For the seven countries of Central America—Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama—a transition to renewable energy and low-carbon technologies is imperative. In addition to reducing greenhouse gas emissions, a robust renewable energy industry can stimulate the growth of clean energy manufacturing and help address regional problems such as an energy supply deficit, low rural electrification, and poverty.
Yet despite abundant renewable energy resources—including wind, solar, biomass, and geothermal—Central America remains highly dependent on imported oil, fossil fuel-based electricity, and unsustainable large hydropower. In the 1990s, deregulation of regional electricity markets opened the power sector to private investments, but it also paved the way for a surge in fossil fuel-based capacity, as most governments did not consider policies to promote renewables during the early stages of these reforms.
As the region’s economies expand, led by strong growth in Panama, energy demand is expected to surge. As a result, these countries will only become more vulnerable to high and fluctuating energy costs from imported oil.
Although Central America has come a long way in introducing programs to promote renewable energy, much more can be done. While the region is developing important utility-scale renewable energy projects that will increase energy supply, including a 102 megawatt (MW) wind farm in Cerro de Hula, Honduras; a 20 MW geothermal power plant in Amatitlan, Guatemala; and a 49.5 MW wind farm called Planta Eólica Guanacaste in Costa Rica. But the effort to expand electrification in rural areas has received less investment.
Energy poverty and rural electrification in Central America vary greatly by country. According to the International Energy Agency, more than 7.7 million people in the region live without electricity, limiting their health care, education, and livelihood opportunities. Off-grid electrification projects offer great promise for these energy-poor communities, as they can be more cost-competitive, reliable, and rapidly built than grid-extension efforts or fossil fuel energy projects. Off-grid renewable energy can be a catalyst to dramatically improve the livelihoods of millions.
The food manufacturer Alimentos Campestres, based in Guatemala, demonstrates the opportunities that can come with increased access to affordable renewable energy. A 50-percent increase in the cost of propane prompted the company, which processes dried native fruits and vegetables, to implement a sustainability program that uses solar technology to power its drying plant.