We have only ever seen Uruguay as a short-term prospect for wind investors. It is a small country where the electricity system is close to being powered completely by renewables.

It is still an interesting market with strong pro-wind credentials, but it has not had the scale to excite overseas institutional investors. And yet, investors may soon get a further boost.

This week, the government of Argentina has kicked off its first renewable energy tender. The country has struggled to attract investment in sectors including wind before because of a lack of political support and the difficult macroeconomic conditions.

Things now look more positive following the election of prime minister Mauricio Macri in November, which has led to the current 1GW tender and could lead to 10GW of renewables by 2025. Of that first 1GW, 60% is planned for the wind sector.

And this growing acceptance of renewables in Argentina could help those in Uruguay. You see, Uruguay has a population of 3.4million, which is one-twelfth of the 41million people who live in Argentina, but it is still far ahead of its neighbour in terms of wind power.

This is true if you look at installed capacity: Uruguay had 845MW of installed wind capacity at the end of 2015 compared to 279MW in Argentina. And, at the end of last year, around 95% of Uruguay’s electricity came from renewables. Most of this was hydro, followed by biomass, solar and wind, but it still suggests that Uruguay is close to hitting its limit.

One of the options for wind developers would be selling their excess power to Argentina, and we are now seeing deals to do exactly that. This month, Uruguayan developer Ventus has agreed to export power from 10MW of the 70MW wind farms it owns in the country to Saesa, an Argentinian energy trader, and there is potential to grow this deal eightfold.

Judged purely on size this is not a huge deal, but it is the first time that private companies have struck a deal to export excess renewable energy from Uruguay into Argentina. There is a contract in place between state-run energy firms in the two South American nations to do similar with hydro power, but the Ventus-Saesa
agreement could open the way for others.

The deal still needs the approval from authorities in both countries but, to us, it looks like it should be a win-win.

Uruguay could use deals like this to encourage developers to build more wind farms, which creates jobs; and Argentina could buy competitively-priced wind energy from Uruguay to help it to shout about its newly-discovered green credentials.

That is not to say that approval is guaranteed. Argentina has launched its 1GW renewable energy auction and it may simply prefer to support investment in schemes within its own borders, even if this means sacrificing the short-term benefit of low-cost Uruguayan wind. Buying foreign renewable power does not officially help it meet its own green targets.

But we expect this deal to go ahead. It is relatively small so does not cause any structural issues for Argentina’s energy market; it carries a PR benefit for Argentina’s pro-renewables government; and it makes little sense for it to penalise an Argentinian business.

And that would also help Uruguay’s wind success story to continue for a little while longer.