World Small HydropoWer development report 2013

www.smallhydroworld.org

GUATEMALA

Published in 2013 by United Nations Industrial Development Organization (UNIDO) and International Center on Small Hydro Power (ICSHP).

2013 © UNIDO and ICSHP

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This report was jointly produced by United Nations Industrial Development Organization (UNIDO) and International Center on Small Hydro Power (ICSHP) to provide information about small hydropower. The document has been produced without formal United Nations editing. The designations employed and the presentations of the material in this document do not imply the expression of any opinion whatsoever on the part of the Secretariat of UNIDO and ICSHP concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries, or its economic system or degree of development. Designations such as “developed”, “industrialized” and “developing” are intended for statistical convenience and do not necessarily express a judgement about the stage reached by a particular country or area in the development process: Mention of firm names or commercial products does not constitute an endorsement by UNIDO or its partners. The opinions, statistical data and estimates contained in the articles are the responsibility of the author(s) and should not necessarily be considered as reflecting the views or bearing the endorsement of UNIDO and its partners.

While every care has been taken to ensure that the content is useful and accurate, UNIDO and ICSHP and any contributing third parties shall have no legal liability or responsibility for the content or the accuracy of the information so provided, or for any loss or damage caused arising directly or indirectly in connection with reliance on the use of such information.

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Recommended citation: Liu, H., Masera, D. and Esser, L., eds. (2013). World Small Hydropower Development Report 2013. United Nations Industrial Development Organization; International Center on Small Hydro Power. Available from www.smallhydroworld.org.

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2 Americas 2.2 Central America 2.2.4 Guatemala Lina Saldarriaga, Pan American Hydro, United States of America Key facts

Population 14,099,0321

Area 108,889 km2

Climate Tropical; hot, humid in lowlands; cooler in highlands

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Topography Mostly mountains with narrow coastal plains and rolling limestone plateau (highest point: Volcán Tajamulco, 4,211 m)

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Rain pattern Average annual rainfall varies between 900 mm and 3,000 mm, depending on the region.

2 Rainy season from May to

November

Electricity sector overview The electricity generation capacity (2011) was 2,510 MW. Hydropower currently provides 50 per cent of Guatemala’s electricity generation (figure 1), and its share is expected to grow significantly in the next decade. Nineteen large and small hydropower plants are in operation with a total installed capacity of 891 MW.

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Due to the steady growth of energy demand of nearly five per cent per year, Guatemala foresees the need to add an additional 2,000 MW to its current 2,510 MW capacity (2011). Poor grid infrastructure results in transmission and distribution losses of approximately five per cent of the electricity generation.

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Figure 1 Electricity generation in Guatemala Source: Administrador del Mercado Mayorista Guatemala

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The Sistema de Interconexión Eléctrica de los Países de América Central (SIEPAC, or Central American Electrical Interconnection System) line, which is scheduled to be completed by 2014, will aid in the consolidation of the Regional Electrical Market (MER) and increase the security of supply. This is likely to reduce electricity and transmission costs in general throughout Central America, by facilitating a shift towards renewable resources. This will also allow for

the convergence of supply and demand of energy throughout the area. The Mexico-Guatemala interconnection line has allowed energy imports from Mexico since early 2010. In 1996 the General Law of Electricity was enacted, establishing the freedom to produce electricity. The law allows free production, as well as private transportation and distribution of electricity, without authorization from the state. Authorization is required only if the use of goods from public domain is involved. The prices for the use of electrical services are subject to authorization as well. The transfer of energy between generators, traders, importers and exporters, which result from the operation of a wholesale market, are subject to the terms and conditions of the law. Small hydropower sector overview and potential Guatemala possesses a technically usable hydropower potential of about 5,000 MW, of which 13.5 per cent is currently being utilized. The specific small hydropower potential has not been identified. However, six small hydropower plants are under construction in Guatemala totalling 35.6 MW, with individual installed capacities ranging from 2 MW to 10 MW.

Figure 2 Small hydropower capacities in Guatemala Two additional sites are in the pipeline, with individual installed capacities of 7 MW and 10 MW, having received authorization and included in Guatemala’s Energy Expansion Plan 2010-2015.

5 Hidro Izabal (10

MW) is a third small hydropower site in the pipeline, which, despite being included in the Energy Expansion Plan 2008-2022, has neither received authorization nor has started construction yet (operation was planned to commence in 2012). Once these projects are finalized, Guatemala will have an installed small hydropower capacity of 62.6 MW (figure 3). The small hydro value chain is significantly developed offering investors services in civil works, engineering, operations and maintenance, power purchase and matters concerning turbines.

