NOVEMBER 2011 Observatory of Renewable Energy in Latin America and The Caribbean NICARAGUA Final Report Component 1: Renewable Technological Base Line Component 2: State of Art C http://4.bp.blogspot.com/
NICARAGUA This document was prepared by the following consultants: CONSORCIO MULTICONSULT The opinions expressed in this document are those of the author and do not necessarily reflect the views of the sponsoring organizations: the Latin American Energy Organization (OLADE) and the United Nations Industrial Development Organization (UNIDO). Accurate reproduction of information contained in this documentation is authorized, provided the source is acknowledged.
CASE OF NICARAGUA FINAL REPORT Product 1: Base Line of Renewable Energy Product 2: State of the Art
Index 1. Executive Summary...9 2. Baseline of Renewable Energy in Nicaragua...12 2.1. Introduction...12 2.2. Methodology....14 2.3. Country's general energy information...14 2.3.1. Gross Domestic Product in Nicaragua...15 2.3.2. Organization of the Electrical Sector in Nicaragua...17 2.3.3. Energy Intensity in Nicaragua...18 2.3.3. Energy consumption per capita...20 2.3.5. National energy consumption...23 2.3.6. Gross Domestic Supply of Energy in Nicaragua...24 2.3.7. Energy consumption of electricity sector in Nicaragua...27 2.3.9. Final energy consumption...29 2.3.10. Final energy consumption by sector...30 2.3.11. Electricity Exports...32 2.3.12. Limits of current energy pattern and prospects of renewable energy...32 2.3.13. CO2 emissions in the production of electricity....43 2.4 Institutional and Legal Framework of the Renewable Energies in the Nicaraguan Electricity Sector...46 2.4.1 Institutional Framework...46 2.4.2 Legal framework of the renewable energies...48 2.4.3 Incentives for investments in renewable energy...54 2.4.4 Legal Framework for Promoting the Hydroelectric Sector...55 2.4.5 Legal Framework for the Exploration an Utilization of Geothermic Resources...57 2.4.6. Existing Environmental Barriers...58 2.4.7 Requirements for developing a project...59 2.4.8 Rate Analysis...60 2.4.9. Institutional Framework for the Clean Development Facility in Nicaragua...62 2.5 Information about Energy Generation Facilities by technology type...64 2.5.1. Thermoelectric...65 2.5.2. Geothermic...70 2
2.5.3 Wind Power...73 2.5.4 Hydroelectric Energy...74 2.5.5 Sugarcane Bagasse...75 2.6 Statements and interviews with relevant experts of the renewal energy sector....77 2.6.1 Interview with Luis Molina, Environment Management Unit (MEM)...77 2.6.2. Interview with Geovanni Carranza, Environmental Management Unit MEM...78 2.6.3. Interview with Renewable Association...79 2.6.4. Interview with Alejandro Quintanilla, Production Manager PENSA...81 2.7. Learned Lessons...83 3. State of the Art Renewable Energy in Nicaragua (Study cases)...84 3.1 Introduction...84 3.2 Information sources...84 3.3 Case selection criteria...84 3.4 Successful Case: Monte Rosa Cogeneration with Sugarcane Bagasse Project...85 3.4.1 Business description...85 3.4.2 Project Description...86 3.4.3 Project Benefits...91 3.4.4 Keys to success...91 3.4.5 Social and environmental aspects...92 3.4.6 Photos from the technical visit of the Consultant Team Error! Bookmark not defined. 3.4.7. Learned Lessons from the project...95 3.5 Successful Geothermal Project: San Jacinto Tizate...96 3.5.1 General description of the project...97 3.5.2 Legal Aspects...98 3.5.3 Technological Aspects...98 3.5.4 Economic Aspects...98 3.5.5 Social Aspects...99 3.5.6 Environmental Aspects...99 3.5.7 Barriers encountered...99 3.5.8 Ability to Replicate...99 3.5.9 Photographs from the project site visit of the Consultant TeamError! Bookmark not defined. 3.5.10 Learned Lessons...99 3.6 Successful Wind Project: Amayo Wind Project...100 3
3.6.1 General description of the project...100 3.6.2. Legal Aspects...101 3.6.3 Technological Aspects...101 3.6.4 Economic Aspects...101 3.6.5 Social Aspects...102 3.6.6 Environmental Aspects...102 3.6.7 Barriers encountered...102 3.6.8 Success factors for the replication of the project...103 3.6.9 Project Photos...103 3.6.10 Learned Lessons...104 4. Conclusions...105 5. Bibliography...107 6. Appendixes...109 6.1 Energy Imports and Exports 2010...109 6.2 Country Appendix...1 4
