Climate Exchange

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By the end of the 1990s, the total demand began to be greater

than the hydroelectricity production, depending on the hydrolog-

ical conditions of the river basins. Today, the Uruguayan electrical

system still has a very strong hydropower component with four

large power plants: Terra, Baygorria and Constitución on the

Negro River, and Salto Grande on the Uruguay River (shared with

Argentina). The amount of energy generated by these hydroelec-

tric power stations depends on the hydro-climatic conditions in

the river basins of both the Uruguay and Negro rivers.

In humid years, these hydroelectric power stations could supply

85-90 per cent of the country’s total electricity demand. In dry

years, such as 2008, these values are smaller than 50 per cent.

From 2003 onward, negative anomalies of precipitation (2003-

2009) have occurred in the Uruguay River basin with consequent

negative anomalies in flows. Only in 2010 were positive anomalies

reported, in conjunction with a cold-phase ENSO.

The fluctuations in available water determine significant year-

to-year variability in the cost of energy production. In dry years,

energy production has to be supplemented with the costly import

of crude oil and electricity from neighbouring countries, exceed-

ing by far the revenues collected from consumers. For instance,

during 2001-2003 the stream flow reached positive monthly

anomalies of 200-300 per cent and no import was necessary. In

contrast, during the La Niña event of 2008-2009, the level of the

reservoirs along these basins reached values below the 20 per

cent margin of their long-term averages. This drought

forced thermoelectric plants into full operation,

burning expensive imported oil to feed the power

grid and draining the Government treasury of more

than US$500 million in losses.

Coping with cost variations

Since 2009, the Electric Company of Uruguay (UTE)

has started to analyse the development of tools to

cope with the financial cost variations in supplying

electricity. Measures include building up savings from

successful hydropower years, obtaining grants from

international organizations for enhanced management

of risks, and a pilot risk transfer insurance that will

cover losses during extreme climate events.

This insurance is based on the estimation of

hydro-energy contributions to the electric system,

using a hydrological model for estimating monthly

water inputs in the Uruguay basin at Salto Grande

hydroelectric dam and Negro River basin hydroelec-

tric power plants. This hydro-electrical model relies

on the input of daily rainfall data from the stations

located in these basins as well as monthly semi-

annual forecasts of rainfall.

Although UTE has its own rain gauges through-

out the river basin for dam management purposes,

the insurance company requested independent and

mandated rainfall data, including historic ones,

from stations operated by the National Weather

Service in Uruguay (DNM) and from the network

of the National Meteorological Institute of Brazil

(INMET). These datasets are then further used to

create rainfall indices with defined thresholds for

drought events.

The hydro-energy contribution to the electric

system (Uruguayan Potential Hydroelectric Energy

Input or UPHEI) varies significantly from low to

high precipitation years. In the first semester of

1989, with very low precipitation, the hydro-energy

input was approximately 1,500 GWh per semester,

while in the first semester of 1998 with high precipi-

tation, the energy input was near 7,000 GWh for

the semester.

The first step was to create an agreement between

Direccion Nacional de Meteorología and UTE to

develop the technical aspects of the insurance. This

cooperation began with talks to reach a working

agreement, which includes the exchange of rainfall

information, precipitation indexes and maintenance

of rain gauges within the Uruguay River basin. This

first stage has not been easy because it was necessary

to overcome barriers such as access to databases in

real time, commitment of rainfall stations, and data-

base certification and quality control procedures

First, UTE contacted DNM to investigate the possi-

bilities of carrying out this project. DNM established

the connection to INMET Brazil for the delivery of

rainfall information from the Uruguay River basin in

Brazil. UTE requested support from the World Bank to

Source: UTE (Uruguay)

Electricity production and consumption (1965-2011)

Source: Mario Bidegain DNM

Annual rainfall anomalies (%) Uruguay river basin 1979-2011