Electric Sector in El Salvador 

July, 2019 -

At the end of the 19th century, mechanisms that transformed natural resources into energy began. The conception of electricity as a private good, which fosters economies of scale and the promotion of transmission and generation megaprojects in the sector, consciously and interestedly omit sustainable energy alternatives from a social and environmental point of view. The causes that leave aside this type of projects are based on the lack of economic profitability for investment interests.

The SIEPAC project (System of Electrical Interconnection of the Countries of Central America), represent an advance since interconnections are added to the national networks of Panama, Costa Rica, Nicaragua, Honduras, El Salvador and Guatemala, which allows the exchange of electricity and a more efficient dispatch of the generation systems of the countries, being one of its main objectives that the countries of the region have a safer transmission system and a reduction in the cost of generation. This reduction would be applicable to the reduction of renewable energy costs to a better integration of these technologies in the matrix and an increase in the transmission capacity between countries.

The energy matrix is a structure of energy flows in all stages from primary production to final energy consumption, encouraging the diversification of the national energy matrix, promoting and motivating the use of renewable energy sources and the incorporation of new fuels is one of the country’s main challenges. As of this date, the energy supply comes from the energy referred to as primary, which should be understood as that obtained in nature directly or after an extraction process. Currently, our country has primary energy from water resources, geothermal resources, plant waste and oil imports, being this last, the main source of energy, and it is from oil that energy products are obtained for daily consumption. On the other hand, secondary energy comes from the different transformation centers whose destination is the various consumer sectors, such as diesel, gasoline, electricity, bunker and GLP. El Salvador, like the rest of the countries in the region, has an energy matrix that is highly dependent on petroleum derivatives, which applies both to the generation of electricity and to various sectors such as industry, commerce, services and transportation, and residential users.

The diversification of the energy matrix faces great challenges, such as ensuring a timely supply at a reasonable cost, giving greater importance to renewable energy that implies respect for the environment. Among these, the reduction of consumption through the implementation of energy efficiency measures and the identification of resources through studies that determine to reduce dependence on petroleum derivatives and allow the proper planning of new projects under social equity precepts and reduction of energy dependence. They are expected to be viable, accompanied by appropriate regulatory legal frameworks that allow their development, motivate private investment and guarantee the energy supply to end users.

The promotion of large-scale renewable energies implies environmental, technical and financial viability, which guarantee concrete benefits, since greater ease of evacuating energy is part of a regional strategy to introduce these generation technologies. However, there are two main challenges to overcome, the main and most important are local investments, and short and medium term projects with a national focus.

The SIEPAC line was built to have an initial transmission capacity of 300 megawatts; however, this line has not been fully exploited as long as the capacities of each country’s networks are not adjusted, since to date, there are countries whose network could not receive or transfer these powers of regional flows and inject their individual consumption simultaneously.

It is estimated that the region’s demand for energy is increasing and will require the installation of 7,000 MW of energy by the year 2020. El Salvador plans to integrate renewable energy sources into its national energy plans, such as the new generation project of 355 MW based on liquefied natural gas, providing clean and efficient energy, in a plant that will be located in the Port of Acajutla, Department of Sonsonate. The project, in addition to injecting cheaper energy into the system, will offer the country the opportunity to lead the regional market, being the largest investment in the history of the country. This project is one of those that will be interconnected with the SIEPAC in the substation of Ahuachapán.

To continue advancing in an energetically independent region, there is still a long way to go. By promoting the protection of the environment and the realization of renewable energy projects, not only should clean energy be considered, since such protection must guarantee benefits to the countries, well-being to the communities involved, job opportunities and a series of actions that contribute to the human and productive development of the areas close to the projects, which contribute to the country’s energy sustainability.

Likewise, it becomes necessary to strengthen the normative role of the State, which not only implies reforms in the applicable legal regulations and to maintain incentives for investment in projects based on the use of renewable energy sources. This in order to contribute to the protection of the environment, such as the granting of exemption from import duties, according to installed capacity, the payment of income tax and all kinds of income taxes coming directly from the sale, such as tax incentives under the framework of the Law of Tax Incentives for the Promotion of Renewable Energy in the Generation of Electricity and Technical Regulations of renewable source projects. At the same time, the reorientation of energy policy is necessary, whose objective is to ensure access to energy markets, as well as trace the sustainable energy strategies that contribute to the social and economic development of the country. This is to be achieved by participating in the consolidation of a regional electricity market that allows long-term firm contracts between countries and interconnection to the regional transmission system through the development of regional plants that allow access to economies of scale in plants of generation at a lower cost located in countries of the region.


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