source: Taylor & Francis Online
The Sinister Side of Solar Energy in Honduras
By: Karen Spring, Aldo Orellana, Luciana Ghiotto & Jen Moore
Huddled under the shade of large trees and tarps erected to block the hot, late morning sun, community leaders, mostly women, settle into plastic chairs chatting with one another. As more cars arrive and everyone waits for the activity to start, people laugh and greet one another with a familiarity forged in their many hard years of resistance against a solar energy project in the community.
It is January 4, 2025, the start of another year in Los Prados I, a small, rural village in the southern department of Choluteca, Honduras. Every year, the gathering brings together key actors from across southern Honduras to commemorate the resistance camp, launched eight years ago, that managed to stop the installation of a large-scale solar energy project in the community’s backyard. The 53 MW project, also called Los Prados, belongs to the Norwegian company Scatec ASA and the investment company KLP Nor-fund Investment AS, jointly owned by the Norwegian development finance institution Norfund and KLP, Norway’s largest pension fund. While the resistance succeeded in halting the project’s advance on the lands adjacent to the communities of Los Prados I and II, at least two of the five concessions that are part of the Los Prados megaproject now operate in another nearby community.
“Over there,” says Leonardo Amador, extending his arm. He motions to the other side of the road, where the community once maintained its 24-hour resistance camp. “That’s where they wanted to put the solar panels—in that whole area almost all the way to that small hill in the distance. From what we understand, it is also of interest to mining companies now.” As we chat, Amador takes a handkerchief out of his back pocket to wipe the beads of sweat from under his sombrero. Choluteca is one of the hottest parts of the country.
For years, as former president of the elected community council or patronato, Amador led the resistance against massive solar energy projects, or what he calls “a sea of tin cans.” As a result, he and others in the resistance have faced threats and trumped-up charges aimed at silencing them. Since 2017, nine people from Los Prados I and other nearby communities who face ongoing charges have had to sign into court on a monthly basis. Others originally accused along with the nine resolved their legal troubles by signing an agreement to stop participating in protests.
As we talk, an armed undercover police officer trails Amador closely. The Honduran state assigned the officer to Amador as protection against the threats he continues to receive. Despite the personal risks involved in their work, he and others are concerned about the threats posed by solar energy projects: displacement, loss of water and arable land, deforestation, and rising temperatures in the areas where the parks are installed.
Meanwhile, the Norwegian-owned solar projects— Los Prados in Choluteca and another, called Agua Fría, in Valle—have brought another sort of legal persecution. The companies are now suing the Honduran government in a pair of international arbitration claims for a total of $400 million under the terms of the 2011 National Investment Law. As Denia Castillo, a lawyer from the Network of Women Human Rights Defense Lawyers (RADDH) who accompanies the affected communities, explains, “The strategy of criminalizing and paralyzing community members who are defending their territories is similarly being used against the government.” While the suit’s specific accusations and related documentation are not public, these claims and five others like it make use of a neocolonial tool designed to give corporations power over governments, especially in the Global South, to push back on the Honduran government’s reforms to the energy sector in 2022. Those reforms sought to rescue the national energy company and to renegotiate the price the state pays to private energy providers, which is one of the highest rates in Latin America.
For communities in Choluteca, solar energy has become synonymous with dispossession. Their lands were taken over with solar panels to benefit distant industries and companies, while their local energy supply remains unstable or sometimes nonexistent. They feel doubly under attack: first by the projects that have had negative impacts, and now by arbitration claims that threaten to obstruct any beneficial reform. Communities and local organizations worry that the companies might also use their suits to pressure the government in closed-door talks to grant permission for project expansion.
The repressive way these solar energy parks were imposed and now dispossess communities of their basic means of subsistence reverberates in the ability of foreign investors to throw their weight around, invoking exclusive rights found in the national law, contracts, and investment treaties that allow them to sue the state when decisions affect their corporate interests. What’s at stake are not merely contractual details. These are disputes over communities’ dignity and a country’s right to decide its own energy destiny without being punished.
A Complete Energy Sector Sell-off
The solar energy contracts that have given rise to conflict in Choluteca and multimillion-dollar claims against the state were approved in a context of deepening privatization in the energy sector, profound corruption, and grave political violence. This period, known in Honduras as the narcodictatorship, followed the U.S.- and Canadian-backed military coup in June 2009 that ousted President Manuel “Mel” Zelaya and consolidated the National Party’s control over the country for 12 years. The governments of this era were adept at employing the language of the energy transition to gain support from international development banks and transnational capital, which saw the post-coup moment as an opportune time to invest.
