Central America Readies Shared Electricity Grid

Aug 12, 2011 - Reuters

* Regional grid 88 pct complete

* Plan to go live next year, but some hurdles remain

By Alex Leff

SAN JOSE, Costa Rica, Aug 12 (Reuters) - Central America is getting ready to switch on a unified power grid that will reduce expensive oil imports and vault the developing region ahead of Europe in terms of electricity integration.

The long-planned network of electrical towers, sub-stations and a 1,120-mile (1,800-kilometer) high-voltage line linking six countries in the isthmus is 88 percent complete and running tests to go live by mid-2012, the project's directors say.

"This is really going to be the most important integration project... on a global scale. The European Union (EU) doesn't have energy integration at this level," said Jose Enrique Martinez of Empresa Propietaria de la Red (EPR). The firm oversees the project known by its Spanish acronym SIEPAC.

EPR is building the regional grid connected to local power networks in Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama, while a regional agency governed by a board with members from each country will operate the line.

Tiny Belize, the seventh and smallest nation in the region, is not included.

All the governments have approved a treaty to create a single regional energy market with one joint regulator so companies can buy electricity from anywhere in the region.

The shared system will boost the countries' access to stable and more efficient energy, key to factories in Central America making everything from T-shirts to medical equipment.

Demand for electricity -- projected to double by 2022 -- is outstripping generation capacity and the aging infrastructure causes frequent power outages.

The $494 million SIEPAC grid will lower generation costs by up to 20 percent, according to studies by project planners. The funds are coming from governments, multi-national lenders and private companies.

The EU is also vying for energy integration but does not see a common market for electricity and gas until 2014.

LONG DELAYS

Central America's dream of energy integration is decades old but wrangling over land rights, market rules and environmental concerns slowed development.

The goal is to help the impoverished region reduce spending on imported oil, that cost an estimated $8.9 billion last year, according to the United Nations.

The main 300-megawatt line could boost Central America's electricity transmission capacity to nearly eight times what it is now, according to one study.

A second phase of the project, which may still be a decade away, hopes to double capacity to 600 megawatts.

Central America is also heavily investing in new and upgraded power plants to generate more electricity that could be traded back and forth through the grid.

The nations will pour even more funds into projects to tap the mountainous, volcano-studded region's potential for hydro-electric, geothermal and wind power in the future.

Prices on the regional market would be negotiated directly by the buyers and sellers but terms for contracts and export rules are still being worked out.

The line also carries fiber optics, which could eventually improve regional telecommunication connections.

The project is seen as a critical drive for integration of Central America's economies, already linked by a free-trade deal with the United States.

But significant hurdles remain.

"The problem is that you have six different countries with very unique interests on a daily basis," said Jeremy Martin, energy program director at Institute of the Americas at the University of California, San Diego.

"To get them to think about long-term benefits versus short term costs, (is) in summary what the challenge is," he added.

In Costa Rica, completion of a considerable portion of the power line is pending resolution of environmental challenges in the courts. Market regulations -- already adopted by Costa Rica's neighbors -- are moving slowly through the congress.

"It's a pity it didn't go forward 20 years ago," said Hugo Ventura, a top energy expert at the United Nations' Latin American economic commission. "But better late than never."

(Editing by Sofina Mirza-Reid)

Source: Reuters