Abbreviations and Acronyms ALBANISA: Alba de Nicaragua S.A BCN: Nicaragua s Central Bank BEP: Barrel of Oil Equivalent CABEI: Central American Bank for Economic Integration CDM: Cleaner Development Mechanism CERs: Certificate of Emission Reductions CND: National Center of Dispatch CNE: National Energy Commission CPML-N: Cleaner Production Center Nicaragua DAI: Import Duty Tax DNA: Designated National Authority ECLAC: Economic Commission for Latin America and the Caribbean ENATREL: National Electricity Transmission Company ENEL: National Electricity Company IFC: International Finance Corporation ITF: Fiscal Stamp Tax GDP: Gross Domestic Product INAFOR: National Forestry Institute INE: Energy Nicaraguan Institute INGEI: National Inventory of Greenhouse Gases INIDE: National Institute of Development Information IR: Income Taxes IVA: Added Value Taxes KTEP: thousands of tons of oil equivalent MARENA: Ministry of Environment and Natural Resources MDL: Clean Development Facility MEM: Ministry of Energy and Mines MEN: Electrical Market in Nicaragua MER: Regional Market 5
MHCP: Ministry of Finance and Public Credit MIFIC: Ministry of Development, Industry and Commerce MW: megawatt of energy PENSA: Polaris Energy of Nicaragua S.A. PGEFR: Power Generation Projects from Renewable Sources PNESER: National Program for Sustainable Electrification and Renewable Energy PNUD: United Nations Development Program PSI: Pound per Square Inches OLADE: Latin American Energy Organization ONDL: Clean Development National Offices SIN: National Interconnected System UNEP: United Nations Environment Program UNFCCC: United Nations Climate Change and the Kyoto Protocol 6
Tables Index Table 1. Main Economic Indicators of Nicaragua 2005-2010...15 Table 2. Gross Domestic Product by Economic Activity...16 Table 3. Energy Intensity Indicators in Nicaragua...18 Table 4. Total Energy Consumption Per Capita in Nicaragua...20 Table 5. Electricity Consumption Per Capita in Nicaragua...22 Table 6. Supply and Demand of Energy in Nicaragua...24 Table 7. Gross domestic supply in Nicaragua (KBEP)...26 Table 8. Primary Energy Production in Nicaragua (KBEP) *...27 Table 9. Power Sector - Energy Consumption for 2009...27 Table 10. Electrical Power Installed Capacity in 2009 and 2010...28 Table 11. Installed Capacity in Central America, 2008...28 Table 12. Net Energy Generation for Type of Plant 2009 2010...29 Table 13. Final Energy Consumption by Source 2004...29 Table 14. Final Energy Consumption by Source 2006-2009...30 Table 15. Final Energy Consumption by Sector 2006-2009...32 Table 16. Nicaragua s Renewable Energy Potential...33 Table 17. Potential Hydroelectric Resources in Central America 2004...35 Table 18. Geothermal resource potential for Central America 2004...35 Table 19. Estimated Geothermal Potential in Nicaragua...36 Table 20. Hydrological network prioritized for hydropower production...38 Table 21. CO2 emissions in Nicaragua...43 Table 22. National Inventory of Greenhouse Gases, Nicaragua 2000...44 Table 23. Public Institutions of the Energy Sector...47 Table 24. Registered Projects of the National Office of Clean Development...64 Table 26. Tipitapa Power Company profile...65 Table 27. Empresa Energética de Corinto profile...66 Table 28. GEOSA profile...67 Table 29. ALBANISA profile...68 Table 30. CENSA profile...69 Table 31. PENSA profile...70 Table 32. Momotombo Power Company profile...72 Table 33. Amayo profile...73 Table 34. HIDROGESA profile...74 Table 35. Monte Rosa profile...75 Table 36. Ingenio San Antonio profile...76 Figures Index Figure 1. Coefficient of Latin America Energy Intensity...19 Figure 2. Coefficient of Central America Energy Intensity...19 Figure 3. Coefficient of Energy Consumption Per Capita in Latin America...21 7
Figure 4. Coefficient of Energy Consumption Per Capita in Central America...21 Figure 5. Coefficient of per capita electricity consumption in Latin America (KWH/inhabitant)...22 Figure 6. Coefficient of Per Capita Electricity Consumption in Central America...23 Figure 7. Gross domestic supply of primary energy 2009....25 Figure 8. Final Energy Consumption by Sector, 2005...31 Figure 9. Customers for electricity consumption...31 Figure 10. Net Energy Generation 2007:...34 Figure 11. Net Energy Generation 2010:...34 Figure 12. Estimated Electric Energy Matrix in 2017...34 Figure 13. Map of Nicaragua s Hydroelectric Potential...38 Figure 14. Map of Nicaragua s Wind Power Potential...39 Figure 15. Expansion of Electricity Generation in Nicaragua 2010-2017...41 Figure 16. Emissions of the Energy Sector in Nicaragua, 2000...45 Figure 17. Aerial view of Ingenio Monte Rosa...86 Figure 18. Energy cogeneration process...87 Figure 19 Cooling tower, electricity substation and cinder station...88 Figure 20. Clarified juice heaters being installed...88 Figure 21. Baler and bagasse bail stacks...89 Figure 22. Balers and protection dome for loose bagasse...90 Figure 23. Growth of electricity generation and commerce...90 Figure 24. Vibrating table and decanters from the cinder station...93 Figure 25. Green sugarcane harvest...94 Figure 26. Monte Rosa landfill view...94 Figure 27. Reforestation and cleaning images...95 Figure 28. Images of social projects...95 Figure 33. San Jacinto Tizate project location...97 Figure 38. Amayo Project location...101 Figure 41. Full view of wind turbine...103 Figure 43. Panoramic view of generators and good farm management...104 8
