Costa Rica - Issues and options in the energy sector

Report No 4655-CR Costa Rica: Issues and Options in the Energy SectorF FILE MpY January 1984 Report of the Joint UNDPMorld Bank Energy Sector Assessment Program This docuMent has a restricted distribution Its contents may not be disclsed without ahorizaion from the Coverntyient, the UNEDP or the World Bank  JOINT UNDP/WORLD BANK ENERGY SECTOR ASSESSMENT PROGRAM REPORTS ALREADY ISSUED Country Date No. Indonesia November 1981 3543-IND Mauritius December 1981 3510-MAS Kenya May 1982 3800-KE Sri Lanka May 1982 3792-CE Zimbabwe June 1982 3765-ZIM Haiti June 1982 3672-HA Papua New Guinea June 1982 3882-PNG Burundi June 1982 3778-BU Rwanda June 1982 3779-RW Malawi August 1982 3903-MAL Bangladesh October 1982 3873-BD Zambia January 1983 4110-ZA Turkey February 1983 3877-TU Bolivia April 1983 4213-BO Fiji June 1983 4462-FIJ Solomon Islands June 1983 4404-SOL Senegal July 1983 4182-SE Sudan July 1983 4511-SU Uganda July 1983 4453-UG Nigeria August 1983 4440-UNI Nepal August 1983 4474-NEP Gambia November 1983 4743-GM Peru January 1984 4677-PE  FOR OFFICIAL USE ONLY Report No. 4655-CR COSTA RICA ISSUES AND OPTIONS IN THE ENERGY SECTOR January 1984 This is one of a series of reports of the Joint UNDP/World Bank Energy Sector Assessment Program. Finance for this work has been provided, in. part, by the UNDP Energy Account, and the work has been carried out by the World Bank. This report has a restricted distribution. Its contents may not be disclosed without the authorization from the Government, the UNDP or the World Bank.   ABSTRACT Costa Rica faces a difficult economic and financial situation at present. The major issue in the energy sector is how to adjust the flow of investments devoted to the sector in light of current economic constraints while still meeting the energy requirements of the future. On the demand side, this can be done through policies that promote the rational use of energy, i.e. by encouraging investment and behavioral decisions affecting energy use that are consistent with the real economic cost of energy and the current state of energy use technology. On the supply side, this requires that investments be concentrated on the development, transformation and distribution of those energy resources which demonstrate the greatest potential for meeting the diverse energy needs of the country at lowest cost. On the pricing side, the achievement of these objectives requires that energy prices reflect their economic costs. Finally, the balancing of the diverse interests of the sector requires a strengthening of the planning system to allow it to formulate the sectoral priorities and design the requisite policies and investment programs with those long term objectives in mind. The Government also is preparing a legal framework for attracting private petroleum exploration investments rather than using its own scarce financial resources in such risky ventures. In the fuelwood sector, which still meets the needs of 40% of the population, measures will have to be taken to ensure that supply stays in balance with demand.   ACRONYMS AND ABBREVIATIONS Acronymis CACM Central American Common Market CAEI Center for Assistance in Energy to Industry CATIE Centro Agronomico Tropical de Investigacion y Ensenanza CATSA Central Azucarera del Tempisque, S.A. CODESA Corporacion Costarricense de Desarrollo, S.A. DGF Direccion General Forestal, Ministerio de Agricultura y Ganaderia DSE Direccion Sectorial de Energia ICAITI Instituto Centroamericano de Investigacion y Tecnologia Industrial ICE Instituto Costarricense de Electricidad IDB Interamerican Development Bank IICE Instituto de Investigaciones en Ciencias Economicas, Universidad de Costa Rica ITCR Instituto Tecnologico de Costa Rica MIEM Ministerio de Industria, Energia y Minas MIDEPLAN Ministerio de Planificacion Nacional y Politica Economica MOPT Ministerio de Obras Publicas y Transporte PEICA Programa Energetico del Istmo Centroamericano, UNDP RECOPE Refineria Costarricense de Petroleo, S.A. SNE Servicio Nacional de Electricidad Transmesa Transportes Metropolitanos, S.A. USAID United States Agency for International Development Abbreviations Prefixes bbl barrels kilo - 1,000 c.i.f. cost-insurance-freight mega - 1,000,000 f.o.b. free on board giga - 1,000,000,000 Gcal gigacalorie GWh gigawatt hour ha hectare hp horsepower kcl kilocalorie km square kilometer kWh kilowatt hour 1 liter LSG liquefied petroleum gas m cubic meter MW Megawatt ton metric ton toe Metric Ton of Oil Equivalent  CURRENCY EQUIVALENTS Currency Unit Colon (4) Exchange Rates 44.004/US$ 1/ FUEL CONVERSIONS FACTORS (Net calorie content expressed in tons-of-oil-equivalent of 10 million kilocalories) Product Conversion Factor Unit Electric power 86 TOE/GWh Crude Oil 0.138 TOE/bbl Liquefied Petroleum Gas 0.097 TOE/bbl Gasoline 0.124 TOE/bbl Kerosene and Jet Fuel 0.131 TOE/bbl Diesel Oil 0.138 TOE/bbl Fuel Oil 0.148 TOE/bbl Non-Energy Pet. Products 0.138 TOE/bbl Coal (imported) 0.730 TOE/ton Coal (Volio 9) 0.530 TOE/Ton Oven Coke 0.640 TOE/Ton Petroleum Coke 0.840 TOE/Ton Charcoal 0.650 TOE/Ton Fuelwood (10% humidity) 0.430 TOE/Ton Bagasse (50% humidity) 0,183 TOE/Ton Coffee Husks 0.425 TOE/Tpn Ethanol (96%) 0.509 TOE/m 1/ This is the exchange rate used in this report. At the time of the mission and the drafting of the report, the interbank exchange rate (applicable to most transactions) was 40.004/US$ and the free market rate was 44.004/US$. As of November, 1983, these rates were unified at 43.65