Caribbean & Central America - June 2024

Officials in both Costa Rica and Honduras recognised electricity problems in May as high temperatures and lower rainfall caused by the El Niño weather phenomenon affected supplies.

On 9 May Honduras’ national dispatch centre (CND), which operates the electricity system and market, announced a 48-hour state of emergency in the national grid (SIN), citing high demand for electricity as a result of a “brutal” heat wave and prolonged drought. A CND statement said that overheating and overloading of circuits and transformers and dense smoke from forest fires in various departments had led to reduced solar energy generation. 

Also on 9 May Costa Rica’s state-run electricity and telecommunications provider Grupo Instituto Costarricense de Electricidad (ICE) announced power cuts due in part to low water levels in reservoirs affecting electricity generation at hydroelectric plants. However, a period of rainfall meant that ICE plans for power cuts were repeatedly suspended and then shelved on 17 May. The start of the rainy season will relieve some pressure in the short-term, but unless structural issues are addressed similar problems are likely to arise in the future as the effects of climate change intensify. 

In Costa Rica, ICE has recognised the need to add more generating capacity to address rising demand for electricity, as well as diversifying away from a reliance on hydroelectric dams. On 16 May, ICE announced that it had confirmed deals for five solar plants with a combined 86MW capacity which will start operating in 2026, and said it was moving ahead with plans to add four wind power plants with a combined capacity of 80MW.

In Honduras, Energy Minister Erick Tejada has blamed the poor state of the electricity network on a lack of investment during the 12-year rule of the previous Partido Nacional (PN) governments, which held office before the leftist Partido Libertad y Refundación (Libre) administration led by President Xiomara Castro took over in January 2022. Tejada complained there had been “practically no investment in generating capacity, transformers, transmission lines and distribution circuits”. He said that the ministry would start a tender process for 1,500MW of generating capacity, however the sector is currently undergoing significant upheaval as part of the Castro government’s energy reforms. The process, particularly the renegotiation of contracts with private generators, has been criticised for adding to uncertainty and discouraging investment.

More widely, issues with the electricity network affect the region as a whole because Costa Rica and Honduras share an interconnected electricity network with Guatemala, El Salvador, Nicaragua, and Panama. These countries also form a regional energy market which normally means that member states can make up for energy shortfalls by buying supplies from other members. However in recent months Costa Rica’s President Rodrigo Chaves said that he had been negotiating with other countries in the region to secure energy but these efforts have been stymied by the fact that other Central American nations have restricted exports in order to prioritise national demand, pushing up prices. 

This will add to existing frustrations with regional integration which saw Guatemala trigger a ten-year secession protocol from the shared market in 2021. There are also issues with the interconnected network, which needs major investment. However, this will be difficult for the various countries as public budgets are already stretched, opening the door to more problems with the power network and increasing frustration with the regional market.

Top electricity official replaced in Costa Rica

On 29 May Costa Rica’s state-run electricity and telecommunications provider Grupo Instituto Costarricense de Electricidad (ICE) announced that the head of electricity, Roberto Quirós Balma, would be replaced. In a statement ICE attributes the decision to the need to “better anticipate potential rationing”.