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Costa Rica Grid: Plans to invest USD257 million over next decade [free access]

December 10, 2019

Costa Rica, a Central American country, has been consistently meeting its electricity requirements mainly through renewable energy sources in an effort to meet its climate goal of achieving zero emissions by 2050. Over the last four years, Costa Rica has generated more than 95 per cent of its domestic electricity from renewable energy, and in 2018, the country went 300 days using only renewable energy, beating its own record of 2015 of 299 days on renewable energy.

 

Costa Rica, which relies heavily on hydropower, has been able to keep its electricity production almost entirely renewable-based, even during the drought of early 2019. This was achieved largely with the help of strong wind production, the country’s second biggest source of clean electricity, combined with water rationing from dams. In the driest summer period of January-April 2019, Costa Rica generated 97 per cent of electricity from renewable sources. Further, about 98 per cent of power is still expected to be produced through clean energy sources in 2019.

 

However, as per industry experts, Costa Rica’s main vulnerability lies not in whether the country can keep generating enough clean electricity given higher drought risks associated with climate change, but in its finances. To maintain its supply of renewable energy in dry periods, the state-owned, vertically integrated utility Instituto Costarricense de Electricidad (ICE) is required to have twice the hydropower capacity installed than it uses regularly, which is a costly affair. Further, in a bid to maintain Costa Rica’s home-generated clean electricity supply in dry spells, ICE has implemented a large number of renewable energy projects and is now facing a financial crisis. In 2018, ICE had to stop the development of the El Diquís hydropower plant due to increasing opposition from local communities, which were concerned about its likely environmental impact. This cost ICE about USD174 million, which was not passed on to the consumers. The country’s dependence on imported electricity is also increasing. Electricity imports from December 2018 to April 2019 were the highest in the last five years, at about 8 per cent of the country’s total electricity supply; this also adds to ICE’s expenses.

 

Further, the intermittent nature of renewable projects is creating an additional financial burden on ICE. During the time of additional power generation, the company is not able to reap benefits due to limited export capacity and has to keep paying independent power producers (IPPs) the full amount under power purchase agreements (PPAs), despite plants running at limited capacity. As a result, ICE ended 2018 with net losses of CRC257 million, going into the red in four out of the last five years.

 

Table 1: Financials of ICE during 2014-18 (CRC million)

 

2014

2015

2016

2017

2018

Net profit or (loss)

(106,376)

(2,470)

30,377

(62,725)

(256,944)

Cost purchase of electricity from IPPs

65,747

77,398

124,133

126,586

149,324

Source: ICE

 

In this scenario, the country must establish a strong and efficient electricity transmission network to utilise the renewable plants effectively as well as increase export capacity. Recently, ICE published its 2019-29 transmission expansion plan, which forecast an investment of USD257 million. The latest expansion plan prioritises the Sur and Miravalles ring network and reinforcement of the Norte-Centro circuit, which along with other works will expand the 230 kV and 138 kV grid by 4 per cent to 2,475 km, while transformer capacity will grow by a projected 6 per cent to 11,541 MVA.

 

Sector overview

ICE is the dominant electric utility in Costa Rica and holds a monopoly in the transmission segment. In the generation segment, there is a cap on the generation capacity allowed to be built and owned by private companies. Only 15 per cent of the total generation capacity can be owned by private players under build-own-operate (BOO) contracts, and another 15 per cent is allowed for projects under build-own-transfer (BOT) contracts with ICE.

 

The distribution and retail of electricity are also in the hands of government-owned companies. Of the eight entities, two are federal government-owned utilities [ICE and Compania Nacional de Fuerza y Luz S.A. (CNFL), which is a subsidiary of ICE]; two are municipal-owned; and another four are cooperative companies.

 

The main regulatory authority is the Autoridad Reguladora de Servicios Públicos (ARESEP). It operates under the Ministerio de Ambiente y Energía (MINAE).

 

During 2014–18, the transmission line length in the country grew at a compound annual growth rate (CAGR) of 2.09 per cent from 2,143 km in 2014 to 2,379 km in 2019. Majority of this capacity was installed at the 230 kV level, which increased at a CAGR of 2.78 per cent during the period, as compared to a CAGR of 0.39 per cent for the 138 kV network.

 

Costa Rica is interconnected with the Central American power grid. The Sistema de Interconexion Electrica de los Paises America Central (SIEPAC) project—a 230 kV, 1,796-km-long transmission line network linking Panama, Costa Rica, Honduras, Nicaragua and El Salvador—was constructed in 2014.

 

Figure 1: Growth in Costa Rica’s transmission line length (km)

Source: ICE

Figure 2: Growth in Costa Rica’s transformer capacity (MVA)

Note: 2019 figures are as of June.

