Panama is a rapidly growing country with a rapidly growing demand for energy. Energy use has skyrocketed due to rapid growth, and as it’s a small nation, Panama has be trying its hardest to keep up. Earlier this year, at the IJ Global-Euromoney Forum, Panama’s Deputy Minister of Economy announced major plans for the country’s energy future. And plans, in this case, mean a massive $5 billion investment. This announcement was so big that it not only laid out a plan to solve Panama’s demand, but to also create a surplus, which can be sold to other energy-hungry neighbors. They also plan on setting up a network of energy sharing with Colombia, in order to help solve mutual demand in both countries, and create a valuable future asset for cross-nation development.
Will Panama become an energy hub?
It’s a lofty goal, but it may not be as tough as you think. While electricity isn’t currently a surplus utility in Panama, it may soon be. There are currently significant investments in the development and completion of Hydro Chan 2, which when at full capacity is expected to nearly double the country’s energy production. And while hydro energy is big, gas and coal will also get a cash injection, and upgrade in the new energy plan. The plan also includes improving energy delivery, meaning that the output flow will become more transportable and more efficient. This will also come in handy for energy delivery abroad, and maintaining a stable infrastructure for even bigger future developments.
How Panama plans to fund energy growth
The planned $5 billion investment will come from both private and public financing, although the majority (76%) will come directly from the private sector. About a third of the total funds will go to Hydro Chan 2, with the remaining being split into large shares for other energy sources (coal and gas), and distribution lines. Though much of the funds for these projects have already been allocated for, Panama expects to reinforce finance from a variety of sources, many from outside the country. The public financing will come from already implemented energy taxes, as well as shares of Canal revenue and federal reserve funds.
The high demand for energy in Panama makes it critical to increase output
As mentioned earlier, Panama’s demand for electricity is growing. In fact, it’s growing so fast, that government projections estimate that it will nearly double over the next five years. This makes updating the grid, and increasing output, not only critical but essential to maintain stable economic growth overall. It also doesn’t allow for much error as far as timing goes. It’s a veritable race between supply and demand, and it could get costly if it becomes out of balance. In other words, if demand for energy continues to beat supply, Panama will have to continue to buy energy from its neighbors. While this is feasible, technically, it’s not economical, and makes it hard to guarantee consistent delivery.
Panama’s economy has slowed a bit in the last year, but overall growth numbers and projections see that there will be steady growth for a number of years ahead. Without sufficient electric production, Panama could drop into serious debt trying to fix the problem. Much like the property market in the country, the race to supply to beat demand is on. And if the Panamanian government has its way, the full energy upgrade will happen within the next five years. It will be interesting to see if they can indeed deliver as planned, and make Panama not only an energy-efficient country, but a regional supplier as well.
