RFI__USAID-ES-18-01__Attachment_3.pdf

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CENTRAL AMERICA

REGIONAL CLEAN ENERGY INITIATIVE

FINAL REPORT – Submitted December 18, 2017

MORGANA WINGARD FOR USAID

USAID.GOV USAID CENTRAL AMERICA REGIONAL CLEAN ENERGY INITIATIVE FINAL REPORT | 2

CENTRAL AMERICA REGIONAL CLEAN

ENERGY INITIATIVE

Final Report

JULY 2012 – DECEMBER 2017

Prepared for:

USAID/El Salvador

Prepared by:

Tetra Tech ES, Inc.

USAID Central America Regional Clean Energy Initiative

1320 N. Courthouse Road

Arlington, VA 22201

USAID Contract Number Contract AID-596-C-12-00001

Disclaimer The views expressed in this publication do not necessary reflect the views of the United States Agency for International Development or the United States Government

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CONTENTS

1 EXECUTIVE SUMMARY

2 INTRODUCTION

2.1 Project Background and Rationale

2.2 Report Structure

2.3 Program Approach

2.3.1 Geographic Coverage

2.3.2 The Team

2.4 Implementation Strategy

2.4.1 Relationship and Interaction among the Activities

2.4.2 Transfer of Know-How

2.4.3 Alliances and Partnerships

2.4.4 Sustainability

3 PROGRAM ACTIVITIES AND RESULTS

3.1 Improved Border Safety and Working Conditions

3.2 Improved Community Services, Quality of Life, and Access to Electricity

3.3 Improved Investment Climate for Renewable Energy Development

3.4 Building Government Capacity to support the Implementation of National Energy Efficiency

Programs

3.4.1 Regional

3.4.2 Panama

3.4.3 Costa Rica

3.4.4 El Salvador

3.5 Designing and Promoting Financial/Fiscal Incentives to Increase Investments in Energy Efficiency

Programs

4 IMPLEMENTATION PROBLEMS ENCOUNTERED AND ACTIONS TAKEN TO RESOLVE

5 LESSONS LEARNED

6 RECOMMENDATIONS FOR THE FUTURE

ANNEX A. ACTIVITIES IMPLEMENTED DURING THE LIFE OF THE PROJECT TASKS 1-5

ANNEX B. PERFORMANCE INDICATOR RESULTS

ANNEX C. COMMUNICATIONS

ANNEX D. NEWS ARTICLES REFERENCED

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1 EXECUTIVE SUMMARY

Energy access, quality of life, and citizen security are some of the key drivers of emigration from Central

America to the United States. The Central America Regional Clean Energy Initiative was a five year, three-month program, funded by the United States International Development Agency (USAID), and implemented by Tetra Tech, aimed at increasing renewable energy in the Region and increasing energy access across the Northern Triangle (El Salvador, Guatemala, Honduras) – thereby improving quality of life and security in the area.

The USAID Initiative focused on improving the regional and national electricity markets, which has the potential to provide energy security while at the same time increasing resiliency to natural disasters and improving system reliability through a diversified, interconnected and reliable energy matrix, and at the local level, activities aimed to provide access to small-scale renewable energy solutions to improve the quality of life of the local populations and at the same time expand access to a reliable, independent energy source where prior to the USAID intervention there was, at best, limited power supply.

Increasing Access to Electricity and Improving Northern Triangle Renewable Energy and

Energy Efficiency Installations

In the Northern Triangle, the USAID Initiative focused on bringing sustainable energy efficiency and renewable energy solutions to the area to improve public safety, quality of life, and to reduce electricity costs. These included providing solar PV systems, solar thermal water heating systems, energy efficient street lamps, and energy efficient indoor and outdoor lighting to communities, industries, border facilities, hospitals, and schools. To ensure sustainability of these systems, the USAID Initiative also provided training on operation and maintenance of the systems along with best practices to optimize efficiency of the technologies to the people and communities that will be directly benefitting from these clean energy solutions. An estimated 400,000 people will indirectly benefit from the implementation of these solutions.

TABLE 1. KEY BENEFITS FROM THE RENEWABLE ENERGY AND ENERGY EFFICIENCY INSTALLATIONS

AROUND THE NORTHERN TRIANGLE

Activity Benefit to the Population Energy efficient lighting, air conditioners, solar PV system at Northern Triangle borders

Faster border crossing times

Safer conditions at night for border employees and truck drivers, especially where cargo is searched

Reduced electricity costs and improved lighting in border offices and dormitories

Better working conditions for more than 600 employees due to the safer conditions, better lighting, and more efficient air conditioners

Solar thermal water heaters in hospitals

At the hospital in Ahuachapan, the hospital can now treat 20 times more patients with hot water therapy

At the hospital in Suchitoto, over 500 patients will now be able to receive hydrotherapy services with hot water, prior to the USAID Intervention there was no hot water at the hospital

Renewable energy in communities

Over 200 families now have access to electricity – including lighting, cell phone charging, and listening to music on the radio

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Several schools in these communities now have outdoor lighting in recreational areas, allowing them to hold events at night

Renewable energy and energy efficiency in agro-industries

Improved efficiency of agro-processing equipment

Energy savings resulting in money to be reinvested in the surrounding communities

Improved working conditions for employees with improved lighting and new efficient air conditioners.

