LAC Policy Descriptions

By Leroy Evans,2014-05-06 17:53
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LAC Policy Descriptions

LAC Policy Descriptions: Nicaragua

    General Background

    State-owned electric utility Empresa Nicaragüense de Electricidad - ENEL (Nicaraguan Electric Utility)

    installed capacity is about 633.2 MW. Much of ENEL’s capacity was built in the late 1970s.

Section 1: Energy provision

    ; Main fuel sources for direct use and power generation

    Nicaragua uses petroleum sources for almost half of its energy needs. Over 80% of electricity is

    generated from fossil fuels, 7.7% from hydro sources and 8.4% from other sources such as


    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.

; Degree of reliance on imported energy

    In 2003 Nicaragua produced 1.6 million barrels of oil equivalent (Boe) electricity, imported 7,000 1Boe, and exported 13,000 Boe. Nicaragua trades its energy production with its neighbors, Panama

    and Honduras, depending on the consumption demand of the local market.

    ; Extent of connection to electricity network (households and businesses; rural and urban)

    In 2003 the estimated population of Nicaragua was 5,482,340 people, of which 3,191,670 (58.21%)

    lived in urban areas and 2,290,670 (41.78%) lived in rural areas. The 2003 data shows that 73% of the

    population living in urban areas had access to electricity, whereas only 30% of the population living

    in rural areas had access to electricity.

; Any capacity concerns (power generation and/or transmission/distribution)

    During the first two quarters of 2003, overall supply increased by 6.4%, while consumption increased

    by 14.4%. In 2004 and 2005 there was an increase of 4.46% in electricity generation and energy sales

    went up 5.69%. Power outages were frequent during the 1980s and 1990s because of political

    instability and natural disasters. Today, power shortages are due only to supply capacity, which is

    declining because of the drop in hydroelectric and geothermal generation output.

    The The Comisión Nacional de Energía (CNE) also announced plans to use industry investments to

    develop 140 MW of renewable power by 2007. Several renewable projects are in place including a

    US$100 million 66 MW geothermal plant; a US$40 million 30 to 50 MW hydroelectric plant, and

    two 20 MW wind projects of US$22 million each. Several countries have shown interest in

    Nicaragua’s renewable sector but are waiting for the country’s government to “detail specific 2regulations that would characterize the projects as non-despatchable.”

     1 Organización Latinoamericana de Energía (OLADE), Informe Energético de América Latina y el Caribe (2003), at 2 Renewable Energy Today, July 1, 2004.

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    Biomass energy generation installed capacity is of about 30 MW. Small biomass power plant projects have been encouraged, some of which include a 1.432 MW (net) rice husk fired plant, a 1.136 MW (net) peanut shell fired and a 5.0 MW sawmill waste and forestry residue fired plant. These World Bank sponsored small-scale biomass power plant projects are under development and feasibility studies have been carried out to assess commercial viability and environmental impacts and benefits.

Nicaragua has the largest geothermal potential in Central America. Its large potential comes from the 3Marrabios range of volcanoes which run parallel to the pacific coast. The current installed capacity is

    77 MW, all of which come from the Momotombo Geothermal Field. New sources of geothermal energy are being explored.

    The Geothermal Law (Ley No. 443 de exploración y explotación de recursos geotérmicos, reformed by Ley 472) was approved in October 2002 and designates the Comisión Nacional de Energía (CNE) as the organization in charge of providing advise to the president on potential areas for geothermal exploration and development. The Instituto Nicaragüense de Energia (INE) issues requests for bids once the areas are approved. INE’s objective is to attract investment for the development of

    geothermal energy.

    ; Potential for renewable energy, energy efficiency and co-generation (i.e. any authoritative assessments)

    Nicaragua has a total installed capacity of 100 MW from hydroelectricity. Hydroelectric gross potential is of 3760 MW. The river basins of the River Grande de Matagalpa, Coco River and the San Juan River are the primary sources of water for the hydropower generation. Nicaragua plans to expand its hydroelectric resources at a small scale by constructing 30 mini hydroelectric power stations.

    At the end of 2003, US$14.6 million agreement was signed by the government for the development of small-scale hydroelectric projects. The Comisión Nacional de Energía (CNE), in collaboration with the United Nations Development Programme, is responsible for carrying out this program. In addition to connecting the areas not connected to the national grid, the program is aimed at reducing fossil fuels greenhouse emissions.

