Panama: Growing supply strains national electric network
Rapid economic growth in Panama is expected to create opportunities for investment in the utilities sector, with an increasing need for both electricity production and distribution facilities.
According to the Secretary of Energy, demand for electricity increased at an annual rate of 5.1% between 2000 and 2011, nearly keeping pace with GDP growth of 6.7% per year over the same period. While usage is up, Panama still generally enjoys more than sufficient supply. During the first two months of 2012, peak demand hit a high of 1402 MW on February 25, at which point the system had an extra 600 MW available.
However, because Panama relies heavily on hydroelectric capacity, water shortages can have an adverse effect on supply. In May, the government was compelled to apply special rationing measures to public and private facilities due to lower-than-average seasonal rainfall.
The electricity sector faces several other challenges, including relatively high prices, sporadic blackouts and a transmission network in need of upgrade and expansion. Indeed, President Ricardo Martinelli recently told local press that the transmission network poses a “very serious problem” for the electricity market, following a fire-induced blackout in Coclé that strained the national network. The president also announced that a bidding round for new transmission projects has been planned for June.
The extent of the network overload problem has already been analysed by ETESA, the national transmission company. According to its projections, certain 230-kW transmission circuits will be subject to overloads ranging from 1-8% in 2013, with this figure expected to rise to 3-8% in 2014. During 2012, ETESA placed restrictions on parts of the network, in particular along the Veladero-Panamá line, to avoid overloading. ETESA’s long-term 2012-26 budget for expanding the transmission network amounts to $483m, with $138m worth of projects expected in the first five years.
While increasing demand may be pushing the transmission system to its limits, the efficiency of the network has improved over the past decade, as total energy losses from the generation, transmission and distribution of power has decreased from 23.5% of net production in 2000 to 14.5% in 2010 and 2011.
Total generation capacity now stands at 2391 MW, relatively evenly split between hydroelectric and coal- and natural gas-fired facilities. ETESA forecasts show that energy consumption is expected to rise an average of 5.5-5.8% from 2012 to 2026, while generation capacity is anticipated to grow at a slightly slower rate of 5.2-5.4% during the same period. Although the private sector will play a major part in the expansion of demand, so too will numerous large-scale public works being completed by the government, such as the new Panama City Metro and expansion of the Panama Canal.
Meanwhile, a restructuring of the supervising and regulating authorities is anticipated for later this year after the federal government approved the creation of the Ministry of Energy and Mines in October of 2012. The new ministry, which will combine the existing Secretary of Energy with the Office of Mineral Resources, will consolidate the work of both organisations as Panama prepares to auction additional transmission and generation projects, as well as open the country up to investment in the exploration and exploitation of hydrocarbons and mineral resources.
After expanding at double-digit rates of 10.8% and 10.7% in 2011 and 2012, respectively, real GDP is expected to rise by 9% in 2013 according to IMF projections, while medium-term forecasts show economic growth gradually falling to a range of 6-6.5%. Panama’s electricity market will likely follow suit, at once straining the national transmission network and creating investment opportunities as the sector strives to maintain pace with expanding demand.