Renewable energy in universities

More than 2,000 students with access to hands-on renewable energy tools

Increased awareness of renewable energy use, impacts and benefits

Energy savings that can be used by the university to invest in improving facilities or in adding new programs/learning tools

Renewable energy in museums

Energy savings of up to an estimated $10,000 annually reinvested in providing museum access to students from schools without the resources to visit the museum

Promoting Regional and National Electricity Market Development and Renewable Energy

Penetration

At the regional and national level, the USAID Initiative activities supported the creation of an enabling environment in the electricity sector which resulted in increased investment in renewable energy, lower and more competitive electricity prices, economic growth, new workforce development, and reduced greenhouse gas emissions. At the start of the Initiative, renewable energy installed generation capacity was 5,184 MW which increased during the project period to 8,130 MW resulting in a more resilient, diversified, and sustainable energy matrix1.

Since the USAID Initiative began, transactions in the regional electricity market among the six countries in Central America have increased 8 fold, from 308 GWh in 2012 to 2500 GWh in 2017, as can be seen in the figure below that shows the transactions in the MER since the start of its operations in 2002:

1 Renewable energy data from the 2010-2015 CEPAL Report – Statistics from the electricity subsector in the

Central America Integration System (SICA)

1.196

1.068

276 290

368 336 344 308

1.446 1.368

1.000

1.500

2.000

2.500

3.000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

MER - Total Electricity Transactions in GWh/year 2002-2017

Project period 2012-2017

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Transactions in 2017 represent an increase of 650% compared to 2010, which was defined as the baseline, well above the expected goal for the project, which was 300%.

While the energy transactions in the regional market experienced a sharp increase, the cost of electricity declined drastically during the life of the Initiative, as seen in the figure below. Taking the period from 2013 (year RMER was implemented) to 2016, there was a 182% in transactions (690 GWh to 1947 GWh) and a decrease in the average prices in the regional electricity market of approximately

60% ($170.5 / MWh at $63.7/MWh)2.

Although international oil prices reduced the price of electricity in the period, the amount of renewable energy transacted in the regional electricity market also played a direct role in reducing prices3.

TABLE 2. KEY BENEFITS FROM THE INTEGRATION OF NON-CONVENTIONAL RENEWABLE ENERGY

INTO NATIONAL MARKETS AND THE STRENGTHENING OF THE REGIONAL ELECTRICITY MARKET

Activity Benefit to the Population

Promoting the integration of non-conventional renewable energy to the national markets

Almost 3 GW of renewable energy installed in the Region from 2011 to 2015 resulting in more diversified electricity sources and cleaner energy generation with reduced CO2 emissions.

Estimated US$7 billion investment in renewable energy, creating employment and driving economic growth

Lower electricity tariffs for end-users, resulting from new generation of electricity at internationally competitive prices.

More stable electricity prices due to lower exposure to the high volatility of the international oil market.

2 Average prices in the MER. Source: Annual Regional Electricity Market Reports 2014, 2015 y 2016 , CRIE 3 “In 2016, the average Price of electricity in the regional electricity market decreased 25% with respect to 2015, of which 35% of the energy integrated into the grid was from hydroelectric sources, which influenced the low prices that were determined.” 2016 MER Annual Report, CRIE

1947170,5

160,2

85,1

63,7

2013 2014 2015 2016

MER - Total Electricity Transactions (GWh/year) and Prices (US$/MWh) 2013-2016

Transactions (GWh) Prices (US$/MWh)

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Improved capacity to implement and operate new, renewable technologies

Strengthening of the Regional Electricity Market governance and regulation

Improved institutional capacity at the regional level increases confidence of the end-users in the abilities of the regional entities to provide effective solutions and reliable energy access

Increased regional transactions resulting in net economic benefits– which was estimated to be US$135 million from 2014 to 20154

Improved energy security for the Central American population, resulting from greater availability of energy sources and increased opportunities for electricity supply improving preparedness for natural disasters and energy shortages.

Reduced electricity price volatility, which indirectly results in more stable tariffs for end-users.

From 2014 to 2016 Salvadorans saved US$282.5 million from the regional electricity market due to competitive energy prices.5

Reduced CO2 emissions by an estimated 40% to 50%, corresponding to a reduction of 23 to 26 million tons of CO2e once the projects are operational (according to a 2017 study conducted by the IDB).

Increased economic growth resulting in a GDP increase of between US$286 and US$980 million. Indirectly this results in higher income for workers and higher tax collection

Workforce development and increased capabilities in electricity market integration and increased opportunities to expand market integration to markets outside of the region – like Mexico and Colombia.

Building Capacity in Energy Efficiency and Renewable Energy

At the regional level the USAID Initiative supported the development of regional energy efficiency standards to facilitate importation and exportation of appliances in the region with common minimum energy efficiency requirements. The USAID Initiative also supported the development of energy efficiency standards and the processes for their implementation at the national level in Panama, Costa

Rica, and El Salvador. The implementation of these standards at the regional and national levels will result in facilitated trade across borders, an increase in energy efficiency and energy savings, and a reduction in greenhouse gas emissions.

