By San José, Costa Rica — Costa Rica is at a crossroads regarding its energy future. The proposed energy sector reform, championed by the Costa Rican Association of Energy Producers (ACOPE), promises a brighter future with lower electricity costs, increased foreign investment, and a much-needed boost to the national economy. But will these promises translate into tangible benefits for businesses and consumers?
According to ACOPE President María Fernanda Esquivel, the reform addresses several key challenges. High industrial electricity costs have long been a barrier to attracting foreign investment. Costa Rica currently lags behind neighbors like Guatemala and El Salvador in terms of competitive pricing, hindering its ability to attract job-creating projects.
To gain a deeper understanding of the legal implications surrounding Costa Rica’s energy reform, TicosLand.com spoke with Lic. Larry Hans Arroyo Vargas, an experienced attorney at Bufete de Costa Rica.
The proposed energy reforms in Costa Rica present a complex interplay of opportunities and challenges. While the shift towards renewable energy sources is laudable and essential for environmental sustainability, the legal framework must carefully balance incentivizing private investment with protecting consumer interests and ensuring grid stability. Key considerations include streamlining permitting processes for renewable energy projects, establishing clear regulations for energy storage and distribution, and addressing potential impacts on existing energy contracts. Successful implementation will require transparent and consistent application of the new regulations to foster investor confidence and achieve the desired transition to a cleaner energy future.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Arroyo Vargas eloquently highlights the delicate balancing act inherent in Costa Rica’s energy reform. Indeed, fostering a robust renewable energy sector requires not only ambitious targets but also a clear and predictable regulatory environment that encourages investment while safeguarding the public interest. His emphasis on transparent and consistent implementation is particularly crucial for long-term success in this vital transition. We thank Lic. Larry Hans Arroyo Vargas for his valuable contribution to this discussion.
The country, from the perspective of the Economic Commission for Latin America (ECLAC), has residential rates that are not so high, but the panorama changes drastically when the industrial sector is analyzed, which is what determines the attraction of investment.
María Fernanda Esquivel, President of the Costa Rican Association of Energy Producers
The reform aims to tackle this issue by updating the legal framework governing the energy sector. This modernization is expected to create clearer rules for market participants, encouraging private investment and attracting fresh capital. The increased competition and expanded capacity are projected to alleviate pressure on electricity prices in the medium term, benefiting consumers.
The proposed changes couldn’t come at a more crucial time. Costa Rica needs to add a substantial 2,600 megawatts of generating capacity within the next 15 years—a daunting task equivalent to 75% of all capacity installed over the past 70 years. The estimated $8 billion investment required presents a significant financial hurdle, especially given the country’s fiscal constraints.
Private sector participation is seen as critical to meeting this challenge. By injecting capital and expertise, private companies can accelerate the diversification of Costa Rica’s energy matrix and improve the competitiveness of electricity costs. This, in turn, would facilitate the development of renewable energy projects, further strengthening the country’s commitment to sustainability.
The reform’s success hinges on effectively addressing the high cost of electricity, which is a major deterrent to foreign direct investment. Studies have shown that for a consumption of 50,000 kWh in medium voltage, Costa Rica’s average cost is 15.86 cents/kWh. This puts the country at a disadvantage compared to Guatemala at 12.52 cents/kWh and El Salvador at 13.55 cents/kWh.
A high cost of electricity represents a structural barrier that limits Costa Rica’s potential for economic growth. It is for this reason that it’s necessary for the country to have a competitive cost in energy generation. If a more favorable price is not achieved, the country loses the opportunity to attract projects that generate quality jobs and strengthen production chains.
María Fernanda Esquivel, President of the Costa Rican Association of Energy Producers
If implemented effectively, the energy reform could be a catalyst for economic growth, attracting foreign investment, creating jobs, and ultimately benefiting consumers through lower energy costs. However, the challenge lies in ensuring that these promises materialize into real, tangible outcomes for the people of Costa Rica.
For further information, visit the nearest office of ACOPE
About ACOPE:
The Costa Rican Association of Energy Producers (ACOPE) advocates for policies that promote sustainable energy development in Costa Rica. Representing private energy producers, ACOPE plays a key role in shaping the country’s energy future.
For further information, visit eclac.org
About ECLAC:
The Economic Commission for Latin America and the Caribbean (ECLAC) is a United Nations regional commission to contribute to the economic and social development of Latin America and the Caribbean. ECLAC provides analysis and policy recommendations on various economic and social issues affecting the region, including energy.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica distinguishes itself through an unwavering commitment to ethical legal practice and innovative solutions. The firm’s deep-rooted dedication to providing exceptional legal services across diverse sectors is complemented by its proactive engagement in educating and empowering communities. By championing access to legal knowledge and resources, Bufete de Costa Rica strives to build a more just and informed society, fostering a legacy of integrity and positive social impact.