1. Executive Summary The objective of this report is to determine the present situation of renewable energy in Nicaragua, the opportunities and perspectives of the sector, the selection of successful projects that can be replicated at the national and regional level; and also the availability of financial mechanisms that contributes to the development of the sector. Thus, there would be a contribution to improve access from different actors and agents related to energy sector in each country, to the knowledge and successful experiences of renewable energies in the region; which will lead to an important increase of investments in energy projects based on renewable sources. In this technical report we present the Base Line of energy technologies based on best known renewable sources in Nicaragua, including the State of the Art of energy generation based on these sources. Nicaragua has the largest land surface in Central America (130.373.47 km2), and the smallest economy in the region. It also has the lowest population density: 47 inhabitants per square kilometer (INIDE, 2008), high energy intensity, low electrification index and high reliance on fossil fuels due to a low use of the high potential from its renewable energy sources. In 2010, Gross Domestic Product (GDP) was USD 6,374.60, which means that Nicaragua has the smallest economy in the region. However, the increase in the Gross National Product surpassed growth projections, achieving a rate of 4.5 % (BCN, 2011). This meant that Nicaraguan economy had the highest growth rate in Central America in the year 2010. The Gross National Product per capita of US$ 1,122.8 in 2008 had a growth rate of 10.4 % (BCN, 2009). The per capita energy consumption has decreased considerably since 2005, from a per capita consumption of 3.20 equivalent oil barrels until reaching 2.50 equivalent oil barrels per habitant in 2009, representing a decrease of 19 % (MEM, 2011c). The total energy consumption structure in Nicaragua between 2004 and 2009 indicates that the residential sector is still the sector with the highest energy consumption in the country, representing 48.4 % of the total consumption in 2009. The commercial sector in 2009 represented 10.5 % of the total consumption of energy, the industrial sector represented 12.3 %, the transportation sector represented 25.7 % of total energy consumption, and the remaining consumption (3.2%) belonged to the agricultural sector and others (MEM, 2011c). With respect to production of primary energy, the energy matrix for 2009 shows that firewood and oil are still the biggest energy sources in the country with 46.20 % and 38.40 % in 2006 and 45 % and 37% in 2009, respectively. Together, this fuels represented 82 % of total energy production in 2009 (MEM, 2011c). 9
Net energy generation with renewable sources reached 27.92% of total generation in 2009, with hydropower and geothermal energy representing 9.33% and 8.45%, respectively (INE, 2011). That year, generation from biomass represented 6.63% of total generation, while Wind Power reached 3.51% (INE, 2011). In 2010, generation from renewable sources was 37.5% from total generation. Hydropower and geothermal energy represented 8.08% and 15.03% from total, while biomass energy and wind power reached 6.76% and 4.83%, respectively (INE, 2011). The energy pattern of Nicaragua, which historically responds to a structural problem, made us a country with high dependence on imported oil (over 70% of thermoelectric generation with fuel oil and diesel in 2007). This situation has limited Nicaragua s economic development because of the growing trend in oil s international prices. Considering environmental and economical consequences of the energy pattern of 2007, it was determined that energy generation dependence on oil was not compatible with sustainable development objectives of Nicaragua. Since 2007, several measures have been implemented as part of a national strategy to face energy deficit in the country. For example, initial priorities were the creation of the Ministry of Energy and Mines, the installation of additional 343 MW in the National Interconnected System (mainly based on bunker and diesel, for the urgency of the situation), and the development of the first renewable energy projects. With the implementation of the Strategic Plan for Energy Sector of Nicaragua, the