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Panama aims to end coal imports, produce ethanol to cut emissions

Panama will advance a clean-energy push by embracing ethanol in its gasoline and ending the use of heavy fuels and coal for its power plants by 2023, the nation’s energy minister said.

Even though Panama promotes itself as being carbon-negative, the Central American nation wants to further diversify its sources of electricity generation, cut emissions from transportation and expand its regional power interconnections.

A plan approved in November by Panama’s Cabinet set five goals to transition through 2030 from fossil fuels, Energy Minister Jorge Rivera told Reuters in an interview.

The plan includes electric mobility, distributed electricity generation and energy efficiency targets.

Panama aims to replace a portion of hundreds of thousands barrels per day of fuel, mostly imported from the United States, by biofuels, and to rely more on renewable sources, including solar and wind, for power generation.

The only power plant in Panama still using coal belongs to a metals mining project operated by a unit of Toronto-based First Quantum Minerals, which has faced legal challenges including being declared “unconstitutional” in 2018.

In April, First Quantum said its unit Cobre Panama delivered a record 82,042 tonnes of copper, over a third of the company’s global output, contributing to a $540 million gross profit for the quarter.

Panama began talks about a month ago with Minera Panama, in which First Quantum has a 90% stake, to negotiate a new contract. The government led by President Laurentino Cortizo wants to increase royalty revenue and press for environmental improvements at the $6.7-billion flagship mining project.

As part of the negotiations, Panama is asking the miner to upgrade its 300-megawatt (MW) power plant, Rivera said. A specific proposal for the conversion must soon be submitted by First Quantum, he added.

“We expect the negotiation to finish this year for a completely new contract,” the minister said.

First Quantum did not immediately reply to a request for comment.

Other privately-owned plants that burn diesel or heavy fuels will be decommissioned by the end of 2023 and replaced by a 670 MW natural gas plant expected to begin operations in 2024.

“The whole market is aware of the energy matrix evolution, and the last contracts to sell that power are about to expire,” Rivera said.

A growing number of nations have set net-zero emissions targets to meet the Paris Agreement. That includes the world’s two largest emitters, the United States and China.


Panama also plans to resume importing ethanol in 2023 to initially mix up to 5% into motor gasoline, and then working with sugar cane farmers to produce it locally and increasing the mix to 10% to reduce air pollution. It had stopped importing ethanol in 2014.

The changes – along with mobility advances including a new subway line – would make Panama, which relies on imported fuels to cover 80% of its consumption, less dependent on foreign supplied fossil fuels.

Panama also has resumed talks with the Colombian government for an ambitious 300-kilometer (186-mile) interconnection that would allow both countries to share electricity.

A severe drought affected Panama’s economy in 2019, curtailing its ability to generate hydropower and raising costs such as Panama Canal passage fees. Even though rainfall has returned to normal, the government and the canal are investing in hurricane and drought preparations.

As part of the interconnection, Colombia had originally planned to sell its power surplus to Panama and Central America, but the price gap between the countries has recently narrowed.

“According to recent forecasts, Panama could export electricity as well,” Rivera said.

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