Costa Rica: The Luxury of Misery

With 19% endemic poverty, 10% open unemployment and 40% informal employment, and some of the highest electricity rates in the region, Costa Rica is opposed to $1 billion in clean energy investments.

Monday, January 22, 2018


By Jorge Cobas González

Meanwhile, the bureaucracy of state-owned companies continues to prescribe first-world remuneration, and continues to protect its privileges following ECLAC development concepts from the middle of the last century, which are utterly out of place today. Because Costa Rica does not have the investment capacity or know-how necessary for the development of latest generation renewable energy projects, even though it has all of the necessary primary conditions: sun, wind, thermal energy.

The state company that holds the monopoly on energy production, the Costa Rican Institute of Electricity (Instituto Costarricense de Electricidad or ICE), boasts that the largest percentage of energy consumed by the country comes from renewable sources, which underpins the image of Costa Rica as leader in environmental protection, but does not boast - of course - that the price paid by consumers for this clean energy is the most expensive in Central America.

And the environmental paradox is that the weight of such high tariffs not only directly affects the competitiveness of the Costa Rican economy by increasing production costs, but also discourages replacement of energy from oil with clean energy, both in the vehicle fleet and in the industrial sector.

Just as the break-up in 2010 of the telecommunications monopoly significantly boosted the development of this sector -which was stagnant- the liberalization of the energy market would provide a strong impetus for the Costa Rican economy, to attract the necessary strong investments, with the consequent generation of genuine employment, and ultimately, increasing the country's competitiveness by decreasing production costs.

Costa Rica's own investment promotion agency, CINDE, says: "In the last five years, Costa Rica failed to receive more than $1 billion in direct foreign investment from companies interested in setting up renewable electricity plants (wind and solar) due to the legal limits on the size of those facilities. The current model does not allow an investor to come and spend $100 million on a solar plant and sell energy to customers. The law prevents it. In Costa Rica, private investors are prevented from building generation plants with clean sources of more than 50 megawatts (MW) of capacity." 

More on this topic

Clean Energy: Growing Business in the Region

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In Central America and the Dominican Republic, the installed capacity of energy generation reaches nearly 20,000 MW, of which 62% correspond to clean sources.

Figures compiled by the Latin American Energy Organization (Olade) indicate that by 2017 the installed capacity of clean or renewable energy generators, including wind, hydro, solar and geothermal, exceeds non-renewable sources.

Central America: Which Country Has the Most Expensive Energy?

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In 2016, the average cost of 1 kWh in Central America was 13.48 cents, while in Costa Rica, it was 18.47 cents.

A report from the CEPAL indicates that in 2016, the average cost of one kilowatt hour (kWh) in Central America was 13.48 cents, while in Costa Rica it was 18.47 cents; 37% more for industrial consumption of 100,000 kWh. In El Salvador and Guatemala, it was 11.03 and 11.54 cents respectively. In Panama, 10.92 cents. 

Obligation to Buy Clean Energy and at Lowest Cost

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The government of Costa Rica forces the Instituto Costarricense de Electricidad to buy clean energy and at the lowest costs found in the local market.

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Data from the Regulatory Authority for Public Services (Aresep) shows that power generation based on diesel and bunker fuel grew by 24% in 2011 compared to 2010, going from 706.529 MW / h to 930.970 MW / h.