The government of Panama is looking to alternative and renewable energy to help diversify its energy matrix to avoid blackouts and power shortages.

While Panama doesn't suffer from the electricity generation problems some of its neighbor do, it is still looking forward to the future to develop a sustainable and cost-effective grid to avoid the pitfalls other nations in the region have fallen into. According to GDF SUEZ, Panama has an installed capacity of roughly 2.3 GW, with GDF supplying 25% of that capacity. The commercial sector is the largest consumer. Demand for electricity has risen by 6.3% over the past five years, and to this may be added rising oil and gas prices and droughts hampering hydro production, whereby the government is now seeking alternative routes to diversify its energy matrix.


In March 2014, a joint venture between Greenwood Energy and Biosar completed the first utility-scale solar photovoltaic (PV) power plant in Panama. The plant, located some 14 kilometers away from Chitre, will generate 2.4 MW of solar energy and will be able to meet the electricity needs of 30% of the demand for the surrounding area. The plant is hooked up to the La Empresa de Generacion Electricita (EGESA) grid network and supplies the equivalent electrical need for 2,600 homes. The engineering, procurement, and construction (EPC) contract was up for tender in September 2013 and won by Greenwood Biosar. The venture provided all the required services and equipment needed for the project, which included engineering, civil works, PV module installation, and monitoring and control systems. This is not the first time that Greenwood Energy and Biosar have worked together, with the two companies working on numerous projects together in the US and Latin America before taking on this project.


The National Dispatch Center (CND) released a report in July 2014 stating that Panama must install an additional 300 MW in generating capacity to help reinforce the system over the short term. While solar energy is some of the cleanest around, to meet this new demand would require the development of one of the largest solar power projects in the world. At present, California plays host to the largest such project, with 392 MW in installed capacity. Hence, the likely way to bridge this gap will be through hydro, which in terms of space and cost is more efficient at generating electricity. Hydro currently produces 60% of Panama's electricity; however, the government is reluctant to keep all its eggs in one basket, but is still pushing ahead with some hydro projects.

In 2013, GDF SUEZ began the commercial operation of its 118 MW hydro plant in Panama, the Dos Mares Hydro Plant. The plant consists of three power plants in total, Gualaca, Lorena, and Prudencia. The plants are situated in Chirique Province and required an investment of $460 million. In 2008, GDF auctioned off 100 MW of power to distribution companies for the period from 2013 to 2022 and is expected to provide 6,000 GWh over that contract period. The project will reduce the country's carbon emissions by 350,000 tons per year.

In June 2014, the state-owned utility company, EGESA, awarded a 215 MW hydroelectricity power plant to a branch of the Brazilian conglomerate Odebrecht. While the Brazilian company will hold a 77% stake in the $1.05 billion project, the Panamanian government will be the other main stakeholder. Odebrecht won a 50-year concession to operate the plant to be built in the western province of Bocas del Toro; however, during the construction of the plant the government will be able to boost its stake in the operation, which is due to be complete in 2019 or 2020.


While hydro can produce large amounts of electricity, it is susceptible to fluctuations in energy output due to droughts, which the country is currently experiencing. To avoid potential brown outs, the government is keen to diversify its energy matrix. A number of wind farms are currently under construction, the largest being the Penonome Wind Farm. It will be the largest in Central America when complete, supplying 10% of Panama's electricity by 2015. The $450 million project is run by Spanish-owned Union Eolica Panameña and will produce 220 MW by mid-2014 and 337 MW when fully operational in 2015. The project comprises 135 towers spread over 19,000 hectares and will eventually smeet the electricity needs of 850,000 people.