Executive Summary
The Costa Rican Institute of Electricity (ICE) holds a monopoly over electricity distribution and generation in Costa Rica. There are some exceptions where other public institutions and co-operatives are authorized by law to generate and sell electricity. The most relevant exception is the National Energy and Light Company (CNFL), which is a subsidiary of ICE. The following exceptions are entitled to generate, distribute and sell electricity within the circumscriptions that have been assigned to them by law. For example: Rural Electrification Cooperatives (including Coopesantos, Coope Alfaro Ruiz, Coopelesca and Coopeguanacaste) and Regional Public Service Entities; ESPH in Heredia province and JASEC in Cartago province.
Renewable energy in Costa Rica supplied about 98.53% of the energy output for the entire nation in 2018. In 2014, 99% of its electrical energy was derived from renewable energy sources, about 80% of which from hydroelectric power. For the first 75 days of 2015, 100% of its electrical energy was derived from renewable energy sources and in mid-2016 that feat was accomplished for 110 consecutive days despite suboptimal weather conditions. As a country, Costa Rica has a geographic advantage over others in that its high concentration per capita of rivers, dams, and volcanoes allow for a high renewable energy output. In addition, Costa Rica is the fourth highest nation in terms of rainfall per capita: it receives an average of 2,926mm of precipitation per year. As a smaller nation with a population of only 5 million and no major industry, the need for strong energy infrastructure is less than for larger countries of higher population density.
Like wind power, solar power is another newer energy source in the country. The first solar power projects in the country were established in 1978 by just a few researchers from public universities at the Solar Power Laboratory at the National University.
During 2012, Costa Rica inaugurated the Miravalles Solar Plant next to the Miravalles Volcano. It was built with the help of the Japanese International Cooperation Agency (JICA). The project’s totaling was $11.5 million ($10 million from JICA and $1.5 million from ICE. This plant of 1MW only represents 0.03% of all the capacity installed in the country.
Currently, Costa Rica generates less than 1% of its energy production using solar power. The rest of the production is 79% Hydro, 12% Wind and 8% Geothermal. The final users of solar equipment are found in the residential, commercial, utility and in a lesser degree off-grid mostly in the inaccessible mountains and Cocos Island.
The law authorizes private companies and persons to generate for auto-consumption without any restriction. Generation of electricity in order to distribute and sell to third parties is authorized only when that energy is sold to ICE at a set price.
Local production of energy equipment is limited to small products needed for solar panels and water installation, such as cables, metal tubing, some valves and metal water tanks. Last year China accounted for 49% of the market and this year is down to 48%. The US is second with 23% of the market going up three percent from last year. Other smaller competitors are Germany (4%), Singapore (3%), Taiwan (3%), Mexico (3%) and Singapore (3%). There are also imports of solar products from Central America, but these are re-exports as most of these products’ origin is from Asian countries. The US continues to grow slightly every year, even in a depressed market that slowed down after new VAT was implemented and businesses had to deal with this new situation. Exports from Costa Rica are also of imported products from other countries. Most companies selling solar systems are assembled Asian solar panels with some U.S. made components.
Current Market Needs
The Costa Rican market is in need of advanced technological products in the solar area, most of the panels are already supplied by Asian companies at prices that are not competitive with US-manufactured similar products. Long-term accumulative batteries are part of the market needs both for large electric cooperatives, ICE and just for the household. EV Charging stations have been installed all over the country, but supermarkets and other businesses are installing EV chargers in their own premises for their clients.
Recent Market Trends
The Costa Rican government approved in 2016 a regulation which allows individuals and companies to produce solar energy (up to 15% of the users per district) and sell up to 49% of their excess production back to the grid. The new trend is found mostly in large companies to lower their bill by installing a system that will help to cope paying a smaller invoice per month. Electricity in Costa Rica is not cheap, with an average of $28 cts per Kw/hr.
ICE made long-term plans for its electric production, but they never forecasted solar to be a more efficient way to obtain power in Costa Rica, as they were fixated in large hydro projects such Diquis, a large dam that wasn’t built because of legal issues with the indigenous population on site. Currently, ICE is betting on the increase of imports and use of Electric Vehicles in order to increase consumption, as many of its large companies have been decreasing consumption due to installation of solar solutions.
Competitive Landscape
American firms have a strong presence in Costa Rica mostly in other areas of energy generation. The main competitors of U.S. businesses in the solar area in Costa Rica are Chinese brands. Most companies selling solar systems are local companies that assembling Asian solar panels with some U.S. made components.
Best Prospects for U.S. Exporters
Currently, the best prospect for Costa Rica are long term accumulative batteries. Other more traditional solar panels and equipment is needed, but the market has found Asian quality products at a very low cost, hence making it very hard for US companies to compete.
Market Entry
One strategy for U.S. manufacturers and suppliers to penetrate the Costa Rican market is to utilize U.S. Department of Commerce’s Export Assistance Centers (USEAC) in the United States and U.S. Commercial Service offices in the U.S. Embassy in San Jose. Seeking the assistance of USEACs before exploring opportunities in this market is highly encouraged. It is recommended that U.S. firms considering using locally registered firms to help navigate this slower-moving business market. Most foreign manufacturers and suppliers employ a single agent to cover the entire country.
There is single specific market entry strategy to enter Costa Rica, but it is recommended for US made products to make use of the current Free Trade Agreement (CAFTA) to eliminate the tariffs and make the solar products more competitive with the Asian counterparts. Local taxes will still have to be paid, such as the 13% sales tax.
Additionally, we recommend a long-term strategy and patience as getting products known in a small market such as Costa Rica can take significant investment in time and resources.
Regulations/Registration Process
For this type of products there is no specific need for registration, but it is very important to follow all the procedures to ship batteries following the rules for shipping this specific product.
Technical Barriers & Tariffs
It’s recommended for US made products to make use of the current Free Trade Agreement (CAFTA) to eliminate the tariffs. There aren’t any restrictions or non-tariff barriers on renewable equipment. There are no known technical barriers, but rather market competitiveness issues with Asian products that supply almost all the solar panels sold in Costa Rica.
Local Industry Resources
U.S. Commercial Service Information
Roy Fernandez, Commercial Specialist,
Embassy San Jose
Roy.Fernandez@trade.gov
COVID Information for Costa Rica
