Central America is set to install 1.5 GW of PV capacity within a six-year period through 2018, according to a new report by market research group IHS Technology.
The region, including Costa Rica, Panama, El Salvador, Guatemala, Honduras and Nicaragua, is also attracting attention from PV developers from around the world, the latest edition of IHS Technology's Emerging PV Markets Tracker report finds.
This year, IHS predicts total PV capacity in Central America will reach 22 MW, up from 6 MW last year, followed by a "gigantic leap" in 2015 when PV capacity soars to 243 MW. It will be in the following three years, however, "when the solar market will make its greatest strides in the region, with aggregate PV capacity from 2016-18 accounting for a massive 81% of the six-year projected total," IHS says.
Overall, the report says the region's current PV pipeline of planned utility-scale projects amounts to 1.3 GW, of which half of the projects have signed power purchase agreements (PPA) on the back of improved policy support for solar energy. The pipeline, IHS adds, is expected to grow now that a couple of tenders have ignited the market, "and developers are testing the waters to access new project opportunities."
While the region already has a high share of renewable power generation, IHS finds that PV deployment is still minimal at present.
"About 70% of the electricity generated in Central America already comes from renewable sources, mainly hydro," says Josefin Berg, IHS senior analyst for solar demand. "Yet over the past few years, increasing power demand has been met with new thermal generation thanks to power generated from oil, coal and gas, increasing reliance on fossil fuel imports. To counteract this and to avoid future volatility in electricity pricing, governments have begun supporting the controlled deployment of renewables."
This year, El Salvador awarded 94 MW of PV in a tender — a move the report describes as as a "solar milestone" in Central America. The tender originally targeted a much smaller level amounting to 60 MW of PV together with an additional 40 MW of wind as part of the original plan. In Guatemala and Honduras, policy makers have also pushed for more large-scale PV projects.
The long-term deployment of PV and other power-generation sources hinges on the rollout of the Sistema de Interconexión Eléctrica de los Países de América Central (SIEPAC), a project that will interconnect the power grids of the six Central American nations. Over the past year, IHS says the electricity grids in the region have been linked via the 1,800-kilometer (1,118-mile)-long SIEPAC transmission line project, which will also enhance the grid's ability to absorb more renewables. Nevertheless, PV policy and demand growth will continue to vary among Central American countries as the region's markets differ greatly in power market structure and regulation.
Price competition favors large utility-scale PV projects
Via tenders, regulators in El Salvador, Guatemala and Panama are looking to add affordable renewable power in their electricity mix.
The bid prices for the three projects awarded in El Salvador ranged from $102 per megawatt hour (MWh) to $123 per MWh. "In the quest for winning bid prices, developers are targeting projects sized above 10 MW, leaving the awarded capacity in the hands of a few companies. All told, three companies shared the awarded 94 MW in El Salvador," IHS says.
In Guatemala three companies also won an 85 MW tender. In Panama, meanwhile, the government is still finalizing details for the upcoming October tender, but the average size of more than 20 licensed projects is 24 MW, pointing to another tender with a handful of winners. Honduras, on the other hand, has opened up for more developers by allowing as much as 600 MW of projects to sign PPAs.
The region is not just focusing on large projects, however. In areas with frequent electricity blackouts and where backup power comes from costly diesel generation, PV is slowly gaining traction as an alternative source of power. In Costa Rica and Honduras, for example, net-metering schemes are being rolled out, which could propel the small-scale PV segment.
"We see an increasing interest in PV from hotel owners and local commerce," Berg added. "A reliable and affordable electricity supply just means better business."
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