FIRMCAPACITYINCENTRALAMERICA DEFINITIONSANDIMPLICATIONSFORVARIABLERENEWABLEENERGY ©IRENA2023 Unlessotherwisestated,materialinthispublicationmaybefreelyused,shared,copied,reproduced,printedand/orstored,providedthatappropriateacknowledgementisgivenofIRENAasthesourceandcopyrightholder.Materialinthispublicationthatisattributedtothirdpartiesmaybesubjecttoseparatetermsofuseandrestrictions,andappropriatepermissionsfromthesethirdpartiesmayneedtobesecuredbeforeanyuseofsuchmaterial. CITATION IRENA(2023),FirmcapacityinCentralAmerica:Definitionsandimplicationsforvariablerenewableenergy,InternationalRenewableEnergyAgency,AbuDhabi. ISBN:978-92-9260-540-7 ABOUTIRENA TheInternationalRenewableEnergyAgency(IRENA)isanintergovernmentalorganisationthatsupportscountriesintheirtransitiontoasustainableenergyfutureandservesastheprincipalplatformforinternationalco-operation,acentreofexcellence,andarepositoryofpolicy,technology,resourceandfinancialknowledgeonrenewableenergy.IRENApromotesthewidespreadadoptionandsustainableuseofallformsofrenewableenergy,includingbioenergy,geothermal,hydropower,ocean,solarandwindenergy,inthepursuitofsustainabledevelopment,energyaccess,energysecurityandlow-carboneconomicgrowthandprosperity. ABOUTTHECLEANENERGYCORRIDOROFCENTRALAMERICA(CECCA) IRENAdevelopedtheCleanEnergyCorridorofCentralAmerica(CECCA)initiativein2015tosupporttheaccelerateddeploymentofrenewablesattheregionallevelinCentralAmericaand,inthecontextoftheCentralAmericanElectricInterconnectionSystem(SIEPAC)lineinterconnectingCostaRica,ElSalvador,Guatemala,Honduras,NicaraguaandPanama,promotethecross-bordertradeofelectricitycomingfromcleanenergysources.CECCAwasbuiltaroundkeypillarsofimplementation:powersystemoperationsandregulatoryframeworksforincreasingvariablerenewableenergyshares;countryandregionalpowersystemplanningwithrenewables;zoningandrenewableresourceassessment;andcapacity-buildingandinformationdissemination. ACKNOWLEDGEMENTS ThisreportwasdevelopedundertheguidanceofGurbuzGonul(Director,CountryEngagementandPartnerships,IRENA)andBinuParthan(DeputyDirector,CountryEngagementandPartnerships,IRENA).ThedocumentwasauthoredbyJoséTorón,CamiloRamírez(IRENA),GastónLestardandColineChampetier(GME),EdnaSotoandFabianBarrera(ex-IRENA). ValuableinputandcommentswereofferedbyIRENAexperts,EmanueleBianco,SimonBenmarraze,PaulKomor,PaulaNardone,MohamedNababa,KamranSiddiquiandJoongYeopLee;additionalinsightswereprovidedbyAlexandraArias(SICA),AdonayUrrutia(DGEHM)andDr.MeenuMishra. ThereportbenefitedfromtheparticipationandcontributionofrepresentativesfromnationalInstitutionsacrossLatinAmericacountries,aswellasotherstakeholdersfromtheregion:MinistryofPublicUtilities,Energy,LogisticsandE-GovernanceandBEL(Belize),MINAEandICE(CostaRica),CEL,CNE,SIGETandUT(ElSalvador),MEM,CNEEandAGER(Guatemala),CREE,ODSandSEN(Honduras),CENACE(Mexico),MEM(Nicaragua),SNEand,CND(Panamá)andENELGreenPower(CostaRicaandGuatemala). PublicationandeditorialsupportwereprovidedbyFrancisField,StephanieClarkeandManuelaStefanides.Thereportwascopy-editedbyEmilyYouers,thegraphicdesignwasdonebyPhoenixDesignAid. DISCLAIMER Thispublicationandthematerialhereinareprovided“asis”.AllreasonableprecautionshavebeentakenbyIRENAtoverifythereliabilityofthematerialinthispublication.However,neitherIRENAnoranyofitsofficials,agents,dataorotherthird-partycontentprovidersprovidesawarrantyofanykind,eitherexpressedorimplied,andtheyacceptnoresponsibilityorliabilityforanyconsequenceofuseofthepublicationormaterialherein. TheinformationcontainedhereindoesnotnecessarilyrepresenttheviewsofallMembersofIRENA.ThementionofspecificcompaniesorcertainprojectsorproductsdoesnotimplythattheyareendorsedorrecommendedbyIRENAinpreferencetoothersofasimilarnaturethatarenotmentioned.ThedesignationsemployedandthepresentationofmaterialhereindonotimplytheexpressionofanyopiniononthepartofIRENAconcerningthelegalstatusofanyregion,country,territory,cityorareaorofitsauthorities,orconcerningthedelimitationoffrontiersorboundaries. FIRMCAPACITYINCENTRALAMERICA DEFINITIONSANDIMPLICATIONSFORVARIABLERENEWABLEENERGY CONTENTS ABBREVIATIONSANDACRONYMS6 GLOSSARY6 EXECUTIVESUMMARY8 ABOUTTHISGUIDE10 CENTRALAMERICAOVERVIEW11 1POWERSECTORS15 1.1PowersystemsinCentralAmerica17 1.2Changesinthepowersector18 1.3Powersectoroutlook18 2REGIONALMARKET20 3POWERPURCHASEAGREEMENTMECHANISMS22 FIRMCAPACITYFORVREINCENTRALAMERICANANDOTHERCOUNTRIES26 1REGULATEDPOWERMARKETS27 1.1Belize27 1.2CostaRica27 2LIBERALISEDPOWERMARKETS29 2.1ElSalvador29 2.2Guatemala32 2.3Honduras35 2.4Nicaragua38 2.5Panama39 3INTERNATIONALBENCHMARK43 3.1Brazil43 3.2Chile46 3.3Mexico50 3.4Peru51 4COUNTRYCASE:ELSALVADOR55 CONCLUSIONS56 KEYGUIDELINESFORUSEOFFIRMCAPACITY60 BIBLIOGRAPHY62 ANNEXI:CENTRALAMERICALEGALFRAMEWORKANDINSTITUTIONALLANDSCAPE68 ANNEXII:EQUATIONS73 ANNEXIII:ELSALVADORCASESTUDY76 FIGURES Figure1CentralAmerica11 Figure2Finalenergyconsumptionpersourcein202012 Figure3Thesinglebuyermodel16 Figure4Thewholesaleelectricitymarketmodel17 Figure5Regionalmarket–SIEPACtransmissiongrid20 Figure6Mainelementsofp