WSHPDR_2013_Final_Report-updated_version

2.2.8 Panama
Yan Huang, International Center on Small Hydro Power
Key facts
Population 3,510,045 1
Area 78,200 km 2
Climate Tropical maritime: hot, humid,
cloudy 1
Topography Interior mostly steep, rugged
mountains and dissected, upland
plains; coastal areas largely plains
and rolling hills 1
Rain pattern Caribbean coast: precipitation in the
rainy season from May to December
accounts for 70-80 per cent and in
the dry season only 20-30 per cent.
Pacific coast: precipitation in rainy
season is 85-93 per cent and 7-15 per
cent during remaining time of the
year 2
Electricity sector overview
The electrification rate in Panama is 88.1 per cent. 3 By
the end of 2011, Panama had 2,391 MW installed
electricity generation capacity, 56.5 per cent (1,351
MW) hydropower, and 43.5 per cent (1,040 MW)
thermal (figure 1). 4
Thermal
43.5%
Hydropower
56.5%
0% 10% 20% 30% 40% 50% 60%
Figure 1 Electricity generation in Panama
Source: Secretaría Nacional de Energía 5
The National Secretariat of Energy is in charge of
formulating energy policies according to the National
Plan of Development. In Panama, hydropower
development started in 1915 with the construction of
the Panama Canal. In 1961, the Instituto de Recursos
Hidráulicos y Electrificación (IRHE) was established
and served as a state-owned enterprise, which made a
plan of a series of small/medium hydropower
projects. In 1972, the nationalization of the electric
sector covered the whole electric system. As a result
in 1974, the Electric System of IRHE was created.
According to the Law No. 6 dated 3 February 1997, the
generation (four enterprises), distribution (three
enterprises) and transmission (one enterprise) were
separated and parts of the shares of some generation
and distribution enterprises were privatized. 5
Small hydropower sector overview and potential
In Panama, hydropower plants are considered small
hydropower if the capacity does not exceed 5 MW.
There are 10 small hydropower plants in Panama with
a capacity under 10 MW and a total installed capacity
of 38.8 MW (figure 2). Four of the smaller plants are
reported not to be operational. 6
According to the Inventory of Hydroelectric Projects
(Inventario de Proyectos Hidroelectricos) carried out
by Empresa de Transmisión Eléctrica S.A. (ETESA), in
2000 the total potential for small hydropower projects
with capacities ranging between 1 kW and 100 kW
was 1.2 MW, for those ranging between 100 kW and 1
MW was 5.22 MW and for those ranging between
1MW and 10MW was 115.9 MW, thus with a total of
122.3 MW. 7
SHP installed
38.80 MW
capacity
SHP potential
122.32 MW
0 40 80 120
Figure 2 Small hydropower capacities in Panama
In order to overcome the low electrification rate in
Panama the Oficina de Electrificación Rural aims to
increase rural electrification by the use of micro
hydro, photovoltaics and small wind projects. 8
Renewable energy policy
Article 55 of Law No. 6 established in 1997, states that
it is in the Government’s agenda to encourage the
diversity of energy sources and to mitigate adverse
environmental impacts by reducing the country’s
dependency on traditional energy sources.
Competitions and auctions for the sale of electricity
are incorporated with a five per cent discount for
renewable energy purchases. 9
The Government of Panama has not established
specific targets for renewable energy but it has
increased its support through the approval of different
incentives. The Law 45 has provided strong incentives
for small renewable energy applications, including
hydro, geothermal, wind, solar and other renewable
energy technologies. In addition, the National
Assembly has launched incentive laws for renewable
energy such as import and other tax exemptions for
equipment of wind generation (projects under 10 MW)
and large hydropower. Wind generation benefits from
25 per cent of repaying the initial investment based on
their carbon credits. 10
Legislation on small hydropower
In 2004 the Government enacted Law 45
(Establishment of an Incentive Regime for Systems of
Hydraulic Generation and of Other New, Renewable
and Clean Sources) that established preferential
measures for mini and small hydropower plants, i.e.
mini hydropower plants may realize sales contracts
directly with electric distribution companies with
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