Power policy

Guatemala has a target for 64% of its electricity to be generated from renewable sources by 2032. Renewables comprised a 32% share in 2019, suggesting additional investment will be required.

To incentivize renewables development, it has a net metering program that enables surplus power to be sold back to the grid. The country also launched a tender for 110 megawatts (MW) of solar capacity in May 2019. However, due to a lack of feasibility studies and inconsistencies in proposals from bidders Total Eren Guatemala S.A and Corporacion Klondike S.A., the tender was canceled in August of that year. The government intends to repeat the exercise, but has yet to set a timeline for this process.

Power prices and costs

After dropping in 2019, commercial and industrial electricity prices remained steady in 2020. However, retail prices rose by 3% to $62 per megawatt-hour. Guatemala has some of the highest retail prices in Latin America, and alongside increased volatility and rising electricity access rates, this has intensified political pressure to stabilize and reduce consumer prices. Guatemala now spends as much on residential electricity subsidies as it does on its two largest social assistance programs combined.

Power market

The power market in Guatemala is unbundled. The country has 50 private and state-owned companies providing generation, distribution, and transmission services. Guatemala is connected via the Central American Electrical Integration System (SIEPAC) to Honduras and El Salvador. Northern Guatemala is also connected to Mexico’s transmission system.

Doing business and barriers

Formal barriers to renewables development in Guatemala are low. Tax incentives to promote installations have been available since 2003. These include import tax and value-added tax breaks for machines, equipment, materials and inputs for investment and construction; income tax breaks; and industrial tax breaks valid for 10 years from when a plant starts operating.

EV market

Guatemala’s electric vehicle (EV) market is at an early stage but is set it grow over the next decade. Even under the government’s most pessimistic modeling scenario – which is based solely on price competitiveness without supportive policies – it projects that EVs could displace 20% of sales of new internal combustion vehicles between 2017-2021, rising to 50% between 2022-26, and 70% between 2027-2030.

EV policy

Guatemala offers tax incentives to support the purchase of electric vehicles (EVs). It has also been proposed that the vehicle circulation tax, known as ISCV, be applied to EVs in a phased manner. This would mean there is no tax in the first year of ownership, and the exemption would gradually decrease until the full tax is required from somewhere between the fifth and tenth year.

Buildings market

The country published its National Energy Efficiency Plan in 2019, which aims to reduce energy consumption by 15% by 2032 versus a business-as-usual trajectory. This includes targets for energy savings of 30% for the public sector institutions, 25% for industry, and 18% for the residential sector.

Buildings policy

In the residential sector, burning wood has historically accounted for the vast majority of energy consumption to due to a variety of socioeconomic, geographic and cultural factors. The government is encouraging the purchase of more efficient wood-burning stoves, which could see a household’s monthly consumption of firewood cut in half. It is also promoting the use of more efficient gas and electric alternatives. In addition, Guatemala is looking to improve the quality of power systems and electrical equipment inside homes to mitigate technical losses from these installations.