As part of the project, support for the development of two credit lines was also provided to two banks that are specifically for the funding of renewable energy and energy efficiency projects. These credit lines will encourage small businesses to invest in more energy efficient and renewable energy technology which will improve efficiency of these businesses and reduce electricity costs. Since the launch of one of the credit lines, the bank has loaned approximately US$500,000 for renewable energy and energy efficiency projects.

4 Integración Eléctrica Centroamericana, Génesis, Beneficios, Prospectiva del Proyecto SIEPAC, BID, 2017 5 Based on information from the Superintendencia General de Electricidad y Telecomunicaciones (SIGET)

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ABBREVIATIONS AND ACRONYMS

ENGLISH SPANISH

AMM Wholesale Market Administrator - Guatemala Administrador del Mercado Mayorista

ANACAFE National Coffee Association Asociación Nacional de Café

ANAM National Association of Municipalities Asociación Nacional de Municipalidades

BFA Agricultural Development Bank Banco de Fomento Agropecuario

CDMER Executive Council of the MER Consejo Director del MER

CEN US Strategy for Engagement with Central America Estrategia de Acción con Centroamérica

CNE National Energy Council Consejo Nacional de Energía

CNEE National Electricity Commission, Guatemala Comisión Nacional de Energía Eléctrica, Guatemala

CRIE Regional Commission of Electricity Interconnection Comisión Regional de Interconexión Eléctrica

DAI Import duties Derechos Arancelarios a la Importación

DO Development Objective Objetivo de Desarrollo

ECAM El Salvador, Central America, and Mexico El Salvador, Centroamérica y México

EES Energy Efficiency Standard Estándar de Eficiencia Energética

EOR Regional Operating Entity Ente Operador Regional

IR Intermediate Result Resultado Intermediario

MER Regional Electric Market Mercado Eléctrico Regional

ORT Technical Regulation Entity Organismo de Reglamentación Técnica

NCRE Non-conventional renewable energy Energía Renovable No-Convencional

OSARTEC Technical standards entity in El Salvador Organismo Salvadoreño de Reglamentación Técnica

PEC Procedures for assessing conformity Procedimientos para la evaluación de la conformidad

PESAE El Salvador Saves Energy Program Programa El Salvador Ahorra Energía

PL Public Lighting Alumbrado Publico

RMER Regulation of the MER Reglamento del Mercado Eléctrico Regional

TR Technical Regulations Reglamentos Técnicos

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TRCA Technical Regulations for Central America Reglamentos Técnicos de Centroamérica

SIEPAC Electricity Interconnection System for the Central

American Countries

Sistema de Interconexión Eléctrica para los Países de

América Central

TEC Total Estimated Cost Costo Total Estimado

UACI Municipality of Zacatecoluca’s Procurement

Department

Unidad de Adquisiciones y Compras Institucionales

UCE-SICA Energy Coordinating Unit under SICA Unidad de Coordinación Energética del SICA

UREE Energy Efficient and Rational Use Uso Racional y Eficiente de la Energía

VAT Value Added Tax Impuestos al Valor Agregado

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2 INTRODUCTION

2.1 PROJECT BACKGROUND AND RATIONALE

The Northern Triangle (Guatemala, El Salvador, and Honduras), characterized by its high levels of violence and poverty6, has one of the highest rates of emigration to the United States in the region leading people to seek opportunities moving to the United States in search of a better life. To improve the quality of life, safety, and working conditions for people in the Northern Triangle, the USAID

Regional Clean Energy Initiative focused its efforts on implementing sustainable, renewable energy and energy efficient solutions that would increase energy access in rural areas with little to no electricity access, reduce electricity costs, and improve safety and security at several border crossings within the

Northern Triangle.

On a broader level, Central America has faced challenges in an array of areas related to the generation and transmission of renewable energy at both the regional and national levels. In the 20 years prior to the Initiative, the increase in traditional electricity generation based on fossil fuels exceeded clean energy sources such as hydroelectric, solar and wind. Meanwhile, the electricity sector continued to expand at a forecast annual rate of around 5% throughout the region. With the increase in demand and the expanding generation market, the Central American region presented a clear area of opportunity to substantially increase the generation of renewable energy to meet growing energy demands.

The project was originally planned as a three-year project with a two-year option period. In the fourth year of the project, additional funding was received which included an additional US$4 million in funding added specifically to improve quality of life in the Northern Triangle. This brought the total project cost to US$13.7 million and the project period to 5.5 years.

2.2 REPORT STRUCTURE

This report is structured into four main sections:

Introduction and background, including the rationale for the project and its main work streams

Main activities and accomplishments

Problems encountered and actions taken, lessons learned, and recommendations to be implemented in the future based on project outcomes

Annexes: detailed project activity list; monitoring and evaluation results; communications achievements; and, articles referenced in the main text highlighting project results in the news

2.3 PROGRAM APPROACH

The USAID Regional Clean Energy Initiative, during the first four years, followed a clear approach to implementing solutions under two broad objectives:

Objective 1: Contribute to increased public and private investment in renewable energy in Central

America by improving the enabling environment and institutional capacity

6 https://www.as-coa.org/articles/update-central-america-and-alliance-prosperity https://www.as-coa.org/articles/update-central-america-and-alliance-prosperity

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Objective 2: Reduce energy consumption by promoting rational energy use at the national and regional levels.

