Solar Energy ready to claim a share in Costa Rica's energy mix

Guanacaste Solar Park Image: Sun Fund Americas

Guanacaste Solar Park
Image: Sun Fund Americas

While in many European countries the establishment of green goals such as an energy mix with 100% renewable sources or CO2 emission neutrality results in endless debates and slow progress, in countries like Costa Rica these goals are practically a reality. Currently considered the greenest country in the world, with almost 90% of its energy produced from renewable sources, Costa Rica is about to see key changes in regulations that will provide the solar sector with competitive rules, enabling it to secure a sizeable bite of the national electricity system.

by Silvia F. Martínez, Solarplaza

Natalia Alvarado - ACESOLAR

Natalia Alvarado - ACESOLAR

After several years of cautious development, the emerging Costa Rican solar market finally has its own voice, with considerable growth, in particular in PV, over the last years. "Four years ago, there was not even any specific regulation, and there were barely any installed systems. Today, the number of companies has multiplied, because solar is perceived as a market that still needs to be opened," explains Natalia Alvarado, President of ACESOLAR (Costa Rican Solar Energy Association) and speaker at the upcoming conference The Solar Future Central America, to be held in November in Panama City.

The regulations that are expected to enter into force within the coming weeks, or by the end of the year at the latest, are playing a crucial role in this definitive opening up of the market. On the one hand, on 8 April 2014, approval was given for the extension of the ICE’s (Costa Rica Electricity Institute) Pilot Plan for Distributed Generation, the system that enables the interconnection of small systems to the grid – working like a net metering model but without financial recognition. With the new regulation, this will be applicable to the whole country.

On the other hand, and even more anticipated, is the decision by ARESEP (Authority for Public Services Regulation) to implement a regulated electricity rate for solar power, similar to that already in place for hydropower and wind power – US$ 0,09-0,15/kWh y US$ 0,08-0,12/kWh, respectively. Today, the tariff for solar energy and biomass production is the same as that for hydropower. 

ACESOLAR believes that the new regulation will signify “the takeoff for large-scale projects, since at the moment the only larger PV plant is the Japanese-financed Miravalles (1MW).”

In setting the minimum and maximum for this tariff band, factors taken into account include profitability, operating costs and investments. Yet ACESOLAR is particularly keen for “the ARESEP to also take into account the seasonal factor, since solar energy could come to replace the fuel consumption that is necessary mainly in the summer months when hydropower production is lower due to periods of drought.”

There is an ever-growing electricity demand in Costa Rica – a market niche that solar energy is totally able to cover. In fact, this clean energy source could contribute to avoiding situations like those experienced during the first months of 2014 when, according to an analysis by ARESEP, it was cheaper for Costa Rica to import energy than to produce it.  As this report reveals, the months of January, February and March saw the marginal cost of producing energy reaching US$422, US$451 and US$468 per MWh, respectively; while the ICE paid US$176 (January), US$206 (February) and US$218 (March) on average per MWh in the regional opportunity market.

Bernhardt Johst - CICR

Bernhardt Johst - CICR

“And there is no other solution as fast as solar energy for solving the problem of demand and electricity prices,” remarks Bernhardt Johst, a consultant with Renewable Energy and Energy Efficiency at the Chamber of Industries of Costa Rica (CICR), who also leads the GIZ (German Federal Enterprise for International Cooperation) projects in Central American countries. Without the official figures in hand, his perception is that “the solar sector could grow at a rate of 50-100 MW yearly” before reaching its peak at 600 MW in approximately 5 years.

Optimal conditions for an upcoming solar boom

Thanks to its strategic geolocation, Costa Rica, as well as the rest of Central America, is a privileged area in terms of high solar irradiation. A recent study by the German engineer Helmut Toni Weigl in cooperation with the Chamber of Industries of Costa Rica (CICR) highlights that "according to various studies and maps of solar irradiation, the country has values of between 1,650 and 2,200 kWh/m²/year," which is twice the values of countries with fully developed solar energy sectors, such as Germany.

Furthermore, Costa Rica’s various distinctive features make it an exceptionally attractive emerging market for investment: Costa Rica enjoys stability and legal security; its electricity demand is constantly growing; the country’s electrification stands at 99.4% of the territory; and almost 88.2% of its energy mix comes from a renewable source – in fact "the highest in the region," as revealed in the latest report by ECLAC (Economic Commission for Latin America) on the electricity sector in Central America.

But above all, there is clear will from the government, society and business sector. Whilst the European solar markets are stuck figuring out how to implement solar energy at the self-consumption level after an overdevelopment of large-scale plants, Costa Rica is experiencing the opposite phenomenon: the distributed generation is becoming consolidated due to citizens’ environmental awareness. “The solar energy boom has yet to come for Costa Rica – and this will happen soon with the new net metering regulation,” claims Johst.

In recent weeks, several industry associations have shown their support and commitment to solar energy, including the ICRC, which has advocated the financial benefits of solar panel installation for the industry. “Most of the companies here are SMEs, which pay according to the so-called ‘general tariff;’ for them, solar would be highly advantageous,” explains Johst. According to the Chamber’s calculations, a business can take four to eight years to recover its investment, and the panels last 25 to 30 years. 

ACESOLAR, CICR and GIZ representatives will take part in The Solar Future Central America, a two-day conference on the region taking place from 13-14 November in Panama City. The conference will discuss the next steps for the solar sector in the region. The event will bring together international and regional public and private parties, including both regional and international companies. The Solar Future Central America is part of the Solar PV Trade Mission Central America organized by the Dutch company Solarplaza from 10 to 14 November, visiting both Costa Rica and Panama.