Emergency Declared Amid Energy Shortage

On the heels of last week's nationwide blackout – the first such incident in five years – and smaller outages this week, the Executive Branch declared a state of emergency yesterday as it responded to what Presidency Minister Rodrigo Arias called an “energy crisis.”

The state-run Costa Rican Electricity Institute (ICE), which manages the nation's power supplies, this week announced electricity rationing will continue. Officials said they were forced into this because regulators shot down their proposed rate hikes Monday.

After rejecting the electricity institute's request for an average 23% rate increase, the Public Services Regulatory Authority (ARESEP) gave ICE two weeks to produce a detailed report on the April 19 blackout and asked it to better explain why an increase is necessary.

ICE president Pedro Quirós told reporters yesterday, “There will be outages until the rainy season begins.”

Unforeseen Crisis: Officials claim that an unusual combination of factors including a very dry year and equipment malfunctions caused the nationwide blackout.

Mónica Quesada | Tico Times

The electrical collapse came at the end of a particularly parched dry season that had Costa Rica's hydroelectric-dependent system running at full capacity, according to ICE. In fact, when the blackout occurred, ICE officials had just announced that they planned to begin emergency rationing because demand was about to exceed production. Reasons included 25% less production capacity because of a very dry summer that left little water to power Costa Rica's hydroelectric plants; a series of damaged turbines at oil-burning thermal plants; and Panama's decision last month to stop selling electricity to Costa Rica.

As rationing began, a circuit exploded in the heart of Costa Rica's distribution system at Lake Arenal in the Northern Zone, unexpectedly setting off a domino effect that sparked a nationwide power outage that began just after 8 p.m. and lasted more than three hours in some parts of the country.

After the apagón-induced chaos, in which traffic backed up for hours in San José and businesses across the country incurred major losses (Intel lost some 150,000 microprocessors on the production line, for example), the lights flicked back on and all eyes turned toward ICE, which oversees 80% of the country's electricity production and distribution.

Business leaders charged that the institute not only failed to keep the lights on, but also left the country in the dark by not giving any sort of a heads up.

“It was a surprise thing. From one minute to the next – boom – there's no electricity, for reasons not communicated to the community in general,” said Carlos Montenegro, the assistant director of the Chamber of Industries. “That showed the system is vulnerable. We're at the limit.”

ICE officials claim the rationing, as well as the blackout, were unforeseeable, and in a country where the electrical system covers 98% of the country – the second best coverage in all of Latin America – it is no wonder the darkness came as such a surprise.

“We're not used to this,” ICE engineer Luis Pacheco said, adding that when compared to its northern neighbor Nicaragua – where power outages were a routine part of life much of last year – Costa Rica isn't so bad.

Still, the institute has been scrambling to figure out a short- and long-term plan to feed the country's insatiable appetite for energy in coming years – a demand that is growing by 6% annually, and by as much as 10% in tourism boom towns, according to ICE – after a series of delays in infrastructure construction in recent years.

Minister Arias said the emergency decree will free up funds so ICE can finish as many as five thermal and hydroelectric plants now in the pipeline to provide the country with an additional 200 megawatts (MW) of power by the beginning of the next December-April dry season.

In the meantime, officials crossed their fingers in hopes that the rainy season, which showed its face with some showers this week, will begin in earnest.

On the Defensive

As ICE started to lick its wounds after the countrywide blackout, ARESEP tossed salt in them Monday when it rejected ICE's rate hike request.

“In the past, rates have been increased more than necessary, and that's why an institution as stable as ICE has such a low deficit,” said ARESEP Director Fernando Herrero.

Herrero suggested ICE take advantage of a six-month-old presidential decree giving the institute leeway to go into debt and invest more funds in infrastructure (TT, Oct. 20, 2006).

Pedro Quirós delivered his counterpunch Tuesday, saying no increase would mean more outages. He reminded Herrero that ICE has already spent the electricity sector's surplus for this year, and said ICE has been obtaining loans for infrastructure projects like a 128 megawatt (MW) hydroelectric project in Pirrís in the Southern Zone, among others, and requires more money to buy fuel to run its thermal plants. The ICE head visited the Legislative Assembly Wednesday in hopes of convincing lawmakers of the urgent need for rate hikes.

Herrero's wasn't the only finger pointed at ICE this week. The Union of Private-Sector Chambers and Associations (UCCAEP), which represents 41 private business chambers, released a scathing statement documenting its “devastating” effects.

The union estimated that the productive sector lost an estimated $10 million during the blackout, which hit the technology, textiles and plastic industries the hardest.

UCCAEP also chided ICE for muddled communication and for releasing a schedule for the rolling outages that wasn't met. After last week's blackouts, ICE punctuated the chaos with a mix of messages that were just as disorienting as darkness itself – first saying there would be more rationing over the weekend, then announcing such a step was unnecessary, and then implementing more rationing after all.

“Consumers don't have the adequate information to take necessary precautions in the face of electricity outages,” UCCAEP said in a statement.

Juan González, vice-president of the Chamber of Industries, estimated that in 2007 and 2008, the production sector will lose $400 million due to the country's energy limitations if something is not done.

ICE claims it needs $7 billion over the next 14 years to keep generation, production and distribution in line with the growing demand.

Since it was founded in 1949, ICE has built Costa Rica's electricity infrastructure to a capacity to generate about 2,000 megawatts. By 2021, the country must double that capacity to meet demand, according to ICE planners – and that means building in 14 years an amount equal to what it took 58 years to build.

ICE has promised another 500 MW of capacity by 2010, and the long-discussed Boruca Hydroelectric Project in the Southern Zone, as controversial as it is massive, is slated to come online in 2016 with another 631 MW of capacity (TT, May 26, 2006).

But first things first: ICE has to make sure it has enough electricity to get Costa Rica through this year.

ICE's Electric Planning Director, Gilberto De La Cruz, told The Tico Times that last week's crisis could have been avoided if plans to build a 190 MW oil-fueled thermal plant in Garabito, near Costa Rica's central Pacific coast, hadn't been delayed. The $170 million plant, for which ICE already bought property and obtained environmental permits, was set to be constructed last year. But because of complications in the bidding process, it won't open until 2009 at the earliest, according to De La Cruz.

Until this week, to try to meet the budding demand, ICE's contingency plan was to draw off as many resources as it can. Last year, ICE rented two new oil-fueled thermal plants; it recently launched an energy-saving campaign; has plans to rent portable oil-fueled thermal plants; and is considering a concession for a biomass plant. Also, it will concession out construction and operation of a 50 MW plant it would buy from the concessionaire after 20 years.

“Why so many different alternatives? Because we're looking for every possibility for energy,” ICE engineer Marianela Ramírez said.

Still, it is clear Costa Rica has become more dependent on oil-based energy sources for its electricity.

Last year, about 80% of electricity consumed in Costa Rica was hydroelectric, about 14% was geothermal and 6% was oil-based thermal. A very small amount is biomass- and wind-powered energy. This year, 20% of the electricity consumed in Costa Rica will be produced by oil-burning thermal plants, Ramírez said.

The increased reliance on oil-based energy is a departure from the country's age-old policy of using renewable energy sources, a policy the Arias administration has also stressed (TT, Nov. 3, 2006).

Tico Times reporters Amanda Roberson, Dave Sherwood and Katherine Stanley contributed to this report.