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Digital Readiness in the Central American Energy Sector

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Digital Readiness in the Central American Energy Sector Implemented by: In cooperation with: Digital Readiness in the Central American Energy Sector Benchmarking and Preparing for a Digital Future Digital Readiness in the Central American Energy Sector Benchmarking and Preparing for a Digital Future Published by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Registered offices Bonn and Eschborn, Germany “Renewable Energies and Energy Efficiency Program (4E) in Central America” GIZ Office San Salvador Boulevard Orden de Malta, Casa de la Cooperación Alemana, Urbanización Santa Elena, La Libertad, El Salvador, Central America T +503 2121-5145 F +503 2121-5101 E [email protected] I https://www.giz.de/en/worldwide/13518.html I www.sica.int/energias4e/ As at July 2020 Design and layout Mabel Orellana (Freelance Consultant), Digna Argueta, Martha Castillo and Neimy Giron (GIZ) Photo credits NASA on Unsplash: page 3 Authors Stefan Haid, Felix Heieck and Martin Hoyer (Roland Berger) Co-authors Ana Lucia Alfaro, Tanja Faller, Isabel von Griesheim and Tatiana Orellana (GIZ) Editing Helen S. Carpenter (RE/MAX One Realtor) and Karla Hernandez (GIZ) GIZ is responsible for the content of this publication. On behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ). 2 Digital Readiness in the Central American Energy Sector Benchmarking and Preparing for a Digital Future Foreword entral America is a region of opportunity and Regional) support the creation of a solid electrical Cthis is also a reality reflected in the energy field. infrastructure, represented by the Central American Electrical Interconnection System (SIEPAC, Sistema The digital readiness study focuses on the current de Interconexión Eléctrica de los Países de América energy scenario of the countries that constitute Central). the Central American Integration System (SICA, Sistema de la Integración Centroamericana), their SIEPAC is considered a regional public good initiatives and adaptation to global energy trends through which 90.7% of population gained access as well as on the identification of opportunities for to electricity in Central America in 2018, providing the digitalization of the Central American electricity energy as a fundamental right for the economic and sector. social development of the region, while promoting energy transition in SICA member countries. Talking about the regional electricity sector implies highlighting some factors that allow driving regional Furthermore, the alignment of regional and actions, e.g. the abundance of resources available in international agreements has permitted Central Central America that enable an exponential growth America to advance strongly in the implementation in the deployment of renewable energy. In 2018, of sustainable actions to achieve the Sustainable 75% of the electricity generated in Central America Development Goals (SDGs) and the Nationally came from renewable sources. Determined Contributions (NDCs), that demonstrates a deeply embedded process of a An absolutely essential factor is the institutional regional energy integration. framework based on the Protocol of Tegucigalpa adopted by the Excecutive Council of SICA, the Under this approach, and in response to the System's highest legal-political body, that addresses global realities such as the challenges of the regional common challenges. Fourth Industrial Revolution, the adoption and implementation of new emerging digital In this context, the Central American Sustainable technologies are of great importance for SICA Energy Strategy 2030 (EESCA, Estrategia member countries to consolidate the region’s Energética Sustentable Centroamericana 2030) sovereignty and energy independence. Therefore, and the Framework Treaty for the Central American we are working for a Digital Central America and Electricity Market (MER, Mercado Eléctrico a Digital SICA. 3 Digital Readiness in the Central American Energy Sector Benchmarking and Preparing for a Digital Future The relevance of this study is demonstrated in institutions and governance as well as improving the joint support of the Deutsche Gesellschaft für organizational culture in the face of digitalization. Internationale Zusammenarbeit (GIZ) GmbH that implements the Renewable Energies and Energy The digitalization of the electricity sector provides Efficiency Program (4E) in Central America, on a window of opportunity to foster a diversified behalf of the German Federal Ministry for Economic regional energy matrix as well as the creation of Cooperation and Development (BMZ, for its specific benefits for the population, as the center and acronym in German), in order to increase energy main subject of development. The implementation efficiency and grid