Panama Readies Energy Plan 2015-2050

Thursday, May 14, 2015

With a population of more than three million, Panama is Central America’s front-runner in terms of growth and development (2014 Human Development Index) as well as the second most competitive country in the region, according to the World Economic Forum. Geographic good luck has blessed it with a canal connecting the Atlantic and Pacific Oceans that significantly influences global trade, as well as offering a broad platform for shipping, commercial, real estate, and financial services. The electricity sector has large-scale private investment projects in the pipeline for the coming years, which will likely support GDP growth, forecast by the International Monetary Fund at 4.6%, a rate of expansion exceeded only by China.

To meet the rising demand, Panama’s energy ministry is pursuing a strategy that seeks to ensure a competitive, sufficient, high-quality, economically viable supply that is at once environmentally sustainable and helps to continue the country’s ongoing development. Broadly, the goals of the energy strategy include universal access through expanded supply coverage, both of electricity and of “modern” energy resources (LP gas rather than firewood, for example), and reasonable prices, without ruling out the possibility of subsidies in low-income sectors. Other core goals of the strategy include minimizing the environmental impact of energy production along with rational use of natural resources.

The country’s electricity generating capacity is based on a combination of fossil fuels (40%) and clean or nonconventional energies (60%). Panama’s main hydroelectric project, scheduled for implementation over the next five years, is Changuinola II, a public-private partnership that it will add 223 mW to the country’s capacity and a dam that would give the plant a 90-day energy reserve. The country also has the largest wind farm in Central America that, once completed, will have the capacity to deliver 280 mW to the national grid.

Panama is committed to energy integration projects that will enable increased development in the Hemisphere’s countries and improve supply security. Panama’s unique geographical location allows electrical interconnection with both Andean Community countries and Central American ones. Interconnection helps to ensure the reliability of supply, makes domestic markets more competitive, and attracts foreign investment.

Electrical interconnection in Central America has been a reality since the start of the century, when the Central American Electrical Interconnection System (SIEPAC) came on stream. The system, which extends from Guatemala to Panama, comprises 1,788 kilometers of 230 kW transmission lines and has a 300 mW capacity. All the necessary standardization steps have been taken to enable energy exchange and improvements in extant systems.

The Panama-Columbia interconnection project, revived under the administration of the country’s current president, Juan Carlos Varela, has enabled companies based in Panama to augment their operations, and the country to strengthen its supply. The project will serve as a bridge for carrying electricity between the North and South of the region.

The Panamanian Government’s strategy to curb greenhouse gas emissions in the short- and medium-term as well as to combat the effects of climate change are based on promoting renewable energy use and generating savings by harnessing the available energy in the country in a rational and responsible way. At present, the possibility is being examined of incorporating natural gas into Panama’s energy matrix, given that the surge in its output in the United States will give rise to a significant amount of traffic of methane tankers through the Canal. The country could seize on this trend to become a storage and transfer hub for liquefied natural gas and other byproducts, such as ethanol and propane. The Panamanian energy ministry is also taking steps in the area of sustainable harnessing of energy and promoting energy-efficiency through rational and efficient energy use.

Finally, as its main goal in the next five years, Panama will define its Energy Plan 2015–2050. The aim is to ensure the continuity of the planning horizon which will be complemented and improved with the adoption of conditions and trends in the global energy sector, and strengthened through regular updates of goals and strategies. The chief aims of the Energy Plan 2015–2050 will be reliability of energy supply, diversification of primary energy sources (based on real production costs and sustainability in the national grid), and expanding electricity supply coverage to remote communities, using renewable energies. The above will be underpinned by four guiding principles: universal access, energy security, economic and productive efficiency, and environmental sustainability.