Central America’s energy market open for business


San José, Costa Rica — (METERING.COM) — June 26, 2013 – The Central American Electrical Interconnection System (Sistema de Interconexión Eléctrica de los Países de América Central, SIEPAC) has brought electricity integration to Central America and is now operating commercially, according to the Inter-American Development Bank (IDB).

On June 1, the regulatory framework of the Central American regional electricity market (Mercado Eléctrico Regional, MER) entered into effect, providing the impetus for regional exchanges of electricity and stimulating private investment in the sector.

Already, according to the IDB, SIEPAC has helped to provide electricity to countries’ national grids when they were experiencing shortages. Panama was able to recover from an energy crisis that had arisen in May as a result of a prolonged drought that reduced the levels of reservoirs at hydroelectric dams and thus the generation capacity, by importing electricity generated elsewhere in the region and transmitted across the SIEPAC from El Salvador, Honduras and Nicaragua.

SIEPAC is a 230 kV network of almost 1,800 km in extent running between Aguacapa in Guatemala in the north through Ahuachapán and Nejapa in El Salvador, Agua Caliente in Honduras, Sandino and Ticuantepe in Nicaragua, and Cañas, Parrita, Palmar Norte and Río Claro in Costa Rica, to Veladero in Panama in the south. A line also runs between Guate Norte in Guatemala and Río Lindo in Honduras.

The installed capacity is 300 MW.

The activation of SIEPAC and MER comes on the 25th anniversary of its original conception and provides an opportunity to recognize that the region can now count on a robust electricity infrastructure, according to the ADB, which has contributed $253.5 million in financing, accounting for more than half of the total $494 million cost.

Future plans include connections to Mexico and to Colombia.

An important issue in the region is the high cost of electricity, with estimates placing the wholesale price in Central America at around $150 per MWh compared to $50 for other comparable systems. With SIEPAC now fully operational, a significant reduction in that cost is anticipated for both households and business users, along with increased security and greater reliability.

These advances are expected to occur on various fronts. SIEPAC and MER will enable the development of larger and more efficient regional generation projects, while also facilitating the preparation of a larger number of renewable energy projects, thus contributing to a diversification of the regional energy matrix. The system also will allow countries to reduce their need to maintain reserve capacity, leading to additional savings.

Forecasts indicate that Central America should double its installed electricity generation capacity over the next 15 years to cover growing demand, which is driven by rising economic growth and increasing urbanization. SIEPAC’s entry into effect comes at a time when high energy costs, the need for secure supply and decreased use of oil and gas for electricity generation are all at the fore.