Costa Rica Aims to ‘Democratize’ Energy By Letting People Generate and Sell Their Own Electricity

Costa Rica is advancing in adjusting its regulatory framework to adapt to the need for a distributed generation of renewable energy. A recently passed law —that is yet to be fully implemented— for the first time gives consumers and producers (known as ‘prosumers’) the option to sell their energy surpluses to national distributors. It also establishes new forms of self-consumption generation from renewable sources.

Government officials signed the law back in December 2021, after it was passed by Congress. Costa Rican Public Services Regulatory Authority (Aresep, in Spanish) is due to design the technical regulation and establish the rates for the sale of energy surplus from consumers that generate their own electricity. The law marks the conditions to promote and regulate distributed generation activities in an efficient, safe and sustainable manner, according to the government.

“This law comes to give legal certainty and governance to an activity that has been developing for many years in the country. We are facing the possibility of democratizing the consumption of electricity production. This is a fundamental step for the energy sector, towards the solidarity model of the 21st century,” said Paola Valladares, a Legislative Assembly representative who pushed the law.

“With this law, we give a clearer and more consistent legal framework to this distributed generation effort. The world is moving towards decentralization and Costa Rica must have clear elements to be part of this transformation process, which recognizes the strength of renewable energies,” added Energy Minister Andrea Meza.

Energy decentralization

In Costa Rica, renewable energy sources supply more than 98% of the country’s electricity. Although distributed generation is something that has been happening in the country in the last decades, there were some patches in its energy system that made the goal of decentralization hard for consumers who produced or aimed to produce their own electricity. With this law and its eventual application, those problems should be resolved in favor of said ‘prosumers’.

This law allows the generation and sale of energy surplus only from renewable sources, like sunlight, water, wind, tides and waves, and biomass. Both business and residential customers are welcome in the new distributed generation scheme, meaning that they can decide if they produce their own electricity or if they buy it from the distributor. The sale of surpluses will need a technically reasoned justification and will be based on rates yet to be established by Aresep.

The bill that was passed in Congress shows data related to distributed generation in Costa Rica. For instance, in 2019 there were almost 2.000 energy-producing consumers, three times more than two years before. Those ‘prosumers’ generated 35 Gigawatts per hour, up from 6,2 Gigawatts per hour in 2017. This shows that there is a growing trend for self-consumption generation in the country and that they are producing more electricity than what they use.

Up until now, energy surpluses in distributed generation meant that generators were granted incentives up to 49% of their electricity bills. This has been this way because of regulations of the Ministry of Environment and Energy (Minae, in Spanish) that don’t allow for the sale of electricity surplus. Those regulations lacked legal certainty in some aspects and limited to 15% the number of ‘prosumers’ who could connect to an electric feeder by geographical area. The new law puts an end to those and other obstacles.

Conditions for the sale of energy surpluses

The law establishes the conditions that must be met for the economic compensation of energy surplus from distributed generation. Those conditions are:

1. Respect the economic equivalence of the moment the surplus was delivered, according to the hourly rate structure and the seasonal period of the time of delivery.

2. The distribution company that the distributed generator is connected to must be interested in acquiring those surpluses, provided that said acquisition supposes an economic benefit for itself and the rest of its subscribers, and without it being mandatory for the distributor to buy surpluses.

3. Purchases of energy surplus and the provision of auxiliary services for that matter must respond to criteria of opportunity, necessity, efficiency and convenience defined by the distribution companies in a motivated, technically and economically reasoned manner.

4. The distribution companies can purchase energy surpluses and auxiliary services from the distributed generators that belong to their area of territorial competence, in order to attend to their needs.