The change of government in Honduras following the recent elections has reshuffled the country’s energy agenda and brought the liberalisation of the electricity market back to the centre of the debate.
Although the international tender for up to 1,500 MW was launched by the previous administration, the new political approach gives it fresh meaning and has revived expectations among private investors—particularly renewable energy developers incorporating energy storage.
“The plans announced for the energy sector represent a radical shift, aimed at returning to the original spirit of the General Law of the Electricity Industry, and they have generated significant expectations,” said Leonardo Deras, commissioner at the Electricity Regulatory Commission (CREE), when assessing the new institutional context.
Beyond the tender itself, the most significant change lies in the prospect of moving towards a more open and competitive market, with greater private sector participation.
From the regulator’s perspective, the existing regulatory framework already provides mechanisms to enable changes to the current structure, which is dominated by the National Electric Energy Company (ENEE) as the single buyer and retailer.
Under the tender design, 65% of the awarded capacity will correspond to renewable energy projects with storage, procured under a BOT (Build, Operate and Transfer) model. This requires plants to be transferred to the state after 15 years of operation—an arrangement that adds complexity to project economics and complicates price discovery, particularly in a country with no prior experience under this contractual scheme.
The structure also raises questions about tariff impacts, as investments would ultimately be financed by end-users. In this context, the definition of the price cap will be one of the most sensitive elements of the process. The regulator must strike a balance between competitiveness, financial sustainability and consumer protection, taking current power purchase agreement (PPA) prices as a benchmark.
At the same time, the new political climate has reignited interest from market players. There has been a rise in enquiries from domestic consortia that previously struggled to advance their projects, as well as from international companies active in both renewable and conventional technologies. The prevailing view is that the change in administration opens a window to reposition investments in Honduras’ electricity sector.
However, the underlying debate goes beyond the tender. At its core is the possibility of dismantling the commercial monopoly and allowing large consumers to negotiate their power supply directly with generators.
“There is a clear intention from the Government, aligned with the private sector’s view, to reopen the market so that large consumers can trade electricity directly with private and state-owned generators,” Deras said, outlining the potential direction of reform.
According to the commissioner, both the regulator and the system operator have already developed most of the secondary regulations envisaged by the law, enabling a technical transition towards a more open market without the need for major legal reforms.
Nevertheless, the key constraint remains ENEE’s financial situation. The state-owned utility is struggling to guarantee payments for new investments, continues to suffer from unresolved technical and non-technical losses, and operates under a tariff structure that only recognises costs, leaving no operational margin. This combination severely limits its role in any transition towards a more competitive market.
For market opening to be viable, Honduras will need to correct the shortcomings that have hindered market development since 2015, modernise ENEE’s internal governance and ensure effective coordination among the four institutions that make up the electricity system, in strict compliance with the law. With the new government in place, that process is back on the table—this time with renewed expectations.
