Nicaragua: Energy Resources

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National electrification rate (2010): 74.6% (78% if illegal connections are taken into account) Urban rate: 73% Rural rate: 30%.

55% of national coverage is still among the lowest in the region and well below the 94.6 average for LAC.

In 2004, the National Energy Commission (CNE) developed the National Plan for Rural Electrification (PLANER), which established goals and investment figures for the period 2004-2013. Its objective is to bring power to 90% of the country’s rural areas by the end of 2012.  The Rural Electrification Policy was approved in September 2006 as the main guide for implementation of the PLANER.

The Nicaraguan electricity system comprises the National Interconnected System (SIN), which covers more than 90% of the territory where the population of the country lives (the entire Pacific, Central and North zone of the country). The remaining regions are covered by small isolated generation systems.

Energy procedure

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Energy debates

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Energy sources

Total installed electricity capacity (2010): 1,060.1 MW Thermal: 52% Hydro-electricity: 12.23% Geothermal: 15.72% Biomass: 13.14% Wind: 7.32%

Nicaragua is the country in Central America with the lowest electricity generation.

Gross electricity generation was 3,140 GWh, of which 69% came from traditional thermal sources, 10% from bagasse thermal plants, 10% from hydro-electricity, and 10% from geothermal power. The remaining 1% corresponds to the electricity generated in the “isolated” systems.

Regulatory roles

Price regulation in the electricity and petroleum liquefied gas industries, competition promotion and protection, licensing and authorization for the developing of business in the electricity and hydrocarbons industries.

Competition

At the beginning of the 1990s, the government of President Violeta Chamorro started the reform of the electricity sector. The reform process was consolidated in 1998 with Law 272 (Electricity Industry Law - LIE) and Law 271 (INE Reform Law). The reform of the INE led to the creation of the National Energy Commission (CNE), which assumed the policy making and planning responsibilities. Law 272 established the basic principles for the operation of a competitive wholesale market with the participation of private companies.  Electricity generation, transmission and distribution were unbundled and companies were prohibited to have interests in more than one of the three activities. ENEL was restructured in four generation companies (Hidrogesa, GEOSA, GECSA and GEMOSA); two distribution companies (DISNORTE and DISSUR), both acquired by Union Fenosa and then merged into a single company; and one transmission company (ENTRESA, then in 2006 ENATREL).

The privatization process that started in 2000 with a public offering of the four generation companies was complicated due both to legal problems and to lack of interest by investors. As a result, ENEL maintained a more relevant role than initially expected. Hidrogesa remained in public hands as the only player in hydroelectric generation while its profits serve to finance the losses of GECSA, which owns the thermal plants that did not attract private interest, and the rural electrification plans in isolated areas.

By creating the Ministry of Energy, President Daniel Ortega’s new government intended to oversee the energy sector. This was the first move in what has become the increasingly successful process of State empowerment within the energy sector.

Currently, large consumers can contract directly with generators or distributors, generators compete for the supply of electricity for electricity distributors.

Energy efficiency

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Capacity concerns

Roughly 30% of all electricity generated in Nicaragua is lost due to technical faults in the national grid and energy fraud (energy "stolen" by electricity consumers who have illegal connections to the grid). This situation is exacerbated by the failure of Union Fenosa (the Spanish company that distributes electricity in Nicaragua) to invest in maintenance, repairs or expansion of the national grid.

As well as a lack of investment, a progressive process of privatization was imposed on the National Electricity Company (ENEL) between 1990 and 2006 with the sale of numerous generation plants to national and international investors.  Meanwhile some of the more important generation plants still under possession of ENEL, which was by now severely undermined, such as the Managua Plant (57.4 MW) and the Las Brisas  Plant (81 MW), were subjected to such extreme underfunding that they experienced frequent technical failures. 

In 2006, the power sector in Nicaragua suffered a serious crisis, with 4–12-hour blackouts that affected virtually the whole country. By the end of 2006 the country was suffering a permanent energy deficit of nearly 100 MW (at that time the average national electricity demand was 485 MW). The emergency situation improved in 2007 due to the installation of 60 MW of diesel generation capacity financed by Venezuela.

