That was the question I asked when I met in July with Panama’s somewhat combative Energy Secretary, Juan Urriola, and the one-word answer I got was this: hydropower. Panama currently produces 750 megawatts of hydroelectric energy each year, or 60 percent of the national total, he told me. Now, with $1.7 billion (1.34 billion euro) invested in 17 new hydro projects – some of which will be completed as early as next year – that means an additional 600 megawatts.
And even then, said Urriola, it will still only represent less than 40 percent of Panama’s estimated 3.5 gigawatt capacity for hydropower, due to the country’s numerous free-flowing rivers. All of which means, for photovoltaics, a lot of swimming upstream.
»The costs of PV don’t let you compete,« the secretary said bluntly, »and we have to live with [the energy] we have first. We already subsidize more than $60 million (47 million euro) in electricity costs to the final user each year, and when you subsidize, someone pays. Either you tax the user, or the public, or the cost of power simply rises.
»We’ll have to implement solar and we’re going to get there,« the secretary assured me, »but we can’t justify an additional subsidy for an energy that’s so much more expensive than the energy we already have.«
Just how much more expensive is Urriola talking about? As Panama’s market currently stands, installing one kilowatt of hydroelectric power costs between $2,500 and $3,000 (1,970 euro and 2,360 euro). By contrast, one kilowatt of installed solar these days runs between $4,000 and $5,000 (3,150 euro and 3,930 euro), or about double the price. These figures are already a vast improvement on, say, 2006, when it cost $10,000 to $12,000 (7,700 euro to 9,400 euro) per installed PV kilowatt in Panama. »And I have figures showing that it’s lowering even more than $4,000,« Urriola added, »so possibly we’ll have a grid-tied solar energy market in the near future … when it will be competitive.«
That future, however, is decidedly not here yet.
Of the three foreign-owned distribution companies in Panama – two belong to Spain’s Union Fenosa, now part of Gas Natural, the other to the English firm Ashmore – none have signaled an initiative to boost PV. And according to the National Authority of Public Services, (Autoridad Nacional de los Servicios Publicos) or ASEP, the state body responsible for regulating licenses and concessions for generating electricity in Panama, the government is under no obligation to try and spur investments in solar energy through subsidies or the like.
On the contrary, power generation here is viewed strictly as a private issue – and the simple reason there are no requests for PV generation right now is that it »keeps being expensive,« said Dennis Moreno, the director of ASEP.
Yet despite how the government seeks to frame it, the truth is this: Panama is in an energy bind. In the first half of this year alone, the country consumed 9.2 percent more electricity than it did in the first six months of 2009 – at a costly rate that hovered between 18 and 22 cents per kWh. Some 4,000 new condo units are scheduled to come on the Panama City market this year, with 191 residential towers still under construction. Voted consistently among the top retirement destinations in the world, Panama’s power crisis is a headache that won’t go away.
As a quick fix to the problem, and to avoid what would otherwise be a constant state of blackouts, the country currently burns massive amounts of pulverized coal and diesel fuel in generators stationed on off-shore barges around the capital. After hydropower, the remaining 40 percent of Panama’s energy comes from fuels burned in thermal power plants – half as a low-speed diesel known as Bunker C, the other half a combination of steam (30 percent) and natural gas combined cycle (20 percent).
As for a long-term solution, it’s not clear yet that there is one. The country – whose population of 3 million makes it the smallest in Latin America – has nearly $4 billion (3.1 billion euro) slated for energy developments over the next four years; about half that sum will go to hydroelectric, $1 billion (775 million euro) to wind (an industry that’s well ahead of solar here, with approval for 150 megawatts of grid-tied generation next year alone), and another $1 billion to thermal fuel.
The passage in 2008 of a net-metering law here was significant insofar as it made Panama one of the first Latin American nations to do so, thus showing the country’s willingness to lead.
What stands out amid the current energy equation, though, is the way that PV, on a national scale at least, just doesn’t fit in. As Energy Secretary Urriola said: »How can we justify paying [high prices] for solar when we have such a great surplus of hydro?«
Small steps forward
In 1997, as Panama was privatizing its energy market, the government passed a so-called Law 6, which stipulated that no economic advantage could be given to one energy source over another; in other words, for an energy to succeed it must be competitive in its own right, without subsidies. In 2004, Law 45 to some degree amended that rule, forcing the government to assume 25 percent of the direct investment costs on all renewable energy projects.
