15 Mar Powering on
Marco Acuña Mora, Executive President, Ice Group, gives us the rundown on all that his company is doing to improve the power infrastructure of Costa Rica.
The global energy sector has made numerous headlines over the past months. However, Costa Rica has seemed less affected by energy-linked inflation than other countries. To start, could you tell us about the recent performance of Costa Rica’s energy sector and how the industry has managed to remain stable despite the global energy crisis? Which major achievements would you highlight for the Costa Rica electricity market as we are closing this complex year of 2022?
Costa Rica has been investing in renewable energy for 70 years, so the country’s electricity matrix is very strong in renewables. Hydropower is the main source of electricity, followed by wind, then geothermal, solar, and biomass, which is a product of agricultural activities. With that we can reach more than 99% of electricity in renewables. The variable cost of the electricity production is very low. Our electricity is produced at a fixed cost because the source is basically free and not linked to market fluctuations (like fossil fuels in the rest of world). Thanks to its natural resources, Costa Rica is independent from fossil fuels for producing electricity. We can control and manage the tariffs of electricity in a better way than other countries, who are more dependent on fossil fuel-based electricity.
Besides, we have enough resources for the local Costa Rican demand, and, beyond that, we can export electricity to Central America. In 2021 and 2022, we have exported 10% of our production to other countries. Those exports of power generate income for ICE, and that income is distributed to our home customers in the form of lower tariffs. For example, last year we exported more than $50 million in electricity, and that was completely distributed to all the customers. Even when the world has experienced skyrocketing prices on power, we were able to reduce power prices by more than 25% this year in Costa Rica. That benefits not only the people but also the businesses and the companies exporting because that gives them an advantage compared with the same businesses located in other countries using electricity with higher costs. That gave them an advantage. That’s how we can get those results: because we generate our own power and don’t depend on any fossil fuels for generation.
Your company is composed of three main subsidiaries, all providing essential public services. Combined, they generated a total operating income of around $2.2 billion in 2021. Through its Strategy 4.0, ICE aims to raise the bar and further contribute to Costa Rica as a whole. Can you go over ICE’s Strategy 4.0 for us? What main trends does it highlight and how is ICE Group adapting to them? How does this strategy relate to the broader goals challenges facing Costa Rica?
Strategy 4.0 is an old one. Right now, we are working on the new strategy, but it is not completely different to that one. We are focusing on ensuring that the company improves reliability of the power system for the coming years to guarantee a platform for the inclusion of the expansion of more renewable energy. I am talking about the network, transmission and distribution systems to incorporate more renewable energy because the big goal is to electrify the economy. ICE is planning the investments required in the power system for making that happen, and not only on the generation side or the demand side (which is factories, customers, and homes) but also the transmission system, the bulk system, and the transmission substations. But that can be possible only by improving the efficiency of the company and investing in the digitalization of processes and operations, which is a very big trend.
We need to make sure our operations are safe, not only from a weather disaster point of view, but also from the cyber security point of view because we are responsible for providing power and telecommunications to the country. Our team is investing on having enough protection for cyber-attacks. The country has suffered from these kinds of attacks, but we haven’t had those kinds of attacks. We have received them, but ICE wasn’t affected directly.
In terms of telecommunications, we are planning on bringing 5G technology to Costa Rica in the next 2-3 years in order to continue making Costa Rica attractive for foreign investment and keep our competitive advantage. We need to guarantee electrification of the economy and, in telecommunications, provide new technologies for people and companies. Our focus is to improve the services outside the Central Valley to attract investment to those areas and create more opportunities for people and companies to be established there; for example, improving electricity service and connectivity for better education, more businesses, and industries outside the Central Valley. That’s another big challenge we have and a goal we are including in the new strategy.
You mentioned a generation of grids that are planned. Are you planning as well to develop transmission and extend the national grid. How essential is it for you to further develop the network between Costa Rica and its neighboring countries?
