Many U.S. solar developers, possibly with an eye toward declining state and federal incentives on the horizon, have recently been casting their gazes toward foreign shores in an effort to diversify. Despite having to contend with currency issues and political risk, doing so may not be a stretch to national developers who are already battle tested from navigating dozens, if not hundreds, of domestic policy jurisdictions.
Perhaps naturally, given proximity to the U.S., many such development efforts have focused on Central America and the islands of the Caribbean. It is also perhaps natural, that given its commitment to its natural resources, its stable political environment, and its relatively stable currency, that many developers have focused on Costa Rica. Unfortunately for the enterprising developer, recent reports have noted that the isthmian nation is already “totally environmentally friendly,” using only energy from renewable sources in the first 75 days of 2015. That is no aberration, as close to 94% of its energy was generated by renewable sources in 2014. Additionally, the government is bringing a large geothermal facility on line soon. Given the state of affairs, U.S. solar developers looking to Costa Rica for short-term fixes to project pipeline shortages should probably cast their gazes elsewhere.
However, for those with a longer-term outlook, the future of solar in Costa Rica could be bright. Up to 80% of the energy capacity of Costa Rica is supplied by hydro-electric plants, which the nation hopes to decrease its dependence on given the impact that this generation source can have on the environment. Additionally, a positive long-term growth rate, a median age of around 30 years old, and successful governmental efforts to increase economic development all point to a rise in capacity requirements going forward. It is also true that the development cycle for large generation assets can be time consuming in Costa Rica, fraught with multi-step approval processes and bureaucracy, and complicated by rules about local ownership. These potential hurdles serve as strong stimulants to begin work far before boots will actually hit the ground. Therefore, and despite some current market signals to the contrary, it would behoove those who wish to get a foothold in the land of ‘pura vida’ to start development sooner rather than later.
Special thanks to Morgan Gerard who assisted in the preparation of this post.