Costa Rica’s electricity sector is undergoing a grid-centric transformation driven by the need for deeper renewable energy integration, enhanced grid stability to manage climate variability, and the rapid electrification of transport and industry. Recent policy initiatives have begun easing restrictions on the procurement of privately generated electricity and introduced legislative proposals to liberalise the electricity market. This marks a significant shift in a sector long anchored by hydropower and the state utility, Instituto Costarricense de Electricidad (ICE). These policy changes are expected to be implemented by the recently elected government. The new administration is expected to sustain efforts aimed at modernising the power system while balancing market reforms, system reliability and long-term decarbonisation goals. A robust electricity sector is vital to support the country’s economic growth, which is expected to grow at 3.4-3.5 per cent over the next couple of years.
Notably, Costa Rica operates one of the world’s cleanest power systems, with hydropower, along with renewable energy, contributing to 87 per cent of its domestic generation in 2024. However, rising variable renewable generation is straining the system’s limited regulation capacity, currently provided by hydro reservoirs and thermal plants, with battery energy storage systems (BESSs) set to add flexibility in the near term. To meet the growing demand, the country is actively exploring alternative energy sources such as offshore wind (OSW) and planning to establish a green hydrogen industry to achieve net zero emissions by 2050.
ICE has highlighted that substantial and urgent investment will be required to expand the power system to avoid potential increases in electricity prices. Under the current regulatory framework, ICE acts as the central purchaser and system coordinator, with eligible private generators required to sell renewable electricity under the build-own-operate and build-operate-transfer models, with total private generation typically capped at 30 per cent of the national installed capacity, split evenly between the two schemes.
To expand and modernise the national grid, support the integration of new generation and handle new demand pressures, ICE has earmarked $1 billion 2034 under its latest transmission plan, Plan de Expansion de la Transmision (PET) or Transmission Expansion Plan 2024-34. As per the plan, it will add 674 km of lines and 1,330 MVA of transformer capacity by 2034 to reinforce the existing network, besides installing reactive compensators.
A strong national grid enables Costa Rica to act as a reliable transit and balancing hub within the Mercado Eléctrico Regional (MER) or Regional Electricity Market, which connects the country with five other Central American markets. MER supports stable cross-border electricity flows and efficient use of Sistema de Interconexión Eléctrica de los Países de América Central (SIEPAC), a 1,793 km, 230 kV regional transmission grid linking Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama. ICE aims to strengthen participation in MER to capture export opportunities, although long-term cross-border contracting remains at an early stage due to transfer limits between countries, highlighting the need for further investment in transmission.
Existing infrastructure
As of 2024, the country had an installed generation capacity of 3,626 MW, the majority of which was based on hydropower (2,353 MW or 65 per cent), followed by renewable energy sources (751 MW) such as geothermal, wind, solar and biomass, while the remaining was based on thermal power (486 MW). During 2024, Costa Rica generated 12,567 GWh of electricity and consumed 12,791 GWh, 86.8 per cent of which was met by renewable sources.
In the transmission sector, ICE operates Costa Rica’s entire Sistema Interconectado Nacional (SIN) or national interconnected system, which extends from Peñas Blancas on the northern border with Nicaragua to Paso Canoas on the southern border with Panama, and from Puerto Limón on the Caribbean coast to Cóbano on the Nicoya Peninsula on the Pacific coast, covering seven provinces. The system operates at two high voltage levels: 138 kV and 230 kV. Four corridors of the 230 kV network are currently meeting the national electricity demand by enabling bulk power transfers from the northern region to major load centres in the Greater Metropolitan Area, and facilitating interconnection with neighbouring countries through the SIEPAC line. Costa Rica’s 138 kV grid is mainly located in the central region and the Nicoya Peninsula.
At the end of 2025, ICE’s transmission network comprised 2,996 km of lines and 12,792 MVA of transformer capacity. ICE directly owns about 82 per cent of the line length, with the remaining held by Mercado Eléctrico Nacional (MEN) or national electricity market participants, mainly Empresa Propietaria de la Red (EPR), the operator of the regional SIEPAC backbone, in which ICE is Costa Rica’s main shareholder. The national transmission network comprises 76 substations. The Costa Rican grid is interconnected with neighbouring countries through five cross-border transmission lines – two with Nicaragua and three with Panama. With the SIEPAC line and a growing regional market, electricity imports are an important energy resource for the country. Costa Rica is working to optimise its import and export potential with its existing generation capacity.
