Costa Rica has long relied on renewable energy, with hydropower providing around 70% of the country’s electricity generation. While this approach has supported low-carbon development, it has also exposed the energy system to climate-related risks, particularly droughts that reduce hydropower production and increase dependence on thermal generation and electricity imports. Growing electricity demand and aging infrastructure further increased pressure on transmission and distribution networks, raising concerns about reliability and system resilience.
To address these challenges, Costa Rica partnered with the Inter-American Development Bank (IDB) to implement a major renewable energy, transmission, and distribution program. Supported by a $200 million financing package, the initiative aimed to strengthen the country’s electricity sector through geothermal energy expansion, modernization of transmission systems, and upgrades to distribution networks. The program built upon decades of collaboration between Costa Rica and the IDB, focusing on long-term planning, institutional strengthening, and the gradual diversification of renewable energy sources.
A key component of the initiative was the expansion of geothermal power generation, which provides a stable and reliable source of electricity regardless of weather conditions. The program also financed significant improvements to transmission and distribution infrastructure to reduce bottlenecks, improve service quality, and increase system reliability. These investments were aligned with Costa Rica’s participation in the regional electricity market, enabling the country to better manage supply variability through regional energy exchanges.
The program’s flexible design allowed adjustments during periods of fiscal constraints and disruptions caused by the COVID-19 pandemic. Resources were redirected toward projects that were ready for implementation, ensuring continued progress while maintaining the initiative’s overall objectives and long-term development goals.
The investments delivered substantial results across the energy sector. Geothermal generation capacity increased significantly with the commissioning of the Las Pailas II geothermal plant, while preparations were made for future geothermal expansion through land acquisition for the Borinquen I project. Transmission reliability improved through the modernization of substations and reduced service interruptions, enhancing the country’s ability to exchange electricity within the regional market.
Distribution services also experienced major improvements through the modernization of power lines, circuits, smart metering systems, and public lighting infrastructure. These upgrades reduced the frequency and duration of power outages while improving operational efficiency and service quality for consumers. In addition, the project contributed to greater workforce inclusion, increasing female participation in construction-related activities and demonstrating the potential of infrastructure investments to promote broader social benefits.
Costa Rica’s experience highlights the importance of addressing electricity system resilience through an integrated approach that combines renewable energy diversification with modernized grid infrastructure. The project demonstrates how flexible financing, advanced technologies, and long-term planning can strengthen energy security, improve reliability, and support sustainable economic development. The initiative serves as a model for countries seeking to build climate-resilient electricity systems while advancing clean energy transitions and enhancing service delivery.
