El Salvador legislation approves Geothermal Energy Law

With 57 affirmative votes from the 60 members of the Legislative Assembly, the new Geothermal Energy Law of El Salvador has been approved. This follows the proposal made by President Nayib Bukele through the Ministry of Economy.

The law has 83 articles, providing a robust framework for geothermal development in El Salvador, particularly for the granting of concessions to private companies. The following are some of the highlights of the Geothermal Energy Law:

• Geothermal concessions may be approved for private investors through public bidding, or in some cases without public bidding, for up to 30 years.
• The General Directorate of Hydroelectric and Mining Energy (DGEHM) will conduct public tenders for areas with geothermal potential.
• In some cases, concessions may be granted without public bidding. Direct awarding is possible for projects declared of national interest by the DGEHM, “when it is justified that their development is strategic for energy security, economic development, and/or national well-being.”
• The concession must be approved by the Legislative Assembly.
• Interested parties must submit exploration plans to the DGEHM. The agency then has 45 days to decide on exploration requests. These can be granted for up to 36 months for up to 50 square kilometers. The companies doing exploration will have preferential rights.
• The DGEHM will supervise and oversee compliance with the concession contract during its execution, construction, generation, operation, or abandonment.
• Individuals or companies holding concessions or making new investments in geothermal generation projects will be exempt from Income Tax, Import Duties, and all types of taxes on income from the sale of reduced emission certificates or renewable energy, among others.
• Foreign concessionaires must establish a company in El Salvador.
• The law allows for expropriations of areas with geothermal potential.

Some members of the Legislative Assembly voiced their criticisms of the law. For instance, Claudia Ortiz of the VAMOS party, criticized the provision for the direct awarding of contracts, saying that does not favor transparency and may increase the risk of corruption. Representative Francisco Lira also pointed out that the bill was not consulted with academics, experts, and members of the communities. However, amendments made based on these opposing views were not passed.

One article was deleted upon the request of Representative Dania González, which identified the fields of  Ahuachapán, Berlín, Chinameca, San Vicente, Obrajuelo, Conchagua, Chilanguera, and Santa Rosa de Lima as “exploitation rights areas” currently exploited by CEL or its subsidiaries. 

Source: La Vanguardia and El Mundo

Carlo Cariaga

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