The Inter-American Development Bank (IaDB) has approved a $250M loan to help strengthen the electricity sector in Costa Rica, with more than a third to be used for development of the 305MW Reventazón hydroelectric project in the country.

The Costa Rican Electricity Institute (ICE) began the Reventazón project back in September 2009. The project includes a 130m-high dam that will create an 8km2 reservoir. It will also include a 13.5MW small hydro plant at the base of the dam.

Nearly $98M of the IaDB funds has been allocated to the project, which is expected to go online in 2016. The bank is also studying additional non-sovereign guarantee financing for the scheme.

The remaining funds will be directed at strengthening ICE’s electric generation, transmission, and distribution capacity. Investments in generation will be made in renewable energy and plant modernization to improve efficiency and lengthen their useful life. In addition, the financing will be used to improve and strengthen transmission and regulation of electric energy to meet quality, security, and reliability requirements to supply different regions of the country as well as the Regional Electricity Market.

The program will help to improve the quality of energy supplied throughout the country’s distribution system, electricity coverage in rural areas, and efficiency in consumption. These improvements will include strengthening the present distribution network, expanding rural supply with 500 photovoltaic installations for isolated communities, and increasing energy efficiency.

Costa Rica’s installed electricity capacity in 2011 was 2650MW, of which 77% was from renewable sources. Although the present installed capacity meets current demand of 1,545 MG, the country’s electric energy expansion plan foresees 5.1 average annual increases in demand. The plan proposes to meet these increases between 2012 and 2024 by adding 1714MW of installed capacity, of which 98% will be from renewable sources.