The Legislative Assembly of El Salvador approved with 57 votes la Geothermal Energy Law, a framework composed of 83 items which regulates the prospecting, exploration and exploitation of subsoil heat. The regulations enable concessions for up to 30 years, grants tax benefits for a decade and provides for the expropriation of land when it is not possible to acquire them directly.
The text assigns to the General Directorate of Energy, Hydrocarbons and Mines (DGEHM) comprehensive supervision and management of permits and policies and investmentsThe opposition questioned the direct contracting without bidding in specific cases and the lack of broad debate with communities and academics, while the government defends that the law seeks diversify the matrix and ensure more stable prices.
What the standard establishes
The law exempts from these requirements the OBJECTIVE and societies where the State holds a majority, directly or indirectly. According to the public company, the objective is to complement the State's capacity, given that the country needs to accelerate projects and the State "can't cope" to cover all future demand, without altering current plans LaGeo.
Permits, stages and deadlines
Those interested in analyzing areas must request a permit from prospecting before the DGEHM, to understand How geothermal energy works, attaching legal information and an activity plan; the authority will resolve in 10 working days. For the exploration, technical, financial and environmental documentation, and a drilling program will be required; the maximum response time will be 45 working days.
The DGEHM may authorize explorations of up to 50 km² for a period of 36 monthsIn El Salvador, reservoirs are usually found at between 800 and 3.000 meters deep, so the projects require specific equipment, operational insurance and safety protocols.
La exploitation concession will grant an exclusive real right over the resource in the subsoil for a period of to 30 years and will regulate the uses of geothermal energyForeign companies will be required to legally incorporate in El Salvador and comply investment schedules, as well as obtaining permits environmental and water, among other obligations.
Throughout the life of the project, the owners must collaborate with inspections, submit technical and financial reports and, at the end of the concession, remove the facilities employed, avoiding environmental liabilities and leaving the land in adequate conditions.
Tax incentives and conditions
The rule incorporates deductions for geothermal reinjection and by pre-investment in electrical infrastructure. These benefits will be exclusive for new projects that increase installed capacity and cannot be accumulated with other similar tax regimes.
Sanctions and supervision
The sanctioning regime classifies infractions serious and very serious, with fines ranging from 5.000 to 10.000 minimum wages from the industrial sector. Operating without a concession, modifying facilities without authorization, or denying technical information is considered extremely serious.
La DGEHM will oversee the projects from construction to closure and will submit a annual report to the Legislative Assembly on the fulfillment of the concessions. In addition, the holders must have a Sustainability Protocol to ensure the balance of the reservoir over a 50-year horizon.
Expropriations and land tenure
The assets necessary for the exploitation may be declared as public utility, enabling expropriation in accordance with the law when there is no direct purchase agreement. The concession grants a real right over the subsoil, independent of surface ownership, so the concessionaire will need authorization from the owner if he is not the owner of the surface.
The opposition has expressed reservations about the direct contracting and the scope of the declaration of national interest by the DGEHM, considering that it could undermine the competition and transparencyThe government maintains that combining bidding and direct awarding in specific cases will avoid delays and promote energy security.
Energy context and ongoing projects
The country estimates a geothermal potential close to 600 MW capacity, of which around 500 MW could attract private investment according to authorities. LaGeo, a subsidiary of CEL, has 204,4 MW installed between Ahuachapán and BerlÃn, and geothermal energy already contributes a relevant fraction of national electricity. Learn about some advantages and disadvantages associated with its development.
In recent years initiatives such as plants have been awarded Chinameca (20 MW) y San Vicente (10 MW) under the build-operate-transfer modality, with return to the State after 20 years. The Government maintains that the new law will allow more stable prices, more employment and a more rapid expansion of the system, without replacing ongoing public projects.
Entry into force
The Geothermal Energy Law will come into force 180 days after its publication in the Official Journal. Within that period, the DGEHM must adjust regulations and procedures, while interested companies will prepare permits and studies to meet the new standards.
With a scheme that combines private investment and public management, clear rules for permits and concessions, targeted incentives and reinforced controls, the country lays the foundations to accelerate geothermal energy, seeking security of supply and environmental sustainability in a sector considered strategic.