For the fifth year the project received additional funding and shifted focus to implement small-scale clean energy projects in communities, border and custom posts, agro-industry facilities, hospitals, and education centers in order to improve citizen security, quality of life, access to energy, and learning opportunities around the Northern Triangle.

Associated with each of these objectives were specific task-related results that formed the basis of the work streams used to guide the activities throughout the project. The main tasks of the project were related to: 1) improving the enabling environment to encourage renewable energy generation in the

Regional Electric Market (MER); 2) Strengthening government capacity to support clean energy projects;

3) facilitating uniform procurement processes and transmission rights; 4) building capacity of government to implement energy efficiency programs; 5) developing financial and fiscal incentives to encourage investment in energy efficiency; and 6) Activities focused on implementing clean energy projects to increase citizen security and improve quality of life for citizens in the Northern Triangle countries (El

Salvador, Honduras, Guatemala).

FIGURE 1. INDICATIVE PROJECT RESULTS BY OBJECTIVE

Objective

Objective

Result 2.2 Financial/fiscal incentives designed and promoted to increase investments in energy efficiency programs

Result 2.1 Increased capacity of governments to support and/or implement national energy efficiency programs

Result 1.3 Uniform procurement processes and transmission rights developed to facilitate the investment in small, medium and large-scale regional renewable power generation

Result 1.2 Strengthened capacity of national and regional government institutions to support clean energy programs and projects.

Result 1.1 Harmonized regional regulatory and trade policy to develop the Regional Electric

Market and improve the renewable energy enabling environment

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2.3.1 GEOGRAPHIC COVERAGE

The Project initially focused on the Central American countries that participate in the Central American

Electrical Interconnection System (SIEPAC) - Costa Rica, Guatemala, El Salvador, Panama, Honduras, and Nicaragua. These countries all participated in activities focused on strengthening the regional electricity market. In Year 5 of the project, the geographic coverage focused more on implementing activities in the Northern Triangle where the US Government is prioritizing efforts to reduce immigration from these countries to the United States. Activities specifically targeted several border posts around the Northern Triangle, agro-industries, vulnerable communities, hospitals, and education facilities (both universities and primary/secondary schools).

2.3.2 THE TEAM

The USAID Initiative Team evolved over the life of the project, but consisted of a core technical team based in San Salvador, El Salvador, with support from technical, monitoring and evaluation, environmental, contracts, and writing/editing specialists in the Arlington, Virginia, office. The team also counted on support from various subcontractors with both country-specific and technical expertise for implementing the various tasks throughout the life of the project.

FIGURE 2. REGIONAL CLEAN ENERGY INITIATIVE ORANIZATIONAL STRUCTURE

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Social Communications for USAID

2.4 IMPLEMENTATION STRATEGY

The implementation strategy was developed and revised throughout the life of the USAID Initiative. This section focuses on these main elements of the implementation strategy:

Interdependence and Linkage Among the Activities

Transfer of Know-How

Alliances and Partnerships

Sustainability

2.4.1 RELATIONSHIP AND INTERACTION AMONG THE ACTIVITIES

Throughout the life of the project the first five tasks were implemented in tandem to bring about sustained change in the regional electricity market, government, and financing for renewable energy, as well as to promote energy efficiency throughout the region. Activities focused on increasing governmental capacity to promote renewable energy within the region, supporting the development of regional and national energy efficiency standards, providing financing options to facilitate investment in energy efficiency – which benefitted from the strengthened standards also developed under the

Initiative.

Activities in the last year of the project focused on actual implementation of small-scale clean energy projects in the Northern Triangle, lessons learned were taken from the financing schemes developed under previous activities, as well as from the National Energy Efficiency Award that saw actual implementation of small-scale clean energy systems and energy efficiency measures before the Northern

Triangle activities commenced.

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2.4.2 TRANSFER OF KNOW-HOW

Under most of the activities implemented as part of the USAID Initiative, technical trainings were carried out to maximize project impact and ensure project sustainability after the project ended.

Working groups were created to involve government stakeholders in the process of strengthening the

MER, increasing the penetration of renewable energy in the region, and participating in the development of energy efficiency standards at the national and regional level. The experiences of the United States and Mexico with the implementation of energy efficiency programs was shared with stakeholders. In the

Northern Triangle, all beneficiaries that received clean energy technology installations also received training on the operation and maintenance of the technology, as well as the benefits of clean energy and operating methods to maximize efficiency of the technology.

2.4.3 ALLIANCES AND PARTNERSHIPS

The USAID Initiative worked with four regional institutions and national government institutions across

Guatemala, El Salvador, Honduras, Costa Rica, Panama, Nicaragua, and the Dominican Republic. In addition to the government counterparts, the USAID Initiative worked in the Northern Triangle with local community governments, customs and border controls, national universities, hospitals under the

Ministry of Health in El Salvador, and local agro-industries such as fisheries and coffee mill cooperatives.

The Initiative also coordinated with large multilaterals and donors like MCC and GIZ, as well as with other USAID-funded projects in the region.

