August 12, 2011 / 1:57 PM / 8 years ago

Central America readies shared electricity grid

* Regional grid 88 pct complete
    * Plan to go live next year, but some hurdles remain
    By Alex Leff
    SAN JOSE, Costa Rica, Aug 12 (Reuters) - Central America is
getting ready to switch on a unified power grid that will
reduce expensive oil imports and vault the developing region
ahead of Europe in terms of electricity integration.
    The long-planned network of electrical towers, sub-stations
and a 1,120-mile (1,800-kilometer) high-voltage line linking
six countries in the isthmus is 88 percent complete and running
tests to go live by mid-2012, the project's directors say.
    "This is really going to be the most important integration
project ... on a global scale. The European Union (EU) doesn't
have energy integration at this level," said Jose Enrique
Martinez of Empresa Propietaria de la Red (EPR). The firm
oversees the project known by its Spanish acronym SIEPAC.
    EPR is building the regional grid connected to local power
networks in Guatemala, El Salvador, Honduras, Nicaragua, Costa
Rica and Panama, while a regional agency governed by a board
with members from each country will operate the line.
    Tiny Belize, the seventh and smallest nation in the region,
is not included.
    All the governments have approved a treaty to create a
single regional energy market with one joint regulator so
companies can buy electricity from anywhere in the region.
    The shared system will boost the countries' access to
stable and more efficient energy, key to factories in Central
America making everything from T-shirts to medical equipment.
    Demand for electricity -- projected to double by 2022 -- is
outstripping generation capacity and the aging infrastructure
causes frequent power outages.
    The $494 million SIEPAC grid will lower generation costs by
up to 20 percent, according to studies by project planners. The
funds are coming from governments, multi-national lenders and
private companies.
   The EU is also vying for energy integration but does not see
a common market for electricity and gas until 2014.
   Central America's dream of energy integration is decades old
but wrangling over land rights, market rules and environmental
concerns slowed development.
    The goal is to help the impoverished region reduce spending
on imported oil, that cost an estimated $8.9 billion last year,
according to the United Nations.
     The main 300-megawatt line could boost Central America's
electricity transmission capacity to nearly eight times what it
is now, according to one study.
    A second phase of the project, which may still be a decade
away, hopes to double capacity to 600 megawatts.
    Central America is also heavily investing in new and
upgraded power plants to generate more electricity that could
be traded back and forth through the grid.
    The nations will pour even more funds into projects to tap
the mountainous, volcano-studded region's potential for
hydro-electric, geothermal and wind power in the future.
   Prices on the regional market would be negotiated directly
by the buyers and sellers but terms for contracts and export
rules are still being worked out.
    The line also carries fiber optics, which could eventually
improve regional telecommunication connections.
    The project is seen as a critical drive for integration of
Central America's economies, already linked by a free-trade
deal with the United States.
    But significant hurdles remain.
    "The problem is that you have six different countries with
very unique interests on a daily basis," said Jeremy Martin,
energy program director at Institute of the Americas at the
University of California, San Diego.
    "To get them to think about long-term benefits versus short
term costs, (is) in summary what the challenge is," he added.
    In Costa Rica, completion of a considerable portion of the
power line is pending resolution of environmental challenges in
the courts. Market regulations -- already adopted by Costa
Rica's neighbors -- are moving slowly through the congress.
    "It's a pity it didn't go forward 20 years ago," said Hugo
Ventura, a top energy expert at the United Nations' Latin
American economic commission. "But better late than never."
    (Editing by Sofina Mirza-Reid)
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