Power policy

Honduras has been planning to implement a net metering policy for the last few years but has not completed the regulations to do so. Once in effect, the policy would oblige distribution companies to purchase surplus renewable power from residential and commercial users and give discounts on their bills.

Decree 70-2007, published in June 2007, guarantees priority dispatch to electricity generated from clean sources. Renewable power is also exempt from income, import value and sales taxes.

Power prices and costs

Electricity prices in Honduras increased from 2020 to 2021, with commercial rates rising most sharply, from $169.28/MWh to $173.26/MWh. Residential prices stayed flat in 2019-2020 at about $161/MWh.

Honduras has total installed capacity of 2.9 gigawatts. In 2021, just under a third of the country’s power came from oil- and diesel-fired plants. Hydro accounted for 28% of generation, while renewables (biomass, solar and wind) were a combined 38.5%. Solar capacity has grown by 23% since 2015 to over 660 megawatts in 2021. The Honduras wholesale market started operations in June 2019 and the country is part of the Central American Electrical Interconnected System (SIEPAC), meaning it is connected to El Salvador, Guatemala, Costa Rica, Panama and Nicaragua via transmission lines. Honduras is a net importer in the regional market.

From 2010-2021, Honduras attracted $2.8 billion in new clean energy investment, driven by $1.3 billion for solar from 2014-2021. These investments were boosted by a feed-in premium for renewables that came into force in August 2013. PV projects up to 300 megawatts installed by July 31, 2015, were eligible to receive a base price for their energy equal to the short-term marginal cost plus $0.03/kWh plus 10%. However, this policy was canceled in 2018 due to financial problems faced by state utility Empresa Nacional de Energia Electrica (ENEE).

Power market

Market conditions for renewables developers in Honduras are not easy. Since 2017, ENEE has faced financial problems and is having to renegotiate feed-in tariffs with national and international companies. However, international companies still have not agreed on lower tariffs.

The utility says energy demand is growing and will rise 4% per year through 2030. The national electrification rate in 2021 stood at 93%.

However, Honduras’s Decree 404-2013 which establishes that transmission and distribution companies are obliged to accept connection to the grid of any company and consumer that requires it, unless it detects a problem that may jeopardize the whole grid and other users. The tariffs to be charged for the use of the transmission and distribution grid are established by the Regional Electric Market Regulation, but the regulation offers no price guarantee or further explicit information.

Doing business and barriers

There are limited formal barriers to renewables development in Honduras. Power purchase agreements (PPAs) with renewable energy generators last up to 20 years but cannot be renewed following expiration.

In addition, the Honduras transmission network remains shaky. On September 16, 2019, a blackout affected most SIEPAC countries and Mexico. The cause was said to be heavy storms in Honduras. The fragile conditions of Honduras’ and Nicaragua’s transmission systems led to nationwide four-hour blackouts in both countries.

EV market

The government has yet to implement any substantive policy support in this sector and the electric vehicle (EV) market remains at an early stage.

EV policy

In its Nationally Determined Contribution, submitted in May 2021, Honduras stated that it wants to promote the use of low-emission transportation by 2030 through policies, strategies, regulatory frameworks, schemes and incentives programs, and projects. However, it offered no specifics on how it plans to implement its goals.

Buildings market

In its NDC, or plan to achieve the goals of the Paris Agreement, Honduras said it plans to promote development of cities and communities, seeking to encourage the protection of people and improve the quality of life based on environmental, social and economic sustainability capable of adequately meeting the basic needs of society.

Buildings policy

The government has yet to implement any substantive policy support in this sector and the low-carbon heat market remains at an early stage.