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Costa Rica

With a cumulative score of 1.65, Costa Rica ranks number 36 among emerging markets and number 65 in the global ranking.

  • Emerging markets
  • Americas

1.66 / 5

Power score


1.60 / 5

Transport score


 

Buildings score


Only 56 markets (28 emerging markets) are scored on the Buildings sector. See the full list on the methodology page.


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Low-carbon strategy

Net-zero goal and strategy

In December 2019, Costa Rica submitted a National Decarbonization Plan in which the country commits to becoming a decarbonized economy with net-zero emissions by 2050.

Nationally Determined Contributions (NDC)

Costa Rica ‘nationally determined contribution’ (NDC) – meaning its plan to help achieve the goals of the Paris Agreement – was submitted in December 2020 and presents two types of commitment. The first one is a 44% reduction in greenhouse gas (GHG) emissions, compared with a business-as-usual (BAU) scenario, and a 25% reduction compared to 2012 emissions. Costa Rica included all sectors in its NDC target.

Fossil fuel phase-out policy

Since Costa Rica generates more than 98% of its electricity from renewables, there is no need for a fossil fuel phase-out policy.

Power

Power policy

Costa Rica’s net-zero strategy was a pioneer in its region, specifically in aiming to reach 100% renewable power by 2030. To put that latter goal in context, in 2020, 99.8% of Costa Rica’s generation came from clean sources, including large hydro. Hydropower is the country’s predominant source of capacity, at 2,330 megawatts, and accounted for 71% of 2020 generation. More geothermal capacity was added in 2019 than any other technology, with 50 megawatts brought online. Geothermal in 2020 accounts for 7% of Costa Rica’s total capacity.

Costa Rica does not need an auction policy since there is an oversupply of renewable energy, however, it was one of the first countries in Latin America to implement a net metering program. The producer-consumer may deposit the unconsumed energy in the distribution network and will have the right to withdraw up to a maximum of 49% of the total energy generated, to use it in the following months in an annual period. By mid 2021, a project of law that envisioned the sale of the electricity surplus to third parties, more tax exemptions and the possibility to generate electricity in one place and use it in another, was being discussed but wasn't approved.

Power policies

Renewable energy auction
Feed-in Tariff
Import tax incentives
Net Metering
Renewable energy target
VAT incentives

Power prices and costs

Costa Rica power prices rose in 2016 due to the heavy use of diesel-fired generation to satisfy a 6.6% jump in electricity demand. Prices fell and rebounded since 2017, but then remained kept almost constant from 2019 to 2020. Residential customers specifically have different tariffs according to the period of the day, which can be the peak period, valley period or night period.

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Power market

The power market in Costa Rica is regulated and dominated by vertically integrated Instituto Costarricense de Electricidad (ICE), the country’s major generator and sole power purchaser. However, the Costa Rican market allows private participation in the form of cooperatives and independent power producers. These entities can be involved with generation and distribution in some parts of the country, but in 2019, ICE and CNFL (its subsidiary) were responsible for generating 67% of total electricity produced.

Costa Rica attracted $2.1 billion in new-build clean energy investment over 2010-2019. Over a third of that capital was directed to small hydro plants ($0.8 billion), followed by geothermal with $0.6 billion and wind with $0.6 billion. Investment peaked in 2014, with almost $0.6 billion accounting for these three technologies. But this dropped by half in 2017 and was even smaller in the next years. In 2019 Costa Rica attracted only $7.5 million to its clean power sector.

Installed Capacity (in MW)

2012201420162018202001K2K3K4K MW

Electricity Generation (in GWh)

2012201420162018202002K4K6K8K10K12K GWh
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Utility privatisation

Which segments of the power sector are open to private participation?


Generation
Transmission
Retail

Wholesale power market

Does the country have a wholesale power market?


Available
Not available

Doing business and barriers

Costa Rica’s government has demonstrated strong commitment to clean energy and climate-related incentives. However, high hydro penetration and slow demand growth have curtailed opportunities for new entrants. With typically around 70% of the country’s power coming from hydro, the need to add other clean generation to achieve the national 100% renewable energy goal is limited.

In 2010, the country established an import-tax exemption for equipment and materials brought in to support renewable energy development. Law 51, which came in force in 2016, authorized power purchase agreements (PPA) for up to 20 years. However, private companies that develop renewable energy projects are not allowed to build power plants of over 50 megawatts, limiting the competition between private and public projects. In addition, due to the low demand caused by the pandemic, ICE is not renewing contracts to buy power generated from other players, once the power it generated is already sufficient to supply electricity to all. Due to this, there are several power plants being decommissioned.

Currency of PPAs

Are PPAs signed in or indexed to U.S. Dollars or Euro?


Available
Not available

Bilateral power contracts

Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?


Available
Not available

Bilateral power contracts

Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?


Available
Not available

Bilateral power contracts

Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?


Available
Not available

Fossil fuel subsidies

Does the government influence the wholesale price of fossil fuel (used by thermal power plants) down through subsidies?


Available
Not available

Fossil fuel taxes

Does the government influence the wholesale price of fossil fuel (used by thermal power plants) up through taxes?


Available
Not available

Transport

EV market

Although the EV market in Costa Rica is still small, the government has created incentives to purchase EVs, either used or new. The public institution ICE has changed 100 from its own fleet to EVs.

According to U.S. International Trade Administration, Costa Rica sold until March 2021 approximately 1,606 electric cars, 625 electric motorcycles and 1,218 special use vehicles (such as golf carts).

EV policy

In Costa Rica’s National Decarbonization Plan, the transport sector is mentioned in several different ways. By 2025, zero-emission two-wheelers should be competititve. By 2035, some 25% of the vehicle fleet should be EVs, and by 2050, the targets are 100% of the new vehicle sales to be zero-emission vehicles (meaning a phase-out target of the Instituto Costariccense de electricidad) and 60% of the vehicle fleet - public and private.

The incentives to achieve this are exemption from VAT, import tax, vehicle ownership tax, toll fees and parking levies in designated areas. Electric vehicles are also exempted from traffic restrictions such as peak and license plate.

Transport policies

Electric vehicle target
Electric vehicle purchase grant or loan incentive
VAT incentives for EV
Import tax incentives for EV
EV charging infrastructure target
EV charging infrastructure support

Fuel economy standards

Does the country have a fuel economy standard in place?


Available
Not available

Buildings

Buildings market

Specific to the buildings sector, Costa Rica's National Decarbonization Plan aims to achieve the three targets. These are an increase of 10% in the use of wood, bamboo and other local materials in buildings by 2025, and 100% of the new buildings being designed and built adopting low-emission and resilience systems and technologies under bioclimatic parameters by 2030, as well as 50% of commercial, residential and institutional buildings operating under emission standards like water heating by 2050.

Energy efficiency plan

Does the country have a national energy efficiency plan?


Available
Not available

Energy performance standards

Are there minimum energy performance standards for buildings?


Available
Not available

Buildings policy

The government has yet to implement any substantive policy support in this sector and the low-carbon heating and cooling market remains at an early stage.

Buildings policies

Low-carbon heat target/roadmap
Tax credits
Boiler scrappage schemes
Heat pumps purchase grants/loans incentive
Ban on boilers: new build homes
Ban on boilers: all homes

Additional insights
from BNEF

Explore more detailed information on global commodity markets and the disruptive technologies driving the transition to a low-carbon economy.

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Energy Transition Factbook

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