San José, Costa Rica, since 1956

A renewable power generation primer

From the print edition

Costa Rica has the potential to be one of the first countries on Earth to generate all of its electricity from clean, renewable sources, including hydro, wind, geothermal and solar. As it stands, in most years the country generates over 90 percent of its electricity from these sources, mostly hydro, and clearly has the potential to eliminate the remaining generation from polluting fossils fuels altogether. What’s more, if it took full advantage of its potential, Costa Rica could export renewable energy throughout Central America.

However, this has not happened, and in some ways the country is going backwards. This year, for example, the percentage of power generated by fossil fuels has increased. While dry weather plays a part, reducing the output of hydroelectric plants, the reasons also include political, technical, legal and economic factors. 

Energy generation and distribution 

When it was founded in 1949, the public Costa Rican Electricity Institute (ICE) was given a monopoly over the generation, transmission and distribution of electricity in the country. Because this was considered a strategic industry for the country’s development, electric power generation had been nationalized earlier, in 1941. 

In the years since, a number of exceptions and openings have chipped away at ICE’s position, although ICE remains the 900-pound gorilla in the room, being by far the principal producer of energy and still in control of the transmission of energy in Costa Rica.

Inroads on ICE’s monopoly have included the creation of local utility companies in Cartago and Heredia, and the establishment in the 1960s of rural electrification cooperatives in Guanacaste, Los Santos, Zarcero, and San Carlos, which purchase electricity from ICE and distribute it locally. These regional utilities and cooperatives have also been granted the authority to generate electricity on a limited scale to distribute within their geographic areas. 

In 1990, for the first time since the nationalization of the nation’s electric system, a new law allowed private companies, including cooperatives, to generate electricity for sale, albeit only to ICE. The law established limits on the amount of electricity that could be generated privately, as well as the type, specifying that that power could only be generated privately by small-scale hydro plants or other “unconventional,” or renewable, sources of power. The law also established limits on the size of private plants as well as the percentage of the country’s total installed capacity from private sources (originally 15 percent). Private electricity was generated under concessions by the state, which were also limited in time and project size. In addition, ICE retained exclusive control over “strategic” forms of power generation, which include large dams and geothermal plants.

Today, the limit on the amount of private generating capacity stands at 30 percent of the total installed capacity, and in recent years most private electricity has been generated under Build, Operate and Transfer (BOT) contracts with ICE, whereby private developers build and operate power plants of up to 50 megawatts, but are obligated to transfer them to ICE after 20 years. 

Furthermore, these concessions are only granted pursuant to public offerings initiated by ICE. In all, out of a total installed capacity of approximately 2,650 megawatts, only around 374 megawatts (or 14 percent) are generated privately. While ICE has opened bids for wind projects for an additional 100 megawatts of private power (TT, June 15), and is expected to open further bids for hydro projects, this is still inadequate to keep up with demand.

Private energy developers and investors today are eager to increase their  share of renewable energy generation, and are pushing for legal reforms to raise the ceiling on private production and improve (from their point of view) other conditions on the private generation of electricity. These proposals are opposed by ICE’s workers and their allies (see story, Page W5), who fear for the future of the institution as well as their jobs. 

Renewable power generation potential

If today a strong tension exists between pressure for private development of renewable energy and resistance to expanding private participation in power generation, this is partly due to Costa Rica’s extraordinary potential to create and sell clean energy, both in the country and throughout Central America. 


Hydroelectric energy, which is principally generated by ICE by large dams, is the backbone of Costa Rica’s energy production. While the first hydroelectric station began operation in San José at the turn of the 20th century, it wasn’t until after the creation of ICE as a state enterprise in 1949 that large-scale generation of electricity based on hydropower was developed. The founders of ICE who implemented this vision, bringing electricity to all corners of the country, are national heroes. Some regional cooperatives and utilities as well as private companies also operate smaller hydro plants. 

In a typical year, over 80 percent of Costa Rica’s electricity is generated by hydropower, which is what allows the country to dream of becoming carbon neutral by 2021. However, the ability to sustain this high level of energy production through hydropower is in doubt due to several factors. These include increasing electricity consumption, predictions of dryer weather as a result of climate change, the environmental impacts of building large dams, and finally, a high level of debt held by ICE, which limits its ability to invest in new large-scale projects. At the same time, the legal restrictions on private generation, described above, preclude private investment in large dams.


Geothermal power generation, which involves using heat from the Earth’s crust to turn water into steam to power electric generators, is a highly promising technology that could, under the right conditions, generate a much larger percentage of the country’s electricity. In fact, many experts think that developing geothermal energy is the key to Costa Rica’s ability to generate 100 percent of its electricity from clean, renewable sources.

In many ways, Costa Rica – in essence a string of volcanoes where the Earth’s internal heat is very near the surface – is an ideal place for the intensive development of geothermal energy, and ICE has two geothermal plants in operation. As with the expansion of hydropower, however, expanding geothermal energy production faces legal, political and economic hurdles.

First among these is the fact that Costa Rica long ago included most of its volcanoes in national parks, where this type of activity is precluded. And changing the law to allow power generation within park borders is a touchy subject in a country whose national parks are an essential part of the country’s identity and have brought it great benefits. Building new geothermal plants, which are expensive, also faces the issue of ICE’s debt on one hand, and the legal limits on private electricity generation on the other. 


In some areas, Costa Rica enjoys strong and steady winds, ideal for the generation of electricity by wind turbines. Since the mid-1990s, private energy companies have been building and operating wind plants in the northern part of Costa Rica, mostly near Lake Arenal, although an area of Guanacaste near Liberia is a new hotspot. ICE also built a 10-megawatt wind plant with financial assistance from the Dutch government and other international donors. The largest wind plant is a private 50-megawatt plant in Guanacaste.

An advantage of wind power is that a plant can be built incrementally; each turbine, which can generate up to one megawatt or more, can be a part of a smaller or larger plant, avoiding the problem of the much bigger investment necessary for construction of a large dam, for example. 

A disadvantage of wind power is that it is only produced when the wind blows, unlike hydropower, which can be generated steadily and on demand (as long as there’s water behind the dam). Geothermal energy can likewise be produced on demand, 24 hours a day, year-round, as can other, non-renewable sources of energy, such as petroleum and coal. 

Nevertheless, in Costa Rica’s national energy grid, wind is an excellent complement to hydropower, because it allows ICE to save water while wind plants are producing, and because the windiest time of year in Costa Rica is the dry season.


While the commercial generation of solar energy in Costa Rica is just getting started, experts foresee quick growth as the cost of generating solar energy drops. (The rapid growth of production of solar panels in China is a big factor in falling costs for solar energy.) The country’s position near the equator and the high number of sunny days in many areas provides excellent generating potential. 

While solar power, like wind, is variable, and so a less reliable and valuable contributor to a national electricity supply, it has important advantages. Compared with other renewable energy plants, solar panels, once installed, have low maintenance and operating costs. Also, solar energy can be effectively generated on any scale, from a single rooftop panel to a large solar array.

With the advent of two-way electric meters in Costa Rica solar panels are an ideal way for individual home and business to save money by generating electricity and feeding it into the national grid. In time, this decentralized, or “distributed” energy generation has the potential to be a significant contributor to the nation’s supply of renewable energy.

Steve Mack:

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