Panama wants to reduce fuel imports and boost ethanol production

RIO DE JANEIRO, BRAZIL – Panama plans to boost a clean energy plan by reincorporating ethanol in its gasoline and ceasing the use of heavy fuels and coal for electricity generation by the end of 2023, said Energy Minister Jorge Rivera.

The Central American nation promotes itself as carbon negative but wants to diversify its electricity generation sources further, reduce transportation emissions, and expand its regional electricity interconnections.

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In November, a plan approved by Panama’s council of ministers set five goals for the transition to 2030 from fossil fuels, the official said in an interview with Reuters.

The project includes targets for electric mobility, distributed electricity generation, and energy efficiency.

Panama aims to partially replace hundreds of thousands of barrels per day of fuels, mainly imported from the United States, with biofuels and make greater use of renewable sources, including solar and wind, for power generation.

The only power plant in Panama that still uses coal belongs to a mining project operated by a Toronto-based First Quantum Minerals unit, which has faced legal challenges, including being declared “unconstitutional” in 2018.

In April, First Quantum said its Cobre Panama unit delivered a record 82,042 tons of copper, more than a third of the company’s global production, contributing to a gross profit of US$540 million in the quarter.

Panama began talks a month ago with Minera Panama, in which First Quantum has a 90% stake, to negotiate a new contract. The government headed by President Laurentino Cortizo wants to increase royalty revenues and push for environmental improvements.

As part of the negotiations, Panama is asking the miner to convert its 300-megawatt capacity power plant to cleaner fuels, Rivera said. First Quantum should soon present a specific proposal to the government, he added. “We expect this negotiation to end this year for a completely new contract,” the minister said.

First Quantum did not immediately respond to a request for comment.

Other privately-owned plants burning diesel or heavy fuels will be de-incorporated by the end of 2023 and replaced by a 670-megawatt natural gas plant expected to begin operating in 2024. “The whole market is aware of the evolution of the matrix, and on that date, the last power sales contracts expire,” Rivera said.

A growing number of nations have set zero emissions targets to comply with the Paris Agreement. That includes the world’s two biggest emitters, the United States and China.

Panama also plans to resume importing ethanol in 2023 by initially blending up to 5% with motor gasoline and then working with sugarcane farmers to produce it locally and increase the blend to 10% to reduce emissions to the environment. Panama stopped importing ethanol in 2014.

The changes, along with advances in mobility, including a new metro line, would make Panama, which covers 80% of its consumption with imported fuels, less dependent on fossil fuels from abroad.

Panama also resumed talks with the Colombian government for an ambitious 300-kilometer electricity interconnection to allow both countries to share electricity.

Severe drought affected Panama’s economy in 2019, reducing its capacity to generate hydroelectric power and increasing some of its costs and Panama Canal passage rates.

Although the rains have returned to normal, the government and the canal are investing in coping with the arrival of intense hurricanes and new droughts.

As part of the interconnection, Colombia had initially planned to sell its surplus energy to Panama and Central America, but the price gap between the countries has narrowed. “In recent projections, Panama would already export electricity to Colombia on a complementary or seasonal basis,” Rivera said.