El Salvador
With a cumulative score of 1.55, El Salvador ranks number 46 among emerging markets and number 75 in the global ranking.
- Emerging markets
- Americas
1.89 / 5
Power score
0.74 / 5
Transport score
Buildings score
Only 56 markets (28 emerging markets) are scored on the Buildings sector. See the full list on the methodology page.
Low-carbon strategy
Net-zero goal and strategy
El Salvador has not yet set a net-zero emissions goal. However, in May 2022, the country partnered with the European Union through the El Salvador-EUROCLIMA Action Plan to develop a strategy for a long-term, low-emissions future.
Nationally Determined Contributions (NDC)
The country submitted an updated Nationally Determined Contribution (NDC) – its plan to help achieve the goals of the Paris Agreement – to the United Nations Framework Convention on Climate Change (UNFCCC) in January 2022. This focuses on lowering greenhouse gas emissions from the energy, agriculture, forestry, and other land use sectors.
El Salvador aims to reduce emissions from burning fossil fuels for energy by 640 kilotons of CO2 equivalent (KtCO2e) by 2030, versus a business-as-usual scenario extrapolated from 2019. It says it could go further with international financial and technical support, targeting an 819KtCO2e cut in emissions by the end of the decade.
In terms of land use, the country has set a goal for a cumulative 50,878KtCOe reduction in emissions across 2035-2040, compared to 2015 levels. This objective is based on increasing natural carbon sinks and receiving large-scale financing from national and international sources, including the private sector.
Fossil fuel phase-out policy
El Salvador does not have a fossil-fuel phase-out policy.
Power
Power policy
El Salvador’s government is focused on diversifying the country’s power matrix and cutting dependence on oil by adding renewable energy capacity. Five clean energy auctions have been held since 2013, contracting 310 megawatts (MW) of renewable capacity, although there have been no new auctions since 2019.
The updated NDC submitted by El Salvador envisages more than 2.2 gigawatts (GW) of renewables capacity being installed by 2030, up from 1.5GW in 2019. It is aiming for renewables to account for 64% of installed capacity by the end of the decade. In the longer term, the country’s National Energy Policy for 2020-2050 has a goal for a carbon-neutral energy sector by mid-century.
The country offers income and import tax exemptions for clean energy projects and guarantees priority dispatch for the electricity they generate. Regulator Siget established standards for net metering in 2017, which allow the sale of surplus electricity from final users to the main grid.
Power policies
Power prices and costs
Commercial, industrial and residential electricity prices in El Salvador dipped slightly in 2021 to $132 per megawatt-hour (MWh), $127/MWh and $150/MWh, respectively. By contrast, wholesale power prices jumped by almost 50% to $103/MWh.
One of the goals in of El Salvador’s National Energy Policy is to reduce electricity costs for end users.
Power market
El Salvador had 2.4GW of installed generation capacity in 2020. Oil and diesel are the largest source, accounting for 32% of the total, followed by large hydro at 23%. Among renewables, solar dominates with 507MW of capacity in 2020, equivalent to 21% of the total, having grown from 104MW in 2017. It is followed by biomass and geothermal, at 12% (300MW) and 8% (204MW), respectively.
The country’s power market is unbundled and generation is open to private operators. El Salvador is part of the Central American Electrical Interconnected System, known as SIEPAC, and is connected to Guatemala and Honduras by 286 kilometers of transmission lines.
The National Energy Policy aims to universal electricity access by 2030, either through expanding the main grid or developing off-grid systems for harder-to-reach areas.
Installed Capacity (in MW)
Electricity Generation (in GWh)
Utility privatisation
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
El Salvador’s renewables boom is set to continue with more project completions in the next two years. However, the country remains highly dependent on fossil fuels and hydro, exposing the power market to price spikes during droughts and periods of high oil prices. Investment in renewables is seen as a path to reducing this volatility.
The country has seen relatively modest economic growth since 2000 and the government is deeply indebted. The fiscal deficit challenge makes it harder to increases the cost of equity.
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?
Transport
EV market
El Salvador has an immature electric vehicle (EV) market, with only 110 electric or hybrid vehicles in the country in 2021. In terms of charging infrastructure, AES El Salvador, a subsidiary of US utility AES, is working with both Grupo NVS and Blink Charging to develop facilities around the country.
EV policy
El Salvador does not have specific targets for EVs. The country does offer tax incentives to encourage EV adoption. Both electric and hybrid vehicles are exempt from customs duty and the 13% value-added tax rate, and there is a 25% reduction in customs duty for two- and three-wheelers. For hybrid vehicles, in particular, there is also a two-year exemption from annual tax.
Electric and hybrid vehicles further benefit from the use of “green parks", which are designated parking spots in areas such as public parks or supermarkets.
Transport policies
Fuel economy standards
Does the country have a fuel economy standard in place?
Buildings
Buildings market
El Salvador’s climate means the focus is on cooling rather than heating buildings. The government has yet to implement any substantive policy support to improve the energy efficiency and carbon intensity of these efforts or the buildings sector in general. That said, developing strategies to increase energy efficiency is one of the priorities of its National Energy Policy.
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)?
Buildings policy
There are no specific laws.
Buildings policies
Additional insights
from BNEF
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