2.4.4 SUSTAINABILITY

The USAID Initiative’s approach to challenges and solutions explicitly sought to guarantee environmental, technological, economic-financial, socio-cultural and organizational sustainability. From discussions on tax incentives or tariff methodologies for energy efficiency technologies, to the design of implementation of clean energy technologies at the community level, the USAID Initiative persistently pursued sustainability. In relation to the regional electricity market, clear contributions to the consolidation and sustainability of the market can be seen through the activities focused on institutional strengthening and governance, as well as regulatory improvements supported by the USAID Initiative.

Throughout the implementation of renewable energy and energy efficient solutions, the USAID Initiative provided business models, financing schemes, operation and maintenance training, and capacity building to improve efficient use of the technologies in order to ensure that these technologies are lasting solutions for the beneficiaries.

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3 PROGRAM ACTIVITIES AND RESULTS

During the life of the project, substantial results were achieved at the regional, national and local levels with respect to improving renewable energy and energy efficiency deployment throughout the region.

The USAID Initiative increased access to electricity and improved the quality of life, safety, and working conditions for the population around the Northern Triangle, built capacity in the region to continue increasing the amount of renewable energy generated in the region, facilitated investment in these technologies across borders, and promoted energy efficiency standards and programs that will reduce electricity consumption and facilitate trade across the region.

3.1 IMPROVED BORDER SAFETY AND WORKING

CONDITIONS

BORDERS Across the Northern Triangle, the USAID Initiative worked to improve citizen security and safety at the borders through the implementation of various types of indoor and outdoor lighting, solar PV systems, and energy efficient technologies including lights and air conditioners. The USAID Initiative worked at the El Amatillo

Border in Honduras, the El Amatillo Border in El Salvador, the La

Hachadura Border in El Salvador, and the Pedro de Alvarado Border in

Guatemala.

IMPACT: BORDERS

6.8 miles of highway illuminated with energy efficient street lighting

160 kW of solar PV energy installed

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As these borders are some of the most important crossings for commerce in the region, thousands of people benefit daily from improved processes at the borders, such as at the El Amatillo Honduras border and customs post where a solar PV backup system was installed to ensure uninterrupted border crossings when there are electricity cuts. Additional benefits come from improved working conditions, particularly at night when lack of light at inspection posts where guards are stationed had previously created unsafe conditions due to low visibility. Workers also benefit from upgraded, more efficient air conditioners in some of the dormitories where workers stay during their shifts and in some of the offices and guard kiosks.

Specific activities and installations are detailed in the tables below.

ENERGY EFFICIENCY

COUNTRY LOCATION TYPE OF INSTALLATION

El Salvador

El Amatillo

Street Lighting

Interior Lighting

Exterior Lighting

Air Conditioners

La Hachadura

Street Lighting

Interior Lighting

Exterior Lighting

Air Conditioners

2 Monophasic power transformers

Honduras

Street Lighting

Interior Lighting

Exterior Lighting

Air Conditioners

Guatemala

Pedro de Alvarado

Interior Lighting

Exterior Lighting

Air Conditioners

SOLAR PV

COUNTRY LOCATION TYPE OF INSTALLATION kW

Solar PV System 37.1

Autonomous Solar Lights 1.6

La Hachadura Solar PV System 62.7

Autonomous Solar Lights .9

Honduras El Amatillo Solar PV System 25.0

Guatemala Pedro de Alvarado Solar PV System 31.4

Total

158.7

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3.2 IMPROVED COMMUNITY SERVICES, QUALITY OF LIFE, AND ACCESS TO

ELECTRICITY

HOSPITALS Many hospitals across El Salvador lack a consistent hot water supply to provide hydrotherapy services for physical rehabilitation. To improve services provided by the hospitals, the

USAID Initiative developed energy studies and designed solar thermal hot water heating systems for eight hospitals across the country. With the provision of the studies and designs, the hospitals have the tools and knowledge to move forward with implementing energy efficiency measures and solar thermal systems in order to provide hydrotherapy services with hot water. In two of the hospitals the USAID Initiative provided the solar thermal water heating systems. The USAID Initiative also developed a guide for implementing energy efficiency and renewable energy measures in hospitals based on the information gathered during the energy studies at the eight hospitals. More than 2,000 patients per year will benefit from the two solar thermal water heating systems at the Dr. Francisco

Menéndez National Hospital and the Suchitoto National Hospital.

EDUCATIONAL INSTITUTIONS In an effort to improve educational opportunities in El Salvador and Honduras the USAID

Initiative provided solar PV systems to Zamorano University in

Honduras and Don Bosco University in El Salvador - two universities that have classes and programs in renewable energy. The systems were provided to reduce the cost of electricity and to provide tools for students to gain hands-on experience with various types of solar

PV technology.

At Don Bosco University the USAID Initiative installed a 30 kW solar PV system comprised of three different solar panel technologies, each with different technical specifications and arrangements. The differences in the systems included orientation and type of solar panels (monocrystalline, polycrystalline, and CIGS Thin-Film), allowing the students to simulate different scenarios using the various technologies. The technology will benefit students from seven different university degree paths and will benefit more than 1,000 students annually. A similar system was implemented at Zamorano University with various solar PV technologies for the students to experiment with, along with a small, separate solar PV system that was installed in a building on campus that previously did not have electricity.

