IDB Advances SIEPAC Expansion to Boost Energy Integration in Central America

The Inter-American Development Bank (IDB) hosted a high-level meeting at its Washington, D.C. headquarters, bringing together energy ministers from six Central American countries, alongside representatives from regional electricity institutions, multilateral partners, and private investors. The discussions focused on the future of the Central American Electrical Interconnection System (SIEPAC), a flagship initiative under the IDB’s América en el Centro regional program.

SIEPAC: A Pillar of Regional Energy Integration

SIEPAC, the Central American Electrical Interconnection System, has been a cornerstone of regional energy cooperation for more than a decade. It links the electricity grids of Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, and Panama through a regional transmission line and is complemented by the Regional Electricity Market (MER).

In 2024 alone, the MER negotiated more than 3,700 GWh of energy, equivalent to US$350 million, involving over 300 private agents. These results highlight SIEPAC’s role as Latin America’s most advanced energy integration model, delivering benefits such as lower costs, greater energy security, and expanded opportunities for private investment.

The Third SIEPAC Protocol: A Roadmap for the Future

At the core of the meeting was the advancement of the Third SIEPAC Protocol, which is designed to:

• Modernize regional governance frameworks to ensure smoother decision-making.

• Strengthen legal certainty to attract higher levels of private and institutional investment.

• Prepare Central America’s electricity system for energy transition challenges, including the integration of new technologies.

IDB Executive Vice President Jordan Schwartz underscored the significance of this next phase:

“SIEPAC has demonstrated that regional cooperation can transform strategic sectors. Thanks to this shared vision, Central America has reduced costs, increased energy security, and opened space for new investments. Now we must take the next step: complete the second circuit, update regulation, and open the door to even greater integration. Under the América en el Centro program, the IDB will remain a committed partner every step of the way.”

Vision 2050: A Sustainable Energy Hub

The meeting reaffirmed a shared regional vision for 2050, aiming to consolidate Central America as a competitive, secure, and sustainable energy hub. This vision emphasizes:

• Energy security to shield economies from volatility and external shocks.

• Attracting global investment into clean energy and infrastructure.

• Exporting renewable energy to neighboring regions, positioning Central America as a clean energy supplier.

The discussions also highlighted the importance of extra-regional integration, particularly with Mexico, Colombia, and Belize, which could expand markets and boost cross-border electricity trade.

Embracing Technology and Renewable Energy

As the region works toward a greener future, participants stressed the need to incorporate:

• Energy storage solutions to stabilize renewable generation.

• Smart grids and digital tools for efficient energy management.

• New regulatory frameworks to accelerate the adoption of renewables and distributed energy systems.

IDB’s Marcelino Madrigal, Head of the Energy Division, emphasized the bank’s role:

“The IDB reaffirms its commitment to continue being a strategic partner for Central America and the region, supporting regulatory modernization, infrastructure financing, and technological innovation that will enable progress towards a more secure, efficient, and sustainable electricity system.”

Strengthening Partnerships for the Energy Transition

With SIEPAC as the backbone of regional integration, the next phase will involve completing the second transmission circuit, deepening reforms, and scaling private investment. The IDB’s América en el Centro program is positioned to play a pivotal role in these efforts, ensuring that regional cooperation remains the driver of sustainable energy transformation in Central America.