Overdependence on hydro-power is being tempered by LNG, wind, and solar projects.

Panama produces no gas, oil, or coal but is an important energy transit point through the Canal and the Trans-Panama Pipeline. Panama generates just over half of its energy through fossil fuels and refined petroleum products, creating the remainder with hydropower and biomass fuels. The country's energy situation is precarious, however, as Panama has had to rely more heavily on oil and coal in the past couple of years when the rainy season failed to deliver the usual amount of rain to drive the hydro plants.

Moves into wind and solar energy in recent years have shown promise in helping balance the supply scales. There has been talk in recent years of an oil refinery to be built by Occidental Petroleum in the western region of Chiriquí, but nothing has come of it—the biggest development, aside from the Canal's expansion, is the growth in the liquefied natural gas trade arising from the shale revolution in the US.

Indeed, the huge project to expand the Canal's capacity was partly driven by the need to accommodate larger tankers, including gas tankers, though the shale gas boom in the US was not even a blip on the radar of Canal engineers and planners. The Panama Canal Authority (PCA) now says the new locks will be able to handle nearly 90% of the global fleet of LNG carriers, including Very Large Gas Carriers (VLGCs).


Ricaurte “Catin" Vásquez, General Electric, CEO of Central America and the Caribbean, told TBY that the gas agreement with Trinidad & Tobago “is clearly a new opportunity to change the energy matrix in Panama. For the very first time, LNG has been considered as a possible fuel for electric power generation. Other countries in the region are also looking at the possibility to move into this cleaner fuel. LNG brings its own complexities as far as scale, volumes and infrastructure requirements to receive and handle a completely new fuel."

Approximately 1 million barrels per day (bpd) equivalent of oil and gas pass through the Canal, while the pipeline was built to pump up to 600,000 bpd of Alaska North Slope crude to Gulf coast and Caribbean refineries. The crude demand situation changed meanwhile, and BP now sends 100,000 bpd the other way, west, to the port of Charco Azul on the Pacific coast.

According to the latest statistics from the PCA, so-called southbound transshipments, Atlantic to Pacific, of petroleum and petroleum products exceeded the northbound by 15 to 1. Fossil fuel cargoes of all types represented about 14% of all shipments passing through the Canal in 2013. Fuel shipments of all kinds have declined sharply in the past couple of years during the Canal's expansion work, but overall transit volumes have held steady.


Not only is Panama overly dependent on hydropower, but state-owned electric power distributor, La Empresa de Transmisión Eléctrica S.A., known as ETESA, estimates that up to 17% of energy produced is lost due to faulty transmission lines. Blas González R., CEO of Central America and the Caribbean for ABB, told TBY that, “In 2013, we faced our first problem with regard to electricity generation in the city due to rainfall patterns. In 2014, we have faced the same again. There is a risk of companies leaving to surrounding countries if the problem persist, or increase, in the coming years. Besides, if a company is planning to invest in a production plant they would think twice about selecting Panama."

Meanwhile, shared transmission lines with neighboring countries such as Colombia and Costa Rica contribute to regional electricity delivery. A new electricity grid connection being built with Colombia will integrate the Andean market with the Central American market via a $415 million transmission line between a substation in northeastern Colombia and the Pedregal Substation in Panama, providing Panama with access to cheaper and more reliable power. The project is slated for completion in June 2016.GDF Suez Energía Centroamérica in 2012 completed construction of its Dos Mares hydro power plant, and in 2013 upgraded its facilities at Bahía Las Minas (BLM) improving the efficiency and reliability of that facility by interconnecting BLM's coal plant to its gas turbine plant.

Fernando Tovar, CEO of GDF Suez Energía Centroamérica, told TBY that, “One of the biggest challenges in terms of infrastructure in Panama is transmission. There is the problem of the transmission from Chiriquí to the load center here in Panama City; however, that is not the only issue. The transmission lines from Colón to Panama are also reaching their saturation point. There is very little additional power installation that can be done in the Colón area, which is where most of the thermal power is located, without expanding the transmission lines between Colón and Panama as well. That is a central part of the infrastructure that needs to be constructed."

Development has a price tag, and energy-related projects represent an estimated $1.5 billion out of a total of $14 billion slated to be spent on infrastructure and economic development through 2018. Bloomberg reported in September 2014 that Panama's President Juan Carlos Varela will seek Congressional approval to raise the budget deficit limit.


Mining is another industry with great economic potential, but which is also energy-intensive. Denis Oscar Pombo A., General Manager, Drilling & Blasting, Inc., told TBY that, “Gold and copper will experience amazing growth in the upcoming years. Panama is a very attractive country for investment due to its relative stability."

While the development of gas is key for the future of the power sector in Panama, infrastructure planners must also include mining company needs in their development plans.

Zorel Jaime Morales, Executive Director of the Panamanian Chamber of Mining, told TBY that, the “Cobre Panama Project is slated to produce around 300,000 to 350,000 tons of copper per year, which means that Panama will be placed around 9th to 10th copper producer countries of the world. The value of metal exports, will then represent around $2 billion per year, an income similar to that produced by the Panama Canal, on a country with a population of 3.5 million people."


Panama's Authority of Public Services (ASEP) in 2014 provided provisional licenses for two solar power plants, totalling 29.9 MW, both to be located on the Pacific coast in Chiriquí province. The larger of the two projects, 20.9 MW, is run by Bajo Frío, a local hydropower plant operator. The other project, Planta Fotovoltaica Chiriquí, is a 9 MW plant in San Juan being built by Enel Fortuna, a subsidiary of Enel Green Power, a hydropower operator with a 300 MW plant on the Chiriqui River.

In September 2014, two renewable energy companies, UGE and OTEPI, announced a contract to supply one of Panama's first net-metered rooftop solar systems—and hinted at other projects to deliver multiple megawatts of solar energy by 2015.

Wind Power Monthly reported in April 2014 that Chinese-owned Goldwind will supply magnetic direct-drive turbines for the second 215 MW Penonome wind farm in Panama, the project in Coclé province being developed by InterEnergy Holdings. The $450 million wind farm is the largest such project in Central America and will meet an estimated 10% of Panama's electricity demand. The first stage of the wind project, 55 MW, was developed by Spanish-owned Union Eolica Panameña and was also supplied turbines by the Chinese firm.

The last word on Panama's energy situation comes from Rodolfo Barniol Zerega, Director General of LNG Group Panama, who told TBY that, “What matters is not that energy is cheap for Panama; rather that it is competitive with the rest of the world, so that the processing industry can grow as an alternative source of wealth and development."