During this time when electricity prices are rising every day, lowering them by 10% may not seem like much. But a reduction of this magnitude should be considered very good news. The news gets even better given that the average 10% reduction in the price of electricity in Costa Rica recently announced by the state power company was achieved using clean energy, which doesn’t generate greenhouse gas emissions, and therefore helps mitigate the effects of climate change.
The power generation system in Costa Rica is composed mainly of plants that use renewable energy and free and locally available fuels like water, wind, sun or the heat of the earth to generate electricity. However, a small percentage of power plants rely on fossil fuels such as diesel and bunker, fuels that have to be imported and whose costs are subject to changes in oil prices on the international market. Oil prices can be very volatile, and especially diesel and bunker (fuel oil) tend to generate the most expensive electricity from all possible fuel sources. .
Although for about the last 10 years over 90% of electricity in Costa Rica has been generated with renewable energy, the use of fossil fuels for electricity generation has more than doubled from 4.9% in 2009 to 10.3% in 2014. This increase has led to additional system costs that have generally been transferred to final consumers. Although fuel costs are not the only issue that impacts electricity rates, they represent one of the main causes of the rising price of electricity in Costa Rica, which has grown significantly in the last decade. Today, one kilowatt hour on average costs about 3 times more than it did ten years ago.
When relying on any fuel to produce energy, whether renewable or non-renewable, it is subject to resource availability. In the case of renewables, this relates to climatic availability since each year brings a different amount of wind or water. Perhaps the exception is geothermal energy, which ensures a consistent flow of energy – in fact, Costa Rica has succeeded in managing it efficiently. In the case of non-renewable fuel availability, this is more related to economic and political factors. But in a country where over 60% of energy is produced with water, any reduction in water resources can have a big impact. This has happened in the country in recent years when a lower availability of water to produce energy has resulted in using more thermal plants that rely on expensive and polluting fossil fuels.
The introduction of other non-conventional renewable energies such as wind and solar, and the increase in the installed capacity of geothermal has reduced the dependence on fossil fuels and helped the country to follow a sustainable path. As for the electricity bill, thanks to a good rainy season in early 2015, it is projected that this year 97% of all electricity will come from clean sources. According to the Costa Rican Institute of Electricity, not using imported fossil fuels in 2015 will produce an estimated savings of more than $ 70 million.
Another way to replace expensive power generated with fossil fuels such as diesel is to import cheaper power from neighboring countries. This is possible provided that there is an electrical interconnection, as is the case among the countries of the Electric Interconnection System for Central American Countries (SIEPAC), an energy market where countries can sell their surplus production and establish long-term contracts for electricity exchange. During the first quarter of 2015, via SIEPAC the country imported cheaper power and avoided the use of fossil fuel plants. This resulted in savings of $ 14.5 million. That is why the regulator of the electricity market in Costa Rica has proposed a 3.6% reduction in the generation component of electricity bills for all sectors.
Costa Rica can teach us two very important lessons that have concrete benefits for citizens: the convenience of using all renewable resources available locally and the importance of regional power integration. In addition to saving money, regional electricity integration also represents a more efficient way to manage the variability of renewable energy. It´s not only about doing something for the environment, it’s also about putting money back in consumers’ pockets.