conditions are being created for the development of renewable energy through public and private projects that uses the available potential of renewable energies. One of the goals presented in the Electric Generation Expansion Plan, it is expected that in 2017 energy matrix depends in 94% from renewable sources (MEM, 2011b). About institutional and legal framework, Nicaragua has created conditions to develop a renewable energy market since 1998. In that sense, there were institutional reforms that have allowed capacity development of private investment in the electric power market in general and in renewable energy projects. The legal and institutional framework of the Nicaraguan electricity sector is given by Law 272 (Electrical Industry Law) and Law 271 (Creation of Energy Nicaraguan Institute INE). The Law 272 segments Nicaraguan Electric Industry in three activities: generation, transmission and distribution; restricting companies participation in only one activity. The generation segment has public and private actors. Private sector is represented by more than 10 companies. In the other hand, in the public sector there is the National Electricity Company (ENEL), which was restructured into four generation companies: HIDROGESA, GEOSA, GEMOSA and GECSA. The transmission system is still managed by the State of Nicaragua, through the National Electricity Transmission Company (ENATREL). The distribution system was privatized in 2000 and is owned and managed by the Spanish company Union Fenosa. 10
In 2007, Nicaragua approved a Law to create the Ministry of Energy, Law 612, Law of Amendments and Additions to Law No. 290, Law of Organization, Competence and Procedures for the Executive Power, to act as the governing entity of the energy sector in Nicaragua, having among its main activities: "formulate, propose, coordinate and implement the Strategic Plan and Public Policies in the energy sector and geological resources" and "promote policies and strategies for the use of alternative energy sources for electricity generation". Specifically, the legal framework for renewable energy is made by Law No. 532 (Law for the Promotion of Renewable Electricity Generation), adopted and published in Diario Oficial La Gaceta in 2005, and a series of previous laws for specific resources and its amendments, complementary laws, sectoral laws, rules and regulations. This legal framework has had other reforms to seek greater synergy between public and private sectors and facilitate the development of renewable energy. These amendments removed administrative barriers and facilitated international financing for renewable energy projects. New projects and expansions classified as power generation projects from renewable sources (PGEFR), according to this Law, will benefit from a series of tax incentives for the import of machinery, equipment and materials for pre-investment and construction works; and also from income taxes and municipal fees. Nicaragua has signed and ratified the United Nations Framework Convention on Climate Change since last decade, and Kyoto Protocol, so it has a Designated National Authority to promote Cleaner Development Mechanism (CDM) Projects, know as Clean Development Office (ONDL), which has already established project approval procedures for the carbon market. Among the initiatives submitted to the ONDL, three are presented as case of studies in this Report. One of them is San Jacinto Tizate Geothermal Project in the department of León. The project is executed by the company Polaris Energy Nicaragua. A pilot phase of 10 MW is already operating, and the construction of part of the infrastructure is already concluded, where two turbines will be installed with total capacity of 72 MW, of which 36 MW is expected to start operations in the end of 2011. Other successful case identified is Co-generation Project based on Sugarcane Bagasse at Ingenio Monte Rosa, in the department of Chinandega. This project consists in the implementation of an electricity generation system that uses as a fuel the remaining biomass from sugarcane processing. The third successful case is Amayo Wind Farm, located in the southwest of Cocibolca Lake, in the department of Rivas. The project included a First Stage of 19 wind turbines 11
