- With IDB support, Honduras strengthened transmission capacity in the Sula Valley, the country’s main economic hub
- Financed by a $155 million loan, the project improved connectivity between the Sula Valley, the national grid, and the regional electricity market.
- These investments reduced energy costs, enhanced system reliability and resilience, and expanded access to the Central American electricity market.
Reliable and affordable electricity remains a binding constraint on economic growth in Honduras, particularly in the Sula Valley, the country’s primary industrial and commercial center.
Although Honduras participates in the Central American Regional Electricity Market—where traded volumes increased from 474 GWh in 2013 to more than 4,100 GWh in 2025—limited domestic transmission capacity prevented the country from fully capturing these regional benefits. Transmission bottlenecks reduced system reliability in the northern region and increased dependence on higher cost local generation, raising electricity costs for households and firms.
To address these constraints, the Inter-American Development Bank (IDB) supported Honduras under the Interconnection System San Pedro Sula Sur – San Buenaventura Project, addressing long-standing critical gaps in the Sula Valley—the country’s main economic hub, where limited transmission capacity constrained energy flows and forced reliance on expensive, inefficient power generation.
Financed with a $155 million loan, the project reinforced the country’s core transmission network, improving connectivity between the Sula Valley, the national grid, and the regional electricity market, by expanding substations and constructing 48 kilometers of 230 kV transmission lines across five municipalities in the Department of Cortés.
Expanding Transmission and Improving System Resilience
The project combined transmission expansion with improvements in system resilience, including adjustments to engineering designs to minimize impacts on private property and reduce social impact and environmental disturbance.
Additional concessional resources supported the integration of more advanced technologies into the grid. Implementation coincided with significant external shocks, including Hurricanes Eta and Iota, which informed further design modifications to strengthen resilience to flooding and extreme weather events.
Better Integration into the Central American Electricity Market
The interconnection entered operation in March 2025, generating rapid and measurable system‑level results:
- Regional electricity transactions increased by 225%, enabling Honduras to make greater use of the Central American electricity market.
- Electricity reliability improved, with energy not supplied in the northern region declining by approximately 20% relative to 2024, alongside a reduction in outage frequency.
- Energy costs fell by an estimated 32%, reflecting more efficient dispatch and reduced reliance on high‑cost generation in the Sula Valley.
- Renewable energy integration increased, as 30 MW of clean energy previously constrained by transmission bottlenecks was fully incorporated into the system—sufficient to supply approximately 70,000 households or up to 40 food processing plants.
Transmission Investments Are Critical
Overall, the project demonstrates how targeted transmission investments can reduce energy costs, improve system reliability, and strengthen regional integration, contributing to a more stable and competitive electricity supply as a foundation for economic growth.
The Honduras experience highlights the importance of transmission investment as a complement to generation expansion and regional market participation. Regional integration benefits depend critically on domestic grid capacity; without adequate transmission, access to regional electricity markets remains constrained.
Transmission investments can also deliver rapid cost and reliability gains when they address well‑identified system bottlenecks. Finally, incorporating resilience considerations into technical design also helps protect service continuity and development gains in the face of climate‑related shocks.