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Renewable energy policy In November 2003, the Guatemalan Government decreed the law 52-2003 Incentive Law for Renewable Energy Projects Development for establishment of fiscal, financial and administrative incentive measures. It declares the urgent need to ensure rational development of renewable energies, instructing the

45.5%22.5%

12.6%11.8%

4.4%3.1%

0.1%

0% 10% 20% 30% 40% 50%

HydropowerReciprocating

Steam turbines

CogenerationElectricity imports

GeothermalGas turbines

35.6 MW

62.7 MW

0 25 50 75

SHP potential

SHP installed

capacity

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Ministry of Energy and Mines to harness these resources and award incentives (exemptions from customs tariff and value-added tax during the construction stage, and income tax during the first 10 years of commercial operation). In addition, with the purpose of promoting renewable resources, the Government has created the Information and Promotion of Renewable Resources Centre and the programme of Energy Project Promotion. For example, the individuals or enterprises engaged in renewable energy projects development enjoy tax relief on imports including value-added tax, relief on rental tax and commercial enterprises tax within 10 years from turnover.

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Legislation on small hydropower With regard to the typical small hydropower licensing process in Guatemala, the first step, once the pre-feasibility study is ready (including plant layout, construction and production estimates), is to claim the temporary water rights at the Ministry of Mines and Energy. Next, the feasibility study must be concluded, including detailed hydrology and geology assessments, and design and construction cost estimates. Thereafter the environmental impact study must be carried out, and if approved by the Ministry of Environment, the grid connection study will follow. If a project proposal is approved by the National Electrical Energy Commission, the procedure to follow depends on the project capacity. For projects with capacities up to 5 MW, water rights staking process consists of registering the project at the Ministry of Energy and Mines. For projects with capacity higher than 5 MW, a 50-year water rights claim must be submitted to the Ministry of Energy and Mines. The next and final step, before construction and commission can begin, is the safety study required for all projects with a dam, which must be approved by the National Electrical Energy Commission. Barriers to small hydropower development Small hydropower development in Guatemala is strongly hindered by social-institutional barriers, comprising land rights issues between local communities and private developers in natural resource management. Inadequate benefit sharing mechanisms coupled with limited conflict resolution mechanisms have created a significant barrier for small hydropower development.

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In addition, Guatemala currently portrays the second lowest Human Development Index (HDI) in Central and Southern America. The need for rural electrification is thus clear.

10 However, rural electrification is stalled

due to ethnic disparities and poverty, which in turn provide a lack of incentive for private investors who are unable to justify high energy investments within

communities with low energy demand and income, thus creating a financial and market barrier to small hydropower development.

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Small hydropower development is further faced with investment barriers, as domestic financing is difficult to obtain due to Guatemala’s high interest rates and short loan terms. International finance is also difficult to obtain.

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References 1. Central Intelligence Agency (2012). The World Factbook. Available from www.cia.gov/library/publications/the-world-factbook. 2. Guatemala, Ministerio de Comunicaciones, Infraestructura y Vivienda (2012). Meteorología. Instituto Nacional de Sismología, Vulcanogía, Meteorología e Hidrología. Available from www.insivumeh.gob.gt/meteorologia.html. 3. Organización Latinoamericana de Energía (2012). 2012 Energy Statistics Report. Quito. 4. Administrador del Mercado Mayorista Guatemala (2010). Statistics Report 2010. Available from www.amm.org.gt/pdfs/informes/2010/InfEst2010_01.pdf. 5. Comisión Nacional de Energía Eléctrica (2010). Perspectivas de mediano plazo (2010-2015) para el suministro de electricidad del sistema electrico nacional. Planes de Expansión Sistema Eléctrico Guatemalteco. Ciudad de Guatemala. Available from www.cnee.gob.gt/peg/Docs/Perspectivas%20PEG.pdf. 6. Bloomberg New Energy Finance and Multilateral Investment Fund (2012). Climatescope 2012: Assessing the Climate for Climate Investing in Latin America and the Caribbean. New York. Available from www5.iadb.org/mif/Climatescope/2012/img/content/pdfs/eng/Climatescope2012-report.pdf. 7. Republic of Guatemala (2003, 2005). Ley de incentivos para el desarrollo de proyectos de energies renovables, Decreto Numero 52-2003 Reglamento de la Ley de Incentivos para el Desarrollo de Proyectos de Energia Renovable . Acuerdo Gubernativo No. 211- 2005. Available from www.mem.gob.gt/wp-content/uploads/2012/04/Decreto-y-Acuerdo-Gubernativo.pdf. 8. United Nations Development Programme (1998). Project Document Republic of Guatemala. Productive Uses of Renewable Energy in Guatemala. PIMS No. 3186 ATLAS Proposal N.00043790-Project N. 000512160. 9. Von Hirsch, Cecilie Karina (2010). The political Ecology of Hydropower Development in Guatemala: Actors, Power and Spaces. Norwegian University of Life Sciences. Department of International Environment and Development. NORAGRIC. Available from http://brage.bibsys.no/umb/bitstream/URN:NBN:no-bibsys_brage_15092/5/Hirsch-2010.pdf. 10. Japan International Cooperation Agency (n.d.).

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Countries and Regions. Guatemala. Tokyo. Available from www.jica.go.jp/guatemala/english/index.html. 11. United Nations Framework Convention on Climate

Change (2005). Project Design Document Form. Version 02 CDM. Guatemala: Las Vacas hydroelectric.

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