It has been estimated that $200 million need to be invested in Central American countries to strengthen the transmission capacity of the regional electricity market.
A study prepared at the request of the Wholesale Market Manager of Guatemala (AMM) details that for the regional market to operate in a comprehensive way, countries must invest more in order to improve transmission capacity.According to Edgar Navarro, president of the AMM, this investment should be concentrated in Nicaragua, Honduras, El Salvador and Costa Rica.
The State of the Region indicates that the asymmetries between the most regulated markets such as Costa Rica and others that are freer such as Guatemala and El Salvador constitute an obstacle to progress of the regional market.
Regional Integration section, the V Report on the State of the Region:
The regional electricity market in the agenda of the integration process
Transmission lines in the regional SIEPAC system are being used to distribute electricity internally in countries, curtailing their capacity for international exchange of energy.
When the US President Barack Obama visited Central America in 2013, he warned that "energy costs in this region are three times what electricity costs in Washington, and that represents a huge disadvantage for companies".Two years before that, all countries, from Guatemala to Panama, were committed to creating the necessary infrastructure for the Regional Electricity Market (MER) to be efficient.
Guatemala is the most interested country in speeding up regulation establishing the model of firm contracts within the regional electricity market.
This was explained by Guatemalan Vice Minister of energy, Edwin Rodas.
The idea of this is to harness the Electrical Interconnection System for Central America (Siepac) not only for the sale of energy to other countries, but also to provide telecommunications services over optical fibers which these lines have.
The Electrical Interconnection System for Central American countries will be a decisive factor in reducing the cost of electricity at the regional level.
According to Ibrán Bueso, a legal advisor for the National Electricity Company (ENEE) in energy, one of the objectives of consolidation of the Electric Interconnection System for Central American Countries (Siepac) is to strengthen the competitiveness of the region by reducing its energy costs.
Mexico and Colombia could be the next countries to be incorporated into the Electrical Interconnection System for Central American Countries.
The issue will be discussed during a three-day meeting which Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama, countries associated with the Electric Interconnection System for Central American Countries, (Siepac), will have this week.
On June 1 the Regional Electricity Market Rules and the Supplementary Detailed Procedure Electrical Interconnection System for Central America became effective.
"It's a big step forward for electrical integration. These are rules designed to operate the SIEPAC line and power transmission capacity between countries with greater intensity," said the executive director of the Regional Operating Agency (EOR), Rene Gonzalez.
A regional legal framework is required that will allow for long-term contracts, not only between countries but also between plants located in one country selling power to another.
Central America’s electrical integration requires not only enabling the Electrical Interconnection System but also an appropriate regional framework.
With the current drive seen in several Central American countries to develop power generation projects, it is essential to look beyond national perspectives and visualize the possibilities for optimization of available resources and complementation of the energy matrices of the region.
Works on the Central American Electricity Interconnection System (SIEPAC in Spanish) are reported to be 95% complete, and are expected to be operational in March 2012.
At a cost of $490 million, the interconnection line extends from Guatemala to Panamá, with capacity to transport between 200 and 300 megawatts of electricity.
Teófilo De La Torre, president of the company that owns the network (EPR), stated that "the project will reduce the cost of electricity in the region due to the ability to make sales to other countries, including outside of the region, because Central America became connected with Mexico last year”, reported Notimex.
The electricity sector's authorities have put together a series of concrete actions that should make the regional market a reality by the end of 2011.
During the meeting organized by the Inter-American Development Bank (IDB) in San Jose, Costa Rica, energy ministers, electrical power generating organizations and regulators from across Central America reaffirmed their commitment to speeding up the process of harmonizing the region's legal frameworks in order to bring about energy integration.
New investment opportunities open up with the coming into force in November of the regional regulations for the sale and purchase of electrical power.
EOR's executive director, René González, indicated during the third Regional Electricity Market Convention in San Salvador that, "we are now moving from the transitional phase into the main stage in the project, from a regulatory point of view, which will enable greater integration," according to an article published on 7dias.com.do.
This is the date by when Central American countries propose to have completed the regional power grid.
By the end of next August the link-up of Costa Rica and Panama is expected to be finished and by October that of Guatemala with El Salvador, says Enrique Martínez, general manager of the Central American proprietary power grid company (EPR in Spanish).
The region aims to standardize its energy laws and regulations, to make it easier to develop renewable energies.
Edgar Chamorro, executive director of SICA (Central American Integration Secretary), explained the initiative at the “XV Regional Forum of Central America’s Energy and Environment Alliance”.
He explained “that a Standardization Commission at Sica is working to harmonize regulations related to importing air conditioning devices, refrigerators, washing machines, televisions, home appliances and low energy transportation units”.
The infrastructure required for a regional electric interconnection system would be ready in 2010, reported CABEI.
Called SIEPAC, this project comprises building a 230 kW electric line spanning 1.790 kilometers. So far, $451 million have been invested in it.
“It is being funded by the Central American Bank for Economic Integration, the Inter American Development bank and other entities”, reported Informador.com.mx.
Costa Rica’s difficulties in expropriating terrains will delay the construction of 70km of electric lines.
The countries members of Siepac, the Central American Electric Interconnection System, expect to conclude their respective stretches of the line in September 2010, while Costa Rica would deliver it on October 2011.
Nacion.com reports that the rest of the countries are unhappy with this, and want the network to be operating as soon as possible, to improve energy supply and commercialization.