GUATEMALA: An Introduction to Energy & Natural Resources

The Guatemalan electricity market has evolved significantly since the 1880s. The current regime dates from 1996, with the General Electricity Act. The Act, and the institutions and regulations derived from it, replaced a State-centered system which proved insufficient to meet the needs of a growing country.

The new framework allowed private-sector participation to generate, transport, distribute and commercialise energy and power within a system favouring competition and efficiency in providing services and infrastructure. The Act also requires distributors to purchase energy and power through bidding processes, encouraging competition, low prices and sector efficiency.

The Act created a Regulator, the National Electric Energy Commission (CNEE), an independent technical office of the Ministry of Energy and Mining (MEM), charged with sector oversight, approving fees for regulated transmission and distribution, dispute resolution among subsector agents, enactment of technical regulations, and rules to guarantee the grid’s safety, service and quality. It also created the Wholesale Market Administration (AMM, the Operator), a private non-profit in charge of dispatch and coordination of commercial operations and transactions in a free-market framework, setting short-term prices for power and energy transfers outside of free contracts, and guaranteeing the safety and supply of electricity.

The CNEE and AMM have been able to act technically under their mandate, avoiding undue political influence. This has permitted successful development of the sector in Guatemala as a case worthy of study and imitation. It was also achieved by privatising the three main distributors – EEGSA, DEOCSA and DEORSA – acquired by Spanish conglomerates Iberdrola and Unión Fenosa through international bidding.

The sale of DEORSA and DEOCSA was conditional upon the construction of new transmission and distribution infrastructure, as detailed by the government in the Rural Electrification Programme (PER), seeking to increase coverage (around 50% at that time).

Proceeds from the sale were placed in trust to finance and manage the construction and funding of the new infrastructure. When the trust ended, coverage reached 92%, with 41 new substations, 1,175.5km of new transmission lines and around 266,415 new end users, all built by DEORSA and DEOCSA under government supervision. PER is one of the most successful examples in the world of extending coverage to isolated areas through network expansion.

Mandatory bidding for energy purchases and privatising distribution brought transformation through investments in power – particularly renewable – generation plants and the grid in general, and now brings regular investments into Guatemala.

Among various factors in the Guatemalan electric sector, the following are vital:

• Privatisation of distributors: as mentioned, privatisation and the PER introduced overall change to the sector.
• Private investment in generation: by allowing the private sector to invest in generation, and with government leadership aimed at modifying the energy matrix, Guatemala shifted from a predominantly fossil fuel-based matrix to one comprised mostly of renewable energy. Since 1996, private investment in the subsector has exceeded USD10 billion, with specific objectives in renewable energy. In 2024, renewable energy represented an average of 53% of the energy matrix, as reported by the Operator. Local and foreign investment has allowed not only to cover national demand but also to export energy.
• Generation Expansion Plan (PEG) tender procedures: the Generation Expansion Plan (PEG) has been implemented by Energuate (DEOCSA and DEORSA) and EEGSA through four tender processes for long-term contracts seeking new power generation plants, emphasising renewable energy. In 2023, the fourth tender (PEG-4) resulted in the award of 16 contracts to 15 companies to supply Energuate and EEGSA for 15 years starting in 2026 and 2028, with around USD400 million of investment in new and existing plants. New projects will be installed in hydroelectric, solar, wind and natural gas.

Demand for electricity increases an average of 3% each year, so further investments will always be necessary. PEG-5, launched in April 2025, aims to acquire supply of up to 1,400 megawatts. These bids facilitate a 15-year power purchase agreement for new renewable plants, granting an additional term of up to five years for plant construction. The bid is open to new and existing plants, for both renewable and non-renewable sources. Bids for PEG-5 are scheduled to be received by 21 November 2025, and decided 31 January 2026, with signing of contracts within three months. The benefits of PEG implementation, including job creation, encompass the energy sector and related activities, such as construction, operation and maintenance, project finance, among others.

Also launched in April 2025 was PET-3, a tender process for expanding infrastructure of the energy transportation system, totaling over 500 kilometers of transmission lines and 14 new substations. This seeks to improve operational security and supply quality and expand coverage to new areas. Bids for PET-3 are scheduled to be received by 9 October 2025 and decided on 30 October 2025, with contracts signed within three months.

While PEG-5 is private, it is overseen by the Regulator and MEM. The simultaneous launch of PET-3 shows that the government is seeking to expand and improve the grid and the sector in general.

Besides the rules contained in laws such as the General Electricity Act of 1996 and the Environmental Protection and Improvement Act of 1986, Guatemala has other important legislation on energy and natural resources, including the Framework Climate Change Act of 2013, the Incentives for Development of Renewable Energy Projects Act of 2003, and the more recent Incentives to Electric Mobility Act of 2022.

The Framework Act of 2013 brought focus on the use of renewable natural resources, developed through the country’s Energy Policy 2019-2050 and the National Energy Plan 2018-2032, aiming to diversify the energy matrix and promote financing of projects for renewables and energy efficiency. Expansion of the generation system is also a component of energy security and resiliency, through increasing capacity in production, storage and supply. The Incentives Act of 2003 grants tax benefits to renewable energy generation plants, such as exemption from customs duties when importing equipment for construction, plus VAT and income tax exemption for ten years when in operation. The Electric Mobility Act of 2022 provides fiscal incentives for the import, sale, assembly and production of electric vehicles and development of related infrastructure, including private and public transportation.

The Guatemalan electric sector – authorities, private investors, generators, distributors and other participants – has led projects that widely increased coverage in services, diversified the national energy matrix, and bolstered investment in renewable sources. The recent successful PEG-4, and the ongoing PEG-5 and PET-3 tenders, are a sure sign that the sector will continue to drive growth, investment and job creation.

Last, but not least, it should be noted that, in 1997, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama signed the Framework Treaty for the creation of the Regional Electrical Market (MER). The MER was designed as a seventh wholesale market, overlapping with those of the member States, with its own regional regulations. It includes a Regional Electrical Interconnection Commission (CRIE, the Regulator), based in Guatemala City, responsible for regulating transactions within MER by agents connected to the Regional Transmission Grid (RTR); and the Regional Operating Entity (EOR, the Operator), based in San Salvador, responsible for dispatch and energy exchanges between MER members, acting as administrator of the regional market.