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The effects of renewable electricity supply when renewables dominate: Evidence from Uruguay

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  • D’Agosti, Natalia

Abstract

The benefits of expanding wind and solar electricity generation depend on their effect on the electricity production mix. Using hourly production data, I study the electricity transition to renewables in Uruguay, a country that currently has 94% of its grid green. First, I quantify how an increase in wind and solar production substitutes hydro, biomass, and fossil fuel electricity production. Second, I analyze how this transition reduces CO2 emissions in the context of large hydropower production. Third, I analyze how this affects spot prices. I find that the increase in wind and solar production has the following effects: (i) a displacement of hydro and fossil fuel production, especially in winter, with no effect on biomass; (ii) a reduction in CO2 emissions; (iii) a decrease in spot prices caused by the shutting off of the most (marginally) costly plants; and (iv) a spillover effect to the region due to an increase in exports to Argentina and Brazil. I find, however, that the increase in wind and solar production is insufficient to eradicate fossil fuels. These results show the effect of increasing renewables, how they interact with each other — particularly in hydro-dependent countries -, and their effect on emissions and spot prices.

Suggested Citation

  • D’Agosti, Natalia, 2025. "The effects of renewable electricity supply when renewables dominate: Evidence from Uruguay," Energy Economics, Elsevier, vol. 144(C).
    • Handle: RePEc:eee:eneeco:v:144:y:2025:i:c:s0140988325001227
    DOI: 10.1016/j.eneco.2025.108299
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