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Central America & Caribbean to Invest in Smart Grid Infrastructure

February 27, 2015

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According to a new report by the Northeast Group LLC of 11 Central America & Caribbean countries, the region will invest $3.3bn in smart grid infrastructure between 2015 and 2025. This investment will target T&D losses of 20% across the region as well as high electricity prices averaging 19.8 cents per kWh.

The report notes that the region offers unique near-term opportunities for smart grid investment and has several strong positive market drivers. Most notably, Central America and the Caribbean averages nearly 20% total T&D losses, primarily due to electricity theft. This has created challenging financial conditions for utilities and is spurring a number of smart metering efforts, many of which are already underway. At the same time, overall high crime rates -- particularly violent crime -- make it difficult for utilities to secure permanent loss reductions and make deployments more challenging.

Non-technical loss reduction efforts are expected to drive near-term AMI deployments. In many Central American countries, AMI penetration rates will approach 90% by the end of the forecast period. But this is partly the result of small market sizes as the average market is just over one million customers. This reduces the overall market opportunity for vendors.

In addition to loss reduction, Central American and Caribbean countries will deploy smart grid infrastructure to incorporate renewable energy and employ demand response programs. These will help reduce electricity prices that average over 19 cents/kWh, in part due to expensive oil-based peaking plants. At the same time, countries in the region on average consume just over 1,000 kWh per person per year, which is less than half the emerging market average. This diminishes the overall savings potential of smart grid and demand response programs.

The largest investments in the near-term will be in the Dominican Republic, Jamaica and Costa Rica. In addition, the region's larger markets of Guatemala and Honduras will also see significant investment over the forecast period. The region benefits from shared standards with the US and proximity to several experienced North American smart grid vendors.

On balance, the report notes that the case for smart grid infrastructure in the region is strong. With non-technical losses continuing to rise while smart grid costs decline, many utilities will see the clear benefits of large-scale deployments in the near-to medium term. With strong economic and geographic ties to the US market, Central America's smart grid market is poised to accelerate over the course of the next decade.


Source: Northeast Group LLC


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