With a cumulative score of 1.67, Panama ranks number 30 among emerging markets and number 58 in the global ranking.
- Emerging markets
1.97 / 5
0.96 / 5
Only 56 markets (28 emerging markets) are scored on the Buildings sector. See the full list on the methodology page.
Net-zero goal and strategy
Panama aims to reach carbon neutrality by 2050 but has yet to set a long-term low-carbon strategy.
Nationally Determined Contributions (NDC)
Panama submitted an updated Nationally Determined Contribution (NDC) – a non-binding plan to help achieve the goals set out in the 2015 Paris Agreement – to the United Nations Framework Convention on Climate Change (UNFCCC) in December 2020. It is aiming to lower carbon dioxide emissions from its energy sector by at least 11.5% between 2022 and 2030 compared with a business-as-usual (BAU) scenario, and by at least 24% between 2022 and 2050 versus the BAU scenario. This would equate to 10 million metric tons of CO2 equivalent (MtCO2e) being avoided by 2030 and 60MtCO2e by 2050. Mitigation efforts include the reforestation of 50,000 hectares across the country, which it estimates will absorb around 2.6MtCO2e annually by 2050. Panama has also reinforced its 2016 NDC target for 15% of energy generation to come from renewables by 2030.
Fossil fuel phase-out policy
Panama does not have a fossil fuel phase-out policy
Panama's National Energy Plan 2015-2050 included a target for 70% of installed generation capacity to come from renewable energy by 2050. The country’s efforts to promote renewables development include tax policies and duty exemptions, but it no longer holds tenders specifically for clean energy contracts. Following legislative changes, state-owned Electric Transmission Company (ETESA) announced in February 2018 that there will be no further tenders expressly to solicit bids from clean energy projects. Instead, all generation sources will compete for contracts. However, ETESA also said technologies will be evaluated based on their environmental attributes and associated costs.
Panama has had tax incentives for the construction, operation and maintenance of clean energy projects since 2004. Renewable generators up to 500 kilowatts are exempt from all taxes on imported equipment as well as value-added tax (VAT). For renewable generators up to 10 megawatts, an income tax credit of up to 25% of the project investment is provided. For generators of more than 10 megawatts, there is a fiscal benefit of 25% and an income tax credit of up to 50% of the project investment. The law also exempts transmission and distribution fees for smaller renewable energy projects up to 10 megawatts, while projects between 10 and 20 megawatts do not pay transmission or distribution fees for the first 10 megawatts for 10 years.
Further incentives for specific technologies are also available. For example, solar PV equipment is exempt from import tax and VAT, and qualifies for a tax credit of up to 5% for income tax and accelerated depreciation. Further, equipment, materials and spare parts for wind generation plants are exempt from all international duties, fees, VAT and import tax. Wind project owners are also exempt from national taxes for 15 years.
A net metering policy was instated in 2016, creating the rules to set up self-generation facilities and allowing connection to the distribution grid and the sale of surplus power. Credits are accumulated in kilowatt-hours up to a limit of 25% of annual or semiannual historic consumption, which is refunded to a customer’s electricity account.
Power prices and costs
Panama’s system operator ETESA sets the minimum and maximum tariff prices, and the transmission and distribution companies present their plans and tariff boards to ETESA for approval.
The government traditionally only subsidizes fuel if it is used for public transportation or cooking. There are several laws regarding types of electricity price subsidies, mostly focused on the population with a lower electricity monthly intake, farmers, and the retired and elder population. In 2021, Panama launched a Covid-19 energy subsidy covering 92% of customers consuming up to 750 kilowatt-hours. The subsidy varies based on consumption.
Power prices rose across all of Panama’s customer segments from 2016 to 2019 before dropping across the board in 2020. However, in 2021, changes in prices varied across segments. Commercial power prices dropped from $195 to $177 per megawatt-hour, industrial prices fell from $126 to $153 per megawatt-hour, and wholesale prices rose from $48 to $71 per megawatt-hour. Residential prices fell slightly from $186 in 2020 to $177 per megawatt-hour in 2021.
Most of Panama’s electricity generation comes from hydropower or the burning of fossil fuels. The country had 3.85 gigawatts of installed generating capacity in 2021, with large hydro and oil serving as the main sources.
Renewables excluding large hydro accounted for 1,076 megawatts in 2021. Solar and wind installed capacity jumped from virtually nothing in 2013 to 716 megawatts in 2021.
Panama’s power market was unbundled in 1997, with generation and distribution opened to private operators. Clean energy projects with installed capacities up to 10 megawatts can enter into direct power purchase agreements with the distribution utility as long as power sold does not exceed 15% of the distribution company’s maximum demand.
Panama is part of the Central American Electrical Interconnected System (SIEPAC) and is connected to Costa Rica via 150 kilometers of transmission lines.
Installed Capacity (in MW)
Electricity Generation (in GWh)
Which segments of the power sector are open to private participation?
Wholesale power market
Does the country have a wholesale power market?
Doing business and barriers
Under Panama’s Energy Plan 2015-2050, the government is aiming for 100% of the population to have access to electricity by 2024. The national electrification rate was just under 96% in 2019.
There are few formal barriers to renewables development in Panama, and the business environment is generally positive. While hydro still represents the largest single source of clean power, solar and wind have been increasing their shares since 2014. However, tenders are no longer held by generation technology.
The Central American Bank for Economic Integration (CABEI) is running a partial credit guarantee scheme for small scale renewable energy projects under 10 megawatts, known as Accelerating Renewable Energy Investments in Central America and Panama (ARECA).
Currency of PPAs
Are PPAs (eg. corporate PPAs and all other types) signed in or indexed to U.S. Dollars or Euro?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Fossil fuel price distortions - Subsidies
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) down through subsidies?
Fossil fuel price distortions - Taxes
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) up through taxes or carbon prices?
Panama’s electric vehicle (EV) market is still premature. EVs represent less than 1% of the country’s total passenger vehicle sales; however, in the last three years, sales have grown by an average of 90%. In 2020, Panama’s EV fleet comprised 120 battery EVs (BEVs) and 218 plug-in hybrid EVs (PHEVs).
Panama passed an electric mobility law in 2022. It states that starting in 2025 at least 10% of publicly owned vehicles need to be BEVs, with the percentage increasing to 25% by 2027 and 40% by 2030. For mass transit, BEVs should make up 10% of the fleet by 2025, 20% by 2027, and 33% by 2030. Purchase incentives include a five-year waiver for license plate costs.
Fuel economy standards
Does the country have a fuel economy standard in place?
Panama does not have any energy efficiency or buildings policies in place.
Energy efficiency policy
Does the country have a national energy efficiency plan?
Energy efficiency policy
Are there minimum energy performance standards for buildings?
Energy efficiency incentives
Is there access to loans or grants for energy efficiency measures (i.e. Wall or loft insulation or double glazing)?
The government has yet to implement any substantive policy support in this sector.
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