After Zelaya’s ouster, the coup government created a National Plan that would guide the development and investment strategy from 2010 to 2022. Although written in neutral and “ideology-free” language, the plan provided a neoliberal development framework to favor foreign investment. In practice, it helped attract support from international financial institutions, such as the World Bank, that require countries in the Global South to have national development plans as a condition for loans and aid.
The National Plan greenwashed its goals of attracting private investment in renewable energy generation as part of the state’s promise to promote “sustainable development in harmony with nature” and mitigate the impacts of climate change. The government projected that Honduras would generate 80 percent of its energy through renewables by 2034 and that this, in turn, “would result in the placement of Carbon Bond Certificates on international markets, enabling Honduras to achieve regional leadership levels that position it as a nation firmly on the path to progress, sustainable development, and climate change mitigation.”
With this blueprint, as early as 2012, under the first coup government of President Porfirio “Pepe” Lobo, the Inter-American Development Bank (IDB) and its private sector arm, IDB Invest, began providing “technical assistance to Honduran commercial, industrial and institutional sectors” to promote renewable energy, with a focus on photovoltaic projects. According to the IDB, this assistance helped to “revolutionize” the energy sector in Honduras, providing initial investments and technical capacities that “made the difference” in Honduras’ early successes in the renewable energy transition. Then, in 2013, the National Congress reformed the 2007 Law for the Promotion of Electricity from Natural Resources, declaring solar energy generation a “national priority.” The reform offered tax exemptions and an additional three cents per kilowatt/hour over the base price of energy to incentivize new projects, guaranteeing generous benefits for private investors to the detriment of the Honduran people.
It was no coincidence that from 2012 to 2014, the government began loan negotiations with the International Monetary Fund. One of the key topics on the table was the administration of the Honduran energy sector and its state utility, the National Electric Energy Company of Honduras (ENEE). According to the letter of intent written and discussed between the IMF and the Honduran government, Honduras committed to implementing “structural reforms in several key sectors,” including the energy sector, and outlined its plan “to allow private participation in distribution and transmission” through long-term concessions and public-private partnerships. While these negotiations were taking place, the Honduran government began to transform the last public elements of the ENEE, whose monopoly had been slowly eroded for years. In 2014, reforms to the General Law of the Electricity Industry achieved the near complete privatization of the energy sector. This privatization had begun in the early 1990s, gradually opening the door to public, private, and mixed capital in the generation and commercialization of energy. The 2014 reforms, however, sought to divide the ENEE into three companies: one for generation, another for transmission and system operation, and the third for distribution. The move went against the warnings of civil society organizations, which had roundly rejected efforts to privatize the energy sector since the late 1990s.
Coming on the tail of the 2013 reform, the 2014 changes laid the groundwork for the signing in 2016 of a public-private partnership contract between ENEE and Empresa Energía Honduras (EEH) for the management of energy distribution. The contract was a disaster. It failed to address energy losses or make needed investments, led to complaints and protests over arbitrarily high electricity bills, and is now the subject of a $700 million international arbitration claim against the Honduran government. The same 2014 law also prioritizes investments in renewable energies to help attract financial contributions from multilateral and bilateral organizations such as the U.S. Export-Import Bank, the World Bank’s International Finance Corporation (IFC), and the Netherlands’ FMO bank, among others.
For example, in 2014, following the approval of several renewable energy contracts, the International Finance Corporation (IFC), the private arm of the World Bank, together with other international financial institutions, began to finance some of the private sector companies operating large solar parks in Honduras. After approving a $146 million loan to SunEdison, which operates three large solar parks in Choluteca, Gabriel Goldschmidt, IFC’s head of Infrastructure in Latin America and the Caribbean proclaimed in a press release that “[r]enewable energy is a priority for IFC in Central America.”
In theory, the focus on renewable energy could be appropriate. Aside from the climate emergency, Honduras faces an energy crisis and relies heavily on privately-owned thermal power generation. But the contracts approved under the narcodictatorship reproduced an extractive logic that further alienated local populations by denying them participation and imposing energy projects through repression and land dispossession. Ultimately, most solar energy generation projects in Honduras uphold the same economic model that for decades has driven social and economic inequality while feeding the bottom lines of foreign companies and national elites. This is precisely what the climate movement calls a false, corporate energy transition.
