Caribbean & Central America - August 2021

On 7 July Honduras and Nicaragua suffered a total blackout, the latest in a series of serious problems that have affected regional electricity distribution.

The operating body (EOR) for the regional electricity market (MER) said it declared a “state of emergency” following the fault, which occurred at 1pm local time and also affected parts of Guatemala and El Salvador. The fault was traced to the Amarateca-Toncontin transmission line in Honduras and service was resumed three hours later, the EOR said in a press release. The economic cost of the blackout was estimated at US$18.2m. The incident followed another fault on 9 June which saw a complete blackout in Nicaragua and affected service in other Central American nations.

These blackouts are hugely disruptive and have led to criticisms of the MER and its continued viability. In fact on 12 July Guatemala announced that it would leave the MER, triggering a ten year notification period. Commenting on the government’s decision, Edgar Navarro, president of the national electricity operator (AMM), cited regular blackouts due to faults in systems and infrastructure in other member states. Navarro also complained that other countries have tried to blame Guatemala for these faults, despite the fact that the nation has invested in infrastructure and equipment. Another issue is that Guatemala wants to be able to sell its surplus electricity to other countries freely, whereas the MER regulator (Crie) has repeatedly ruled that it sell excess electricity only after regional demand has been met (see sidebar).

These are not new complaints. Energy distribution in Central America is governed by a 1996 framework treaty, which integrated distribution systems in Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, and Panama using a 1,800km transmission line that runs from Guatemala to Panama. Known as the Central American electrical interconnection system (Siepac), it cost US$500m to build and came online in 2014. However, transmission systems in the region aren’t strong enough to deal with a fault in the line, which as a result cause overloads and the collapse of local systems, resulting in a kind of domino effect in which a fault knocks out one part of the line, flooding other areas with huge amounts of electricity that the local systems cannot handle all at once.

These power outages are incredibly damaging but stopping them from happening will require lots of investment, both in the integrated system and national distribution systems. This is a longstanding issue due to stretched public budgets in the region, which has only been exacerbated by the coronavirus (Covid-19) pandemic and its effects on public finances. In addition, the EOR has failed to make countries work together on a truly regional project, and they are pursuing individual strategies. Deeper integration was one solution proposed by analysts, including developing a standardised regulatory framework across national energy markets. The idea was to iron out these political aspects in order to enable regional solutions to the serious infrastructure shortfall, but Guatemala’s recent announcement means that is even more complicated than before.

In the face of these issues the EOR put out a statement on 27 July in which it assured the public that it was taking steps to “safeguard the integrity of the regional electricity network”. The objective is to maintain operationality and ensure that electricity supplies are guaranteed both in normal conditions and in emergencies, added the EOR, which said that the development of electricity infrastructure is the responsibility of each individual nation.

•  EOR on Guatemala

The EOR also defended the restrictions it has imposed on Guatemala’s electricity market by saying that it acts “with equity, impartiality and transparency” in the interests of the whole Central American community rather than one particular entity.