Saturday 30 September 2023

Deficit in rainfall jeopardizes Costa Rica’s ability to generate electricity

There's not much water in Arenal and the thermal energy has skyrocketed by 272%. Deficit in rainfall would leave the Arenal reservoir in December at its lowest level for December and compromises rates and energy production for 2024, after fuel use and imports grew from July to July by almost 400%.

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30 September 2023 - At The Banks - Source: BCCR

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QCOSTARICA — A decrease in the usual level of rainfall has Costa Rica’s electricity generation system, which was proud to rely on hydro production, face risk situations that could complicate meeting demand and affect rates.

Little water in Arenal and a 272% increase in thermal energy threaten the country’s electricity generation. Graphic Semanario Universidad

The Arenal lake reservior is on the verge of low historical levels required to serve as support in the event that hydro generation declines, while the wildcards of thermal generation and energy imports are reaching levels that have not been observed for a decade. and that would affect rates.

According to data from Costa Rica’s national weather service, the Instituto Meteorológico Nacional (IMN), the appearance of the El Niño weather phenomenon began to occur in the second half of the year. This generated delays in the start of the rainy season, which in general would reach around 20% for the last quarter of the year. The phenomenon would occur in practically all regions.

Arenal under pressure

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This has an effect not only on energy generation, due to the reduction of river channels, but also on the Arenal reservoir, which becomes the only reserve in the country by 2024, in case an arid situation continues.

The reservoir registered a historically low level in April and June (532 meters above sea level), and although it showed a slight rebound in July (533.5 meters), the projection of the División de Operación y Control del Sistema Eléctrico (DOCSE) del ICE  – ICE Electrical System Operation and Control Division- is that it could reach 536.78 meters in December: it would be the lowest level in 16 years for a December.

This is not at all hopeful to serve as a reserve in 2024: an ICE source commented that, to function securely, about 540 meters are required in December, right at the end of the rainy season, and as insurance to face the driest months.

Costa Rica, contribution in MWh to generation, data as of July

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Additionally, the country is already facing very high growth in other sources, going back almost ten years: thermal generation increased by 272% in the interannual data for July, while energy imports from the Regional Electricity Market (MER) increased 666%.

Altogether, the 612,762 MWh of thermal energy and imports as of July 2023 represent more than 400% growth compared to the 125,344 MWh in July 2022.

This increases the generation from these non-renewable sources from 1.7% of the total in the country to 8%, which has effects on rates: every time fuel is used to generate, the variable cost of generation (CVG) model, which also considers the cost of energy imports.

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However, the situation is complicated given that the other countries in the region also face a complicated situation due to the lack of rain, which seriously limits the possibilities of resorting to the MER as insurance in case of shortage: the Electricity Transmission Company (ETESA) of Panama announced in June that they suspended energy exports, while in Honduras the National Electric Energy Company (ENEE) reported that the measures announced this year will not be enough to avoid electricity rationing, and in Guatemala, the Electricity Corporation Central America (CEC) warned that the energy crisis will not be solved in the short term, and that if energy demand increases, there will be no capacity to meet it.

But the outlook in this regard is cloudy, with no rain forecast: the estimates of the MER Operating Entity were that, contrary to the previous year, in 2023, energy demand will grow by 4.8% in the region, and by 4.5% by 2024. And in this context, the impact of the rains, common to the Central American area, also knocks on the doors of the MER, which in 2022 saw injections to this energy market grow by 3.2%, but in what is recorded in 2023 it reports a reduction of 32%.

Predicted rainfall deficit for Costa Rica from October to December

In the case of Costa Rica, the generation expansion plan that ICE published in March 2023 estimated an increase in demand in this area of 1.9% in 2023, which would increase to 2.2% in 2024.

ICE authorities were consulted about the projections and approach to this panorama, particularly with the behavior of the dry season and the situation of the Arenal reservoir, but at the time of going to press they had not sent the responses.

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In that sense, we wanted to contextualize the strategy in the face of these phenomena, given that, in the demand expansion plan, which makes projections until 2040, it only mentions the word drought to refer to the situation in 1994, when it generated a use of thermal resources of 17% of total generation.

The current panorama is far from that situation; However, the use of 329,587 MWh of thermal generation reported by the DOCSE in the July report already represents the highest figure in the last decade in this area, and when there are still five months left in 2023.

However, there are already maneuvers by ICE authorities before the regulatory authority, the Autoridad Reguladora de Servicios Públicos (Aresep), to request adjustments in the model: for now, the request to vary the CVG from a quarterly calculation to an annual one has transcended, in the search of alternatives to try to distribute the coming increase over a period of several months, to avoid a focused impact in a short period.

Article translated and adapted from Read the original here.

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