Then, in 2008, the Panamanian government approved legislation known as Resolution 2060, which allowed residences and businesses to install and feed up to 10 kilowatts of solar power into the grid. While 10 kilowatts may not sound like a lot, it was a landmark policy that set Panama apart from almost all its Latin American neighbors – including energy giants like Brazil, Argentina, Colombia and Venezuela, none of whom have established any net-metering law. For this reason, no one here denies that the legislation is a step forward. But at the same time, many feel it does not go nearly as far as it should.
For one thing, the law doesn’t translate into any actual payments-in-hand for the energy producer; unlike a European-style feed-in tariff, here there is no check getting sent to the PV producer. Rather, all that the producer is able to do is offset a small portion of his bill with the credit he receives for PV power injected into the grid (at the same price as the utility charges for conventional energy).
When I met with Energy Secretary Urriola and pressed him about the policy, suggesting that it didn’t do enough to promote PV growth on a national scale, he reacted angrily. The secretary reeled off a list of facts: 2,000 government-sponsored pilot projects to bring PV to remote rural communities; a slash on taxes for solar technology imports; a sharp drop in the cost of solar materials and installation – from half to, in some cases, a two-thirds price decrease.
»At the end of the day, yes, we’ll have to arrive at solar energy, we’re very clear about this,« Urriola said, and reminded me that the government of Ricardo Martinelli has only been in power for one year. In that time, Martinelli has made clear that he wants to steer Panama’s economy away from its increased reliance on fossil fuels. »We’re moving forward, we’re on the path. [But] I can’t go and knock on people’s doors saying, ›Hey, there’s a law now and if you don’t use it I’m going to fine you.‹ If I could fill Panama tomorrow with solar panels, rest assured, I would do it without fail,« said the secretary, repeating his mantra.
»But you can’t tell an investor to put in money if he doesn’t know how he’s going to make it back. The costs of solar don’t allow it to compete today and it’s probably not a question of tomorrow [either], because water is cheaper for me: I’m going to use the water for as long as I can. We’re a developing country and we have to keep developing. I’m not going to ask the final user, who can buy energy generated by water, to buy it now at 30 percent greater cost.«
Nonetheless, PV in Panama is getting closer to grid parity than you might expect. Installing a high-quality system these days at normal cost can result in an energy payback period of seven years. Not to mention that a recent amendment to the net-metering law here means users can now accumulate rollover savings past one year; for example, if a user needs 7 kilowatts of power and instead he generates 10 kilowatts through his solar array, the earnings from those 3 kilowatts can be saved, at no cost, and used at any time.
Engineers without borders
Taking advantage of what limited government support is available for PV, a small group of engineers working at the Universidad Tecnologica de Panama (Panama Technical University), in the central sugar- and rice-producing province of Cocle, are now carrying out what is perhaps the country’s most impressive solar installation campaign to date.
Starting in 2004, the engineers have been assigned a $12.7 million (10 million euro) donation from the European Union and the Panamanian government to install 880 watt PV systems on more than 300 schools and 100 health clinics in the remote indigenous villages of the northwestern Ngobe-Bugle province.
Known as Sol para la Educacion y la Salud (Sun for Education and Health), or SOLEDUSA, the pilot project has brought electricity to the lives of some 150,000 people who never had it previously – many of whose communities are located dozens of miles from the nearest grid hookup, taking several days of travel by foot, horseback and sometimes canoe to reach. With more than 9,000 50 watt modules, 4,000 batteries, 600 controllers and 600 inverters installed so far, the project represents what one of the lead engineers, EfraÃn Conte, calls »the largest-scale solar installation in Central America.«
»These are very, very remote areas. It means a great advance for the people living there,« said Conte. Thanks to the PV, some rural schools are now resembling something more like community centers, he said, where villagers are gathering in the evenings in a way they never did before; adults are taking health seminars and learning to read, while children watch films and enjoy other entertainments. »Most of these children have never even seen a television. It changes their way of life.«
In what appears to be an even broader cultural shift, the PV installations and the donated computers that accompany them are allowing the indigenous communities to grow, and student populations to increase, as parents no longer feel the need to send their children to the cities for an education.
