The Policy of Power and the Power of Policy: Energy Policy in Honduras

Development and energy demand are synonymous. The rapid industrialisation of Latin America and the high ranking accorded to electrification projects by the region’s development planners in the post-war period have combined to ensure a growing demand for energy in the region. This has led, at times, to various supply constraints resulting in excess demand. The response to the problem has been varied. Some countries, such as Mexico and Colombia, have addressed the problem by developing domestic extraction capacity. Others, such as Brazil, have experimented with alternative energy sources, most notably, ethanol. In Central America, the absence of known depletable energy resources allied to a shortage of foreign exchange has ensured an almost exclusive dependency upon hydro-electric power sources for electricity generation. In the case of Honduras, the reliance on hydro-electricity proved costly. Environmental degradation allied to a lack of maintenance of the country’s principal plant resulted in serious energy shortages in 1994/5 with electricity being rationed for up to 12 hours each day. As a direct consequence, GDP growth declined, the import bill rose due to the switch to alternative fossil fuel sources and air pollution rose due to increased generator usage. This paper traces the evolution of energy supply and demand in Honduras, showing why the crisis of the 1990s emerged. It then forecasts future energy demand and examines the way this demand might be met. A concluding section spells out the difficult decisions small developing countries have to face in their desire to achieve economic growth without sacrificing environmental capital.