integration of variable renewable of new digital technologies in the energy transition energies. is necessary to boost the regional digital vision 2030 and progressively build the Digital Central America The study was conducted thanks to the contributions we aspire to. of various actors in the value chain of the Central American electricity sector. The aim is to release, in We believe in integration as a strategic instrument a holistic manner, a series of recommendations for for development, thus we work every day to decision-makers, to encourage them to continue on leverage and enhance the region of opportunities the path towards improving framework conditions, that we already are, a Central America that leaves and subsequently to promote the use of digital no one behind, in any field. technologies in the energy sector. The most decisive factors are focused on strengthening five Vinicio Cerezo fundamental axes such as digital infrastructure, General Secretary human capabilities, investments and capital, public President of Guatemala (1986-1991) 4 Digital Readiness in the Central American Energy Sector Benchmarking and Preparing for a Digital Future Table of Contents Foreword ������������������������������������������������������������������������������������������������������������������������������������������������������������������������ 3 Abbreviations . .12 1. Introduction . .16 2. Approach and Methodology . .17 2.1 Desk Research . .18 2.2 Participants and Research Instruments �������������������������������������������������������������������������������������������������������18 3. Assessment Framework . .18 3.1 Global Trend Analysis . .18 3.1.1 Megatrends . .19 3.1.2 Global Energy Trends ����������������������������������������������������������������������������������������������������������������������������20 3.1.3 Energy Parameters . .22 3.2 Use Cases, Digital Technologies, and Framework Conditions . .23 3.2.1 Use Cases . .24 3.2.2 Digital Technologies . .24 3.2.3 Framework Conditions that Enable Digitalization . .26 3.3 Risk Analysis . .26 4. Current State of Digitalization in the Energy Sector . .28 4.1 Costa Rica ����������������������������������������������������������������������������������������������������������������������������������������������������������30 4.1.1 General Information about Costa Rica ����������������������������������������������������������������������������������������������30 4.1.2 Impact of Global Energy Trends on Costa Rica . .33 4.1.3 Outlook and Improvement Areas for Costa Rica ����������������������������������������������������������������������������34 4.1.4 Enabling Framework Conditions in Costa Rica . .37 4.1.5 Digital Technology Use Cases in Costa Rica . .43 4.2 El Salvador . .47 4.2.1 General Information about El Salvador . .47 4.2.2 Impact of Global Energy Trends on El Salvador �������������������������������������������������������������������������������50 4.2.3 Outlook and Improvement Areas for El Salvador ����������������������������������������������������������������������������51 4.2.4 Enabling Framework Conditions in El Salvador �������������������������������������������������������������������������������54 4.2.5 Digital Technology Use Cases in El Salvador . .59 4.3 Guatemala . .63 4.3.1 General Information about Guatemala . .63 4.3.2 Impact of Global Energy Trends on Guatemala �������������������������������������������������������������������������������66 4.3.3 Outlook and Improvement Areas for Guatemala ����������������������������������������������������������������������������67 4.3.4 Enabling Framework Conditions in Guatemala �������������������������������������������������������������������������������70 4.3.5 Digital Technology Use Cases in Guatemala �������������������������������������������������������������������������������������75 4.4 Honduras . .79 4.4.1 General Information about Honduras . .79 4.4.2 Impact of Global Energy Trends on Honduras . .82 4.4.3 Outlook and Improvement Areas for Honduras . .83 4.4.4 Enabling Framework Conditions in Honduras . .86 4.4.5 Digital Technology Use Cases in Honduras . .90 5 Digital Readiness in the Central American Energy Sector Benchmarking and Preparing for a Digital Future 4.5 Panama . .94 4.5.1 General Information about Panama . .94 4.5.2 Impact of Global Energy Trends on Panama . .97 4.5.3 Outlook and Improvement Areas for Panama . .98 4.5.4 Enabling Framework Conditions in Panama �����������������������������������������������������������������������������������100 4.5.5 Digital Technology Use Cases in Panama . 105 4.6 Nicaragua ��������������������������������������������������������������������������������������������������������������������������������������������������������109 4.6.1 General Information about Nicaragua . 109 4.6.2 Impact of Global
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