Over the past two decades access to the electrical grid in Honduras more than doubled, but around 20% of the country still lacks access to grid coverage. In the absence of grid connectivity, firewood is used as the key source of fuel. This is particularly true in rural areas, where firewood accounts for over 80% of household primary energy supply. But dependence on firewood entails a number of negative social, economic, and ecological consequences. In addition to the real and potential adverse implications of heavy reliance on firewood, Honduras’ heavy dependence on imported fossil fuels is a similarly pressing energy and economic issue. In 2008 Honduras spent around 14% of GDP on hydrocarbons. Moreover, from 2001 to 2010, Honduras’ energy bill tripled, indicating the economic strain and volatility inherent in Honduras’ present energy regime.
The Honduran government recognizes the potential of renewable energy technologies to improve industrial, commercial, and residential access to affordable grid-connected power, and is eager to exploit these opportunities to enhance the sustainability of rural energy services. Two of the government’s main priorities are to scale-up access to electricity services in rural areas, and to promote rural access to clean energy cooking solutions. By 2022 the government aims to reverse the present fossil fuel and renewable energy ratio to achieve 60% renewables and 40% fossil fuels. Yet despite the government’s commitment to increasing the share of renewable energy in the country’s energy mix, gaps in regulation and licensing guidelines, lacking capacity of project developers, weak access to long term financing, and insufficient transmission infrastructure to accommodate intermittent renewables continue to inhibit the large scale implementation of Honduras’ low carbon objectives.
Honduras is tapping US$30 million in grant and near-zero interest credit financing from the Scaling-Up Renewable Energy Program in Low-Income Countries (SREP) for a diverse programmatic investment plan aimed at creating an enabling environment for Honduras’ renewable energy sector. Specific activities financed under Honduras’ SREP investment plan include a grid-connected renewable energy program, a rural energization strategy for accelerating rural electrification and promoting access to improved and appropriate cooking technologies, and a policy and regulatory reform initiative intended to improve the conditions for the development of Honduras’ renewable energy sector. Designed under the leadership of the Honduran government in coordination with the Inter-American Development Bank (IDB), members of the World Bank Group (IBRD, IFC), other development partners, and key Honduran stakeholders, Honduras’ SREP investment plan is expected to leverage over US$150 million in additional co-financing.