Central American countries are racing to inaugurate alternative power sources, to avoid the high costs of imported fuels.
Several projects, based on renewable and coal sources, some of which were conceived during the last spike in prices in 2008, are beginning to come to fruition.
The first wind farm in Honduras is in the construction phase and will produce 100MW with a price tag of approximately $250 million. The government is looking at other wind farms.
Sinohydro of China signed an agreement in September 2010 with the Honduran government to build the Patuca III hydroelectric plant, which will add another 100MW of generating capacity. Investment in this plant will be around $300 million, but the plan included two other plants, Patuca I and II, bringing total investment north of $1 billion.
The two projects are equivalent to one sixth of the country’s current generating capacity, 80% of which is thermal. Their completion could help Honduras to attract investment in 24 other renewable projects President Porfirio Lobo’s administration has on the drawing board.
Finance minister William Chong said: “We are being hurt by high fuel prices, because we use imported fuel for energy production. This will change as we introduce green technology. It will reduce our fuel bill.”
He said the fuel bill caused by rising prices will probably add one point to inflation this year, which he expects to be between 7% and 8%.
Panama, which is not as dependent as Honduras on imported fuel for power, is nevertheless diversifying to reduce the impact of hydrocarbons. The electricity generating mix is approximately 60% hydropower and 40% thermal.
Panama is adding a new 120MW coal-fired plant and AES, the country’s largest generator, is adding a 225MW hydroelectric plant, Changuinola, in the first half of 2011. Panama’s current capacity is 1,543MW.
Dulcidio de la Guardia, Panama’s deputy finance minister, said fuel prices are definitely a concern as the country looks at fast growth and strong capital inflows. The IMF has projected GDP growth for Panama at 7%, but de la Guardia said it should be higher, based on figures for January and February of this year. Tax revenue in the first two months of the year was up 30% compared to the same period in 2010.
“We are worried about inflation from external sources. Inflation should not pass 4.5%, but there are additional pressures that could translate into social pressure if fuel and food prices stay high,” he said.
One country where fuel is not impacting on energy is Costa Rica, where hydropower accounts for 82% of its electricity generation. Costa Rica’s goal for 2021, its bicentennial year, is to become the first country in the world to stop using fossil fuels for power plants.
The IDB’s Inter-American Investment Cooperation approved a $50-million loan to Nicaragua’s Blue Power and Energy to build a 40MW wind farm in Nicaragua, which is equivalent to slightly more than 5% of the country’s current electricity generation.
Renewable energy was also on the agenda of US President Barack Obama’s recent stop in El Salvador during his first regional visit since taking office.
Augusto de la Torre, the World Bank’s chief economist for Latin America and the Caribbean, said these efforts “also provide the region with an important dividend in terms of climate change.”