with a generation capacity of 2.1 MW each, for a total electric power of 39.9 MW1. The second Phase has an installed capacity of 23 MW An analysis was made about social, economic and environmental impacts of these initiatives, as well as their barriers and learned lessons. It was concluded that these projects are feasible, replicable and that they support the sustainable development strategy of the country. These projects contribute to the reduction of oil bill and improve trade balance; generate employment and promote local economic development, while increase coverage of electricity service and decrease its costs. With the development of this report, we have identified funding sources for the development of renewable energy sector; and has also been verified that investments return conditions improve with the sale of carbon certificates (CERs). 2. Baseline of Renewable Energy in Nicaragua 2.1. Introduction The situation of Nicaragua's energy sector is characterized by low per capita energy consumption, low electrification rate, high energy intensity and a limited use of renewable energy potential. The power generation matrix in Nicaragua shows a high dependence on fossil fuels. For 2010, 65.30% electricity generation was based on fossil fuel generation. The remaining percentage was generated from renewable sources, with a participation of 15.03% by hydropower plants, 8.08% by geothermal source, 6.76% from biomass and 4.83% from wind power (INE, 2011). Despite the high potential of renewable energy identified, about 4,500 MW, less than 5% is used for energy generation. According to the Strategic Energy Plan, the greatest potential for renewable energy is hydroelectric sources with 2,000 MW, followed by geothermal sources with 1,500 MW (MEM, 2011a). Nicaragua is the country of Central American region with the lowest percentage of energy generation from renewable sources. In Central America in 2009, the regional capacity was composed by 45.9% of thermoelectric power plants, 41.8% of hydroelectric plants, 4.9% from geothermal plants, 6.7% of bagasse cogeneration units in sugarcane mills, and a 0.7% from wind power plants. This means that 54.1% of the installed capacity of electric power generation in Central America comes from renewable energy sources (CEPAL, 2009). Nicaraguan government, through the Ministry of Energy and Mines, has promoted a strategy to eliminate power generation deficit, promoting the expansion and diversification of the energy matrix to renewable sources. 1 Interview with Sean Porter, General Manager of Amayo wind farm. 12
There are already several initiatives to increase power generation through investments in wind, hydropower, geothermal and biomass projects. Also, the hydroelectric potential of Nicaragua is very important, and with adequate policies and incentives and a strengthened legal and institutional framework, there will be interested investors in renewable energy sector. It is important to mention that Nicaragua will be implementing a National Program for Sustainable Electrification and Renewable Energy (PNESER, for its acronym in Spanish), that will execute feasibility studios for renewable energy projects in the next four years as part of a comprehensive strategy designed to transform the electricity sector. Baseline for renewable energy in Nicaragua describes the current situation about renewable energy development in the context of the national energy market. Also, this work has identified the most recent and successful practices in the field of renewable energy in the country. This report describes the role played by the renewable energy sub-sector in the strategy to reduce dependence on fossil fuels in power generation. It presents the country's overall energy information, the institutional and legal framework of renewable energy in the Nicaraguan electricity sector, as well as the institutional framework of Clean Development Mechanism in Nicaragua and also the information of most relevant facilities. In addition, the main lessons are identified from the baseline, with special emphasis on identifying key factors and their application in the strategy proposed by the Nicaraguan government to reduce dependence on fossil fuels in electrical energy generation. The State of the Art Report examines the major developments in the field of renewable energy in the country, through an analysis of the latest and most successful practices in the field of renewable energy. The state of the art has been developed choosing the most successful renewable energy projects. Therefore, the report provides vital information for public institutions and private organizations that wish to develop projects under similar conditions, as they will be able to take advantage of the knowledge generated on the successful experiences and reduce the uncertainty associated with new investment projects. To develop a baseline about renewable energy in Nicaragua, a collection of information has been made to provide an overview of the national energy situation based on the content of the Technical Information of the country (Annex 1). This task has been developed in cooperation with the Ministry of Mines and Energy of Nicaragua. 13
