The Central American nation relies on hydropower, but investing in extra capacity to keep the lights on during dry periods has saddled its utility with rising debt
By Sebastian Rodriguez
SAN JOSE, June 19 (Thomson Reuters Foundation) - Despite a harsh drought this year, Costa Rica - which relies heavily on hydropower - has been able to keep its electricity production almost entirely renewable.
The dry spell, which ended in May, was the first big test of an ambitious push for clean energy, said Javier Orozco, planning director at the Costa Rican Electricity Institute (ICE), the state-owned power and telecoms provider.
The Central American nation needs clean electricity to meet its climate goal of achieving net-zero planet-warming emissions by 2050.
A renewable electricity supply is one of the "most important advances" towards freeing the economy from fossil fuels, according to a national decarbonisation plan launched in February.
Other focus areas are adopting cleaner public transport, improving waste management, and expanding the country's forests.
But the clean power has come at a cost - heavy investment in excess capacity that is driving up the utility's debt levels, energy researchers said.
Over the last four years, Costa Rica has generated more than 95% of its domestic electricity from renewable energy. In 2018, nearly three-quarters came from hydropower, official data showed.
This year's drought threatened that record - but strong wind production, the country's second biggest source of clean electricity, combined with water rationing from dams means about 98% of power is still expected to be produced cleanly in 2019.
"After these critical months, we don't think we'll need more thermal production (using fossil fuels)," Orozco told the Thomson Reuters Foundation.
In the driest summer period from January to April, Costa Rica generated 97% of electricity from renewable sources, he noted.
That was despite drought hitting rivers hard, with some already dry by January and all suffering "exceptionally low" water levels, putting a lot of stress on hydropower generation, Orozco said.
But Jose Daniel Lara, a researcher at the University of California Berkeley, said Costa Rica's main vulnerability lies not in whether it can keep generating enough clean electricity as climate change hikes drought risks, but in its finances.
To maintain its supply of renewable energy in dry periods, the utility must have twice the hydropower capacity installed than it uses regularly – and that is costly, Lara said.
WIND, IMPORTS PLUG GAP
In recent years, the ICE has bet on wind energy to reduce its dependence on water to produce electricity.
Wind power grew to 15% of the electricity mix in 2018, up from 4% in 2011, official data showed.
During the drought this year, strong winds were one factor keeping the rain away, Orozco said - but they drove the turbines.
The gates at hydropower dam reservoirs could be shut when winds were high and opened when they dropped, he added.
Yet Costa Rica's imports of electricity from other parts of Central America cloud the picture somewhat, said Jorge Blanco, a researcher at the electrical engineering school of the University of Costa Rica.
Electricity imports from December to April were the highest in the last five years, at about 8% of the country's total electricity supply.
Blanco said importing electricity was often cheaper than turning on the country's thermal plants, which run on diesel.
"If we hadn't had the possibility of importing energy from Central America, there would have been an important problem here," he said.
But that imported power cannot really be counted as clean, he noted, since about 60% of Central America's generation comes from fossil fuels.
Still, as 40% comes from renewable sources, Orozco said it was far cleaner than making up the gap using thermal generation in Costa Rica.
Under guidelines from the Intergovernmental Panel on Climate Change, emissions from imported electricity should be counted in the country where the power was produced.
In a bid to maintain Costa Rica's home-generated clean electricity supply in dry spells, the state power provider ICE has implemented so many renewables projects it is now facing a financial crisis, researcher Lara warned.
When there is plenty of rain, more hydroelectricity is produced than needed - and much of it is wasted because export capacity is limited, he said.
"We survived the drought - but that's because ICE is paying for plants in a system that is not consuming enough energy," Lara said.
Generating excess power in wet seasons has led to higher electricity tariffs for consumers and financial problems for the ICE, he said.
"It's as if I bought a Mercedes to drive Uber, I had it parked in the garage all day, and then I said that I don't have enough money to pay off the loan," said the electrical engineer.
The ICE ended 2018 with net losses of $400 million, going into the red in four out of the last five years, with its debt reaching almost $6 billion.
The utility wants to supply the excess power it produces for electric transport, but that market is still in its early stages, keeping power demand low.
"ICE has to make very difficult decisions," said Lara.
It could, for instance, sell some small non-critical hydropower plants, although the over-capacity situation may deter investors, he said.
(Reporting by Sebastian Rodriguez; editing by Megan Rowling. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, climate change, resilience, women's rights, trafficking and property rights. Visit http://news.trust.org/climate)
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