The USAID Initiative also worked with the Tin Marin museum in San Salvador to implement a solar PV system that will reduce the cost of electricity to the museum. The museum is focused on providing educational opportunities to elementary and middle school students; the cost savings realized will subsidize museum visits by schools from rural communities.

The USAID Initiative also provided and installed solar PV lighting systems in recreational areas at several schools. Systems were installed at sports fields and playgrounds in Guatemala (Quirina Tassi de Agostini and Félix Hernández Andrino/República de Canadá) and El Salvador in the Complejo Educativo El Zonte and in the Centro Escolar Walter Benneke the USAID Initiative installed outdoor lighting around the playground which includes basketball courts, which can now be used at night for sports events or night classes by the surrounding communities.

IMPACT: UNIVERSITIES

More than 1,000 students with access to hands-on state-of-the art technology

IMPACT: HOSPITALS

2,000 patients benefitting from improved services annually at 2 hospitals

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The table below summarizes all the education centers that received solar PV equipment and the associated capacity of the installations.

COUNTRY EDUCATION CENTER kW

Don Bosco 30

Tin Marin 60

Benneke 1

El zonte 1

Escuela el Sunzal 4

Quirina Tassi de Agostini 0.3

Félix Hernández Andrino/República de Canadá 0.975

Zamorano University 44.24

Escuela Agricola Panamericana 0.03

Total 142

COMMUNITIES To improve quality of life for vulnerable populations, the USAID Initiative introduced clean energy and energy efficient solutions to nine communities in El Salvador (Isla

Perico in La Unión), El Barrial, Guatemala (Los Planes, Pajales II, San Vicente, and La Cumbre in Chimaltenango), and Honduras (El

Lonal, Los Lirios, El Matambre in Francisco Morazán and El

Guayabo in El Paraíso).

One way in which the USAID Initiative contributed to energy security and citizen safety was by donating solar PV kits to families in the communities named above; in some cases, providing these families access to electricity for the first time. The solar kits can be used to provide access to electricity at night, to charge a cell phone, or to listen to the news on the radio or television among other uses. These kits also provide an alternative to traditional biomass burning for light at night which has harmful health affects related to smoke inhalation and vision impairment, as well as a monthly cost of US$10-US$12 – which, when compared to an average national per capita income of US$3,900 per person7, can be a crippling cost to a household. The photovoltaic systems delivered included: one solar panel, a battery, LED lights and mobile phone charger. The USAID Initiative donated kits to 200 families.

The table below shows the communities where the USAID Initiative implemented solar PV solutions and the size of the total investment.

7 https://data.worldbank.org/country/el-salvador

SOLAR PV IMPLEMENTATION IN COMMUNITIES

COUNTRY COMMUNITY kW

El Salvador

Isla Perico 6.86

El Barreal 0.22

IMPACT: COMMUNITIES

200 families with improved access to electricity https://data.worldbank.org/country/el-salvador

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AGRO-INDUSTRIES The USAID Initiative provided energy efficient and renewable energy solutions to two fisheries in El Salvador: ASPESCU in San Miguel and

ACOOPACIFICO in La Unión. In both fisheries, energy efficient air conditioners were installed in the administrative offices and in the processing areas, while energy efficient compressors were installed for the freezers. Solar PV systems and energy efficient lighting were also installed.

These measures aim to reduce the monthly expenditures for electricity and improve working conditions for the fishermen. These measures will reduce electricity expenses by an estimated 30%; the fisherman have agreed to reinvest their economic savings in projects that benefit the surrounding communities.

The USAID Initiative also worked in two coffee mills in Guatemala - La Esperancita in San Marcos and El

Guayab in Huehuetenango - through the installation of energy efficient motors for coffee processing.

The energy efficient motors are expected to reduce the electricity costs by up to 25% each month during the coffee production season. The savings realized will be reinvested in social projects in the surrounding communities.

An opportunity was also identified to implement energy efficient measures in the Asociación Nacional de Café (ANACAFE) headquarters. The USAID Initiative donated LED panels to the main office building to reduce electricity costs and improve lighting. This activity, along with the energy efficient installations in the coffee mills, serve as a demonstration projects that can be replicated in other coffee mills across the region to bring energy savings and improved efficiency to the coffee industry.

The tables below show the different agro-industries where the USAID Initiative implemented both energy efficient and renewable energy solutions and their associated investments.

Pjasles II 0.45

San Vicente 0.45

La Cumbre 0.6

El Lonal 0.36

Los Lirios 0.3

El Matambre 0.36

El Guayabo 0.69

Total 10.29

ENERGY EFFICIENCY

COUNTRY BUSINESS TYPE OF INDUSTRY TECHNOLOGY

IMPACT: AGRO-INDUSTRIES

1) 30% reduction in energy consumption per pound of fish produced

2) 25% reduction in energy consumption during coffee-producing season

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ASPESCU Fishery

Interior Lighting

Air Conditioners & Compressors

ACOOPACIFICO Fishery

Interior Lighting

Air Conditioners & Compressors

ANACAFE HQ Coffee Producer EE Lighting

Cooperative Integral Agricola La Esperansita Coffee Mill Motors

Asociacion Civil El Guaya'b Coffee Mill Motors

SOLAR

COUNTRY BUSINESS TYPE OF INDUSTRY TECHNOLOGY kW

El SALVADOR ASPESCU Fishery Solar PV 23

Total 23

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3.3 IMPROVED INVESTMENT CLIMATE FOR RENEWABLE ENERGY DEVELOPMENT

Activities to improve the investment climate for renewable energy development in Central America included two streams of work. On one hand, the strengthening of governance and regulation of the

