Energy players must find common ground

By Kevin Wells |  Special to The Tico Times

Costa Rica has an energy problem. Anyone who has ever paid an electric bill or sat in the dark for hours would agree. 

The country used to produce excess electricity for export to neighboring countries, which generated revenue for the Costa Rican Electricity Institute (ICE). ICE’s power-generation model seemed sustainable, as it relied mostly on free water, wind and heat below the Earth’s surface. 

Economic growth and the real estate boom changed everything. ICE could no longer generate the energy required to meet increased demand, and not so long ago, they were forced to have scheduled blackouts and increased reliance on dirty, expensive fossil-fuel generators to deal with the shortfall (TT, April 23, 2007). 

Although the global debt crisis slowed real estate development and the associated increase in demand for electrical power, the fact remains that Costa Rica has an energy problem that must be solved before the only options available will negatively impact ICE, its customers and the country as a whole.

The Tico Times article “Costa Rica’s Past and Future Clash over Renewable Energy,”  by Steve Mack (TT, Sept. 7), is spot-on. ICE and the private sector must search for ways to work together to solve the energy problem. Costa Rica desperately needs a coherent energy plan that creates growth in renewable energy generation while protecting the public interest and maintaining the sovereignty of ICE to utilize Costa Rica’s vast renewable energy resources responsibly. Anything less will result in financial disaster for ICE and higher prices for consumers.

If the energy sector goes the way of the telecom industry, ICE will be crushed as it gets outmaneuvered by private companies with deeper pockets. One only has to look at the ridiculous number of cellphone towers that now litter Costa Rica to realize that CAFTA’s effect on the telecom market has not been good for everyone. If this is the result of the de-monopolizing of the telecom market, then ICE and the Costa Rican people need to be very skeptical of any changes in the electrical energy sector. Nobody wants to see bunker oil and coal-fired plants sprouting up all over the country next to all those red and white cellphone towers. But if the Costa Rican government is not careful, that is exactly what will occur.

Costa Rica’s energy problem is not unique. Therefore it only has to look at what other countries are doing, or not doing, to find a workable solution. The United States consumes electrical power on a scale not seen by any other country in the world, and citizens have accepted a misguided, expensive and risky energy policy since the energy “crisis” began in the mid-1970s. Since then, renewable energy has only been a buzzword used during political elections, and people have become numb to phrases like “clean coal,” “safe, renewable nuclear power,” and “oil from friendly countries.” 

In the last year, the U.S. reduced or eliminated incentives for installing renewable energy generation systems, while tax breaks continue for fossil fuel plants and politicians promise to reduce dependency on foreign oil.

The long-term energy policy in Germany is considerably more rational. Germany has aggressively promoted solar as a highly desired renewable energy source. Energy planners in Germany have used incentives such as tax breaks, low-interest loans, and feed-in tariffs to promote solar and wind power across the country. After the horrifying nuclear accident and reactor meltdown in Japan, Germany altered its energy plan to remove nuclear power entirely from the country, and redoubled its efforts to promote renewable energy as a source of electrical power.

Costa Rica and other countries with developing economies cannot afford to have an energy policy like the U.S., which places the energy crisis squarely on the consumer’s back, or even a policy like Germany, where capital is available to finance its aggressive long-term plan. 

Fortunately, Costa Rica is uniquely positioned to solve its energy problem thanks to abundant renewable energy resources. The Costa Rican government and ICE can solve the energy problem if they enact policies that promote growth in renewable energy sources at the consumer level to generate electrical power.

First and foremost, ICE and electrical cooperatives should remain the sovereign entities that control large-scale generation, distribution and sale of electrical power. This will ensure that national renewable energy resources are not lost to private companies with large demands for profits that can only come at the expense of Costa Rican energy consumers. 

ICE needs to create an energy plan that eliminates the use of fossil fuels to generate electricity. Bunker oil plants are quick and relatively easy to build, but their fuel source is very expensive, dirty and must be imported from foreign sources. Power produced from these plants is four or five times more expensive than hydro, wind, geothermal or solar power. Shelving these plants will ultimately make Costa Rica’s electrical power less expensive for consumers. This goal could be met easily if ICE and other electrical cooperatives took measures to incrementally increase the amount of renewable energy created from widely distributed small- to medium-scale private and public energy generators.

ICE needs to question the total financial benefits of large utility-scale plants. In most countries, electrical power plants are located convenient to the fuel source, and the people who use the energy are located somewhere else. In between, there is a maze of electrical transmission wires and equipment. Sending electrical power over any distance is problematic due to energy lost in the wiring, transformers and other stresses to equipment that eventually cause the power to go out. 

Almost everyone in Costa Rica has heard the term “transformer problem” used to explain a several-hour power outage. Distributed renewable energy generators would decrease losses incurred over transmission lines and avoid outages created by over-stressed equipment. 

Small-scale distributed renewable energy generators could never replace ICE, as the relationship would be truly symbiotic. ICE needs the small-scale generators and the small-scale generators need ICE. Jobs would not be lost at ICE, but they would change. Instead of operating a few dozen large-scale power plants, they would have to maintain the metering and interconnection of several thousand small generators.

ICE’s net-metering pilot program was a very progressive move in the right direction to become carbon neutral and increase the energy generation capacity of the nation’s electrical grid. Net-metering and reduced import tariffs for solar energy equipment have made it economically feasible for private individuals to produce some or all of their own clean, renewable power.

If those individuals were allowed to make just a little more than they need for their own homes, ICE and the cooperatives could sell that excess power to other customers. ICE would avoid competition with profit-hungry corporations while eliminating the need for fossil fuels to power the national energy grid. 

Grid-parity for solar power, the point where the cost to produce locally generated solar energy equals the grid’s wholesale rates, is still many years away in most of the world. However, solar power has already reached the grid-parity threshold in Costa Rica due to the tremendous solar resource available, the high cost of electricity, and the recent decreases in prices for solar panels and related equipment. 

Solar power creates the majority of its energy at and around noon, when the energy ICE sells to large-demand customers is the most expensive. Any excess power sent to the grid from a renewable energy system at this time of day is very valuable, because it offsets power that ICE would have to generate to keep up with peak demand. This energy usually comes from the bunker oil plants. 

ICE’s net-metering program, while very progressive, has one flaw – it has not required the other electrical cooperatives in the country to participate. Until the ICE net-metering program is expanded to include every home in Costa Rica, the true potential for distributed renewable energy production will be impeded.

Net metering is not the only vehicle that an electrical utility and government can use to promote growth in renewable energy. Feed-in tariffs (a fancy name for getting a check in the mail for producing energy), tax-break incentives, low-interest loans and one-time grants all have been used around the globe to accelerate the installed base of renewable energy systems. Instead of punishing large consumers of electricity with high-demand charges, ICE could reward the same customer with tax breaks for investing in renewable energy generation systems or do the same for taking steps toward conservation. 

Instead of simply offering very low electricity rates to people who consume very little electricity, ICE could write them a check for any excess power supplied to the grid from their homes or businesses. ICE would have nothing to fear as long as there are limits placed on the amount of power that any individual could sell to the grid. 

Private investors would jump at the chance to finance systems that produce energy for 25 years or more, yet pay for themselves in less than five years. 

If Costa Rica is serious about solving the energy problem before it becomes a crisis, it must find common ground, where ICE, the electrical cooperatives and private investors can work together to best utilize the incredible green energy resources to develop a sustainable electrical grid for the citizens and guests of Costa Rica.

Kevin Wells is chief technical officer of Pura Vida Energy Systems, S.A.