A Flurry of Corrupt Solar Energy Contracts
In January 2014, the National Congress approved more than 100 renewable energy projects in a single sitting. Among them were at least 23 solar energy projects awarded to 21 companies. The process was riddled with irregularities and corruption.
The legislative session, which became known as the “legislative diarrhea,” continued into the wee hours of January 20, 2014, one day after the legislative period had ended on January 19. It was also the same day that the then president of Congress, Juan Orlando Hernández—frequently referred to as JOH and now behind bars in New York on drug trafficking and arms related charges—ended his term before entering office as president of the republic a week later. All of these contracts were awarded without a bidding process.
Each of the 21 companies that received the 23 solar contracts were new, created on average nine months earlier. Only two companies had prior experience in solar power generation and the rest did not meet the legal requirements to receive a public contract. Seventeen of the 21 companies were sold between five and 15 months after obtaining the contracts, suggesting that they were “front companies” that existed only on paper. It was later discovered that some of the owners of these apparent front operations were linked to JOH’s drug-trafficking associates.
In addition, the contracts obliged the state to pay an inflated price per kilowatt-hour (kWh) of energy for a period of 20 years. ENEE committed to pay 15 cents per kWh compared to the Latin American average of 11 cents per kWh. This generated enormous concern about ENEE’s growing debt and economic crisis and the burden it put on the state.
Five of these contracts correspond to the Los Prados solar energy project in Choluteca, which Amador and others have been resisting for years. At least two are now in operation. But Norfund, Scatec, and KLP Norfund Investments were not the original owners. The five contracts that became the Los Prados project were originally granted to companies in the names of Liana María Bueso Majano and Jim Eloy Muñoz Gómez.
Bueso Majano had links to several corrupt entities during the narco-dictatorship. She was employed from 2010 to 2012 in the government institute for infrastructure and transportation formerly known as SOPTRAVI, which was later dismantled for its involvement in awarding government contracts to the Los Cachiros drug cartel to launder drug money. She was also a congressional candidate for the National Party in the 2012 elections. Additionally, she was the legal representative of Joya Grande Park, an exotic animal zoo owned by Los Cachiros and later confiscated when the cartel was designated as a drug trafficking organization by the U.S. Office of Foreign Assets Control.
Between 2014 and 2015, Bueso Majano and Muñoz Gómez sold their solar energy contracts to the Spanish company Ecoener Inversiones de Centroamerica, which later sold them to Scatec and KLP Norfund Investments. In 2015, KLP Norfund Investments entered into an agreement with Scatec to develop the Los Prados project.
The contract that corresponds to the Agua Fría project, a Scatec-built solar power plant in the south-eastern department of Valle, was originally awarded to the company PRODERSSA, whose shareholders included Roberto David Castillo Mejía. Castillo was an employee of ENEE at the time and has since been accused in the corruption case “Fraud on the Gualcarque.” The case alleges that Castillo used his position in the state electricity company to obtain contracts and licenses in favor of the Agua Zarca project, a planned hydroelectric dam on the Gualcarque River that faced opposition from Indigenous leader Berta Cáceres and the organization she cofounded, COPINH. Castillo is currently in prison serving two sentences totaling 22 years, one for his role in the 2016 murder of Cáceres and another for the Fraud on the Gualcarque corruption case.
In May 2015, Scatec Solar and PRODERSSA signed a contract for the operation of the Agua Fría solar project. In 2018, the Honduran Attorney General’s Office seized PRODERSSA for its ties to Los Cachiros.
A company that has been linked to Castillo’s family, PEMSA, is still a shareholder in the Agua Fría project. According to COPINH, PEMSA’s accounts in Panama were used to receive a $1 million payment just two days before Cáceres’s murder, allegedly to pay the hitmen who broke into her home on March 2, 2016. In 2019, following Castillo’s arrest, PRODERSSA’s board of directors authorized the transfer of Castillo’s and other companies’ shares to Norfund.
Reforms, Resistance, and Multimillion-Dollar Claims
Following on the heels of the narcodictatorship, when Xiomara Castro became president in January 2022, she inherited an energy system held hostage by private interests. Electricity rates were unaffordable, blackouts were frequent, and ENEE was on the verge of financial collapse. In response, Castro pushed for reforms aimed at negotiating accessible electricity prices and regaining public control over electricity generation, distribution, and marketing.
