in fact, that we have created with a bunch of friends, but first of all, with a lot of experience in public policies and transitions. We work in the whole region. Not only regional, but in Europe and even working sometimes here in the United States, but mainly in Latin America in order to help countries make their own transition journey, working either with governments and private sector, also with other NGO and other international organizations. Our role is to make things happen.
So we are taken as an example, as a model, for what we did in Uruguay. In fact, we are trying to focus on what is going on in these particular circumstances in every country we pick, because every country has to define its own transition journey.
Stone: It’s interesting the name is Asociación Ivy, if I’ve pronounced that correctly. And Ivy has a special meaning, is that right?
Méndez Galain: Yes, this is difficult because it’s not the meaning that you think about, because it’s not [as in English] “Ivy.” It’s “Ivy,” [pronounced EeVee]. Ivy is a Guarani name. The Guaranís were the people who lived in my region before the Spanish came, and so in Guaraní, Ivy means the beautiful land, the Promised Land. The land was a myth. It was a kind of figuring out what could a better world be for them? So this is why we took this name, because this is something we have to create. We have to create a new way of developing, and this transition process, this pathway, is one we’re guiding by this Ivy myth of a beautiful land that is waiting for us.
Stone: And Noah, I want to introduce you, as well. You’re the author of a New York Times Magazine article on Uruguay’s energy transition, for those who want to look it up, it’s called “What Does Sustainable Living Look Like? Maybe Like Uruguay.” When did you find out about Uruguay and the energy transition in Ramón’s stories?
Gallagher Shannon: I found out in about 2020 or 2021. I was thinking about some stories with my editor. I’ve written a lot on the effects of climate change, on massive thunderstorms in South America, on corporate and private security in the age of natural disasters and communities losing their groundwater. I realized I didn’t know a lot about the other side of the climate change story, which is about solutions.
At the same time, my wife and I were moving from New York to Colorado and were in the process of condensing our lives and moving. We were thinking a lot more about our impact and what kind of life we wanted to build. So I was thinking about these kinds of big, existential questions. My editor asked me a pretty simple question, which was, “Are there places in the world living right now the way that most of us need to live in the future?”
It was a simple question, but it hit a lot of complex answers because it was an imaginative one, too. It didn’t necessarily ask, “What is the solution to climate change?” in a monolithic way, but just, “Are there places out there that propose a path forward that we hadn’t yet seen or experienced?” So I set off and did some research and talked to some different sources. I read as much as I could. They were kind of the usual suspects, the Northern social democracies in Europe that I feel like we’ve all read.
Stone: The Denmarks of the world?
Gallagher Shannon: The Denmarks of the world that we’ve all thought about, and we can picture in our heads with a kind of sleek, technocratic air or something. I just wanted to think about unusual places, somewhere that most people hadn’t thought of. I landed on Uruguay for a few different reasons. One was that I realized I just didn’t know anything about it. The other was that it seemed almost like a Goldilocks of countries, where its per capita footprint seemed small enough that it was near that two tons per person that we need to get to, if we’re going to limit the world to 1.5 or 2 degrees warming. So it seemed within sight of that, but it also had a good enough standard of living that it didn’t feel like we were asking the Global North to somehow retreat in its standard of living. So I thought that was really interesting.
And then the more that I read, the more that I saw that they had accomplished this pretty incredible energy transition from using a lot of thermal power, to using almost a hundred percent renewable. A couple of things about it grabbed me. One was that they had done it relatively quickly. We’re talking about a decade or so, which in an American timeframe just seemed insane. And the other was that they were kind of an unlikely cast of characters that had helped accomplish this. One of them was José Mujica, who is a former guerrilla, turned president in the country. So as a writer, I’m thinking about characters, and that’s a great character to explore.
Then, of course, there was Ramón, who the more that I read about and heard about your background in theoretical physics and working on the big bang, I’m thinking, “Well, how did this guy wind up going from doing kind of blackboard math about the biggest problems in the universe, to trying to solve an energy problem in a very small country?” Once I had surveyed that landscape, I was like, “This is a great story.”
Stone: For a moment, I’d like to turn over the conversation to the two of you, because you recounted the story of Uruguay and the energy transition so beautifully in that New York Times Magazine piece. I wonder if you could just jump in a little bit with the questions you might have here on the key parts of that transition. What were the key components of the transition itself?