Source: ICE

 

Upcoming investment in transmission

During 2019-29, ICE predicts power demand to grow at a CAGR of 2 per cent to reach 2,010 MW by 2029 and plans to add 500 MW of generation capacity during the period to meet this demand. To support this, 91 transmission projects have been included under the latest transmission plan. Of these, 13 per cent are new while the rest are part of the 2017-27 transmission plan of ICE. As per the technical study, four projects have been prioritised under the 2019-29 transmission plan. These are:

 

Table 1: Projected increase in transmission line length and transformer capacity during 2019-29

 

Installed capacity as of June 2019

Addition till 2029

Line length (km)

2,375

100

–138 kV

652

0

–230 kV

1,723

100

Transformer capacity (MVA)

10,921

620

–Autotransformers

2,091

30

–Elevators

4,156

135

–Reactors

4,594

455

–Step-down transformers

80

0

Source: ICE

 

Under its 2019-29 transmission plan, ICE plans to invest USD257 million in grid expansion. Of this, USD174 million will be invested during 2019-23 and USD83 million will be invested during the second half of the period, i.e., 2024-29. In addition, USD159.4 million is required as operating costs during the period. Thus, the total cumulative cost required to meet the expansion and operation needs of the transmission system in the period 2019-2029 is USD416.7 million.

 

The investment for the 2019-29 period is less than the previously announced road map of USD389 million mainly due to the withdrawal of transmission reinforcements associated with the Sur–Centro project, which required an investment of USD164 million and included the transmission network development associated with the El Diquís hydroelectric project. The Sur–Centro project has been withdrawn as the El Diquís hydroelectric project has been replaced with renewable energy projects.

 

Figure 3: Forecasted demand during 2019-29, MW

Source: ICE 

 

Table 2: Planned investment in transmission network during 2019-29 (USD million)

 

ICE's investment

External sources

Total investment

O&M cost

Total

2019

5.17

45.86

51.03

3.93

54.96

2020

14.96

9.89

24.85

5.84

30.69

2021

44.32

4.19

48.51

9.58

58.09

2022

11.69

10.81

22.50

11.31

33.81

2023

3.94

23.55

27.49

13.43

40.92

2024

4.11

34.31

38.42

16.39

54.81

2025

4.31

38.73

43.04

19.70

62.74

2026

-

1.45

1.45

19.81

21.26

2027

-

-

-

19.81

19.81

2028

-

-

-

19.81

19.81

2029

-

-

-

19.81

19.81

Total

88.50

168.79

257.29

159.42

416.71

Source: ICE

 

Table 3: Key upcoming projects under 2019-29 transmission plan

Project

Lines/substations

Voltage level (kV)

Details

Scheduled date of commissioning

New projects

Replacement of power transformers based on their condition

Escazú substation

138

Increase in transformer capacity from 30 MVA to 45 MVA

2019

Naranjo substation

138

Addition of 45 MVA transformer capacity

2020

Desamparados substation

138

Increase in transformer capacity from 45 MVA to 75 MVA

2020

Caja substation

230

Replacement of the two 230/138 kV, 100 MVA autotransformer with 110 MVA; Installation of 230/34.5/13.8, 45 MVA transformer capacity

2020

Coronado substation

230

Installation of 230/34.5/13.8, 45 MVA transformer 2

2021

Caja substation

230

Replacement of the 100 MVA, 230/138 kV autotransformer with another single phase at 110 MVA

2021

Moín Ampliación 12

Moín substation

230

Installation of 230/34.5/13.8, 45 MVA transformer 1 and 2

2024

North-Central transmission reinforcement

Borínquen substation

230

Construction of new substation

2026

Garabito–San Rafael line

230

Construction of 70-km single-circuit line with 600 MVA capacity

2026

Lindora–Tarbaca 1 and 2 line

230

343 MVA derivation of the Lindora–Tarbaca 1 and 2 lines in the San Rafael substation (two lines of 1 km each, two circuits)

2026

Lindora–San Miguel 1 line

230

Derivation of Lindora–San Miguel 1 line on La Caja substation (2 circuits of 1 km each), 380 MVA

2026

San Rafael substation

230

Construction of new substation

2026

La Caja substation

230

Amplification

2026

Garabito substation

230

Amplification

2026

Other key projects

Increase in transmission capacity

Miravalles–Mogote line

230

390 MVA capacity certification. Stable state capacity day 390 MVA, night 447 MVA. Emergency capacity day 489 MVA, night 578 MVA.

2019

Mogote–Pailas line

230

380 MVA capacity certification. Stable state capacity day 380 MVA, night 438 MVA. Emergency capacity day 475 MVA, night 566 MVA.

2019

Río Claro–Progreso line

230

Increase in transport capacity from 200 MVA to 300 MVA. Stable state capacity day 300 MVA, night 362 MVA. Emergency capacity day 372 MVA, night 389 MVA.

2019

Anillo Sur

Pirrís–Tejar line

230

19.7-km double-circuit line

2020

Higuito–El Este line

230

19.7-km double-circuit line

2020

Higuito substation

230

Construction of new substation

2020

Higuito–El Este line

230

5.8-km, double-circuit

2020

Tarbaca–Higuito line

230

5.8-km, double-circuit

2020

Tarbaca–Higuito line

230

Reconstruction of 1.5-km line

2020

El Este–Tejar line

230

Reconstruction of 14-km line and derivation of 2-km line

2020

Tejar substation

230

Construction of new substation

2020

Anillo de Miravalles

Fortuna substation

230

Installation of the 20 MVAr line reactor

2023

Mogote–Miravalles line

230

Derivation of two circuits of 1 km each

2023

Ticuantepe–Cañas line

230

Derivation of two circuits of 0.5 km each

2023

Source: ICE

 

Outlook

Costa Rica is among the stable economies of Central America and is investing in renewable energy projects to reduce dependency on hydro projects and generate clean energy. To support this, the country is now focusing on not only expanding but also strengthening its grid network.