Future plans
Demand and generation
As per PET 2024-34, Costa Rica’s electricity consumption is expected to increase at a CAGR of 2 per cent during 2026-34.
In line with the national policy on renewable electrification of the economy, ICE’s Plan de Expansión de la Generación 2024-40 aims to promote renewable energy sources, reduce dependence on fossil fuels, strengthen energy security and lower energy consumption. Under the plan, ICE aims to install 2,462 MW of new capacity during the 2026-40 period, besides decommissioning 1,233 MW of old power plant capacity across thermal, geothermal and hydropower plants (HPPs). Net capacity additions during the period will include 1,221 MW of solar, 632 MW of wind, 173 MW of hydropower, 141 MW of geothermal, 120 MW of BESS, 95 MW of thermal and 80 MW of biomass capacity.
Some of the major upcoming generation projects include the 159 MW Cachí 2 HPP, the 53 MW Fourth Cliff HPP and the 55 MW Borinquen 2 geothermal power plant, all of which are central to the optimal generation expansion plan for the coming years. The plan involves an estimated investment of $2,450 million, comprising $1,756.3 million in capital investment, $678.5 million in operating cost and $15.4 million in costs related to unsupplied energy.
Costa Rica is actively developing an OSW road map, targeting nearly 17 GW of technical potential (1 GW fixed-bottom, 16 GW floating), primarily in the north-western Punta Descartes region. In late 2024, it was found in a study, carried out by ICE and financed by the Central American Bank for Economic Integration (CABEI) and the Republic of Korea through the Korea-CABEI Single Donor Trust Fund, that the La Cruz de Guanacaste region in the North Pacific off Costa Rica has the greatest technical OSW potential. The Ministry of Environment and Energy and ICE, in collaboration with the Global Wind Energy Council, are focusing on market readiness, regulatory frameworks and environmental assessments to integrate this technology into their 2050 net zero emission goals. The country has also been involved in technical studies assessing the feasibility of establishing a large-scale green hydrogen production facility. Costa Rica’s National Green Hydrogen Strategy aims for a potential production capacity of up to 6 million tonnes per year, and an installed electrolysis capacity of 150-500 MW by 2030.
Transmission
To support this upcoming generation capacity and demand, ICE plans to add 674 km of lines and 1,330 MVA of transformer capacity during the 2026-34 period, as per the latest PET. Of the line length additions, 39 per cent or 264 km will be new constructions, while 410 km will be reconstruction and uprate projects. Under the plan, Costa Rica’s energy transfer capacity is expected to increase by 11 per cent, rising from 12,552 MVA in December 2024 to 13,932 MVA by December 2034. This growth reflects the addition of new generation projects requiring transformation assets, and the need to expand transformation capacity at substations to meet the rising demand.
In fact, during 2022-24, the majority (75 per cent) of the transmission connection requests processed by ICE were linked to wind power projects, followed by connection studies for high voltage customers and users, each representing 6 per cent. Solar, geothermal and bagasse-based projects each contributed 3 per cent; while biomass and thermal projects accounted for the smallest proportion, at 2 per cent each.
Costa Rica plans to invest $1.6 billion in its transmission infrastructure till 2034. The investment is front-loaded, with $997 million planned for the 2026‑30 period and the remaining $568 million in the latter half (2031-34). In addition, 56 per cent of this amount will be capital investment, and the remaining 44 per cent corresponds to the operating and maintenance costs.
Among projects under the plan, Costa Rica has prioritised nine transmission projects to ensure sufficient capacity in the system. These include the Northern Zone project ($176 million, 234 km), the Orosi Ring project ($117.83 million, 41 km), the Integral Nicoya Peninsula project ($111.31 million, 191 km) and the North-Central Link project ($99.78 million, 70 km).
The way forward
Costa Rica is moving decisively towards a new phase in its energy transition, marked by the addition of renewable capacity, the promotion of energy storage technologies and a regulatory framework that enables greater private sector participation. The country is at a pivotal stage, where advancing towards a more balanced and diversified electricity mix and a robust transmission grid is essential to sustaining long-term system resilience and growth.