Regional Electricity Market aimed at facilitating the increase of market transactions, the opening of national markets and attracting investments. On the other hand, support was provided for renewable energy auctions and monitoring of the implementation of the awarded projects, as well as the technical and regulatory adaptation of the electricity systems for the integration of new renewable technologies.

By the end of the Initiative, the installed capacity of renewable energy was 8,130 MW8, representing an increase of 57% with respect to the 2010 baseline. This increase can be explained by the strong growth of wind and solar energy, which was supported by the USAID Initiative and represents 18% of the installed capacity of renewable energy in the region. Today, in the energy matrix, renewables represent

53% (Figure 3) of the installed capacity, a substantial improvement with respect to the 2010 baseline.

The transactions in the regional electricity market increased sharply during the project, reaching 1,947

GWh in 2016; approximately 2,500 GWh are projected for 20179. This growth equates to a 650% increase in transactions from the baseline in 2010 (baseline) to 2017 – much higher than the expected project target of 300% (see below).

8 CEPAL, Statistics from the electricity subsector for SICA Countries, 2015, published in January 2017 – the latest available CEPAL report available to date.

9 Projection based on transaction growth from January-November 2017 with respect to the same period in 2016, which was

28,3%. Source: EOR Transactions Reports

FIGURE 3. RENEWABLE ENERGY INSTALLED CAPACITY 2010-2015

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FIGURE 4. MER ELECTRICITY TRANSACTIONS 2010-2017 (GWH/YR)

(below) shows the transactions in the regional electricity market since it began operation in 2002. After a period of seven years of stagnation and low volume of transactions, the last five years have shown sustained growth in operations, coinciding with the activities of the USAID Initiative. The yellow boxes highlight the project years of the 2012-2017, where transactions in the MER increased from one of the lowest years, 2012 with 308 GWh / year, to 2,500 GWh / year projected for 2017.

FIGURE 5. MER ELECTRICITY TRANSACTIONS 2002-2017 (GWH/YR)

336 344 308

1.446 1.368

1.947

2.499

1.000

1.500

2.000

2.500

3.000

2010 2011 2012 2013 2014 2015 2016 2017

MER - Total Electricity Transactions in GWh/year 2010-2017

1.196

1.068

276 290

368 336 344 308

1.446 1.368

1.000

1.500

2.000

2.500

3.000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

MER - Total Electricity Transactions in GWh/year 2002-2017

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Since the regulation of the regional electricity market (RMER) became effective in 2013, there has been a reduction in the average energy price of the MER, which can be attributed in part to the decrease in the price of oil during the same period, but also to the increase in hydroelectricity transactions in the regional market that impacted the downturn of prices. This effect on electricity prices is also detailed in the 2016 Regional Electricity Market Report from CRIE: “In 2016 the average electricity cost from the regional electricity market was US$64.66 per MWh, which represents a 25% reduction in costs with respect to

2015 when the electricity prices averaged US$85.25 per MWh…. this shows that the regional electricity market prices do not depend on thermal energy prices that are derived from oil. Approximately 35% of the energy that was incorporated into the regional electricity market in 2016 was from hydroelectric sources, which influenced the low electricity prices that were obtained.” As an example, the president of the Nicaragua Energy

Association explained that in Nicaragua from 2016 to 2017 electricity from the regional electricity market has been replacing electricity produced at thermal energy from several plants in the country – because importing the energy from the regional electricity market is cheaper than generating the energy through private or government owned electricity companies in the country – resulting in lower electricity bills for the end user10.

FIGURE 6. ELECTRICITY TRANSACTIONS (GWH/YR) AND PRICES (US$/MWH) 2013-201611

MER

Ver https://www.laprensa.com.ni/2017/11/11/nacionales/2328883-nicaragua-esta-comprando-mas-energia-en-el-mercado-electrico-regional 11 Graph prepared by EOR https://www.laprensa.com.ni/2017/11/11/nacionales/2328883-nicaragua-esta-comprando-mas-energia-en-el-mercado-electrico-regional https://www.laprensa.com.ni/2017/11/11/nacionales/2328883-nicaragua-esta-comprando-mas-energia-en-el-mercado-electrico-regional

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The USAID Initiative contributed to these results at both the regional and national level. On one hand, at the regional level, the USAID Initiative’s activities improved the enabling environment through two lines of action aimed at facilitating transaction growth, opening of the national markets, and attracting new investment:

1. Strengthening of the regional governance and institutional capacity of the regional entities in charge of regulation, operation and policy coordination in the regional electricity market

2. Promoting the implementation of regional-level regulation and harmonizing national regulations across the region to facilitate electricity transactions.

