As a result of a generous feed-in tariff (FiT), most solar photovoltaic installations in Central America in 2015 will occur in Honduras. The FiT, along with a new electricity law, have created major changes to the renewable energy sector in the country.
Honduras’s power sector is going through a period of transition. The power market has been controlled by state-owned utility Empresa Nacional de Energia Eléctrica (ENEE), which is responsible for all transmission and distribution. There is participation of private sector for power generation and ENEE also generated 23% out of the total 7.6TWh produced in 2014. Another 73% was generated by Independent Power Producers and 4% was purchased in the regional electricity market.
The Central American country approved a new electricity law that entered into force in July 2014 which will end ENEE’s monopoly and allow greater participation of private players in the power market. It also creates an independent regulatory agency ‘Comisión Reguladora de Energía (CREE)’. The new law was prompted by ENEE’s high level of debt (equivalent to 1.8% of the country’s $18.6bn GDP in 2013), late payments and power losses. The reform process is still ongoing.
Honduras has a total installed capacity of 1.8GW. In 2014, more than half (53%) of 7.6TWh total power generation was produced using oil & diesel. Large hydro represented 23% of generation, while other renewables (biomass, small hydro and wind) accounted for 16% of power production.
Honduras is part of the Central American Electrical Interconnected System (SIEPAC) and is connected to El Salvador, Guatemala and Nicaragua by transmission lines. Honduras is a net importer in the regional market.
Decree 70, published in June 2007, is the main source of renewable energy incentives. It establishes a 10% price premium to clean energy projects for the first 15 years of operation. It also grants import, income and sales tax exemption to renewable energy generators.
A feed-in tariff scheme offered contracts of $180/MWh for the first 300MW of PV commissioned before July 2015. Projects commissioned after that date receive $150/MWh.
As of the second half of 2015, a total of 387MW of PV capacity had been commissioned in the country, making it the second largest solar market in Latin America.
Honduras also uses auctions to contract new power capacity. In 2010, ENEE held a clean energy-only tender, which contracted a total of 250MW of capacity from 39 hydro, biomass, cogeneration and geothermal projects.
Score Summary
Honduras advanced 11 places in Climatescope 2015, with an overall score of 1.50 to reach 14th place. The country’s 2014 metrics were a 1.15 score and a 25th-place ranking.
In 2015, Honduras benefited from a notably stronger performance on the Growth Rate of Clean Energy Investments Indicator of Clean Energy Investment and Climate Financing Parameter II. The country also registered sharp improvement on the separate Local Investments Indicator of that parameter.
On Enabling Framework Parameter I, Honduras in 2015 lost ground, with a 1.06 score and a parameter ranking of 34th. In 2014, Honduras scored 1.29 on the parameter, ranking 20th.
Honduras in 2015 bested all Climatescope countries on Clean Energy Investment and Climate Financing Parameter II, with a 2.06 score. That result compares with a 0.64 rating in 2014, placing the country in 22nd place.
On Low-Carbon Business & Clean Energy Value Chains Parameter III, Honduras in 2015 scored 1.48, ranking it 27th. Its 2014 metrics were a 1.42 score and a rank of 30th.
On Greenhouse Gas Management Activities Parameter IV, Honduras in 2015 repeated its 20th-place ranking and its 1.56 score of the previous year.