We are part of the electrical integration of Central America. We are able to invest in regional transmission through a company called Empresa Proprietaria de la Red (EPR) which is the owner of the SIEPAC (an interconnection of the power grids of six Central American nations) line. That is expanding. That company can invest in the connections in the countries. There are plans for investing through that company to neighboring countries, for increasing the transaction capacity of electricity. In the case of ICE, we have plans for improving cross border transmission in the northern parts of the country connecting to Nicaragua; but in the southern part, we have problems exporting energy to Panama. We can import energy from Panama, but we cannot export. That is something interesting with power: it’s different going one way or the other. But, yes, we are investing in our own country and in regional projects through the EPR Company, a company owned by all the countries of Central America.
What is ICE Group’s stance toward mini grids? How is ICE developing these solutions and what role should they occupy in the broader national system?
We have a pilot project with power storage. We are considering extending it in the country in the future, not only for rural areas but also for industries in the Central Valley. However, we do not get involved directly, as we don’t go into the companies or industries, and we don’t have control on what they do inside. Our position in ICE is not to obstruct those kinds of private initiatives. That is what we can do, but we have to ask for monitoring those kinds of systems for integrating into the national grid. As a company, we don’t see that (at least in the near future) as business for ICE. That’s a private sector matter.
Kölbi (ICE’s mobile carrier) currently leads reputational rankings among Costa Rican operators. It was also noted as having the highest download speeds among operators in a 2021 survey by Sutel, the country’s telecoms agency. Could you tell us more about Kölbi and its main projects in the short-term? Could you tell us about your vision for this company?
The telecommunications market in Costa Rica is a rare market because there is a public telecom company that remains dominant, even 10-12 years after opening the market. I don’t see that happening in the region at least, where all the public companies disappeared after five years. People prefer us because we are ICE. ICE has been around since the 1940´s, which is key for Kölbi, the marketing brand of ICE.
ICE needs to be leading Costa Rica’s technology transformation. We were the first with 4G, with fiber optics, and we want to be first ones with the 5G deployment. We also need to make sure that the country (not only the company) has the best telecom network in the region because that is key for Costa Rica’s competitiveness. We are talking about not only about 5G deployment which is the access, but also about all the telecommunications network for connecting those devices to the world.
My vision is to deploy 5G. You don’t have an advantage if you have a great 5G deployment, if you don’t have good connectivity to connect your customers to the rest of the world. We have this end-to-end vision at ICE for providing the country with a competitive edge to attract foreign investment and to provide better lives for the people here. That is key because we re-invest all our profits. The plan also is to make the company profitable, reliable, to provide the country with an advantage, but also to reduce the digital access gap in indigenous communities, rural areas , remote schools, businesses, industries and agriculture. We maximize value for the country, we don’t maximize profit. That’s why I’m saying that Kölbi is peculiar: we focus on profit but for reinvesting in the country to gain an advantage and to reduce the connectivity gap.
ICE Group recently received a letter of interest for a $300 million line of credit from US EXIM Bank to develop 5G projects in Costa Rica. How is ICE Group (and its subsidiary RACSA) positioning itself in the 5G market? Would you tell us more about the recent developments in this segment?
Right now, we are working on the business model and project planning. We want to release the tender for the technology by June 2023. I think that we will be selecting the vendor by the end of next year and that the deployment will begin in 2024. We are going to start with these areas in the Central Valley and be more focused on businesses. We also have this goal of providing private 5G networks for the industry next year. There are two stages: one for businesses and the other for people. The one for businesses is going to be happening this year and for the people, 2024-2025, because of the deployment. We must go through the law, these tender processes, because we are a public company with public funds. That delays the deployment a little bit compared to the private sector. The difference is we have the frequency spectrum for deployment.
Regarding innovation as a company, can you give us more examples of ICE Group’s pioneering role in developing innovative projects in Costa Rica? How is that strategy integrated into the broader National Plan for Science, Technology, and Innovation 2022-2027?