On the other hand, at the national level, the USAID Initiative’s activities were aimed at improving the enabling environment through:

Supporting the processes for renewable energy auctions that resulted in the awarding of 276 MW of new generation capacity in El Salvador and monitoring the progress of 574 MW of projects awarded in auctions in Guatemala

Supporting the processes, technical and regulatory adaptation of the systems and national electricity markets, carrying out renewable energy penetration studies, and participating in the processes of developing and updating Guatemala’s and El Salvador’s regulations.

Supporting the implementation phases of the projects awarded and evaluating the processes for future improvement, through assistance provided to national authorities in the form of monitoring tools, evaluation of projects and processes, and identification of lessons learned

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Workshop on the harmonization of offers in the regional electricity market in July, 2017

STRENGTHENING THE ELECTRICITY REGIONAL MARKET GOVERNANCE AND

REGULATION Working across a region requires concentrated efforts to coordinate among the various national government institutions and the governing regional institutions, each of which has their own agenda. The USAID Initiative focused on improving coordination efforts and streamlining processes to support the development of the regional electricity market, which consisted of:

Driving progress in the regulatory harmonization of the national systems which makes increasing regional transactions possible

Promoting the implementation of transmission rights and uniform contracting procedures that will incentivize investment in regional generation projects, including renewable energy

However, the Initiative found regional agencies largely governed by short-term problems and operational conflicts, related to the transition towards new regulations, insufficient organizational capacity and weak inter-agency coordination.

To adapt to this context, the Initiative focused on:

1. Building capacity among the key regional entities for strategic planning for a common regional strategic agenda and a portfolio of strategic initiatives to be jointly implemented.

2. Supporting the development of the regulatory harmonization process and implementation of regional regulation, not only by providing technical assistance, but also by facilitating these initiatives to be part of the strategic regional agenda that was being developed.

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CAPACITY DEVELOPMENT FOR REGIONAL ORGANIZATIONS:

Support to the organizational restructuring process for the regional system operator

(EOR). The technical support to the EOR resulted in a successful process that contributed to its evolution towards a more complex, sophisticated and mature organization, which faces growing demands for effectiveness in a context of a Regional Electricity Market still in the process of development and consolidation. Based on this, the USAID Initiative developed the Strategic Plan and the Code of Good Governance to prepare for the future reorganization, aligning the structure with the Code of Good Governance and the Strategic Plan, thereby improving the effectiveness of the organization to carry out its mission.

Strategic Plan and Organizational Restructuring support to the regional market regulator (CRIE). During the first year of the Initiative, CRIE worked closely with the USAID

Initiative to develop its Strategic Plan and redesign its organizational structure to align it with that

Plan.

Development of Joint Strategic Plan, Road Map for the Regional Electricity Market, and Interinstitutional Coordination Mechanisms. The first regional electricity market

(MER) Joint Strategic Plan was a focal point for the Energy Summit held in Washington, DC, on

May 4, 2016. Regional Presidents, along with regional agencies, attended this Summit, led by the

Vice President of the US. The Task Force Report of the US, Caribbean, and Central America on

Energy Security resulting from this summit recognizes the MER Regional Strategic Plan as one of the crucial achievements for Central America, indicating that the MER countries and institutions, with the support of the US, should concentrate their efforts on strategic themes and key aspects that are identified in the MER Joint Strategic Plan. Also, the USAID Initiative supported Directors

Council of the MER (CDMER) in the development of the Inter-institutional Coordination

Mechanisms CDMER-CRIE-EOR. The design of these coordination mechanisms is part of the Joint

Strategic Plan and it is a key tool to support the implementation of the MER Roadmap and to substantially improve the effectiveness of the joint regional actions and the regional governance framework.

Development of the Energy Sector Governance for the General Secretariat of

Central America Integration System (SG-SICA). The USAID Initiative supported SG-SICA in finalizing the Regulation of the Council of Energy Ministers, which included the legal framework associated with the roles and responsibilities of the energy ministers and directors, the rotating presidency, and the role of the SG-SICA in the energy sector. The Regulation provides the governance structure of the Energy Coordination Unit (UCE-SICA), defining its internal functional and operational regulations and procedures, and its budget for operating within SG-SICA’s organizational structure. As indicated by several of the region’s Energy Directors, this unit will be essential to any future regional coordinated effort in the energy sector, by facilitating discussions, prioritization, analyses, and decision making for the energy ministers at their regional meetings, and as an initial step, a proper legal and institutional framework is a pre-requisite.

DEVELOPMENT OF THE REGULATORY HARMONIZATION PROCESS AND THE

IMPLEMENTATION OF REGIONAL REGULATION:

EOR Regulatory Harmonization – The USAID Initiative helped to integrate a regulatory agenda for regional harmonization in parallel with the development of operational interfaces that countries were developing at that time.

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Commercial aspects of the regulatory interfaces. The USAID Initiative supported the

CDMER as coordinator of the Joint Strategic Plan, working with the regulatory agenda of harmonization in the commercial aspects of the interfaces. This second phase benefited from greater inter-institutional coordination and CDMER leadership, made possible by the mechanisms proposed by the Initiative.

Support to the EOR for the implementation of the firm contracts and short-term transmission rights. This resulted in the review and updating of five technical procedures that facilitate the implementation of…