Government agencies

The CNE had a division dealing with rural electrification using renewable energy and energy efficiency programs.

The Ministry of Environment and Natural Resources (MARENA) is the institution in charge of the conservation, protection and sustainable use of the natural resources and the environment.

Energy regulation role

The Ministerio del Ambiente y los Recursos Naturales – MARENA, along with INE and MEM, play a specific role in the promotion of sustainable energies and environmental protection. Unfortunately, due to budget restraints, MARENA must seek for international assistance to develop its sustainable programs.

Ownership

Since the early 1990s, generation provided by the private sector. Foreign oil exploration and hydrocarbon resources opened to foreign development.

In 2006, there were 10 generation companies in the National Interconnected System, eight of which were in private hands, and generating 70% of the total capacity. 100% of the hydro-electric capacity is in the hands of the public company Hidrogesa. In Nicaragua, 100% of the transmission is handled by ENATREL, which is also in charge of the system’s dispatch.  Meanwhile, the company Dissur-Disnorte, owned by the Spanish Union Fenosa controls 95% of the distribution. Other companies with minor contributions are Bluefields, Wiwilí and ATDER-BL.

Degree of independence

The Board of the Nicaragua Energy Institute is formed by three members appointed by the National Assembly and proposed by the President, for a six-year period. They can be removed by the National Parliament for legitimacy reasons.

Energy debates

Instituto Nicaragüense de Energía. Informe de Gestión. January 2009. http://www.ine.gob.ni/noticias/Informe%20Gestion%20INE%202008.pdf

The SIEPAC project will integrate the electricity network of the country with the rest of the Central American countries, which is expected to improve reliability of supply and reduce costs.

Proponents of SIEPAC expect that interconnecting the nations' electrical transmission grids will alleviate periodic power shortages in the region, reduce operating costs, optimize shared use of hydro-electric power, create a competitive energy market in the region, and attract foreign investment in power generation and transmission systems. It has been claimed that the cost of energy for consumers could go down as much as 20% from US$0.11 per kWh to US$ 0.09 per kWh as a result of the project.

SIEPAC is expected to create a 1,125-mile 230 Volt transmission line, with a planned capacity of 300 MW between Guatemala and Panama, as well as improvements to existing systems. SIEPAC likely will involve upgrading links and building 230 kV links between Guatemala and Honduras, and Honduras and El Salvador.

Energy framework

The Geothermal Law (Ley No. 443 de Exploración y Explotación de Recursos Geotérmicos, reformed by Ley 472) was approved in October 2002. Law No. 443 regulates the exploration and exploitation of geothermal resources.  The Nicaraguan Energy Institute (Instituto Nicaragüense de Energía - INE) issues requests for bids once the areas are approved.

The EURO-SOLAR Programme, from the European Commission’s Europe Aid Cooperation Office, foster the use of renewable energy through the installation of 600 generating kits using 100% renewable energy sources in 42 rural villages. The equipment consists of photovoltaic panels and, in some cases, a back-up wind generator.

Reliance

In 2007, Nicaragua imported 63.95 million kWh from its neighbours Panama and Honduras.

Nicaragua has no oil production; in 2001, its consumption was of 24,500 bbl/day. There is one oil refinery with a capacity of 16,000 bbl/day. Most of Nicaragua’s oil imports come from Venezuela. Imported petroleum supplies about half of the country’s energy needs.

Insufficient efforts to promote investment in Nicaragua's enormous potential for RE meant that the country was doomed to suffer severe energy insecurity when in 2005 the international oil price began to rise. Between 1996 and 2006, only 142 additional MW were made available to the national grid. Over half of the "new" energy created during this ten year period is produced in conventional fossil fuel combustion generating plants exacerbating further the country's irrational dependence on oil for electrical generation. During 2006, Nicaragua paid out 65% of the value of its exports to import oil and other petroleum derivatives.

Role of the government

The National Energy Commission (CNE) was in charge of formulating the policy and planning of the energy sector, including rural electrification.

