Distributed energy market in Costa Rica

Costa Rica has made distributed renewable energy generation a national priority. The country has over 3,500 active systems and nearly 100 MW of installed capacity, almost entirely from rooftop solar. The 2021 Distributed Energy Law (Law 10086) provides a strong legal framework for self-generation, grid interconnection, and net billing, positioning the country as a regional leader in consumer-based renewable energy. However, controversial tariffs introduced in 2023 temporarily slowed growth, prompting regulatory reforms expected to relaunch the market in 2025. The sector remains critical to Costa Rica’s energy resilience and decarbonization goals amid rising electricity demand and the challenges of hydro dependency in the face of climate variability.

• Regulatory volatility and tariff risks: While Law 10086 provides legal clarity, the 2023 implementation of access tariffs (“solar tax”) sparked controversy and market slowdowns. Regulatory frameworks are still evolving, and sudden changes in fees or interconnection rules can affect project bankability.
• Grid capacity limitations and technical integration barriers: Distribution circuits are subject to hosting capacity caps (currently 15% of peak load). In areas with high solar penetration, new projects may face delays or require grid upgrades, adding complexity and cost.
• Utility resistance and cost-recovery concerns: Some utilities, especially rural cooperatives, have expressed concern about revenue erosion from self-generation. While the new regulations aim to balance cost recovery, lingering opposition can slow or complicate project approvals.
• Limited access to affordable financing for end-users: The high upfront cost of solar+storage systems (~$1,000 per kW) remains a barrier, particularly for residential and small commercial customers. Financing tools are improving but are not yet universally accessible or standardized.
• Low average electricity rates reduce economic incentive: Costa Rica’s grid electricity is largely renewable and relatively cheap, reducing the cost savings incentive for self-generation compared to fossil-dependent countries. Return on investment (ROI) periods can be longer unless tariff reform favors self-consumption.

•  Costa Rica generates 99% of its electricity from renewables (primarily hydro, wind, geothermal). This offers a supportive ecosystem for clean energy investment.
• The Instituto Costarricense de Electricidad (ICE) and its subsidiary CNFL manage most of the country’s generation and distribution infrastructure. This centralization simplifies some partnerships, but it also means that most projects require navigating public-sector processes.
• The Autoridad Reguladora de los Servicios Públicos (ARESEP) oversees pricing and service standards and is responsive to stakeholder feedback. It suspended controversial fees in 2024 and is currently revising the distributed generation tariff framework.
• Distributed generation enjoys broad support among consumers, environmental NGOs, and professional associations. Public participation in rulemaking (e.g., hearings, consultations) is well established.
• Dozens of solar installation firms already operate nationwide, creating opportunities for Canadian firms to:
  • supply components
  • partner on training
  • offer specialized services like storage optimization or predictive maintenance
• Costa Rica is a stable democracy with:
  • an independent judiciary
  • robust property rights
  • active trade promotion agencies (like PROCOMER) that support foreign investors in clean energy

• Regulatory reform package (mid-2025): Expected changes to Decree 43879 will enable collective self-generation (energy communities), aggregators, and streamlined interconnection processes. This presents a key opportunity for early movers.
• Potential large-scale distributed solar tenders: In response to the projected 2–3 GW electricity supply gap by 2030, new public-private partnerships and distributed generation contracts could be launched. These initiatives may focus on industrial parks or free-trade zones.
• EV infrastructure rollout and integration programs: New programs expected to promote solar-powered charging and decentralized energy storage solutions, with potential openings for pilot projects in urban and tourism-heavy areas.

Costa Rica is an emerging leader in distributed renewable generation. The market combines robust legal backing, growing demand, and strong public and institutional support for clean energy. With upcoming reforms set to unlock new business models, Canadian firms have a unique window to bring advanced technology, financing, and expertise to a fast-evolving and values-aligned energy market.

For more information on the opportunities in the Costa Rica market please contact Brandon Arias, Brandon.Arias@international.gc.ca.