Home → News & Events → New renewable energy rate model proposed (Jul 15, 2008)

(Infocom) — The Public Services Regulatory Authority (ARESEP) has designed a new model to fix rates and prices for providers of renewable energy, such as the wind energy projects taking place in Guanacaste. The model seeks to contribute to solving the energy problems affecting country.

This new model — which will soon be presented for feedback in a public audience — will allow for the establishment of rates and prices for private generators whose energy sales contract with the Costa Rican Electricity Institute (ICE) have expired or are about to lapse.

Regulator General Fernando Herrero underscored the importance of fomenting generation of renewable energies and take full advantage of the current capabilities of private generators. 

Thermal energy generation, which burns fossil fuels, has significantly increased in Costa Rica, impacting the prices consumers pay for electricity and boosting emissions or carbon dioxide, which consequently affects the environment and people’s health.

Almost two decades ago, when the country faced similar energy problems, parallel generation legislation (Law 7200) was enacted to permit more than 30 private energy generators using renewable power sources to join the National Electric System (SEN).

However, by 2010 ICE will have a number of expired contracts with such private generators within the framework of Law 7200, and if nothing is done about it and assuming that expansion of the SEN network will continue, private generators’ contributions to the SEN would be significantly scaled back within three years. This would not only aggravate the current energy crisis, but it would also waste the capabilities of these smaller providers to generate clean energy that is cheaper compared to thermal power.

On the other hand, it should be noted that the SEN network’s expansion plans will not be accomplished as soon as it was planned. One reason is that tropical storm Alma, which ripped through the country earlier this year, caused serious damage to the Pirris hydroelectric plant — which is currently under construction in southern San Jose province and is considered key to avoiding blackouts beginning in 2010.

The need to encourage renewable energy generation becomes evident when considering that in 2007 the cost of generating energy by burning expensive fossil fuels was $0.22/KWh, while private energy generation only cost $0.08/KWh. With fuel prices soaring to unprecedented heights, in the first four months of 2008 these two types of energies cost $0.30/KWh and $ 0.11/KWh, respectively. Meanwhile, the last hydroelectric plant that ICE has brought online produces energy at $0.0736KWh, which clearly demonstrates the importance to continue expanding large-scale hydroelectric generation.

The new proposed rate model is expected to optimize the production potential of private generators, so that their plants will continue to be a part of the SEN network and so that, when feasible, these plants can increase their production capabilities up to 20 megawatts.

Herrero pointed out that the model’s methodology is based on a unique production structure, allowing for rate setting to be simple and transparent.

The new model will be applied to energy generation concessions and energy sales regulated by Law 7200 and needing ARESEP oversight.