In October 2022, the National Congress approved the Electric Energy Law, and in 2023, the government decided not to renew its contract with Empresa Energía Honduras (EEH), responsible for distribution, due to its inefficiency and alleged corruption. It also launched renegotiations of energy generation contracts.
The private sector’s response to Castro’s reforms was immediate and aggressive. In 2023 and 2024, seven firms launched international arbitration against Honduras for a total of $1.6 billion dollars at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID). The amount claimed is 1.4 times greater than the savings Energy Minister Erick Tejada anticipates the state will recoup from its contract renegotiations. The companies’ claims rely on exclusive provisions for transnational investors found in free trade agreements and a 2011 Investment Law approved during the narcodictatorship. Among the claims are the two suits for $400 million from Scatec ASA, Norfund, and KLP Norfund Investments AS over the Los Prados solar project in Choluteca and Agua Fría in Valle.
These claims threaten the government’s ability to regulate the sector and compound the local controversy that projects such as Los Prados have caused. In addition to Amador’s community of Los Prados I, the communities Los Prados II, Costa Azul, Guamerú, La Cuchilla, and Ranchería have also participated in the years’ long opposition. They object to how the projects were imposed on them without respect for their self-determination, leading to displacement, dispossession, and criminalization.
In 2015, the communities of Los Prados I and Los Prados II were surprised when heavy machinery began clearing a large area adjacent to their lands and homes. They had no knowledge of the proposed project and had not given their consent. The communities set up the resistance camp blocking access to the area, and in 2019, local groups organized a consultation. Over 11,000 people participated with a large majority voting against extractive projects in their territory, including solar energy.
“They arrive as if they were the boss, imposing themselves on our communities,” says Amador of the companies during an event to reflect on the arbitration cases. “They don’t even have the moral decency to consult with the communities to ask if we agree with the projects, turning residents against each other to achieve their aims. We have lost friends in this struggle; people have been murdered for opposing the project. Others have had to migrate away as a result of the persecution.”
Although no known investigations have been completed, local residents link the conflicts to two murders, including the 2018 assassination of leader Reynaldo Reyes Moreno, who was criminalized for his involvement in opposing the project. According to Global Witness, 166 environmental defenders and social leaders were murdered in Latin America in 2023. Eighteen of these murders occurred in Honduras, where 149 defenders were murdered in the last 12 years. Many of these cases go unpunished or are never investigated.
Marlenis Pastrana, who is from Costa Azul, one of the communities closest to the project, joined the resistance camp from the moment the company attempted to build on lands close to Prados I and II. “My family has been affected in many ways,” she says, noting some members have faced threats and legal cases. Community members also report environmental harm and difficulty accessing their lands and crops. When the project was in construction, the community faced restricted access to the area where their water supply originated, a place they relied on for firewood and fish during the rainy season. As Pastrana explains, “They destroyed a [local] forest and a water source that passed through our community.”
Almost 10 years later, the project’s impacts remain, particularly in Costa Azul, where community lands and houses sit adjacent to where the solar panels have been installed. Today, Costa Azul residents attribute rising temperatures in their community to the clearing of trees to make way for the panels. The deforestation also affected the water source that originated in the area where the project is now located. With restricted access to water and the longstanding extreme poverty in the community, residents complain about increased incidence of health problems including diarrhea, high blood pressure, and skin allergies. Solar panels are no substitute for trees, especially in communities that depend on vegetation for relief from the sweltering sun and on trees such as the jícaro as part of their subsistence economy.
According to sources from the Honduran Attorney General’s Office, Scatec ASA, Norfund, and KLP Norfund Investments AS filed their claims to put pressure on the government during contract renegotiations, presumably to maintain the original conditions of their contracts intact.
The Honduran state, for its part, has responded with political firmness but limited technical capacity. In February 2024, the government announced its withdrawal from ICSID in an apparent attempt to shield itself from further claims. However, the same month the decision was set to go into effect, at least four new claims were filed. What’s more, ICSID is only one mechanism—other arbitration tribunals exist to which corporations can still bring claims. In May 2025, two new claims were filed against Honduras.
