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illegal electricity users connected to the formal network


of 34.5kV subtransmission lines constructed


69/34.5 kV substations installed


Rural electricity network strengthens links with the international grid

An IDB-financed program to strengthen Honduras’ electricity distribution system is incorporating 8,000 new rural users as well as improving the efficiency of the national power grid in preparation for its connection with the network that will link Mexico and the countries of Central America.

The Program is being financed by a $35 million loan from the Bank’s Fund for Special Operations approved in 2004.

Wide disparities in service

In a country where poverty remains a serious problem, inadequate and unreliable electric power service contributes to lower standards of living and lack of opportunities. Coverage for the country as a whole is only 63 percent, and regional disparities can be extreme. In the departments of Cortés and Francisco Morazán, where the country’s two largest cities are located, coverage approaches 90 percent. But in largely rural Intibucá and Lempira departments, the rates are barely 24 percent and 15 percent, respectively.

Electricity service in rural areas is also poor, in part due to the length of the 69 Kilovolt and 34.5 Kilovolt subtransmission lines that result in poor voltage quality. Meanwhile, the major consumption centers of Tegucigalpa, the capital, and San Pedro Sula, an industrial center, are both located far from the country’s hydroelectric plants and do not have easy access to hydrocarbon fuels, which creates additional technical problems with regard to voltage support.

Moreover,  country’s reliance on hydroelectric sources reduces real or available capacity. For example, the El Cajón plant has an installed capacity of 300 megawatts, but can only supply up to 175 megawatts, depending on the level of the reservoir.

Electricity coverage is also a concern at the international level, where Honduras and six other Central American countries, and Mexico are implementing two IDB-supported power integration projects as part of the Plan Puebla-Panama (PPP) regional integration initiative. One, the Central American Electric Interconnection System (SIEPAC), is establishing a regional electricity market for the six countries of Central America. The other, the Guatemala-Mexico interconnection, will link this market to Mexico and increase the region’s supply options.

The PPP Executive Committee decided to promote rural electrification programs within the PPP framework, because although they are intrinsically local or national in scope, they provide significant added value associated with creating links among the rural electrification programs of the different countries.

Honduras’ state-owned National Electricity Company (ENEE) is responsible for providing service and developing, operating, and maintaining the country’s generation, transmission, and distribution infrastructure it controls. The company, which serves 788,000 customers, faces a formidable challenge of upgrading the power grid to meet the development requirements of the country. A basic problem for achieving this goal has been financial difficulties steaming from previously signed power purchase agreements, energy losses, and a weak revenue stream from user charges.

ENEE seeks to meet this challenge by adopting a model for the sector that accounts for the country’s small electricity market, the limited capacity of its regulatory agency, and a weak institutional structure for shaping sector policy, which makes it difficult to attract private investment to the sector and guarantee supply. With these challenges in mind, the government has been developing a strategy to increase generation and transmission capacity, expand rural coverage, and improve sector finances.

The program in brief

The Puebla-Panama Plan-Support for Rural Electrification and the Energy Sector Program is providing support for two related objectives: expand the power grid in rural areas and improve the efficiency of ENEE.

In the area of rural electrification, investments are focused at improving service in the departments of Lempira, Intibucá, and Olancho. Included is equipment for the 34.5 Kilovolt and 69 Kilovolt systems, two new 69/34.5 Kilovolt substations, and two 69 Kilovolt subtransmission lines. The goal is to extend rural electrification services to approximately 8,000 new users, in addition to improving existing service for an additional 27,000 users.

Investments to improvethe efficiency of ENEE include building a 19.5 Kilometers, 138 Kilovolt line between La Puerta and Naco and a 50 megavoltampere, 138/34.5 Kilovolt substation in Naco; modernizing the National Dispatch Center; providing support for a plan to reduce losses, and strengthening the Social Electrification Office.

Efforts to support the ENEE loss-reduction program include the purchase of vehicles, equipment, and tools for a temporary 40-member investigation unit; formal connection of approximately 6,500 households in irregular communities that are currently connected to the grid illegally; and establishment of a geographic information system for the primary and secondary distribution networks in the country’s major cities.

The IDB’s partners

Both the IDB and the World Bank have supported the government on structural issues affecting the electricity sector through periodic meetings and exchange of information. Efforts to strengthen ENEE complement rural electrification planning activities by the Canadian International Development Agency and the European Union in efforts to diagnose losses and develop a loss-reduction strategy.

Financing for rural electrification has been extended from the Central American Bank for Economic Integration, Japan, Norway, Korea, and Finland. The World Bank has plans to finance a rural infrastructure project, which includes rural electrification projects in isolated areas based on renewable energy sources, the rehabilitation of rural roads, and the development of local water and sanitation services.

Finally, as part of the PPP energy initiative, coordination meetings have been held with these institutions and other multilateral and bilateral agencies. During the execution phase, the Social Electrification Office is implementing a mechanism to enable financial and donor institutions involved in rural electrification in Honduras to share up-to-date information.

Toward the future

The program will support investments in the critical energy sector in Honduras. These investments will allow Honduras to access the Central American electricity market as well as to modernize its infrastructure through better and more efficient transmission and transformation infrastructure, as well as improvement in the governance of ENEE.



  • 500 illegal electricity users connected to the formal network
  • Initial activities completed for modernizing governance and information systems
  • 50 km of 34.5 kilovolt subtransmission lines constructed
  • 2 69/34.5 kilovolt substations installed
  • 1 136/69 kilovolt substation constructed



Honduras’ National Electricity Company faces the challenge of upgrading the country’s power grid to meet growing development needs.

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