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.
Negotiations have started to evaluate alternatives for integrating the Mexican electricity market into Siepac.
Salvador Lopez, temporary president of the Electric Interconnection System for Central American Countries (SIEPAC) told Prensalibre.com that in the meeting they will start to assess the legal mechanisms that could be used to realize the integration.
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.
Solutions have been found to the problems of easement and complaints from environmentalists, and the Electrical Interconnection System for Central America will be complete in its entirety in July.
The works on the last stretch of 32 km of the Electric Interconnection System for Central America (SIEPAC) in Costa Rica are 80% finished, after having suffered delays due to complaints about environmental damage and legal claims.
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.
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.
Central America’s energy matrix contains an increased amount of hydrocarbon based generation, while the regional interconnection promises to reduce costs through economies of scale.
In the past two decades Central America has not been too successful in achieving sufficient electricity generation with a stable supply at competitive prices.
The regional matrix generation has changed from 66% hydroelectric, 30% thermal, and 4% renewable in 1990, to 41% hydroelectric, 47% thermal and 13% renewable in 2008.
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.