In Honduras, there is an important potential of untapped indigenous renewable energy resources. Due to the likely long-term trend of high oil prices, such resources could be developed at competitive prices.
Currently only hydropower and biomass are used on a large scale for electricity generation. While the potential of large generation from hydropower and geothermal energy has been studied in detail, the potential for the development of other renewable energy resources is yet to be explored in depth.[1]
This article covers renewable energy as a source of electricity generation and does not cover other aspects of renewable energy (biofuels in transport, solar heating etc.).
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Decrees No. 85-98 and 267-98 promote the development of renewable energy-generating plants. The decrees include tax breaks to developers and a secure buyer for energy at prices equivalent to the system’s short-term marginal cost. The national integrated utility ENEE, which is the default buyer, must pay a premium (10 percent of the same short-run marginal cost) for the electricity generated when the installed capacity is below 50 MW. This framework has facilitated the negotiation of about 30 public/private partnerships with ENEE for small renewable energy plants. In addition, Decree No. 85-98 also establishes tax exemptions in favor of developers: import and salestaxes on equipment, and a five-year income tax holiday.[1]
The penetration of renewable energy technologies into rural electrification programs is still lagging behind due to a lack of clear and consistent policy framework in the field. As a result, most of the rural electrification activities are still grid extensions.[1]
Currently, 33 percent (502 MW) of the installed capacity of the national interconnected system is hydro plants. There has been an intensive use of small- and medium-scale hydro energy, with 14 out of 16 existing hydro plants with capacity below 30 MW. Two large plants (El Cajon and Rio Lindo) account, however, for more than 70% of the total capacity.[1]
In Honduras, there is a large potential for electricity generation based on hydropower. In 2003 then President Ricardo Mauduro put in place a Special Commission for the Development of Hydroelectric Projects.[2]
There are 16 new hydro projects that are expected to be commissioned before 2011, with an overall capacity of 206.5 MW. The two largest projects are the Cangrejal and Patuca 3.[1] There are also other large hydropower project that are not included in the power expansion plan. These large projects have attracted some criticism. Some of the most prominent projects are:
Concerning medium-size and small dams, private developers receive tax breaks. Specifically, private producers are benefiting from fiscal incentives, tax exemptions, and the recognition of 10 percent of the short-term marginal cost per kWh as a premium. Fiscal incentives for small and medium-size hydropower have created a bias toward this type of development and against other renewable options, such as the use of photovoltaic, wind, and geothermal systems.[1]
Due to the diversity of the Honduran landscape, the potential for wind development varies considerably.[6] Currently, there is a 100 MW wind project under way[7], finance was agreed with US EXIM Bank in mid 2010 (EXIM bank project reference AP083987xx) and is expected to begin construction in late 2010.[1] This project, sponsored by Mesoamerica Energy, will be located in Cerro de Hula, in the municipalities of Santa Ana and San Buenaventura, 20km South of Tegucigalpa[8]. Mesoamerica seems to be actively controlled by the Actis Infrastructure Fund[9].
Honduras has a large potential for solar photovoltaic generation. In fact, it is a practical solution for servicing energy-isolated rural communities. Currently, there are about 5,000 individual Solar Home Systems, with an average size between 30 Wp and 50 Wp, which makes up for a total capacity of approximately 15 to 25 kW of power.[1]
The growth of a wider photovoltaic market in Honduras has been hampered by a combination of high unit prices, absence of financing assistance and a lack of government support.[1]
Honduras has a large potential for electricity generation from biomass, mainly from the sugar industry. Currently, there are nine biomass projects in operation, with a total of 81.75 MW installed capacity. These plants are estimated to supply 2.3 percent of the total demand of energy in Honduras for 2007.[1]
The three planned geothermal projects in Honduras add up to 85.5 MW of installed capacity. The largest of them is called Platanares, in the Department of Copan, which is expected to begin operations in 2011 with an installed capacity of 40.5 MW and a generation of 354.8 GWh per year.[1] and[10]