Power Generation and Cost of Electricity in Panama

INPUT BASE:

Panama’s Electricity Market

Panama’s electricity market operates on a well-established structure involving several key stages: generation, transmission, and distribution. The dynamics of these stages shape the overall cost and availability of electricity throughout the country.

Power Generation in Panama

The generation of electrical power in Panama is predominantly managed by private companies. These entities produce electricity which is subsequently sold for distribution. The country leverages a mix of energy sources, including:

• Hydropower: This is the primary source, accounting for around 68.9% of the country’s electricity generation. Thanks to its numerous rivers and water bodies, Panama capitalizes on renewable hydropower.
• Natural Gas: Contributing about 13.2%, natural gas is the second largest source of electricity generation.
• Solar Power: With increasing investments in renewable energy, solar power now constitutes approximately 4.8% of the total electricity mix.
• Wind Power and Oil: These sources make up around 4.4% each, providing additional diversity in the energy mix.
• Coal: Despite global moves towards cleaner energy, coal-fired power plants still supply 4.1% of Panama’s electricity.

As of 2021, Panama’s total electricity production reached 12,106 GWh.

Transmission of Electricity

Once generated, electricity needs to be transmitted from the production sites to distribution companies or large customers. In Panama, this critical stage is managed by the Electric Transmission Company, S.A. (ETESA), which is wholly state-owned. ETESA ensures the reliable and efficient flow of electricity across the country’s grid, addressing the demands of both urban and rural areas.

Electricity Distribution

The distribution of electricity to end users is handled by three main companies:

• ENSA (Empresa de Distribución Eléctrica Metro Oeste, S.A.): It serves Colón, Darién, the Kuna Yala Region, Eastern Panama, and the Pacific Islands.
• Edemet and Edechi: These companies are part of the Naturgy Group and are responsible for distribution in West Panamá, Coclé, Herrera, Los Santos, Veraguas, Chiriquí, and Bocas del Toro.

Cost of Electricity in Panama

The electricity cost in Panama varies depending on the user type and region. Here’s an in-depth look at the costs as of 2023:

• Residential Cost: Approximately $0.170 per kWh.
• Commercial Cost: Around $0.185 per kWh.

A typical household’s monthly electricity bill ranges between $100 and $300, largely influenced by government subsidies and the size of the residence. Although these costs are competitive globally, they are relatively higher compared to the international average.

Deep Dive Into Cost Factors

Generation Costs:

• Renewable Energy: Hydropower and solar power entail initial high setup costs but offer low long-term operational costs.
• Fossil Fuels: Fluctuations in global oil and gas prices directly impact generation costs, making electricity prices susceptible to international market trends.

Distribution Costs:

• Infrastructure Maintenance: Upkeep of distribution networks requires continuous investment, reflected in user tariffs.
• Geographical Challenges: Remote areas or those with harsh terrain may incur higher distribution costs due to the complexities in maintaining the network.

Government Subsidies: Subsidies play a crucial role in stabilizing electricity prices for consumers, especially in disadvantaged areas.

Future Prospects of Power Generation

Panama is steadily advancing towards more sustainable and diversified energy sources. Here are the notable trends and plans:

• Expansion of Renewable Energy: Increased investment in solar and wind energy projects to reduce dependence on fossil fuels.
• Modernization of Infrastructure: Upgrading transmission and distribution networks to enhance efficiency and reduce downtime.
• Policy Support: Government policies and incentives encouraging the adoption of cleaner energy technologies.

Conclusion

Panama’s power generation and electricity costs are deeply influenced by its energy mix, infrastructure, and government policies. The reliance on hydropower and the gradual incorporation of renewable sources position the country as a forward-thinking player in energy sustainability. However, the balancing act between maintaining affordable electricity prices and investing in new technologies will dictate the future trajectory of Panama’s electricity market.

References

• International Energy Agency. (2021). Electricity Generation by Source.
• Panama’s National Energy Secretariat. (2023). National Electrification Plan.
• ENEL Green Power. (2023). Renewable Projects in Panama.
• Electric Transmission Company, S.A. (ETESA). (2023). Annual Report.
• Ministry of Economics and Finance, Panama. (2023). Government Subsidies in Energy Sector.

Please visit these URLs for more information.