In one Ngobe village, San Pedro, for instance, 178 students were enrolled in classes in 2002. Today that number stands at 290, a fact Conte attributes directly to the existence of solar-charged video machines and computers being used in the classrooms. »They’re not leaving anymore. They stay in the rural areas. Since they can study right there at home, there’s no need to migrate,« he said.
If the pilot project succeeds, it could be replicated elsewhere in the country, even internationally. And to date, due partly to the emergence of so-called »energy committees,« in which village men and women are popularly elected to take care of the PV equipment and to teach others how to clean, maintain and diagnose their systems, the $10,000 (7,870 euro) arrays have been almost problem-free. All, that is, except for the batteries.
»The problem with the batteries in Panama is the aggressive climate: heat and humidity are the battery’s worst enemies,« said Conte. »In theory a battery should last five to 12 years. Here, the average is three.«
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Building green
Among the impacts of Panama City’s raging growth has been an influx of foreigners to the capital – some of whom have contributed to the country’s debate on how to increase PV production despite an abundance of other cheaper energy sources. Colorado native Jessica Simpson is an example. Having worked as a sustainable building designer for the National Renewable Energies Laboratory in the 1990s, Simpson moved here five years ago with her husband, Keith Furones, a building contractor, and last year helped found the Panama Green Building Council. The goal of the organization is to »become a hub for green building in all of Central America,« she said. Something easier said than done.
»From outside appearances, Panama would be ideal for solar because the cost of electricity is so high,« said Furones. Nevertheless, »the initial focus in Panama was energy capacity, it was the government looking at a developing middle class and saying, ›We have to have power as quickly as possible.‹ Making a more sophisticated energy grid incorporating solar energy is just now coming into discussion.«
»I think PV has a future here,« Furones added. »A lot of the country is remote [and] there are many people off-grid who want to stay living that way. There are residential options, commercial options, industrial options,« he said, which is why »solar is still going to have to find its place in Panama.«
For her part, Simpson envisions the Panama Green Building Council as a group that will welcome designers, architects, engineers and city planners from around the Caribbean, Central and even South America; ideally, she said, professionals »can come and be educated on solar technology and green building and take the practices they learn back home.«
There are challenges, she added, in getting Panamanians to adapt to the new energy strategy. »We have to take a population that’s generally naïve on green issues and has never been concerned about lifecycle costs, and tell them why [solar] is beneficial,« Simpson said. »It’s not just using the technology. It’s learning the responsibility of maintaining the systems. They have to be taught and trained by technicians.«
Conditions are improving
As for those technicians, their ability to penetrate a larger part of Panama’s economy with solar goods and installations continues to grow as the country itself develops. One Panama City-based integrator, Domingo Sánchez, who is founder and owner of the PV installation company SERSA, said that better road conditions had vastly improved his access to domestic markets which had been formerly off-limits. »In the past, bringing solar materials into Darien province, for example, meant 14 hours by car and two days by boat,« he said.
»Now, with the completion of the Pan-American Highway, the journey has been cut to three hours by road and one day by boat, thanks to stronger engines.«
Based on his growing list of clients, and on the national adoption of a net-metering law, Sánchez said he’s optimistic about solar’s future in Panama. »Earlier this decade, less than 5 kilowatts of PV were being installed [nationally] each year. Now we’re talking 20 to 30 kilowatts, a major advance.«
Another installer in the capital, Joel Villamil, of the Kyocera distributor Omicron, shared the sense that while solar sales might be down 10 percent this year due to the global financial crisis (as well a bombardment of cheap modules from China), overall the trend in Panama is a good one.
»Interest has risen in solar mainly because the cost of electricity has gone up 40 percent in the last five years,« Villamil said, and despite the fact that »the government hasn’t made any incentive, [PV] is getting closer to parity. Though it’s not there yet.«
Challenges remain
For all the success that off-grid PV installations are having in Panama these days, there are also countless stories about why systems here have not worked. In many cases, problems result from sheer ignorance about the value of a system and how it works. In some villages, for instance, residents have been known to convert their donated PV modules into worktables. Vandalism is also an issue, where villagers have broken into their PV batteries and stolen the lead, which they used as fishing sinkers.
