Energy, the engine driving the country

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Energy is the engine behind development and Panama needs more electricity than ever. With a forecast annual economic growth rate of 5% to 7%, energy us will increase significantly in spite of the fact that it has already been growing annually at a rate of 5%. It is also known that in the next 10 years an approximate of 500 MW more will be required. These predictions justify the high cost of investment and the haste with which these types of projects are being developed.

Reports of the Energy Secretariat have pointed out that the electricity network must add 100 megawatts (MW) every year just to satisfy the market.   This means an annual investment of $200 to $300 million.

Energy projects under construction will add energy capacity of 435 MW in 2016

Total energy capacity is more than 2,746 MW and the demand is 1,529 MW, but the real capacity is just 382.60 MW. Statistics show a growth in the consumption of Megawatt per hour (MWh) of 9.2% in March 2015, com

pared with 2014. This reflects the country’s development, but at the same time demonstrates that it is necessary to find other energy sources.

Currently, the largest consumer in the country is the commercial sector which, like the residential sector, has shown increased consumption, demonstrating that the efforts of the State and private companies to promote energy savings have not taken effect. The Government will have to invest $5 billion to guarantee electricity supply for the next five years.

Wind farm in Cocle province

National Authority of Public Services (Autoridad Nacional de Servicios Publicos ASEP)

The National Authority of Public Services (ASEP) is the institution that regulates the energy sector, creating a policy framework to assure that the service provider conforms to the objectives established by legislation in this sector.

The electricity sector in Panama consists of all those installations that are needed to convert energy from the primary source to be used as electrical energy (generation). This includes management and raising the voltage of such energy to be distributed in consumption centers (transmission) and delivering them to clients for final use (distribution) at different voltage levels. It also includes the norms for the services to be safe, efficient and of high quality.

The National Energy Secretariat (Secretaría Nacional de Energía SNE)

This department is the main government institution regarding the policies of the energy sector, and it is responsible for adopting the national policies for hydrocarbons and electric energy, as well as the rational use of energy and the development of alternative sources.

Structure of the Energy Sector

The energy sector can be divided into two areas: hydrocarbons and electricity. Panama’s energy portfolio is diverse. The country has a whole spectrum of primary and renewable energy sources. Currently the country is making efforts to curtail its dependency on fossil fuels and identify new ways to produce energy.

Electricity

Hydroelectric plants make up 75% of Panama’s total energy production. Around 900MW of hydro potential in the country is thought to be economically viable for development. Panama is expected to invest around $1bn in electricity generation over the next ten years. Nearly 90 hydroelectric projects have been proposed. A 1,100-mile transmission line will connect Panama to southern Mexico.

There are around 17 hydroelectric plants around the country and there are others under construction or awaiting approval from the ASEP. The most important are Chan I and Chan II, which will generate 223 MW once operations start.

However, the down side of hydroelectric energy is the damage to the environment and the local population. The majority of these projects are located in Bocas del Toro and Chiriqui provinces, where a high percentage of the native Amerindian tribes live. The hydroelectric dams cause problems and interfere with their day-to-day activities such as fishing. The clashes between tribes and companies continue and the government is trying to find a viable solution that satisfies the energy demand of the country and at the same time stops conflict with the local population.

The other 25% of local energy is produced by thermoelectric plants. The main ones are Bahía Las Minas, located in Colón province, and Pan Am, in Panamá province. Currently the Government is making long term contracts with companies that can provide thermoelectric generation units to provide 700 MW and increase the energy offer in the country. The contracts will be of 10 to 15 years duration. Experts recommend that the new plants be located in Colón, because it has logistics facilities such as ports and distribution capabilities.

The wind power park called “Parque Eólico Toabré”, located in Penonome, Cocle province will produce 270 MW during the next 15 years, enough to provide electricity for half a million people. It is the first of its kind in

Panama and the biggest in Central America. The project costs $560 million and is the responsibility of Empresa Estatal de Transmision Electrica (ETESA), Union Eolica Panameña (EOP) and China Goldwind.

