Cleantech market in Costa Rica

In 2023, about 95% of the electrical energy output in Costa Rica was generated by renewable energy sources. Most of this energy comes from hydropower (74%). Additional sources are geothermal (13%), wind power (12.5%), solar (0.5%), and biomass (0.1%). The remaining is from backup plants which run on diesel and bunker.

According to data from the World Economic Forum published in June 2023, Costa Rica ranks third in energy transition in Latin America, with an effective energy transition score of 63.5, exceeding the global average of 56.3. This positions Costa Rica as 25th in the world, out of 120 countries analyzed.

Costa Rica has 99.4% electricity coverage of its territory, a similar rate as developed countries. ICE, the state-owned energy company, seeks methodologies and alliances, together with other interested institutions, to achieve 100% coverage. This is a goal that no other Latin American country has achieved to date.

Energy consumption in Costa Rica is increasing which is being driven by a booming tourism industry and in exports (precision and medical equipment, agricultural products, and food). This growth in demand presents a challenge for Costa Rica's energy system, which is under pressure to grow its generation capacity. This is further aggravated by the fact that almost two thirds of energy generation come from hydropower and climate change impacting water levels by lower water flow in the rivers of the country. In May 2024, rationings were announced by the Costa Rican Institute of Electricity (ICE). Although they were not implemented, the announcement highlighted the fragility of the hydropower system.

Key opportunities in Cleantech for Canadian companies in Costa Rica

Energy generation

In November 2021, the country approved Bill 22.009: "Law for the promotion of the distributed energy resources from renewable sources," allowing for the production and sale of renewable electricity. This encourages the development of renewable energy projects, particularly solar, and wind and geothermal.

Large companies commonly install a system to lower their operating energy costs. There is a need for advanced solar technologies and most of the panels are supplied by Asian companies at low prices. Solar energy systems are built and sold locally with the imported panels.

ICE is promoting the construction of electricity generation projects with solar, wind, biomass and geothermal projects underway. The Institute has and will continue to publish solicitations for more renewable energy to the private sector to contract more solar and wind capacity. These plans aim to add at least 675 megawatts of extra capacity in the next 8 years. Additionally, Costa Rica is keen to develop biofuels as another clean energy source.

Electric Vehicle (EV): The Costa Rican government is promoting electric transportation adoption through zero import duties for new cars. Transportation is the country's largest source of emissions and increased EV adoption will enhance the country's "eco-friendly" image. Biofuels is another clean energy the country would like to develop.

EV Charging stations have been installed throughout the country. The Costa Rican Electric Mobility Association (ASOMOVE) data from 2023 indicates there are 249 electric charging stations, of which 150 are semi-fast (they complete the charge in 10 hours) and 99 are fast (they allow you to reach 80% in one hour). The Electromaps site and app allows people to geographically locate these connectors, which are already installed in the seven provinces of the country. Despite increasingly better charging infrastructure, there is still room for growth.

Battery Storage: Long term accumulative batteries are the best prospect for Costa Rica market needs both for large electric cooperatives, ICE, and household/industrial sector. Newer battery technologies that can retain electricity for longer are needed to supplement solar solutions.

Waste Management: There are several identifiable opportunities for Canadian companies to participate in the goals of the National Policy for Comprehensive Waste Management, including the establishment of waste management technological parks and incentives that will be granted by the Government to companies implementing innovative technologies for comprehensive waste management. The country achieved concrete changes in reforestation, through incentive plans and programs, such as the Payments for Environmental Services (PES) in the 1990s. The program has been successful in promoting forest and biodiversity conservation; making Costa Rica the only tropical country in the world to have reversed deforestation. By 2016, the amount of land covered by forest has doubled to more than 50 percent of the country's total landmass. The success of renewable energy in Costa Rica is partially due to the pioneering of this program.

Notable challenges for Canadian companies in Costa Rica

Foreign Competition: Asian products and brands are dominating the solar power sector in Costa Rica, offering very low-cost options, hence making it hard to compete. Most companies selling solar systems are local companies that assemble Asian solar panels. Solar components such as ingots and wafers are expensive to produce, and China has the most economical options. This makes it difficult to diversify photovoltaic supply chains, but there are opportunities to service the growing number of farms and private energy producers.

