Guatemala is the second largest Central American power market, with a total generating capacity of 3.2GW. In 2014, it generated 9.8TWh of electricity, with 48% coming from fossil-based generation. Large hydro is the next most important source, representing 36% of total power produced. Other renewables (small hydro, biomass and geothermal) amount to 16% of generation.
Guatemala holds auctions to contract electric output and power, in which renewables may have a specific quota or compete with other technologies. In addition, the country offers a range of tax incentives to clean energy projects, as set by Decree 52-2003. It includes fiscal incentives for renewable projects and exempts generators from import equipment value added and net income taxes for 10 years. Additionally, net metering is also allowed in the country.
The power market in Guatemala is unbundled, with state and private players acting in generation, transmission, energy trading and distribution segments. The Ministry of Energy and Mining oversees planning for the electricity sector, while the National Electricity Commission (Comisión Nacional de Energía Eléctrica, or CNEE) is in charge of regulation Additionally, the Wholesale Market Operator (Administrador del Mercado Mayorista, AMM), a private organization, organizes the system’s dispatch based on marginal cost of generation.
Guatemala is connected via the Central American Electrical Integration System (SIEPAC) to Honduras and El Salvador. In 2014, the country exported 986 GWh to Central America, which represents a 106% increase compared to 2013 (478GWh). This increase can be attributed to the higher demand of neighbor countries and excess generation from biomass plants in Guatemala. Additionally, northern Guatemala is also interconnected to Mexico’s transmission system.
Since 2012, CNEE organizes tenders to contract power capacity where renewables may compete with all other sources. Distribution companies are the final offtakers. The first tender awarded a total of 393MW to small hydro (221MW), wind (101MW), solar (55MW) and biomass (16MW) plants, out of 623MW contracted for 15-year power purchase agreements. A second tender, in 2014, was set up to initially contract 250MW, open to all technologies. The auction contracted more than expected, a total of 322MW. This time, wind projects did not secure any contracts, as projects were not competitive enough, but other renewables (solar, biomass and small hydro) were awarded 116MW out of 322MW contracted.
The auctions have been the main driver for renewable energy investment in the country, resulting in a record year for clean energy committed funds: in 2014, a total of $702m was invested in biomass, solar, small hydro and wind plants.
In 2015, the first auctioned projects started to come online. The country’s first wind farm, a 53MW plant, was commissioned in the Guatemala department. Additionally, two large-scale PV plants (30MW and 50MW) were also commissioned in the Santa Rosa department, increasing Guatemala’s renewable share. The addition of new renewable capacity and future pipeline of projects should have a positive impact on reducing electricity prices, decreasing them in the long term.
Score Summary
Guatemala’s 1.40 overall score in Climatescope 2015 elevated it to 18th place, 11 levels above its 2014 ranking. Its 2014 overall score was 1.10.
The country’s ranking change was propelled in major part by improvement on its Growth Rate of Clean Energy Investments Indicator of Clean Energy Investment and Climate Financing Parameter II.
On Enabling Framework Parameter I, Guatemala finished 19th in 2015, a two-place improvement from 2014. Its 2015 and 2014 Parameter I scores were 1.34 and 1.28, respectively.
On Clean Energy Investment and Climate Financing Parameter II, Guatemala vaulted to fourth place in 2015 from 25th in 2014. Its 2015 Parameter II score of 1.56 compares with 0.61 recorded for 2014.
On Low-Carbon Business & Clean Energy Value Chains Parameter III, Guatemala in 2015 matched its 2014 score of 1.22. Its Parameter III rankings were 35th in 2015 and 34th in 2014.
On Greenhouse Gas Management Activities Parameter IV, Guatemala registered a score of 1.45 in both 2015 and 2014, ranking 23rd in 2015 and 21st in 2014.