Panama: Traces of Transition – Energy for the Future

Panamá.Trazos de transición. Eólicas

Panama is a country blessed by nature. With its strategic location, and access to both oceans, its territory has served as a link and meeting point between cultures since pre-Hispanic times, and today it is a fundamental element of world trade.

One of the keys to the operation of the canal is the rains that occur in Panama for nine months, and which guarantee to have enough water for the operation of the Panama Canal. The country is among the rainiest in the world (on average it rains 2,465 mm per year), and these rains are what have allowed today to have about 75% renewable energy in its electricity generation matrix (2020), mainly hydroelectric.

Hydropower also poses challenges, given the variability of hydrology with El Niño and La Niña phenomena, and also the impacts of climate change, which can make extreme events (floods and droughts) more frequent. For this reason, Panama has undertaken a policy of diversification of its energy matrix, framed in its Energy Transition Agenda (ATE), whose guidelines were approved in 2020.

The ATE proposes to increase the use of renewable energy other than hydroelectric, mainly wind and solar. Likewise, it proposes key strategies for the insertion of electric mobility, access to modern energy, and the modernization of the electricity sector, among others.

Adherence to RELAC: the vision for 2030

Panama is already above the average in the region in terms of the use of renewable energy for electricity generation (69% in the last four years, on average, versus 58% in the region). As part of the commitment to continue supporting renewable energy, Panama announced at COP26 its adherence to the “Renewables in Latin America and the Caribbean” (RELAC) initiative, proposing to maintain, at a minimum, 71.7% the participation of renewable energies by 2030.

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This implies that the country will have to install 9 GW of renewable generation until the end of this decade. To achieve these goals, the installation of solar and wind energy is mainly planned, in addition to maintaining the existing hydroelectric capacity in adequate conditions.

Wind and solar energy have increased their participation from practically zero, in 2015, to 8.3% of generation in 2020, and it is expected that they will continue to grow in their relative participation. An important boost will be distributed generation, mainly solar. The National Distributed Generation Strategy (ENGED), prepared with IDB support, estimates that 1.7 GW of distributed generation could be achieved by 2030.

The benefits of renewables are not only environmental, such as reducing CO2 emissions and local pollution, but also economic. In addition to the evident reduction in the use of fossil fuels (all imported in Panama), ENGED estimates that distributed generation may contribute to the creation of more than three thousand new jobs by 2030 in the electricity generation sector. ENGED is closing the public consultation process, and, once approved, its implementation will require the participation of all actors in the sector, in order to modernize it and bring it into the 21st century.

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A key aspect for the insertion of wind and solar energy, variable by nature, is to be able to guarantee the safety and reliability of the electrical system. This implies the need to have generation that can be dispatched (and eventually stored), and to identify mechanisms for demand flexibility, in addition to advancing with regional integration, both with Central America, through SIEPAC, and also with Colombia. Regional integration can serve to support energy security, while supporting countries to maximize the use of their renewable resources.

Diversification of the energy matrix

In addition to the advances in the diversification of the electricity matrix, Panama still has the challenge of reducing the use of fossil fuels in its energy matrix. In 2020, the energy matrix was dominated by fossil fuels, mainly dedicated to transportation (Diesel oil 33%, Gasoline and Naphtha 26.3%, Liquefied Gas 7.7% and Electricity 29.3%). Because Panama is not an oil or gas producing country, these numbers show the country’s dependence on imports of fossil fuels, and on the variation in their prices.

Therefore, and added to the incorporation of variable renewables in the matrix, the Energy Transition Agenda proposes the insertion of electric mobility, with its goals established through the National Electric Mobility Strategy.

This strategy aims to increase the use of electricity in the fleet of private vehicles, public bus transport, and motorcycles, in addition to the expansion of the metro (electric) network and passenger transport by train. According to estimates made by the National Secretary of Energy in the sector’s White Paper, the use of electricity for electric mobility would help reduce the demand for fossil fuels by 2030, to a value 32.9% lower than in 2020.

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Transition Strokes

Panama has made the commitment to continue being a country with a green electricity matrix. In addition, it has taken up the challenge of reducing the use of fossil fuels in its energy matrix. It is not a simple task, since it is necessary to guarantee, at the same time, energy security, affordability, and supply reliability. Firm steps are being taken, and in the right direction, clearly identifying the aspects that must be modernized in the sector in order to bring it into the 21st century, and seeking to take advantage of the technological revolution that may allow a more efficient and less polluting use of energy.

The title of this blog refers to a contest recently launched by the National Secretary of Energy of Panama, in search of a logo that represents the energy transition. The contest is open until November 20, and is a good example that a transition process can only happen when society, the people, are part of it.

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