Gallagher Shannon: I wonder if we might jump a step back further with Ramón and talk about what kind of work you were doing prior to the energy crisis in Uruguay, what problems you were thinking about in physics, and then how that eventually brought you into politics, brought you into civil service, because I think that’s an interesting journey.
Méndez Galain: Yes, it had absolutely nothing to do with what I’m doing now, absolutely nothing. I was a scientist. Yes, I was a university professor working in many countries and many prestigious universities. I worked with a lot of very creative and very fantastic people. But I was working on what was going on in the first microsecond after the big bang. So what was the shape of the universe, which was absolutely different as we have right now? The physics was quite different, and there were some symmetries that we are now trying to understand. So I was a theoretical physicist, working, of course, with data, but just doing models, and so trying to understand how things are quite different from the one we have right now worked on, in those moments, because that helps us understand a lot of things that are present, of course. But just theoretical physics, nothing to do with reality.
My only reality was my students, to whom I used to talk and deliver all my courses. But this was my main job, and I enjoyed it very much. When you are in the academy, you have a lot of freedom. You have a lot of freedom to think whatever you want, to say whatever you want, to have mistakes, and then to begin once again, even stronger. But you have a lot of freedom, and I enjoyed that very much.
Gallagher Shannon: Take us back to maybe the mid-2000s, when the energy crisis really begins in Uruguay. Maybe you can just characterize that for us, because I know that was the kind of moment that catalyzed a lot of this change.
Méndez Galain: Yes, absolutely. And when you have really big problems, you have a lot of opportunities of crisis. It gives us opportunities. We used to say we were, in fact, in a perfect storm. Fortunately, our economy was increasing very rapidly. We were succeeding at decreasing poverty at extraordinary rates, really because of public policies. We were succeeding in doing that, but at the same time, energy consumption was increasing dramatically.
We are a small country. We are the second-smallest country in South America. We have only 3.4 million inhabitants, and we were dependent on fossil fuel imports because we don’t have coal, we don’t have natural gas, we don’t have oil. And we have already used our large rivers to install hydropower plants. So we needed to import oil or natural gas or whatever. Our two big neighbors, Argentina and Brazil, were having their own difficulties coping with their own domestic demands, so it was not easy for them to assist us. We were in really deep difficulties, with demand growing, and with not knowing what to do in order to cope with that. We were beginning to have — I wouldn’t say “blackout” — but at least an electricity shortage. We were really experiencing strong difficulties.
Gallagher Shannon: So once you’re brought into civil service, I know that there was perhaps some plan to move to atomic energy, since that was at least a little closer to your expertise. Why didn’t that work out?
Méndez Galain: First of all, just one step backward. The point is that in that particular moment, I couldn’t see to get involved in the search for a solution. I was a particle physicist, but I was always a part of the wider society. So I began to study the energy issue, and of course many people were talking about nuclear energy, because the people were looking for the solution. And in fact on management’s side, I’d come to understand more and more, there’s not one solution. There is a complement of solutions. So I had to look at the point in another way, because you have a lot of dimensions. You have the economic and the technological dimensions, but you also have the environmental dimension, the social dimension, the geopolitical dimension, the cultural dimension, and even the ethical dimension — everything that concerns the energy issue.
So I began to study all of that, and as I was a kind of nuclear physicist, as a particle physicist, everybody was looking at me and saying, “Well, I am going to go to nuclear. What can you do for that?”
Gallagher Shannon: Well, it made sense, right?
Méndez Galain: Yes, it made sense, but I began to study the issue, and I realized that this was not the best solution for us because we still are having to continue importing technology, importing uranium. We don’t have uranium, either. And we have a better solution just to believe in our own resources, our wind, our sun, our water, our biomass waste. This depends on us. We didn’t need to depend on imported fossil fuels or on the energy markets or the energy fluctuation of energy commodity prices. So there was a better solution.
That’s why I’ve written my thoughts, and without realizing, I ended up with a complete comprehensive proposal, based on a just energy transition to renewable energies. And to my surprise, one day I received a phone call, and the president wanted me to implement that crazy idea. And I did something even crazier. I accepted. So I changed my life dramatically, from the academic point of view with all this freedom you have, and going through what has been the politically responsible for our national energy agency. It can’t be a lot of freedom when you are in a political responsibility. You cannot say whatever you want. You cannot even think whatever you want because your thoughts could be overheard.
