After 62 years of generating most of its electricity by using clean sources, Costa Rica is now taking further steps to decrease oil dependency almost entirely.
By funding key hydroelectrical projects and encouraging the creation of an electricity market where power producers may freely compete, President Laura Chinchilla’s government hopes to supply less than five percent of the country’s total demand for electricity with using fossil fuels by 2021.
Opening the electricity market is one of the keys to achieve that, say proponents. It could also help expand electricity coverage while boosting the growth of small-scale power-producing businesses across the country.
By installing small turbines in creeks and other water sources, power companies could increase Costa Rica’s energy supply by at least 300 MW, which is as much energy as the Reventazón hydroelectric project, currently being built in the Caribbean slope town of Siquirres (see box, Page 5), is expected to produce when complete. That’s enough power to supply at least 525,000 homes.
As a result, small generators would be contributing to the country’s formula of using hydroelectric and other renewable energy sources to provide electricity, a strategy that’s been gaining momentum for several decades as a result of the country’s vast natural wealth.
“The demand for electricity increases at a faster pace than supply. It takes several years for hydroelectricity facilities to be up and running,” says Carlos Wahrman, an energy consultant for AWA consulting services, a private firm specializing in hydroelectricity. “The Costa Rica Electricity Institute [ICE] has been designed to take on enormous endeavors, such as blasting mountains, building dams, flooding acres of land and changing landscapes. But ICE is totally unable to build small power generation plants because of its size. That’s where private initiative steps in.”
Under current regulations, private parties may produce and sell to ICE up to 30 percent of the country’s total demand for electricity. That’s how small businesses, cooperatives and civil associations had gotten together to bring electricity to far away zones, especially in the northern border communities, in the last 20 years.
During the second administration of former President Oscar Arias (2006-2010) and the current Chinchilla administration, officials have promoted the approval of the General Electricity Act, which would open electricity production to market competition, allowing producers to trade with any consumer and even sell power to other Central American countries.
Under the current regulations, private generators may only sell electricity to ICE.
On Nov. 30, 2010, the Executive Branch sent a bill to congress to further discuss the idea. However, opposition leaders blocked the bill, saying it is unnecessary because ICE can continue providing electricity to the entire country, as has happened in the last 60 years.
On March 17, Laura Chinchilla issued a decree mandating ICE officials to encourage small-scale power generation.
“We have an electricity generation strategy that has worked almost flawlessly,” said Jose María Villalta, a congressmen for the Broad Front Party. “The country has decided to take the path of renewable, cheap, environmentally friendly energies, and ICE has performed amazingly. The only people that would like to see energy competition under free-market rules are the ones who would [financially] benefit from it.”
Currently, ICE provides electricity to 99 percent of the population. Only 10,031 households remain without access to electricity, according to figures provided by ICE.
“We consider it important to encourage private participation in the energy field in a responsible way,” said Juan Carlos Mendoza, congressmen for the Citizen Action Party. “The electricity bill won’t be approved the way it was presented to this Legislative Assembly because it encouraged strong competition. We are, however, open to study other options.”
Wharman stands by the idea of encouraging private competition. He says it would be a shame if Costa Rica’s abundant natural resources were not fully utilized to generate energy.
“This country is privileged and has always focused on renewable energy sources. Private investors understand that and will strengthen that same philosophy,” Wharman said.
The other important move to reduce fossil fuel use is for ICE to continue investing in the renewable energy sector.
“We will continue making efforts to keep ICE as the leading hydroelectricity provider,” said Teófilo de la Torre, Costa Rica’s minister of Environment, Energy and Telecommunications. “ICE’s expertise in clean energies will keep us as leader in green electricity in Central America. It is one of the most successful institutions in the country.”
From its early beginnings in 1949, ICE has focused on developing hydroelectricity and other renewable energy alternatives.
As of December 2010, Costa Rica produced 2,606 MW of electricity for the entire country last year. Of that, 60 percent is the product of hydroelectric generation, 28 percent comes from thermal projects (using fossil fuels), six percent is from geothermal sources, four percent from wind and two percent from biomass (usually obtained from cattle).
Hydroelectricity projects remain the best choice in clean energies due to their low operation costs once dams are built. The Costa Rican government plans to invest at least $600 million each year to enforce these types of projects, De la Torre said.
“We believe that it’s a smart investment, because hydroelectricity will save us millions of dollars in oil purchases in upcoming years. That’s our biggest bet, but we also continue to develop other alternative energy sources,” he said.
Solar energy remains an expensive option, because it requires specialized batteries that last only five years. However, ICE installed 1,787 solar energy systems in the last five years, representing a $2.5 million investment.
Wind power may produce up to 66 MW each month and could potentially generate up to 200 MW, which would be enough to cover Costa Rica’s electricity demand for a two-year period. Wind-based energy projects also have low operating costs.
“It’s naive to believe any country in the world can get rid of electricity generated from petroleum. The reason is that renewable energy sources are not reliable all the time. Sometimes droughts decrease water levels in the dams and wind isn’t always strong enough. When that happens, we need to go back to petroleum,” Wharman said.
“That’s why private generation becomes useful. In the next 20 years, electricity supply and demand will have increased three or more times, so oil dependency will increase just as much,” Wharman said. “But if we are able to profit from the huge potential that private generation offers, we could become free from expensive and polluting oil products. No healthy country should base more than 20 percent of its energy on fossil fuels.”
Reventazón Project: A New Milestone in Hydroelectricity
Scheduled to open in 2016 and capable of generating 305 MW of power when finished, the Reventazón Hydroelectric Dam, in the Caribbean slope town of Siquirres, will provide enough energy for at least 525,000 families. At a total cost of an estimated $1.2 billion, the Reventazón project is the most complex hydroelectric plant ever built in the country. Of the total cost, the Costa Rica Electricity Institute, or ICE, will fund $70 million, and the Inter-American Development Bank will fund $800 million. The remaining cost will be paid for by the bidding company that ultimately wins the contract to operate the dam.
The two front-running companies in that bidding process are Brazil’s Electrobrás and China’s Sinohydro.