Analysts: Haliz Doskee, Piotr Dobresnski, and Ryan Fitzgerald
Team Leader: Haliz Doskee
Much of Guatemala’s energy legislation is covered under Decree No. 93-96 – General Electricity Law, a law previously criticised by the International Monetary Fund for its excessive procedural requirements, procedural ambiguity, lack of enforcement, and high degree of judicial variability. For example, under the General Electricity Law, all energy firms including renewables must contract electricity power capacity through auctions held by the National Electricity Commission. Auctions in 2012 awarded 600MW of production in three forms of contracts; hourly-supply contracts, option contracts, and generation contracts. Significantly, the 2012 report established that one half of all energy production must be awarded to renewable energy sources. The established energy mandate successfully awarded contracts to 32 hydro plants, 2 solar plants, and 3 wind plants. In September 2013, a further 250MW were awarded to various companies, many of which operated through renewable energy, at an average cost of USD 109.38/MWh. While the report presents the narrative of a high degree of success, the procedural ambiguity and excessive procedural requirements made it very difficult for smaller actors get involved.
While many energy and tech firms enjoy monetised incentives from the Guatemalan government, they also have the support of the US Trade and Development Agency. Specifically, the Clean Energy Finance Facility (CEFF) for the Caribbean and Central America. The program was conceived of to be a catalyst for the development of renewable energy infrastructures in the region. Programs such as the CEFF can offset a variety of operating costs in Latin America including: engineering costs, legal costs, consulting costs, and third-party costs.
Under Guatemalan law, Articles 97, 125, 126, 127, 128, 129 set out the parameters for the protection of social, economic, and technological development; while at the same time maintaining and conserving ecological balance. Unfortunately, these articles, as outlined in Guatemala’s constitution, are weak and at best insufficient. While the articles make it clear that future development would benefit Guatemalan citizens and the communities, it is not clear as to how current and future legal frameworks will be enforced to protect both civil liberties and ecological conservation. Moreover, Article 125 of the constitution states, “The State will establish and propitiate its own conditions for […] exploration, exploitation, and commercialization [of natural non-renewable resources].” Such a clause needs further explanation as it is unclear what government ‘conditions’ are and what they entail. The same clause poses serious concerns for aboriginal populations who have historically been disenfranchised by the Guatemalan government.
While such legislative frameworks in Guatemala are designed to encourage and aid in the development of renewable energy, and foreign direct investment practices many investors are concerned that bureaucratic and judicial inefficiencies may marginalise future investment initiatives. However, such concerns are outweighed by the government’s commitment to the development of clean energy networks, developing strong international support structures for clean energy practices, and building stronger ties with the other South and Central American countries. If the current laws and legislatures continue to be effectively in implemented Guatemala there could be a projected increase in both domestic and foreign capital invested in renewable energy technology.
Should Guatemala’s renewable energy industry could soon grow to become one of the country’s foremost profitable industries. This would allow for greater legislative power within government, due to the essential nature of the industry, there will not only be benefits for the economy, but on environmental conditions within the entire Central and South American region. Increased policies in Guatemala could also encourage other neighbouring countries to adopt similar policies which would be to the region’s mutual benefit. The development or amendment of current and future legal and legislatives frameworks for both environmental protection and foreign direct investment requires cooperation from several key parties and actors including: the public; the various levels of government; and foreign investors. This triadic relationship is essential for all future renewable energy endeavors.