So it was a dramatic change back then, but I enjoyed it much, much, much more than my previous one because when you have a political responsibility, you can change people’s lives, and this is what I tried to do.
Gallagher Shannon: I thought one of the most interesting things I discovered when I went down to Uruguay and visited with you and others is that on paper, when you look at a transition that goes from using fossil fuels to using almost a hundred percent renewable energy, you expect that there have been climate marches in the street, or that the government that’s taking over is pushing a kind of green revolution.
When I got there and talked to people, that didn’t seem to be the case. It seemed to be that there were many different factors driving this transition. In fact, when I talked to people and said, “What was the Green Revolution like?” A lot of Latin Americans were like, “Well, there wasn’t really a revolution in the Latin American sense. It was that we were worried about sovereignty. We were worried about the future. We were worried about our economy being yoked to commodity prices that were being affected by global wars that were very far away from Uruguay.” I thought that was one of the most unexpected and unlikely things about the transition that you guys went through.
Stone: I want to chime in on that one. One of the things that’s so interesting as well, as you just alluded to, is that it’s an energy transition, but it’s an energy transition relying upon clean resources. That’s what’s so unique about it. You’re looking for security, right? — energy security. But renewables provide that.
Méndez Galain: Yes, renewables provide that. And you become independent of all these kinds of wars or other geopolitical events. And this is fantastic. Ask me what was the impact on the electricity sector in Uruguay after this tragic war in Europe — zero. We have no impact because we’re not dependent on energy commodities. This is fantastic. It’s even more fantastic for a small country, for a small economy. As a small economy, we are much more dependent on what is going on all over the world. But doing this, you become independent, or more and more independent on all of that. And this was very important.
Stone: I want to ask you about some of the specifics. We talked about the switch to renewables. As I understand, central to the development and to the transition was actually development of contracts for clean energy with private suppliers, and that was a bit of a shift because the state-owned electric utility UTE had owned all the generation, or most of it, up until that point. So there was a shift there, but talk to us about the actual plan for how the renewables were brought on.
Méndez Galain: Yes, one of the difficulties was that a lot of money was needed to make all the investment. In total we spent 6 billion dollars in investment in only five years. If you make a comparison to the United States, this is 12% of our GDP. Six billion. We have a 50 billion dollar-sized economy. So 6 billion dollars is 12% of that. Imagine that. You’ll see how many zeroes this figure has in the United States. We’re talking about trillions of dollars.
So this was impossible to be done just by government, just with public funds. Even if we have access to markets, to the IMF or the IATBE [?], a lot of banks. It is a huge impact. So we ran public/private partnership strategy which was original, which was disruptive in a way. The point is yes, we made bidding processes to see which are the best private investors that want to invest in generation in Uruguay. But after the electricity is generated, it goes to the public grid. So the energy itself is the good to be worried about. This is the public good, and the public good is driven by the public utility.
So there’s a very original private/public partnership. This has been done through bidding processes and long-term contracts. So these long-term contracts are the best for everybody. For the private sector, you know how much money you’re going to receive for the fund in twenty years, so you can reduce the risk in a very important manner. And for the consumer, it is fantastic, because you know what the price of electricity is going to be for the fund in twenty years. So it’s the best world. And this is why they work.
Stone: Something that you emphasized in the article, Noah, and I want to ask you about, Ramón, that was so interesting — particularly interesting from an American perspective, where energy is so politicized. Climate is so politicized. Political compromise was part of this plan. You were able to achieve that. Tell us about the opposition and how much opposition there was and what the compromise was about.
Méndez Galain: First of all, their position. The point was that at that time, 15 years ago, they didn’t see me coming. So in fact, there was not that much opposition because things went one after the other. I used to say that if you have a recipient of plenty of dirty water, you can do two things: Either you throw away all the dirty water, and then you put clean water, or you put clean water after clean water, drop after drop. At the end of the day, there’s no more dirty water. And this is what I did. So they didn’t see me coming.
But on the other side, yes. Having a long-term agreement between all political parties was fundamental, and this was the role that you mentioned of Jose “Pepe” Mujica. I’ve served two presidents. The second one was fantastic, Pepe Mujica. And when he asked me to remain in office, he said, “But Ramón, you have to make this policy to be a policy that’s accepted by all political parties.” So we negotiated with all political parties represented in parliament. We had four in Uruguay at that time, and we succeeded. Now we have six, but at that time we had four, and we succeeded in negotiating. We made some minor changes, and it was crucial because when you are going through long-term processes, we need to have a continuity of these processes. And this is perhaps the most important message I can deliver.
