Renewable Energy

Advancing toward sustainable energy

A new energy era.

Panama has begun a transformation of its energy matrix to give answer to, and even get ahead of, the demands of the commercial, residential and industrial sectors and contribute to the conservation of the planet’s natural resources. This effort opens new foreign investment opportunities to develop and implement new technologies in the country.

Growing demand

It is estimated that in Panama the domestic energy demand will increase 5.2% per year between 2014 and 2050. To satisfy the demand, the country is open to foreign investment.

Abundance of natural resources

Panama is rich in water resources, solar light and wind energy, which can be exploited as clean, sustainable energy sources:

  • WATER: large rivers and annual rain precipitation of up to 7000mm.
  • LIGHT: approximately 5.5 daily hours of solar light.
  • WIND: especially in the provinces of Veraguas, Chiriqui and Los Santos, where the average wind speed reaches 4.51m/s, 3.89m/s and 2.82m/s respectively.

Interconnectivity

Due to its strategic location, Panama is key for plans to connect the electric networks of North and South America. Currently, Panama is preparing to complete the Panama-Colombia interconnection project in 2019, which will have a capacity of 600MW. The Trans-Panama pipeline is an oil transportation route that reduces the time and costs between the Atlantic and the Pacific. It has a daily capacity of 860,000 barrels.

Cluster of worldwide prestigious companies

Multinational companies with regional headquarters in Panama under the special SEM regime, among them AES Corporation, Gas Fenosa Natural, Halliburton, SkyPower, ABB, Celsia, Enel Green Power, Unión Eólica, ENGIE and LS Energia, take advantage of important tax, labor and migratory benefits.

Dynamic sector growth

Panama’s electricity, gas and water sector grew and average 10.36% a year between 2006 and 2016.

Leadership in clean energy investment

Panama reached the #2 position in Central America with respect to clean energy investment in 2015, with a total investment of US$1.76 million.

Financial and political stability

The World Bank qualifies Panama as one of the most politically stable countries in America. Also, the country offers very attractive advantages:

  • Dollarized economy.
  • World-class financial center.
  • Very low inflation (currently 0.8%).
  • he greatest credit facility in Central America.

The Panama Canal

The expansion of the Panama Canal is key for the development of Panama’s energy sector. It is estimated that 12 million metric tons of liquid natural gas will cross the canal annually. The North Coast Terminal of liquid natural gas, which will begin operations in 2018, will be the first installation in Panama to receive liquid natural gas ships with loads of 30,000 to 180,000m3. Additionally, the cluster of bunker and other oil derivatives is increasing its storage capacity.

Benefits, incentives and ROI for foreign investment in the energy sector

Panama has established tax incentives for the construction, operation and maintenance of clean energy projects, among them:

Tax exemption on transmission and distribution.

Import duty exemption.

Income deductions.

Tax exemption on goods and services.

Tax incentives for wind energy.

Tax incentives for solar energy.

NATURAL GAS

Incentives to Natural Gas invesment

Tax credit of up to 5% of the total direct investment applied to the income tax of public infrastructure civil works.

Custom duty exemptions for equipment, machinery, materials, spare parts and other imports necessary for the adequate functioning of the installations.

Possibility of using an accelerated depreciation method to depreciate tangible assets.

20-year exemption of all taxes for the manufacturers of liquid gas generation equipment within Panama. Equipment includes: mechanic, electronic, electro-mechanic, metallurgical and electric.

Current projects

Gas Natural Atlantico y Costa Norte are building a new combined cycle plant with a 380MW capacity and a liquid gas terminal with a storage capacity of 180,000m3. Located in the Colon province, it will begin supplying natural gas in 2018. This new gas energy, together with hydroelectric power, will guarantee energy security for another 20 years.

The joint venture of BAM ICONSA has begun building a liquid gas import dock and an entry/exit of the liquid gas Terminal Costa Norte that will be completed in 2018. The dock is designed to receive liquid natural gas ships with a 30,000-180,000m3 capacity.

The joint venture ENGIE and AES Corporation will use the LNG Terminal Costa Norte to sell gas to third parties in Central America.

WIND ENERGY

Invesment Incentives for Wind Energy

Tax credit of up to 5% of the total direct investment applicable to the income tax on public infrastructure civil works.

Import tax exemption on equipment and materials used for the installation and maintenance of wind energy generation plants.

Possibility of using an accelerated depreciation method for equipment used in wind energy generation.

15-year exemption of all taxes for manufacturers of wind energy generation equipment within Panama.

Current projects

Laudato Si Project. Developed by InterEnergy, it is the largest wind park in Latin America, located in Penonome.

BIOMASS

Investment incentives for Biomass Energy

Full tax exemption on capital gains.

VAT exemption on imports and tax exemption on commercial and industrial licenses.

Custom duty exemption for equipment and materials used to develop biomass energy projects.

15-year exemption of all taxes for manufacturers of wind energy generation equipment within Panama.

Exemption of taxes, tariffs, contributions and other local fees.

Current projects

Aguaseo Project. Aguaseo, a private garbage collection company in Colon, presented a proposal to build a biomass plant that would process 450 tons of waste a day and generate 15mWh.

SOLAR ENERGY

Incentives to Solar Energy Investment

Tax credit of up to 5% of the total direct investment applicable to the income tax from public infrastructure civil works.

Exemption of all import taxes for equipment and materials used for the installation and maintenance of solar energy plants.

Possibility of using an accelerated depreciation method for tangible assets.

Current projects

The largest solar power plant in the Chiriqui province operates in Green Power Panama, with a 12MW capacity.

Celsolar has obtained a license to build a photovoltaic plant with a 20MW capacity in Chiriqui.

Laws 6 and 45

The country’s competitiveness is supported by laws that regulate the market.

ETESA, the only electricity transmission and buyer in Panama carries out auctions to find renewable energy through ASEP, the public utilities regulator in Panama that establishes the tender guidelines.

Laws N° 6 and 45 established an incentive system for renewable energy projects including:

Import tax exemption for equipment, machinery, materials, spare parts and other imports necessary for the installation and maintenance of renewable energy plants with an installed capacity of up to 500KW.

A tax incentive of up to 25% on the direct investment for companies that develop new projects or increase the production capacity of renewable energy systems of up to 10MW.

Tax credit applicable to capital gains tax of up to 5% on the investment for renewable energy projects that become public infrastructure.

Elimination of import taxes, fees and taxes on imported equipment/materials for the construction of plants.

Guaranteed tax benefits to the operating plants according to their carbon reduction level.


Download: Renewable Energy

National Energy Plan 2015-2050 renewable and alternative energy investment opportunities

Special Investment Regimes

SUCCESS CASES

“Panama will undoubtedly continue to grow in the coming years. For its economic model to be sustainable in time, it will be necessary to continue working in training its domestic labor force and continue creating learning synergies with the foreign talent. This will be the key to success”

Alberto Alesi, Regional Director for the Caribbean and Central America
ManpowerGroup

Last Tweets

ADDRESS

Ricardo J. Alfaro Ave. Plaza Edison, 3rd floor
+507 560-0687
proinvexpanama@mici.gob.pa

Follow us

LOCATION