Guatemala faces power market stress as grid constraints drive spot prices to USD 107/MWh

Guatemala is facing a critical moment in its power system.

Over just four days, the electricity spot price (POE) surged from USD 8.56/MWh on 1 January to a peak of USD 107/MWh, according to data from the Administrador del Mercado Mayorista (AMM).

On 4 January, the daily average reached USD 48.27/MWh, reflecting volatility of more than 50%.

This sharp price movement occurred despite significant renewable energy curtailment.

Hydroelectric reservoirs were spilling water with flows above 23 m³/s, indicating that clean generation was available but could not be fully utilised due to insufficient transmission infrastructure or a lack of energy storage capacity.

Ottoniel Alfaro Díaz, president of the Asociación de Autoproductores con Energías Renovables de Guatemala (AAERG), highlighted a fundamental contradiction in the system: current hydroelectric surpluses contrast with forecasts of drought conditions and steady demand growth of around 1.6% per year, as warned by United Nations agencies.

Alfaro also cautioned that delays in key transmission projects, such as PET-3-2025, could lead to a repeat of the power interruptions experienced in 2024.

He urged authorities to act swiftly, calling on the Ministry of Energy and Mines and the Comisión Nacional de Energía Eléctrica (CNEE) to implement an emergency contingency plan.

The current situation reflects the first of three structural paradoxes identified by Alfaro as threats to Guatemala"s energy security: abundant energy availability during the rainy season, followed by a real risk of supply shortages during the dry months.

The second paradox relates to a recurring price pattern.

"Low prices with renewable curtailment are followed by sharp price spikes," Alfaro explained.

Without meaningful storage capacity or a competitive retail electricity market, the system wastes low-cost renewable energy during periods of high hydrological availability and later turns to expensive imports.

In recent weeks, Guatemala imported electricity from Mexico at prices of around USD 43/MWh.

While necessary to ensure supply, these imports add costs and increase exposure to external market conditions.

According to Alfaro, this structural inefficiency fuels excessive price volatility across the system.

To address these bottlenecks, he argued that the AMM, the CNEE and the Ministry of Energy and Mines should actively promote grid-scale energy storage solutions, such as batteries, alongside retail market liberalisation.

These measures are in line with recommendations from the International Renewable Energy Agency (IRENA) and are increasingly seen as essential for integrating higher shares of renewable energy.

The third paradox affects both investors and consumers.

Renewable generators face growing uncertainty when trying to secure long-term power purchase agreements (PPAs), while end-users are exposed to higher costs during price spikes.

Beyond national borders, Alfaro warned that instability in Guatemala"s system can spread through interconnections to the Mercado Eléctrico Regional (MER), amplifying risks across Central America.

Alfaro closed with a direct call to policymakers: "The government and Congress of Guatemala must implement reforms now.

The equation is clearinaction comes at a high cost.