Costa Rica has signed fourteen FTA agreements with countries in every region of the world, including US-Central America-Dominican Republic FTA (CAFTA), and with the People`s Republic of China. These agreements give companies from those markets preferential access to the Costa Rican market, presenting increased competition for Canadian companies.

Barriers to Entry: ICE holds a monopoly over electricity distribution and generation in Costa Rica. While there are exceptions for some public institutions, private companies (Law #7200), and co-operatives, ICE has total control over who can produce and sell electric power. This enables ICE to maintain anticompetitive practices and ensures its dominance in the production and distribution of electricity.

Entering the electricity sector is challenging, except for providing services or products related to renewable energy, particularly hydro and wind power technologies. Doing business with the Costa Rican government entities can be slow and bureaucratic due to excessive procedures and cautious decision-making.

Costa Rica business landscape

Costa Rica is a small country with a population of around 5 million. It is the only Latin American country in the list of the world's 22 older democracies. The country abolished its army permanently in 1949. It has one of the longest democratic traditions and political stability, which has helped it to be a leader in international business and tourism in the region. It is considered an upper middle-income country and has shown steady economic growth over the past 30 years. This growth resulted from an outward-oriented strategy, based on the openness to foreign investment and gradual trade liberalization, as well as its environmental policies and accomplishments, which have helped the country build its green trademark.

Costa Rica began its energy transition many years ago, aiming to create a national energy matrix with low levels of emissions and based on the use of clean and renewable sources. To achieve this goal, the country launched the National Energy Plan 2015-2030, and in February 2019, launched its National Decarbonization Plan. With these plans, Costa Rica commits to becoming a green economy with the long-term objective of having net zero emissions by 2050.

In April 2024, the government presented a National Policy for Comprehensive Waste Management 2023-2033. The main objective of this policy is to transform the comprehensive management of waste in the country. The goals include 1.3 kg of waste generated by inhabitant per day by 2033, that 25% of the waste generated be recovered by 2033, respectively, and for 50% fewer homes nationwide with inadequate waste disposal practices. In recent years Costa Rica's, waste generation rates (kg/inhabitant/day) have grown between 7.5% and 10%, with projections of a linear growth rate of 6% over the next 10 years.

In addition to the environmental policies and programs, Costa Rica benefits greatly from its geography. The country's mountain ranges, stretching from northwest to southeast, contribute to a high concentration of rivers, dams, and volcanoes, enabling substantial renewable energy production. According to 2020 data from the World Bank, Costa Rica is the sixth country in the world with the highest precipitation per capita, receiving an average of 2,926 mm of rainfall per year.

However, fossil fuel energy consumption continues to grow in the country, according to information from the Nation State Program (PEN) 2023 report, in eleven years imports of petroleum products grew by 41%. The main consumption is in the transportation sector, which has led to a constant increase in greenhouse gas (GHG) emissions. In 2022, 75% of all commercial energy used in Costa Rica is still imported in petroleum derivatives.

The country, through the public and private sectors, is increasingly betting on renewable energy sources, especially wind and solar. The private sector has increased the use of solar panels and both the public and private sectors have increased the use of wind energy generation.

Likewise, the legislation allows distributed generation, which opens the possibilities to increase the use of solar energy. Data from ICE show that distributed generators contributed 0.45% of ICE's electricity generation in 2023. This is equivalent to approximately 0.32% of the country's total electricity consumption and 0.07% of national energy consumption.

These data also show that, within the framework of a very low national use of solar energy, distributed solar generation (on consumers' roofs, etc.) is greater than centralized generation (in the National Electric System).

The final users of solar equipment are found in the residential, commercial, utility and to a lesser degree off-grid mostly in the inaccessible mountains and Cocos Island. However, the large producers of their own energy through solar panels are the large private companies.

Summary

Costa Rica is recognized worldwide for its commitment to the environment and for its dedication to the generation of electricity using renewable energy sources, such as hydro, geothermal, wind and solar. The country has made great efforts to consolidate an energy matrix based mostly on renewable energies and has also achieved ample coverage to supply the population with electricity.

For more resources and information on the Cleantech market in Costa Rica, please contact brandon.arias@international.gc.ca