We deploy technology, we don’t create technology. We depend on other companies for technology but we innovate on how we use the technology. Now we are working hard on having this digitalization of the networks, for example, making smart grids for the benefit of the customer to improve the service. In addition, we are bringing technology for electrification of the economy. This is not really an innovation in terms of technology, but it is something new for the country. For example, we are encouraging the spread of electromobility throughout the country, not only for private but for public transportation. In the telecommunications space, we want to make available satellite connectivity for everybody in the country. That is another big project we have: working closely with neighbors around the dams and rivers, to creating a better environment for the people around, for the wildlife to strive. We do implement better practices all the time for the sustainability of our renewable or natural resources, like water. We have huge management around our facilities, and we innovate there to take care of the ecosystem and the environment.
Costa Rica produced 98.58% of its energy via renewable sources over the first six months of 2022. In parallel to that, in early November, ICE Group announced it would launch the first Costa Rican public route using electric buses. How did Costa Rica achieve such excellent results before every other country? In what ways is ICE Group promoting its model outside of its borders? Is the Costa Rican exception replicable/adaptable elsewhere?
That began many decades ago with visionary people in the 1940s and 1950s. Protecting our nature is in our DNA, so it’s very easy for us to convince people that renewable energy solutions are the best way forward. For me culture and education are key. From a very young age, our children witness forest protection, renewable energy usage, river, sea or animal protection. That provides a platform for implementing public polices in an easier way, because people are already formatted to that.
I think our model is replicable, however, it is not only a matter of public policy implementation, but also culture and education. That is key for having these kinds of results in a country. If people don’t care about nature and the environment, it is very difficult to expect people and businesses to follow green public policies. That is something very important and that can be replicable. Our example provides value for other countries, and we can achieve these results in a cost-effective way. While other countries are faced with huge energy prices, we in Costa Rica have been able to reduce our electricity prices, which helped our economy a lot. We have invested in education, in public policy, and those are producing results. I think we can export that model of technology to other countries.
Can you also tell us more about the electric buses. Can you tell us more about your plans to help decarbonize the transport and industry sector in Costa Rica?
We received a donation from the German government two years ago for the public buses, and now we are receiving another donation from another country. We lent electric buses to public transportation operators for testing, for them to get used to the technology, and for passengers to feel and use that technology. The feedback was amazing: people loved the buses, and we achieved over 80% energy cost reduction compared to fossil fuels. The OpEx of these buses in so much lower, and now we have other operators interested.
That is what ICE does: introducing technology for the use of country. In 2018, when electric cars were starting to spread all over the world, ICE bought 100 electric cars to give people confidence in the technology, and now the market is moving along. We don’t have to invest more in chargers for creating the market. The market is already there. We are working on a business model to lease buses to operators. We’re trying to get funds from multilateral institutions providing very cheap funds for these types of initiatives through the Ministry of Environment and Energy of Costa Rica, and we are working on that.
Likewise, we talked to different manufacturers about boilers. Boilers consume a lot of fossil fuels and are used for heating food or different processes. We were very proactive on bringing manufacturers to the country, linking them to the different business owners, etc. Now there are many different electric boilers in the country and more planned for the coming years, so we did our job there. We promote technology change in the country, but everything is aligned with renewable energy use, sustainability, and social inclusion. You can see that in all the activities that we do.
We have learned to manage nature. You cannot manage nature the same way you manage an oil company. You cannot command Mother Nature to provide you with this amount of water, wind, or sun. We need to learn how to plan and forecast, and for that we need a very sophisticated weather and climate modelling and forecasting system. ICE has a meteorological department because we need to make sure we have enough energy next year to provide power to the country; because we don’t have a contract with nature. That is a challenge we are facing, but we feel we are prepared because we have been doing this for decades. But other countries need to be more sophisticated on that: not only providing forecasting for planes, aircraft, ships, or people, but also for utilities. That is an important aspect to consider.
What’s your final message to our viewers?
Energy transition is possible, but you need a clear vision, education, and funding to make it happen. Once you have that in place, and once it starts to create value, the states will see that it’s worth it.