In order to make these kinds of dramatic changes, you need agreements, you need political agreements. And you need to build a national narrative that sustains this process. The good news is that nowadays renewables are not just a solution for the global climate crisis. Renewables are also an important solution at the national level because we decided to sharply decrease our electricity production costs by almost half because nowadays renewables are the cheapest option. So we created 50,000 new jobs. This is 3% of our national labor force.
Again, to make a comparison with the United States, 3% of the labor force are several million new jobs created. So forget about climate change for a while. Forget about that. Even if there were no climate change, renewables are the best solution right now because you do not depend on energy commodities. You just fix the price of electricity for long-term. You’re just dependent on your own resources, of course. You are decreasing costs. You are creating jobs. It’s fantastic.
Stone: Here’s a really interesting point that I ran across. Per the World Economic Forum’s Global Competitiveness Index, Uruguay ranks first in Latin America in terms of quality of electricity supply. And that’s amazing. You’re relying upon renewables for the vast bulk of your generation. How do you balance those intermittent renewables in Uruguay?
Méndez Galain: This is perhaps the most important point because people used to say — and incredibly they’re still repeating right now — that it is not possible to go beyond a certain limit of intermittent sources, like solar and wind. And this is not true. We have proved this is not true. No one went to Uruguay. Everybody can go to Uruguay and see what has been going on for the last six years right now, okay? So yes, it is possible to manage intermittent sources.
Of course we have to run the system in a completely different way because in Uruguay, sun and wind are key. Everything is working to help sun and wind to work, because yes, there are individual intermittencies of these sources. But the complementarity between different sources allows us to build a robust system, which is as robust, or even more robust than it used to be. Before, we were dependent on dry years, on the El Niño phenomenon, which is very important in South America. And now we still depend on that, by the way, but we are much less dependent on the overall costs that we used to have in those dry years. They went down dramatically.
So what I want to say is that, yes, it is possible doing absolutely completely different things, but it is possible to run a system with a large amount of intermittencies. We have about 40% of our electricity coming from wind, just wind. And this is because, yes, the complementarity between resources means jobs.
Gallagher Shannon: Are there ways in which, when you have a grid that’s that reliant on a mix of renewables, that you have to change your relationship between supply and demand? I’m thinking right now with the drought that’s been going on in Uruguay. Are there ways in which that makes generation difficult, or do people have to change their usage based on the time of day?
Méndez Galain: No, no, fortunately not. Last year was the worst because we had a lack of rain. It was the worst in a century in Uruguay, okay? So we didn’t succeed in having 2% fossil fuels in the grid. But we had 7. So it’s a lot. If you compare 7 to 2, it’s a lot, but it’s only 7. I mean, put it the other way, it’s not 98% renewable, it’s only 93% renewable, but it is already a lot. If we all succeeded to make that, more than 90% of renewable at any time, okay, well done. But yes, we are still dependent on the El Niño phenomenon in dry years, and this makes a difference. But we succeeded in managing it, yes. And even though last year and the year before that, we succeeded in continuing to export electricity to Argentina and Brazil. And this is an important amount of money we receive because of these exports. In 2021, we got 1% of our GDP just for exports of electricity surpluses to Argentina and Brazil. So it works in this way.
Stone: I’d like to dive a little bit deeper. You’d mentioned hydro. Hydro is about a third of the installed capacity in Uruguay:
Méndez Galain: Installed capacity is one-third, yes.
Stone: So when you have the drought conditions, how much are you relying upon hydro for balancing the renewables at this point, or is it simply the geographic diversity of the wind that allows you to, again, provide energy at any time?
Méndez Galain: It’s a small country, but even so, it’s enough to have diversity in wind and solar. That’s true. But when we don’t have enough water in order to filter the variability, if you wish intermittency of sun and wind, we have to use fossil fuel plants. This is not difficult. We have an insurance policy. These insurance policies continue to be fossil fuel plants, but the most important point is how you use those fossil fuel power plants. They have to be much more flexible. If you have, for example, let’s say a nuclear energy plant. You cannot turn it down, everything that the one is going off. If you have a coal plant, it’s the same.
