Central America struggling to advance with electricity integration
Central America’s electricity market, and thus its growth potential for renewable energy investment, requires further integration.
There is “strong work to do in order to align the six countries in the Central American electricity market,” Ramón Fiestas, Latin America director of the Global Wind Energy Council (GWEC), told BNamericas. “If this is achieved, we will see growing interest and investment in Central America.”
And electricity demand is on the rise. From January 1 to October 2, the sale and purchase of electricity in the regional integrated power market (MER) both grew by around 8% to 2.2GWh, according to data from grid operator EOR.
The Central American grid, known as Siepac, comprises six individually small markets – Belize is not part of the network.
Electric utilities and regional stakeholders have been at odds for years over whether the grid’s capacity should be increased as a whole, or if enhancements should focus on areas of highest demand.
The global renewables agency Irena, meanwhile, has focused on using Siepac as a means to create a Central American clean energy corridor.
Meanwhile, individual authorizations have been granted to expand the network, such as the approval given to Transportista Eléctrica Centroamericana for the expansion of the La Vega II substation, the new Barberena substation and the La Vega II-Barberena transmission line in Guatemala.
“There are two tracking [principal] countries, Panama and Costa Rica,” Fiestas said, “and then you have a second stage of countries that have worked successfully over years, like Nicaragua and Honduras.”
But given that the electricity sectors in each country are so small, they can struggle to realize efficiencies of scale. Also, because most of the countries are poor, electric utilities in the region tend to focus on short-term maintenance and small-scale projects.
Fiestas said the creation of an overarching Central American “seventh market” was needed, rather than each country functioning individually.
POLITICAL TURMOIL
Finally, the six-market area is susceptible to each nation’s politics, creating whims that can stunt regional cooperation.
Fiestas cited Nicaragua, which generates 20% of its electric power from wind energy. He said you have to “look to Denmark, Spain, Portugal, Uruguay” to find other countries with such a high share of wind power generation.
In 2013, the World Bank hailed Nicaragua as “a renewable energy paradise in Central America.” But, after years of wind farms feeding into the power supply, Nicaragua has been beset by socio-economic conflict more recently, forcing the government to introduce a fiscal reform earlier this year.
Amid the tumult, progress on renewables, and regional electricity integration more generally, has faltered.
Fiestas said the creation of an overarching Central American “seventh market” was needed.
EXTERNAL SUPPORT
The two main nodes for feeding investment and support to Central America’s electricity markets, and spurring investment in renewables, would be the region’s northern neighbor, Mexico, or else potentially from the south.
Driving integration from the south seems unlikely, however, at least in the near term. For one, Colombia, often a launching pad for investment into Central America, has been relatively slow to embrace renewables.
“If they had taken this track since 2002, 2003 or 2004, a number of companies from Colombia would be moving into Central America,” Fiestas said, “but this hasn’t happened. Colombia came late [to renewable energy with] first steps this year.”
So inbound investment to help Central America generate more electricity may have to rely on the appetite of those in Mexico.
Fiestas said a number of wind turbine manufacturers and energy companies in Mexico are focusing on Central America.
Danish wind turbine maker Vestas – which last week secured an order for 42 turbines with V150 rotors for a wind farm in Mexico – uses a factory in the Mexican state of Matamoros to build all its blades that are installed in the region.
According to a recent study by Wood Mackenzie Power & Renewables, Central America as a region is expected to generate about 1.5GW of wind energy in 2019.
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