2.2. Methodology. A comprehensive analysis of power generation situation in the country was made, emphasizing the contribution of renewable energy installations in meeting demand. For this purpose, Separate Sheets were made for each plant in operation in the country (over 1 MW of installed capacity). From the processed information, three projects have been identified and selected, as the most important cases for energy generation from renewable sources, with productive applications that can be replicated in other areas in Nicaragua and in Latin America and the Caribbean. The selection criteria were the characteristics of projects that demonstrate sustainability. This means that these projects demonstrate the following characteristics: local economic growth, employment generation, and production of clean energy (reduced carbon emissions). The sources of information used to prepare the baseline of Renewable Energy for Nicaragua, can be classified by their origin and type of information that they contain: a) Sources of energy information. b) Sources of social, economic and production information by sector. c) Legal and energy regulations d) Other sources of information Energy information was obtained from the Ministry of Energy and Mines (MEM), Nicaraguan Institute of Energy (INE), Central Bank's archives, publications about renewable energy sector, as well as statistics and web pages of these institutions and others. Social, economic and productive information comes from statistics and official publications of National Institute of Information Development (INIDE), published on its website. Information regarding the legal and institutional framework comes from the laws of the Republic published in the Official Gazette of the Government of Nicaragua. 2.3. Country's general energy information Nicaragua is the country with the largest area of Central America, with 130.338.47 km2, of which 120,339.54 km2 are on land, presenting a total population of 5,668,866; of whom 2,809,918 are men and 2,858,948 are women (INIDE, 2008). The urban population represents over 56%, which is concentrated in the capital, Managua, and in the main cities of the pacific and central north part of the country. It is also important to note that Nicaragua has the lowest population density in Central America, with 47 inhabitants per square kilometer. The population has grown between 2000 and 2008 at an annual rate of 1.3% (INIDE, 2008). 14
To face energy deficit that reached 20% of maximum demand in 2006 (about 100 MW), a high priority was given to electric sector as an important base for Nicaragua s development. Ministry of Energy and Mines created in 2007, promoted immediate measures: a. 343 MW were added to electric generation installed capacity, mainly from thermoelectric plants and 23 MW from renewable resources b. Conditions were created and important diligences for the development of Geothermal Project San Jacinto Tizate (72 MW) and Wind Project Amayo (63 MW), both private, to solve financial problems. The energy generation infrastructure, connected to the National Interconnected System (SIN, consisted of 29 plants in 2010, with an installed capacity of 1,060.1 MW (INE, 2011). For 2010, the 65.3% of the energy generated is thermal based on bunker and diesel, representing 2,169 MWh during the year (INE, 2011). In addition, Nicaragua has the highest energy intensity in Central America (OLADE, 2010). In 2005, 66.7% of population had access to electricity services. Regarding power consumption, the majority of customers (around 83.8%), consume less than 150 KWH per month (MEM, 2011a). 2.3.1. Gross Domestic Product in Nicaragua In 2010, the Gross Domestic Product (GDP) was USD 6,374.60, which positions Nicaragua as the country with the smallest economy in the region. Table 1. Main Economic Indicators of Nicaragua 2005-2010 Description 2005 2006 2007 2008 2009 a/ 2010 b/ GDP Growth (%) GDP Growth per inhabitant (%) 4.30 4.20 3.1 2.8-1.5 3 2.90 2.80 1.7 1.4-2.7 1.7 GDP at current prices (million 136,138. 81,524.4 91,897 103,289.0 121,026.3 125,068.6 Córdobas) 4 GDP Implícit Índex 257.80 279.00 304.20 346.90 363.80 384.20 (1994=100) GDP (million Current 4,872.0 5,230.3 5,598.8 6,247.5 6,148.0 6,374.6 Dollars) Source: (BCN, 2011) a / Preliminary figures b / Estimated 15
