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New opportunities for solar energy production in Costa Rica

Luis Diego Obando, Mariella Quirós

Arias Law - The Costa Rican government, through the Costa Rican Electricity Institute (ICE) plans to invest US$539 million in the next two years for the development of wind and solar energy. The goal is to increase by 12% the current electricity capacity from this type of energy source (reaching 412 MW of installed capacity).

Two thirds of this new generation will be from solar or photovoltaic energy, and 60% of this is projected to originate from private production.

The Government has announced that the procurement processes for this energy will be carried out within the framework of Law 7200, which authorizes autonomous or parallel electricity generation.

This Law establishes a scheme of eligibility and selection processes in order to sign a Power Purchase Contract accompanied by a Connection Contract to the National Electric System between the private company and ICE.

This type of process is not short, and requires a series of formalities to be complied with both by the companies and ICE itself before the purchase can be formalized and the execution of the projects can begin.

In this scenario, given the country’s public interest needs in terms of energy production and strengthening the country’s current capacity, the General Public Procurement Law also provides for other alternatives that may be useful for ICE in its process of selecting and implementing partnerships with the private sector.

In this regard, the Law empowers the Government or decentralized institutions (in the case of ICE) to lease real estate (Art. 67) where the installation of a photovoltaic plant is planned, complying with a series of parameters such as a study demonstrating the suitability of the property and that the selected option is the most profitable, an appraisal defining the value of the property or the lease price, as well as a reasoned act of the head of government expressing compliance with the aforementioned requirements. The above, without the need to go to public tenders. The solar panel infrastructure could be considered as part of the facility incorporated to the lease.

It should be taken into account that the eventual lease contract would have to be accompanied by some figure such as, for example, a management and maintenance contract for the photovoltaic plant (or similar), in order for the generating company to ensure ICE the required energy production, following the parameters of the Law regarding the connection to the National Electric System.

The Administration could analyze the possibility of considering this "plant management and maintenance" scheme as part of ICE’s ordinary activity in order to achieve more expeditious contracting processes, but in accordance with that permitted by Law 8660 on Strengthening and Modernization of the Public Entities of the Telecommunications Sector, particularly Article 8 on "Business Associations".

The Government can and should review the feasibility of implementing this type of alternative schemes allowed by the regulatory framework in order to make the State’s action more effective and efficient in matters of important public interest, such as the strengthening of the national electric capacity, which in turn will result in greater "country competitiveness".

The information provided by ARIAS® is presented for informational purposes only. This information is not legal advice and is not intended to create, nor does it constitute, an attorney-client relationship. Readers should not act upon this information without seeking advice from professionals in the field.

Authors:

Luis Diego Obando
Mariella Quirós
Senior Counsels
Arias Costa Rica

AriasLaw.com

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