Costa Rica Forced to Buy More Expensive Energy

Energy Plant
This is the 6th Hydroelectric Power Plant to Close in Costa Rica.

At midnight today, El Cedral, a hydroelectric power plant based in Ciudad Quesada (San Carlos), loses its permission to sell energy to the Costa Rican Electricity Institute (ICE). This marks the sixth such facility to close, causing ICE’s already-rising electricity costs to soar even higher.

Though the El Cedral hydroelectric facility filed paperwork on May 14th for its permits to be renewed, the Ministry of Environment and Energy (Minae) has so far been unable to approve it. In fact, since 1999, the government has neither awarded new nor re-approved water concessions, causing five different companies to lose their rights to sell hydroelectric power to ICE. To improve the situation, in April 2008, the Costa Rican government decreed that Minae would take on said responsibility.

El Cedral uses the waters of the Platanar River to generate energy, selling 15 million kilowatt hours to ICE every year. According to the Costa Rican Union of Private Business Chambers and Associations (Uccaep), El Cedral sells its hydroelectric power to ICE for $0.07 per kilowatt hour. In the absence of this energy supply, ICE will have to make up the losses with thermal generation, which is derived from crude oil.

Thermally generated power is not as clean a power source as hydroelectric, and it is also far more costly: instead of El Cedral’s $0.07/kilowatt hour, ICE will have to pay $0.47 per kilowatt hour of thermal power, an almost seven-fold increase. To put it into perspective, ICE will pay an additional ¢3.1 billion extra for this energy, approximately $6 million.

Elbert Duran, spokesman for ICE, said that El Cedral’s power generation is very useful during summer, and that even in winter, it is not usually substituted for thermal power, because during the winter (rainy season), hydroelectric power is even more readily available. If El Cedral’s permit is not renewed, and with it, the permits of three other Costa Rican hydroelectric power companies, ICE estimates that it will spend an additional ¢24 billion ($48.5 million) in 2008.

In its defense, Minae says that it is just getting used to its new responsibilities and received several permit requests in May. These kind of requests take at least a month, and they are processing them as quickly as possible. However, it is important to note that the energy permit issue has been a problem for about 9 years, and many wonder why the government, taking into account increased energy costs for its citizens, didn’t act earlier.

Though El Cedral’s permit expires at midnight, Minae should renew it — as well as the other impending expirations — within the next few weeks, allowing the hydroelectric plant to continue supplying ICE with low-cost power. Even so, for a country with such a strong eco-friendly reputation, this lack of foresight is a big disappointment, and ICE, as well as the country’s consumers, are calling for immediate action to repair these problems.

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