Jul 02, 2024
For many, Costa Rica is already a sustainability success story. The Central American nation has hit impressive green energy targets, making the country a climate trailblazer.
“99% of our electricity comes from renewable resources,” explains Sylvia Larrea, energy specialist for the Inter-American Development Bank in Costa Rica. This is largely thanks to long-term, forward-thinking investments in hydropower plants, which take full advantage of the country’s plentiful rainfall, complemented by geothermal, wind, solar and biomass sources.
But despite enjoying almost universal access to clean electricity, Costa Rica is still dependent on fossil fuels. Transforming this will require a sweeping shift in the transport and industry sectors, which together account for three-quarters of all energy consumption.
In answer, the government has set its sights on ramping up electromobility and rapidly decarbonizing industry, backed by a flexible national grid to absorb and channel even more renewable power.
It is a formidable undertaking, but exactly the kind the Climate Investment Funds’ Renewable Energy Integration (REI) investment program was established to support. As the world’s only climate finance program wholly dedicated to clean energy integration, REI helps developing countries build efficient energy systems that can deliver clean power where and when it’s needed.
Costa Rica’s REI investment plan was approved at the end of last year, with financing from CIF, IDB Invest, and the World Bank Group. Under this plan, Costa Rica will focus on shifting both public transport and industry away from fossil fuels, and ensuring that scaled-up clean energy sources can plug seamlessly into the national grid.
The authors of the plan recognized early on that the key to achieving such systemic change will be the active involvement of industry. During the design phase, they consulted with electricity supply companies to pinpoint possible industry-specific changes and to identify champions. The goal was to find out “how industry could be part of the solution,” explains Ronny Rodríguez, the Vice Minister of Energy for Costa Rica. “That is, replace petroleum derivatives with electrical energy in their industrial processes.”
CIF’s injection of highly concessional capital is critical for creating this buy-in. The $70 million plan was endorsed with an initial allocation of $45 million in November 2023. “When we bring to the table concessional resources like [those from CIF],” says Sylvia Larrea, “you can lower the cost of financing.” This helps de-risk the project, opening the door for the private sector to come on board.
The initial plan projects to install 724,000 advanced metering system units, provide charging infrastructure for 185 electric buses, eliminate 17,729 tonnes of carbon dioxide equivalent per year, and reduce service costs by $1.2 million annually.
“Each of those solutions will contemplate private sector participation,” says Matthieu Pegon, head of blended finance at IDB Invest. “Either through financial institutions, or through energy service companies, or by working directly with companies.”
Electrifying transport and industry is not only important for the climate, but it makes solid economic sense, as it will free Costa Rica from its current dependence on imported fossil fuels. “Costa Rica recognizes the extraordinary opportunity we have in this moment,” says Ronny Rodriguez, “to decarbonize and electrify our economy, and accelerate a just energy transition that supports all of our communities.”
