In the last decade, Panama has significantly increased its electricity coverage rates and the level of rural electrification coverage has increased from 57.6%, representing about 115,000 households without electricity services in 2005, to 91% in 2015. These developments were mainly due to the efforts of the Government of the Republic of Panama, which, with the support of the IDB, pledged to promote electrification in rural areas that are not served, are unprofitable or non-concessional. To see these advances in action, watch the video “Improving Lives with Sustainable Energy in Panama” (Spanish only).
The Bank has approved a series of loan operations and non-reimbursable technical cooperations related to rural electrification. Among these, the program “Support for Sustainable Rural Electrification I and II” for US $30,000,000 and US $20,000,000 respectively stands out. The first of these loans was approved in 2005 with the aim of increasing access to electricity services for rural populations in order to reduce poverty and improve the living conditions by increasing the efficiency of public resources used in the rural electrification subsector. As a result, a total of 7,544 homes benefitted from network extension projects while 4,849 homes benefitted from isolated system projects, and 48 public centers benefitted from isolated systems projects. The program also trained a total of 21 OER staff and funded 17 studies on isolated system projects.
As a mechanism to achieve the objectives mentioned, the Rural Electrification Program was established, which is 86% (US $30 million) financed by the IDB and 14% (US $5 million) by the contribution of the Government of Panama. Its mission to develop rural areas, in this case by providing electricity service, with the priority objective of increasing coverage by 10% in rural areas during the five years of the project (2007-2011). The baseline being used to measure improvement is that 56% of the rural population had electricity before the start of the program.
Some of the lessons learned from this and other Bank interventions in Panama in rural electrification are:
- It is crucial to encourage private investment rather than to rely on state financing for the construction of rural electrification projects. This approach increases the efficiency of the development process of projects and the distribution companies are in charge of the final design and construction of electrical installations and are responsible for operation and maintenance in the future;
- The importance of incorporating best practices to improve the procedures and methodologies used at all stages of project development, in particular by seeking to limit state subsidies to the minimum amount required; and
- The need to select and implement an adequate management scheme to ensure the sustainability of isolated systems based on renewable energy projects, for example, by micro-contracting service providers that define operation and maintenance responsibilities with broad community participation.
By continuing to support best practices in rural electrification projects, we hope to create a more sustainable future for the citizens of Latin America and the Caribbean.