    Section 2: Energy market

    ; Ownership (state/municipality/private/mixture) of electricity and gas utilities and other sources of energy

    Electricity Market:

    Since the early 1990s, most of electrical generation is provided by the private sector. The state-owned Empresa Nicaragüense de Electricidad ENEL is also being privatized. Its contribution to supply has dropped steadily from 50% in 2002 to 24% in 2003, while private suppliers’ contribution increased from 27% to 39% during the same period. In January 2002 privatization of the generation assets of state-owned utility ENEL resulted in the sale of only one of the three plants: the 115-MW thermal generator Generadora de Occidente S.A. to El Paso Energy’s Coastal Power Unit. In November 2002, Spain’s Union Fenosa sold 19% of Distribuidora Norte and Distribuidora Sur to two of the country’s 4largest business conglomerates for an undisclosed price.

     3 International Geothermal Development, August 2003; World Energy Council, 2001. 4 Platts Internacional Private Power, A country-by-country update of markets outside the U.S. and Canada (2002), at

    p. 411

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    Liquid Fuels Market:

    In July 2002, the president announced a legislation opening the country to foreign oil exploration.

    Onshore concessions, as well as offshore blocks in the Atlantic and Pacific Oceans were included in

    the announcement, which marks the first time Nicaraguan hydrocarbon resources are opened to

    foreign development since 1979.

    Territorial disputes with Colombia have resulted from Nicaragua’s offshore drilling 120 miles east of

    Nicaragua. Several U.S. oil firms, such as MKJ Explorations Inc., were granted permission from the

    Nicaraguan government to drill near the areas in dispute. The Colombian government claims that the

    chain of islands east of Nicaragua belongs to Colombia by virtue of a 1928 treaty. Nicaragua claims

    that the oil fields are located west of the 82nd meridian, and therefore the waters are under

    Nicaraguan control under the same 1928 treaty.

; Extent of competition in power generation and energy retail

    ; Structure extent of vertical integration of generation/transmission/distribution/retail

    The transmission system remains under government control, but private generators can invest and

    own in system extensions.

    Section 3: Energy policy framework

    ; Existence of an explicit energy policy framework (e.g. a recent White Paper) and key policies

    (e.g. privatization, liberalization, rural electrification plan etc) or not what role is envisaged

    for sustainable energy?

    The National Assembly in March 1998 passed a law to reorganize the energy sector giving the

    Insituto Nicaragüense de Energía INE the role of regulator. The law also made possible the

    privatization of the country’s generation and distribution system, and implementation of regulations

    that, as of December 2002, had not been finalized. Under the law, private generators are free to sell 5electricity to distributors, large-end users, or directly to the national grid.

    The Comisión Nacional de Energía CNE (National Energy Commission) will develop an expansion

    plan for generation to guide investment. Generation projects based on natural resources must first 6obtain a license, which will have a term of up to 30 years.

; Any current energy policy debates/developing legislation e.g. on security of supply; energy

    market reform; incentives for renewable energy etc.

; Any specific policies or programs to promote sustainable energy

    The Government is working with the European Union and the UN Economic Commission for Latin

    America and the Caribbean to conduct a geothermal rural electrification and direct application pilot

    project in the areas of the Cosigüina Volcano and Ometepe Island.

     5 Id. 6 Id.

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    On July 5, 2004, the Banco Centroamericano de Integracion Económica (BCIE) announced it would

    finance a geothermal project for the generation of electric energy. The BCIE along with the Standard

    Bank London (SBL) will provide US$1 million for the project.

; Any major energy network or sustainable energy studies available

; Role of government in energy policy which departments are involved?

    The government regulates the energy sector and formulates its policy and planning. Involved

    departments are the Insituto Nicaragüense de Energía INE and the Comisión Nacional de Energía


    ; Any government (or government funded) agencies with a specific role in sustainable energy

    and/or environmental protection (with an energy role)

    The Ministerio del Ambiente y los Recursos Naturales MARENA, along with INE and CNE, 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


; Any energy planning procedure in place

Section 4: Energy regulation

; Is there an energy or utility regulator? When was it established?

    The Instituto Nicaragüense de Energia - INE is the regulator of the power sector. More information

    available at

    ; Degree of independence of the regulator from government (legal structure, who appoints the

    regulator and board)

    INE was created in 1985 and separated from Empresa Nicaragüense de Electricidad - ENEL in 1992

    and given sole responsibility for policy, planning and regulation.

    ; Regulatory framework legislation, duties, powers (any references to environment, sustainable

    energy )

    INE is responsible for enforcing energy sector regulations, including the hydrocarbon or petroleum

    sector, environmental regulation, and for issuing generation and distribution licenses.

    ; Regulator’s roles – key tasks (e.g. price controls, promoting competition etc) , actions to date,

    any action/role in the sustainable energy field)

    ; Role of government departments in energy regulation (both where a regulator exists and where

    there is no regulator)

    ; Have any regulatory barriers to sustainable energy been identified and if so what are they?

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