The National Congress of Honduras approved the Energy Justice Law, which addresses the organization and operation of the country’s electricity market.
The new legislation seeks to restructure Honduras’ electricity model, address the financial and operational challenges facing the National Electric Power Company (ENEE), and promote a more competitive framework with greater private-sector participation in different areas of the industry.
A new structure for ENEE
The law reorganizes activities currently concentrated within ENEE. The new model provides for the separation of the main activities of the electricity system into distinct areas or subsidiaries for:
- Generation.
- Transmission.
- Distribution.
ENEE will retain its status as a state-owned company and will continue to own strategic assets, including its hydroelectric power plants. The legislation also establishes restrictions on the sale or privatization of the company and its assets.
Greater private-sector participation and new market players
Investors and companies in the sector will have greater opportunities for private-sector participation. The reform strengthens the framework for developing projects and allowing new participants to engage in activities such as:
- Electric power generation.
- Renewable energy projects.
- Energy storage systems, including batteries or BESS.
- Construction and operation of transmission infrastructure and substations.
- Electricity commercialization.
- Distributed generation and self-consumption.
Energy storage receives express recognition
The law expressly incorporates energy storage into the structure of the electricity market, including standalone storage systems and hybrid power plants with storage capacity.
The creation of the generator-storage agent is intended to provide greater legal certainty for the development of energy storage projects and new business models associated with system flexibility.
Among other provisions, the new framework contemplates the development of compensation mechanisms related to the available capacity of energy storage systems and the participation of these technologies in ancillary services and market operations.
However, several of these mechanisms will need to be further developed through secondary regulations and technical provisions issued by the competent authorities.
New investment opportunities in transmission
The reform creates greater opportunities for private-sector participation in the development of transmission lines and substations through competitive processes and international public tenders for projects included in expansion plans.
Construction companies, infrastructure developers, investors, and technology providers will have opportunities to participate in future procurement processes and the development of strategic projects.
The new framework seeks to prioritize public tenders and competitive mechanisms for the procurement of energy, capacity, infrastructure, and other services related to the electricity system.
What does the reform mean for companies and investors?
- New renewable energy generation projects, within a market framework that provides greater opportunities for private investors.
- Development of BESS and other energy storage technologies, now expressly recognized under the regulatory framework.
- Participation in transmission and substation projects, in response to the country’s need to expand its electricity infrastructure.
- New opportunities for electricity commercializers and qualified consumers.
- Participation in future public tender and competitive procurement processes.
- Development of distributed generation and self-consumption projects.