So what we have are gas turbines, engine-powered. You can turn it on in three minutes. The important point is that we have knowledge of wind and sun much better than we used to have before. I can tell you, with less than 20% error, a week in advance, which is the amount of wind electricity and solar electricity that you’re going to have in the grid. So this is crucial, to know how to dispatch different sources that you have.
For sure, in order to do that, academics work for years to design a ground-breaking software to handle this intermittent energy dispatch, and for years, really. And this energy dispatch is based on the probability of occurrence of different weather scenarios, based on both a century of historical data and weather forecasting. So this is crucial. Once again, making an energy transition is not just adding wind and solar to your grid. It’s not just that. You have to make a lot of changes in how you plan the system, in how you operate the system. In the market model, we have to design a new market model because, as you were saying, Andy, renewable energies are quite different. It’s a quite different model than the traditional one in the power sector.
Stone: So you’re working with Ivy, and you’re looking to apply the lessons learned from Uruguay to energy transitions, to help other countries with their energy transition. And that’s a critical question. Uruguay is very small, a small electric grid relative to other countries. It has a different energy mix. It doesn’t have its own substantial fossil fuel resources. A lot of wind, a lot of hydro, as you mentioned. How applicable are these lessons from Uruguay to the rest of Latin America and other places? And this really comes up in the context we hear so much about, and we mentioned it earlier in this context — Denmark. Denmark being this special case, but how applicable are its lessons elsewhere?
Méndez Galain: Thank you for the question, because a lot of people are saying that Uruguay is excited to do that because we are a small country. And nothing could be further from the truth, because in fact, for small countries, it is much more difficult for a small country in the Global South, it’s difficult to make these kinds of changes. In large economies, you have more people, more people with a lot of capacity. You have more money. You have more capacity to accept investment, to receive investment. You have local manufacturing. We didn’t have local manufacturing. I tried to have local manufacturing of windmills in Uruguay, but if you are going to have only two kilowatts of wind, it’s not enough.
Stone: And that’s critical, because here in the United States, that manufacturing capacity is one of the political levers to get everybody behind renewables.
Méndez Galain: And you create a lot of jobs, so this is the kind of thing that you can do in large economies. It’s much more simple to make these kinds of changes in large economies than in the small ones.
Gallagher Shannon: I think in large economies like ours, too, though, there’s increasingly political belligerence between opposition parties.
Méndez Galain: Absolutely.
Gallagher Shannon: And one thing I was fascinated by in Uruguay was hearing that you guys had a majority in government, and you still kind of pressed pause to try to get cooperation from the opposition, which blows my mind as an American in this particular political environment. But then also talking to some of the opposition party members, who basically complimented your plan and said, “This is great. This is good for the country. This is the future for the country.” As an American, I’m sort of waiting for the other shoe to drop, like, “But.” What’s your “but” here?
Méndez Galain: The point is that we have to have a national narrative, and this is what I’m working on with Ivy in a lot of countries. Every country has to have its own narrative. Why do we need renewables? What do we need for energy transition? And if there is a public acceptance of that, then if there’s a change in government, and the new government doesn’t want to continue what it did, it has to give a lot of explanation, because people want that, because people know that it has created jobs, that this will decrease the energy bill because we’re going to be less dependent on what’s going on in Europe or in Saudi Arabia. If you have a strong national narrative, building strong political agreements is much easier. And I think that we do have this right now. I know here in America you have a lot of differences, political differences — even concerning the acceptance of the effects of climate change. Once again, renewables deliver the best solution at the national level. Forget for a while climate change.
So I was guided by climate change. But even if there were not climate change, this is the best solution.
Stone: I wanted to ask you a follow-up question on that, because one thing that struck me about Uruguay was that you put this policy in place for a lot of different reasons, and usually I feel like as Americans, we think that big policies are going to follow big social moments, right? There are going to be people marching in the street, and only then the government is going to react. But again, an opposite thing happened in Uruguay, where the government made a very proactive decision, perhaps for sovereignty and geopolitical reasons, economic reasons. How do you then get people on board with the climate movement, kind of after the fact, almost?