The Ministry of Energy and Mines (MEM), created in January 2007, replaced the CNE. The MEM is in charge of producing the development strategies for the national electricity sector. http://www.mem.gob.ni

Regulatory framework

The “Indicative Plan for the Generation in the Electricity Sector in Nicaragua, 2003-2014” does not set any target or legal obligation for the development of renewable resources in the country.  However, in April 2005, the government approved Law No. 532, the Law on Promotion of Electricity Generation with Renewable Resources.  This law and the Hydro-electric Promotion Law (amended 2005/531) provide incentives to invest in electricity generation, including duty free imports of capital goods and income and property tax exemptions.

Regulatory barriers

When the price of petroleum increased in 2002, the regulator failed to approve electricity tariff increases because they were expected to have been very unpopular. The financial burden of the higher generation costs was thus passed on to the privatized distribution company, which has, partly as a result, been suffering severe losses.

Current legislation on water resources overlaps with specific mini-hydro legislation for projects larger than 5 MW. In addition, project design is difficult given the scarcity of stream flow data.

Energy regulator

The Nicaragua Energy Institute is the independent regulatory body of power sector. It has been created in 1979. http://www.ine.gob.ni/

Renewable energy

Nicaragua has the potential to produce over ten times the current national demand from renewable sources. 

Despite this, the country currently depends on imported oil derivatives to generate roughly 75% of its electricity.

The Energy Ministry has been working towards the long term aim of transforming the infrastructural framework of energy generation in Nicaragua so that by 2014 eighty percent of the electricity produced in the country will come from renewable sources. As part of this plan private and mixed international and national companies have been given contracts to develop six different geothermal generating plants, five hydro-electric plants, three wind power plants and one biomass plant to generate a total of 597 MW by 2014.

Hydropower Nicaragua has a total installed hydroelectric capacity of 100 MW.. Hydroelectric gross potential is of 3,760 MW. Within the Electricity Support Program, Nicaragua will strengthen its power system by rehabilitating two major hydro-electric plants with the help of a US$40.2 million loan approved in December of 2008 by IDB. The funds will be used to rehabilitate the Santa Bárbara and Centro América Hydroelectric Plants, the country main renewable energy generators.

There are plans for the construction of new hydro-electric plants. In 2006, the Central American Bank for Economic Integration (BCIE) and the Government reached an agreement by which the BCIE will provide US$120 million in the next five years (2007-2012) in order to finance several hydro-electric projects: - Modernization of the Centroamérica and Santa Bárbara plants, which generate 50 MW each. - US$37 million for the design, construction and initial operation of the 17 MW Larreynaga hydro-electric plant, to be located 161 km North of Managua, in the Department of Jinotega. - US$42-45 million for the design, construction and initial operation of the 21 MW Sirena-Los Calpules hydro-electric plant. In March 2008, the Irani Government approved a US$ 230 million credit for the construction of a 70 MW hydropower plant on the Tuma River in the northern department of Jinotega.  Nicaragua plans to expand its hydro-electric resources at a small scale by constructing 30 small-scale hydro-electric power stations. Wind energy In February 2009, the country began operating 19 windmills that have the potential to generate 40 MW.

Geothermal energy Nicaragua is endowed with large geothermal potential thanks to the presence of volcanoes of the Marribios range along the Pacific Coast. However, the country is still very far from exploiting this natural resource extensively and efficiently. The larger of two operating geothermal plants is the Momotombo geothermal project, whose commercial exploitation started in 1983, when the first geothermal unit of 35 MW was put in operation. The second unit of 35 MW was installed in 1989. However, mismanagement of the exploitation led to declines in output levels down to 10 MW. In August 2008, the Canadian Polaris Energy through its local subsidiary Polaris Energy Nicaragua (PENSA) finished the Phase I of San Jacinto Tizate geothermal plant and injected 38.8 MW into the national grid. After completion of Phase II in 2010, the geothermal plant will have total installed capacity of 66 MW.

Biomass energy Potential for biomass use is high. Energy balances for 2006 and 2007 show a high level of bagasse utilization for electricity by independent generators. This expertise could be rapidly expanded to further increase grid-connected co-generation.