Costa Rica Facing Energy Challange
Costa Rica stands at a critical crossroads, facing an energy crisis reminiscent of challenges not seen since 2007.
Triggered by an intense El Niño, the severe drought has dramatically decreased rainfall, pushing the country’s electricity supply to the brink. Renowned for its lush landscapes and commitment to renewable energy, Costa Rica depends heavily on hydroelectric power.
This source constitutes about 70% of the energy
matrix. The drought has critically lowered reservoirs,
threatening constant power supply. The Costa Rican
Electricity Institute (ICE) has warned that without imminent rain, energy rationing may be necessary.
From January to May 2024, energy demand in Costa Rica grew by 8% compared to the same period last year. According to Marco Acuña, executive president of the Costa Rican Electricity Institute (ICE), electricity consumption is significantly larger than last year which exceeds the institution’s forecasted growth rate of 4%.
President Rodrigo Chaves is finding solutions, hoping for daily rain and contacting neighboring countries for energy, despite shortages. A 9% surge in energy use, largely from air conditioners in tourist areas is the issue, driven by El Niño-induced heat. He points out that unpredictable wind patterns have disrupted wind power generation, further complicating the energy scenario.
ICE’s plans indicate that from 2022 to 2030, a $4 billion investment is needed to upgrade infrastructure for the transmission, production and distribution of energy. This represents 4% of the Gross Domestic Product
(GDP). This investment would enable the country to add 1,200 megawatts of capacity to the electricity system because of the growing demand.
“It’s a significant amount of money, and both the public and private sectors will need to make substantial efforts and remove barriers to these investments,” said Acuña.
Vice Minister of the Environment Ronny Rodriguez highlighted that the growth in demand is expected and will increase further with the eventual arrival of the semiconductor industry, which will need even more energy.
The country must seek new sources of energy. Acuña notes that Costa Rica has the potential to produce 32,000 megawatts from hydroelectric, onshore wind, and offshore wind sources, but investment is crucial.
ICE is currently working on a gas-fired power plant that will generate up to 400 megawatts. The second tender for solar energy production will soon open, targeting customers in the Central and South Pacific regions.
The executive president of the Costa Rican Association of Energy Producers (ACOPE) believes the country neglected electricity generation in the past. He also emphasizes that for Costa Rica to attract new industries, it must ensure a reliable supply of quality energy. He further pointed out that while the private sector is willing to invest, significant legal uncertainty from current legislation poses a challenge.
The country is also discussing opening the electricity market, which is currently monopolized by the state through ICE. Many discussions need to be held soon to keep the country on track for economic growth which is happening pretty fast compared to many years.