Another stumbling block in Panama is the weather: it’s only sunny here three or four months out of the year. With a rainy season that generally lasts nine months – from April to Christmas – Panama still gets frequent and intense sunlight, but also a lot of overcast days and rains battering the PV systems.
The last barrier to solar, and perhaps its most pernicious, is the bureaucracy. When Andrew Coats, the director of a green architectural firm called Cresolus, tried getting a license to build a solar home for one of his clients, he ended up getting shuttled back and forth between government institutions, none of which told him the clear process he needed to go through. »They looked at me like I was crazy for trying to generate solar electricity,« Coats told me.
»I ran around offices for a couple of months and came to nothing [just trying to] get the paperwork, somebody in the government who could say, ›Here, this is the piece of paper you need.‹ The hurdle is that the license they’re giving out is not designed for solar generated electricity, it’s designed for a massive utility company, so the costs are prohibitive.« Eventually, Coats said, he gave up.
»The diesel generator is the simplest solution for everybody at the moment,« he said.
Panama’s PV future
Whether Panama, with its net-metering law, can succeed in becoming a sort of solar laboratory for the rest of Latin America has yet to be seen. But that at least, according to Cynthia Deville, director of the National Environmental Authority’s (Autoridad Nacional del Ambiente, or ANAM) Climate Change and Desertification unit, should be the country’s goal.
Deville worked previously in Panama’s electricity sector; today, she helps poor communities in the ruggedly dry and deforested Azuero Peninsula acquire EU grants for solar installations. She said she knows that »solar equipment is very costly and that not everyone is inclined to use it.« But, nonetheless, »we want to create an opening through [another] law or incentives to bring PV to the residential sector.«
In March of 2009, Deville helped poor communities get financing for three residential PV projects through the EU’s Energy and Environment Program (AEA), for a total of $116,000 (90,000 euro). This year she’s trying to do the same; one project proposal involves building a solar oven to dry wood for rural furniture makers, another using solar modules to power machines that milk cows.
Panama, she said, »is ideal for PV projects, and now distributors and exporters see a growing market here.«
»In Panama we’ve lived like we’ll never run out of anything. Water. Trees. Animals. And energy. But not conserving has a high price. We hope the Martinelli government’s energy policy is considering improving and reformulating the solar incentives,« she said.
Sharing her optimism was Scott Muller, president of Permacity, the company that installed the country’s first net-metered system: a 5.4 kilowatt rooftop array at a villa on the Costa Esmerelda, an hour west of the capital.
Panama, Muller said, »with its [high] price of electricity and its net metering, is really poised for a boom. What you’re looking at here is the ability of distributive generated energy to stand on its own technical valor: that it’s cheaper and more sustainable and better for everybody.«
»If you [consider] a 30-year lifetime of solar modules, it comes out at 9 cents per kWh. So the numbers are there. The economics are there. The technology is there. We just need to create systemic capacity,« Muller said. He added, Panama’s legislation »has implications all across the hemisphere, including connecting the electric grid throughout the Americas, [and could] determine which direction Latin America goes in terms of sustainability.«
But according to those in high seats of power, like Energy Secretary Juan Urriola, PV’s potential is still more of an idea that something that can be put into realistic practice, on a large scale, anytime soon.
»I don’t see solar plants in the short term [in Panama] of any more than 5 megawatts, or maximum 10 megawatts,« he said. Instead, he suggested, »what would be good here is if the many people who have secondary beach houses and ranches installed solar modules. That would do more than a large solar plant, and that’s where we should concentrate [our efforts].«
In the relaxed, unaccommodating tone he had used with me throughout our interview, Secretary Urriola concluded:
»Things arrive when they have to arrive. Electricity is and will continue to be good business in Panama. Some of the best players in the global energy field are here: AES, Suez, Enel, Gas Natural, Ashmore. Why are they here? Because investing in the Panamanian electricity market is a good business. You say, ›Spend millions to have solar‹ and I say, ›Why, if I still have enough?‹«