Estí hydroelectric dam in Chiriquí

Estí hydroelectric dam in Chiriquí

Construction started in the second semester of 2014 and in its first phase it will generate 102 MW, which will increase to 225 MW at a later date. The park covers approximately 18,239 hectares and has 86 wind turbines with a hub height of 90 meters. The first tower was energized on the January 28, 2015, and on February 1, 2015, the first kWh was sold through UEPII’s contract to the Panamanian grid. The project was completed in August 2015.

EOP has announced that it is ready to expand the park and will add 25 new turbines, which could be bigger than those already present on the wind farm. It is expected that construction work will begin in January 2016. Currently the wind park supplies 11% of the electricity generated in the country.

Another renewable source of energy is solar power and in 2014 the “Sarigua Solar Plant” started operations as a pilot project, generating 2.4 MW to the National Interconnection System. There are other solar projects such as Solar XXI, developed by the University of Panama in Chiriqui province with 40MW; Panasolar Generation in

Hydrocarbons

New energy laws have provided the basis for the blueprint to operate in the hydrocarbon sector and are allowing Panama to transform to preserve its vital role as a driver and leader in the development of the country.

The National Secretariat of Energy facilitated the entry of oil companies to the country, and in 2014 the first preparations for the exploration and exploitation of oil and natural gas in the country were made.

The Secretariat hired the company OTS Latin Amer-ica Inc., through funding from the Andean Development Corporation (ADC), using a special fund of $381,000, which was provided by the regional body. The total project cost was $476,000 and 20% was financed by the Pan-amanian government.

The National Secretariat of Energy has a database with information on oil fields in the country spanning the last 80 years, including geophysical surveys, geological information, and evaluated potentials. Ten sedimentary basins have been identified on land and sea, where there are likely reserves of oil and gas.

These Ten basins are located in the province of Darien, the Gulf of San Miguel, the Gulf of Panama, the Gulf of Chiriquí, the Caribbean Sea, Bayano and in the province of Bocas del Toro. In these basins, a study was done to determine which of the basins have greater possibilities for exploration. The National Secretariat of Energy passed the Law 53 of 9 September 2013, to adapt the old Act No. 8 of June 16, 1987 that rules the activities with hydrocarbons, to new trends in the industry.

Coclé province with 9.9 MW promised for 2016 and the second phase of Sarigua with and additional 2.4 MW.

So far ASEP has issued 67 licenses and it is expected that 1136 MW of solar power will be generated. For the final licenses, some projects are already under construction and others are scheduled to start energy production in the coming months.

Among the companies that already have a license to build photovoltaic power plants there are projects for 2, 8, 10, 50 and up to 120 megawatts of capacity. They are located in Chiriqui, Cocle, Herrera, Los Santos, Veraguas and Panama.

The “Sistema de Interconexion Electrica para Ameri-ca Central” (SIEPAC) projects have been constructed for transmission lines to connect 35 million consumers in Panama, Costa Rica, Honduras, Nicaragua, El Salvador, and Guatemala, at an estimated cost of $300 million.

The electrical interconnection projects are operating optimally. Steps have been completed for approval criteria for this energy exchange. The transmission line capacity of 230 kilowatts and 300 megawatts between Guate-mala and Panama covers 1,788 kilometers. Improvement of existing systems has been made as well.

As part of the work, Panama and Costa Rica have been connected, linking the Veladero substations in Panama, with the sector of Rio Claro in Costa Rica.

Panama-Colombia Interconnection line

The electricity interconnection line between Colom-bia and Panama will operate from the first quarter of 2019. Currently both countries have commissioned environmental impact studies and once they are concluded they will proceed to open bids for the project.

A company was created in 2003, called Interconexión Colombia-Panamá (ICP) formed by the Colombian Inter-conexión Eléctrica S.A. E.S.P. (ISA) and ETESA for Panama. The interconnection contemplates the construction of a 600 kilometer line capable of transporting 400MW of energy. The estimated cost is $450 million.

Colombia through this network could sell energy to the region and even to Panamanian consumers during the dry season when the hydroelectric production is low. The Interamerican Development Bank approved a loan for $1.5 million to finance feasibility studies.

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