Regulation of electricity utilities – power generation

Authorisation to construct and operate generation facilities

What authorisations are required to construct and operate generation facilities?

The eight distribution companies may develop their own generation projects. Those projects can be developed by one distribution company or between any number of them. Private companies can also be part of the project.

Private investors wishing to develop a project to sell energy to ICE must obtain the following permits:

  • any private company that wishes to develop an energy generation project to sell energy to ICE must first obtain a permit from ICE called an ‘elegibilidad’, which is basically a preliminary review to check that the project is possible from the legal, finance and technical point of view, like a pre-feasibility;
  • from an environmental point of view, a generation project needs an environmental viability permit from the Environmental Secretary (SETENA). For this process, there is an audience in the place where the project will be built and it is usually hydroelectric projects that encounter some social opposition.
  • if a company has an environmental viability permit from SETENA, and the project is a hydroelectric plant, the project then needs a ‘water’ concession from the Water Office of the Environmental and Energy Ministry (MINAE), which allows the company to use the hydraulic force of the water (liters of water per second with a specific meter drop) that also determines a specific energy potential.
  • the last permit is the public service concession given by the Public Services Regulatory Authority (ARESEP), if the project already had obtained the previous permits and also after a public hearing to present the project.

These are the permits needed to sign a contract to sell energy to ICE, but the selection of a project depends on the willingness of ICE to start the process of incorporating a new generation plant, for example: ICE request one eolic generation project of 20MW and companies that have an eolic ‘elegibilidad’ could offer a price per kWh lying within a ‘tariff band’ that the ARESEP has previously approved. The project with the best price wins the contract.

In 2017, ICE published a new Expansion Plan that does not include any new private projects scheduled for the coming years, because the Plan focuses on a new hydroelectric project of 600MW that, according to ICE, could be complete by 2026. However, in August 2018, ICE authorities were considering stopping the new project until 2024 because Costa Rica has enough renewable generation.

Grid connection policies

What are the policies with respect to connection of generation to the transmission grid?

ICE has a monopoly on transmission networks in Costa Rica.

Any generation project bigger than 5MW needs to connect to the transmission network in a substation and this means it will need authorisation from ICE.

A generation project smaller than 5MW could connect to a distribution company network if the distribution company so permits.

Alternative energy sources

Does government policy or legislation encourage power generation based on alternative energy sources such as renewable energies or combined heat and power?

Costa Rica has had a renewable energy policy for several decades.

Currently Costa Rica produces more than 99.67 per cent of its electricity from renewable energy sources. For several weeks in the rainy season Costa Rica produces 100 per cent of the electricity from renewable sources.

Costa Rica uses fuel power plants only when it needs to back up the system but not as an ordinary source of electricity.

Most renewable energy comes from hydroelectric plants (77 per cent).

Eolic projects have grown rapidly in the past years, now with 11 per cent of the electricity coming from wind.

Solar projects should grow in the future: ICE has 1MW installed while Coopeguanacaste has 5MW installed.

According to a recent government study, the grid in Costa Rica has the potential to install 791MW of solar generation and 371 of wind generation in the next six years.

Any renewable generation equipment has tax exceptions.

Climate change

What impact will government policy on climate change have on the types of resources that are used to meet electricity demand and on the cost and amount of power that is consumed?

Costa Rica has had a renewable energy policy for several decades.

The goal is to improve the 99.67 per cent renewable electricity production.

Even more important is the process of moving transportation to electric solutions instead of fuel options. At the end of 2017, Congress approved a Law to create incentives for reaching 100 per cent electric vehicles.

If Costa Rica is able to reduce carbon emissions in transportation, within the next decade the country could be carbon-neutral.

Storage

Does the regulatory framework support electricity storage including research and development of storage solutions?

The National Energy Plan of Costa Rica (2015-2030), which MINAE approved in 2015, has a specific objective of analysing electricity storage possibilities for use of renewable energy in times of higher consumption. There is huge potential to integrate renewable generation with storage facilities.

Government policy

Does government policy encourage or discourage development of new nuclear power plants? How?

Nuclear energy is not renewable energy and it is not considered under the National Energy Plan of Costa Rica (2015-2030).