A Neocolonial Tool Against Self-Determination
Investor-State Dispute Settlement (ISDS) is a powerful neocolonial tool, especially wielded against countries in the Global South, like Honduras. Embedded within bilateral investment treaties, free trade agreements, and domestic investment laws and contracts, ISDS creates a “parallel justice” system that enables transnational corporations to bypass national courts and challenge sovereign governmental decisions deemed unfavorable to their interests through international arbitration tribunals, including ICSID and others.
Honduras has eight bilateral investment treaties and 12 free trade agreements that provide transnational corporations with recourse to ISDS. In addition, in 2011, President Lobo created wide access with the approval of the National Investment Law just in time for the “Honduras Open for Business” conference to promote private investment. The result is 21 ISDS cases against Honduras in the past two decades, with a staggering 16 filed since 2023, making Honduras the second most sued country in Latin America in 2023. The known pending claims total $19.44 billion— approximately 55 percent of Honduras’s GDP in 2024—posing an existential threat to one of Latin America’s most impoverished nations.
The case of Honduras Próspera exemplifies the extreme nature of these corporate assaults. A group of U.S. investors backed by billionaire Peter Thiel is claiming approximately $10.8 billion from Honduras after Castro’s government repealed legislation enabling the creation of quasi-autonomous “model cities” or ZEDEs (Zones of Employment and Economic Development). A second investor with a ZEDE in Choloma launched a separate claim in May 2025 for an amount estimated at over $100 million. These zones, widely opposed in Honduras, essentially surrendered territorial sovereignty to private investors, also posing a threat to local communities and the environment.
The solar energy projects in Honduras further illustrate how ISDS claims can severely undermine local communities’ rights and environmental protections. Despite being promoted as clean energy initiatives, the projects belonging to KLP Norfund Investment and Scatec have had devastating effects on communities, as Leonardo Amador and Marlenis Pastrana have testified. Installing panels against people’s will has resulted in the displacement of communities from their lands and the criminalization of protest against their projects. These companies’ ISDS lawsuit is nothing more than an extension of these abuses before an arbitration tribunal, where communities also have no voice.
ISDS empowers corporations to undermine democratic processes and largely ignore the will of communities and the severe social and environmental consequences investments may provoke. Communities have filed numerous complaints about corruption and irregularities at Los Prados, with no response from authorities. Corporations, however, can swiftly invoke ISDS mechanisms to protect their interests and anticipated profits.
Throughout Latin America, ISDS has become a tool for disciplining governments that attempt progressive reforms, including in the energy sector. Of the 1,401 known ISDS claims worldwide, 380 (nearly 30 percent) target Latin American and Caribbean states. The Global ISDS Tracker has identified 140 ISDS claims related to renewable energy investments worldwide, including 18 against Latin American governments, an indicator of the sway that transnational private capital holds over the way the energy transition is being defined. Recently, Canadian investment firm Brookfield threatened Colombia with a claim over a controversial cap on electricity that renewable energy generators can sell in the wholesale market to stabilize prices in times of drought. Brookfield’s 2016 takeover of state-owned ISAGEN is considered one of the biggest privatization deals in Colombia. The Centre for International Corporate Tax and Accountability Research finds that the company has raised profits and shareholder dividends while minimizing investment, tax payments, and benefits to its workforce.
The chilling effect of claims or even threats of claims severely constrains policy space for governments considering even modest reforms. Former UN human rights rapporteur David Boyd has stated that such threats discourage governments from enacting needed measures to protect the environment and human rights. The result is a double manifestation of colonialism: economic colonialism through mechanisms that prioritize foreign investor profits over national sovereignty and community self-determination, and environmental colonialism that prevents meaningful energy transitions or measures to protect the environment, wellbeing, and self-determination of affected communities.
In Honduras, green colonialism under the narco-dictatorship exploited environmental concerns to justify predatory investments in the energy sector. Now, corporate colonialism seeks to lock the country into exploitative economic relationships through tools such as ISDS. When supposedly “clean” energy projects destroy local livelihoods and ecosystems while generating profits primarily for foreign investors, and when governments attempting to regulate these projects face crippling penalties, the colonial nature of this relationship becomes clear.
The international legal and economic architecture thus functions not to facilitate genuine sustainable development, but rather to maintain hierarchies of power that enable ongoing extraction of resources and wealth from the Global South under the guise of progress. In this context, for communities and progressive movements worldwide, dismantling the ISDS regime has become increasingly urgent.