Méndez Galain: Well, I’m going to say something politically incorrect. I am not quite sure that there is a political movement sustaining the energy transition in Uruguay. I mean it works. Okay, that’s fine. As a small country, perhaps we are proud of being the first in all of the world in something. It is something to make us proud. In Uruguay, football — what you call “soccer” in the United States — is the most popular sport. In 1950, seventy years from now, we have been the world champion. So we were just talking about that, because we are a small country, being first in something, fills us with pride. I think this is an interesting point. People said, “Okay, that’s fine. These windmills are turning around over there everyplace. This sounds modern, and it happens that we are leading something, and this is good.”
But at the end of the day, the only point for people is just to have the amount of their bill less. And this is the most important point for people.
Stone: I want to bring that point up, because as you point out in the article, Noah, there were some complaints that electricity prices have not fallen for consumers, right?
Méndez Galain: Yes, sure. And we used to say that these were the worst days in office, where my colleagues from the Ministry of the Economy, they said that not all the cost reduction we got was being translated to their bills, because nowadays the public utilities are a kind of ATM of the government. There is a revenue transference from the public utility to the government for all public policies. Okay, that’s fine, and this is easy for health, for education. That’s fine. But this has not been translated, everything, to the bill. So people are complaining. I accept that. I agree with that. But it is not an easy decision. It was a world economic decision of the country. And this is something that is hindering somehow, and some people are not that happy with the transition. But they say that at the end of the day, there was a bill reduction of about 20%. But it could have been much more than that because once again, the production cost with action was reduced to half of what it used to be, but this has not been translated to the bill. Only 20% of that was translated to the bill. So people are still complaining.
There are some things also that are extraordinarily interesting in Uruguay. There is also poverty reduction, and people deserving better, so people are consuming more electricity. They are consuming more electricity, and they are paying more, but it’s not because the kilowatt hours are more expensive. It’s because they are consuming more. So this is something also that has been used politically in a bad way, but at the end of the day, once again, the only thing important for people is the bill.
Stone: So the transition that we’ve been talking about is the transition of the electricity sector, but there’s also the broader economy and the broader use of energy, right?
Méndez Galain: Yes.
Stone: I understand that Uruguay is now looking aggressively at hydrogen. Is that from wind, as well?
Méndez Galain: Wind and solar, yes. In fact, we’re going to hydrogen. We not only need to decarbonize the power mix, we need to decarbonize the transportation mix and the industry mix when you produce it, for all the industries. Also in buildings. And for that, not necessarily is electricity the solution. So yes, green hydrogen will be, ten years from now, the best solution to get over fossil fuels. And yes, we’re working on that for sure. Uruguay has a possibility of using wind and solar to produce not only just green hydrogen, to also eMethanol. You know to produce eMethanol, this is for example for ships and also what is called [UNINTEL] for planes. You need not only wind and sun, but also you need what is called biogenic carbon, and this is produced by countries like Uruguay that has a lot of green industry.
So you have CO2 which is produced from natural origins, and not using fossil fuels. And this is something that we also have in abundance. So yes, we are in the line [?] for the new transition, which will be based on green hydrogen.
Stone: Is there anything you wanted to say to sum up, in terms of your experiences with Ivy, optimistic/pessimistic path forward?
Méndez Galain: Yes, I just wanted to say that you don’t have to think that because Uruguay is a small country that you cannot do it elsewhere. You can’t say that, “Yes, because these guys have a lot of hydro, oh, it’s much easier.” Yes, it’s true, having a lot of hydro is important. We have about 40% of hydro. This is important. But the most important thing is, is it a flexible system? And for that, my message is that public policies are absolutely crucial. It’s too big a thing for the market alone to make the point. You need to have strong public policies. You have to build a whole transformative ecosystem in order for things to happen. The transition will not happen spontaneously, for sure. You have to guide that in order to happen.
My message is I am absolutely convinced that perhaps we won’t get 98% of renewables, but going to no more than 20% of fossil fuel is something that we can do all over the world. And having less than 20% of fossil fuels would already make us think.
Stone: Ramón, thanks for talking. And again, congratulations on the Carnot Prize.
Méndez Galain: First of all, having been talking with you, meeting Noah again, it was a big, big pleasure. Thank you for inviting him. But most of all, thank you so much for the Kleinman Center and the University of Pennsylvania to have put me on this list where I have never imagined before to be.
Stone: It’s great to have you here. And Noah, thanks for talking.
Gallagher Shannon: Yes, thanks Andy. Congratulations, Ramón.
Stone: Today’s guests have been Ramon Méndez Galain, this year’s recipient of the Carnot Prize, and journalist Noah Gallagher Shannon.