Energy investment in El Salvador has totaled $2.5 billion in the last decade

Energy investment in El Salvador has been significant during the last decade. The Central American nation seeks to modernize its energy matrix and increase the production of green energy to meet future needs.

Energy investment in El Salvador has brought about positive change

El Salvador’s energy matrix has not only grown, but it has also changed. Investments in the country’s power grid during the last decade have exceeded US $2.5 billion. This has enabled significant energy generation growth, especially in terms of renewables.

Some of the investment in El Salvador has been made by: Pacific Energy (Energía del Pacífico), with US $1.15 billion; AES, with almost US $680 million; NEOEN, with another US $300 million; MERELEC Group, US $97.5 million; and DELSUR another US $50 million, among others.

In constructing all the necessary infrastructure for its power generation plant, its floating storage and regasification unit (FSRU), and all the transmission infrastructure associated with its project, Energía del Pacífico invested US $1.15 billion. This enabled the company to initiate operations last May.

On the other hand, the multinational AES invested more than US $180 million in power generation between 2018 and 2021. In addition, the company has invested almost US $500 million in energy distribution since 2010. This amount includes an annual investment that would add more than US $59 million at the end of 2022.

NEOEN’s investment, which began to participate in the country’s energy grid in 2014, amounts to US $300 million in four solar plants. These facilities are expected to operate sustainably for the next 30 years.

DELSUR has made an energy investment in El Salvador of US $50 million in the last five years. This year alone (2022), the company’s investments in the power grid will exceed US $14 million. Additionally, DELSUR expects to add another US $50 million between 2023 and 2026. Also, MERELEC Group has invested US $97.5 million in the last five years.

Between January and July of this year, the energy produced in El Salvador reached 3,699.3 GWh. According to the latest statistical report from the Transactions Unit (UT), this represents an increase of 19.3% compared to the same period last year. Adding that figure to the amount of energy imported in the same period (433 GWh), a total of 4,132.5 GWh was injected into El Salvador’s national energy grid. During this time, the country’s total electricity demand was 3,908.67 GWh. This means that there was a surplus supply of 223.83 GWh.

“Many times, people may incorrectly conclude that there is a shortfall in energy production by seeing that energy imports are greater than exports. Yes, you have a net importation of energy, which is a characteristic or a recurring pattern in our market that has not changed. Still, it is an economic issue, not because El Salvador cannot generate that energy,” noted the general manager of NEOEN, Paolo Cartagena.

He further explained that this means that there are a good number of contracts in which the participants agree to make a specific energy contribution to the system but not necessarily to produce it themselves. “Then, if there comes a time when it is cheaper to import power than to generate it, they will make that economic transaction, even if they can generate the energy for themselves,” he added.

In 2021 alone, El Salvador imported 1,317 GWh and exported 134 GWh, according to the UT Labor Report for that year.

In El Salvador, the energy system always manages a reserve with more capacity than peak demand. The surplus even allowed for the export of 154.81 GWh during the first seven months of 2022.

Renewable energies with the greatest power

UT statistics record that of the total energy produced this year in the country, up to July, 72% has been renewables: 940.3 GWh (25.4%). This figure corresponds to hydroelectric power; 882.5 GWh (23.8%), and includes geothermal energy; 426.8 GWh (11.5%), and biomass; 320.9 GWh (8.6%).  Also included are solar energy with 82.6 GWh (2.2%) and wind power.

Although at first glance, energy investment in El Salvador reveals that thermal energy is the one that registers the highest production, with 1,046.1 GWh, the percentage of total generation remains at 28.2%.

“Taking 2017 as a reference, the energy grid that feeds residential dwellings in El Salvador had 59% that came from renewable energies, and as of 2022, it has become almost 73%. There has been an increase, and I think we are walking on the renewables path. I believe that the country has the potential to increase (that percentage) in the long term, especially in the area of solar energy. With sufficient energy investment in El Salvador in solar infrastructure, 30% of the total grid supply can come from that resource”, expressed the director of operations of Maya Power, Alfonso Sampera.

Some improvements are needed

El Salvador could improve some areas, and others in which greater attention is required include an increase in the production of renewable energies and the implementation of energy storage systems. The country must also venture into the production and use of green hydrogen, promote electromobility, and invest in the modernization and digitalization of the electrical grid. Furthermore, the country must develop tax incentives and promote financing tools that facilitate private-sector investment to acquire the necessary technology to minimize non-renewable energy generation.

Paolo Cartagena from NEOEN stressed that updating the industry’s regulatory framework is also necessary to encourage more significant energy investment in El Salvador. The country should do this to ensure that the industry’s growth proceeds in an orderly fashion. This is because there are many private solar panel installations, for example. This energy for self-consumption is not being accounted for when assessing the total capacity of the national energy grid.