Drought to Impact Electric Rates

Weather this rainy season has been pleasant -- too pleasant to fill the country's power needs. Last Saturday's edition of the nation's leading newspaper, La Nacion reported that low levels of water in hydroelectric dams is causing a rationing of water and the increased use of diesel- and bunker-powered generators.

This will cause electrical rates to rise, starting immediately so as to spread the increased cost of imported fuel over several months, lessening the impact on wallets. Already this year, nearly 90% of the projected 2011 allotment of fossil fuels has been used.

The purchase of additional fuel by a country that prides itself in forging ahead to zero carbon emissions underscores the Achilles heel of hydroelectric generation: the weather. The last two years were generous in rainfall but this year the gush slowed.

It also shows the need for less ambitious but more reliable use of alternative generation of electricity, such as geothermal and wind, that can be more comfortably financed by the private sector than construction of expensive dams. (See past articles regarding advances in this sector.)

A geographic factor is prominent in the mix as well: Drier weather has been experienced mostly in areas of the dams, not universally across the country. While the Central Valley has experienced 17% less rainfall, the Central Pacific has had 36% more and Limon province is 3% higher.

In 2009, fossil fuel generated only 5% of the total electricity consumed during the year. Based on past consumption, ICE, the government-owned power company, laid in supplies to cover past use -- and now must buy more.

Even then, ICE engineers do not find prediction easy as far as cost goes. La Nacion points out ICE's 200-megawatt plant at Garabito in Puntarenas province uses bunker (fuel oil) when it goes on line and is cheaper than smaller diesel-powered plants.

Update: The Comptroller General's Office has rejected a private electricity contract, but this one another dam. It is the Chucas Dam near Atenas, as small rural town northwest of San Jose.

The $107.5 million, 50 megawatt facility is proposed on the Grande de Tarcoles River by the Italian firm Enel Green Power and will sell its electricity to the state-owned power company ICE. The firm will generate power under concession for 20 years before turning the dam over to ICE.

Some 78% of the country's electrical power currently comes from ICE's dams as opposed to only 17% by other means, with two more hydroelectric projects under way--but delayed. ICE engineers seem to be mesmerized by the lure of bigger projects, perhaps as a bureaucratic way to keep their monopoly of electric generation.

Analysis: But this lack of innovation has its cost in increased electrical bills. The need for the private sector to fill the gap is clear. It will mean passage of the bill languishing in the Legislative Assembly to encourage private participation in fulfilling this country's hunger for more electricity.