In 2010, it was expected that real GDP growth of Nicaragua were slightly over 3%, to return to the expansion track that was interrupted in 2009 when the GDP contracted 1.5% due to the global financial crisis. Economic recovery is supported by the strong export growth, which reached a 30% increase en 2010 (ECLAC, 2010). Among the most dynamic sectors in 2010, the manufacturing (8.9% increase in 2010 compared with 2.9% drop the previous year) was highlighted. The food and clothing sector showed the biggest increase, with average increases of 40.3% and 12.1% respectively. The livestock and trade achieved increases of 10.3% and 5.4% respectively, which contrast with the low increase of 8.4% of the financial sector because of the limited placement of credit products (ECLAC, 2010). Table 2. Gross Domestic Product by Economic Activity Source: (BCN, 2011) a / Preliminary figures b / Estimated c / Includes livestock, forestry and fishing Relative Position of Nicaragua in Central America. Nicaragua in 2007 was the country with the lowest gross domestic product growth in the region, with a growth rate of only 16
50% of the average for Central America. In 2009, there was a decline on its economy of 1.5%, relatively lower than other countries in the region except Panama (ECLAC, 2009). In 2010, the GDP growth exceeded forecasts of 2% growth, achieving a rate of 4.5% (BCN, 2011). This meant that the economy of Nicaragua had the highest growth rate in Central America. In the other hand, Nicaragua went from a GDP per capita of US$ 792.9 in 2001 to US$ 1,122.8 in 2008, with a growth rate that year of 10.4% (BCN, 2009). 2.3.2. Organization of the Electrical Sector in Nicaragua The electricity sector in Nicaragua is composed of a series of public and private stakeholders to ensure that all related activities are conducted in a coordinated and transparent manner and as efficiently as possible. The graph below shows the agents of the electricity sector: Ministry of Energy and Mines Regulators Nicaraguan Institute for Energy Regional Comission for Electrical Interconection Power Distribution National Center Operators Regional Comission for Electrical Interconection Producers Transmission Market agents Government institution that defines strategies and action plans for the development of the national electricity sector Body to regulate the energy sector, to promote competition in order to guarantee better costs and quality Regulator of the regional energy market, with legal status and capacity in the framework of international law Administrator for the Electrical Market in Nicaragua (MEN), for the Regional Market (MER) and the operation of the National Interconnected System SIN Body to administer the regional market, created by the Framework Treaty for the Central America Electrical market 17 Plants for Generation of Electricity State transmission company ENATREL Distribuitors Private Enterprise Disnorte - Dissur Large consumers Consumers with voltages > 13.8 Kva and concentrated power > 1,000 Kw Regional agents Source: Prepared based on data from (CNDC, 2010) 17
2.3.3. Energy Intensity in Nicaragua According to Energy Balances prepared with data for the period 2005 to 2009 (MEM, 2011c), Energy Intensity has improved, from requiring 3.70 barrels of oil equivalent per thousand dollars of GDP in 2005 until requiring 2.82 barrels per thousand dollars of GDP in 2009, representing an improvement of 23% in the period. This data is reflected in the following Table: Table 3. Energy Intensity Indicators in Nicaragua INDICATORS (2006-2009) YEAR 2005 2006 2007 2008 2009 Final Consumption (KTep) Final Consumption KBEP)2 GDP Million C$ 1994 GDP Million U$ 3 2,417.80 17,421.82 31,623.90 4,703.91 1,958.90 14,115.15 32,936.90 4,899.21 2,007.70 14,466.78 34,136.90 5,077.70 2,007.00 14,461.74 35,078.80 5,217.81 1,957.70 14,106.50 34,563.40 5,141.14 Source: Own calculations based on official data (MEM, 2011c). Energy Intensity (BEP/ Thou. U$) 3.70 2.88 2.85 2.77 2.82 Energy Intensity of Nicaragua in relation to Latin America. Nicaragua has relatively high energy intensity in Latin America, and is the largest in Central America. This places the country at a disadvantage in their trade. In cases like neighboring countries, Costa Rica with 1.14 BEP and Panama with 1.16 BEP, these countries have a significantly lower energy intensity than the 2.82 BEP required by Nicaragua to produce $ 1,000 GDP. In figures 1 and 2, Energy Intensity of Nicaragua is shown in relation with other countries of Latin America and the Caribbean: 2 Conversion rate TEP a BEP of 7.205649 was used according to Conversion Table (OLADE, 2004) Average exchange rate for 1994 was used: 1 dollar is equivalent to 6.7229 cordobas in 1994 according to BCN 3 18
Figure 1. Coefficient of Latin America Energy Intensity Latin-American Energy Intensity 2009 (BEP / $1,000 GDP) 10 8,69 9 8 7 6,14 6 4,54 5 4,01 4 2,97 3 2 0,94 1,06 1,14 1,15 1,16 1,16 1,16 1,16 1 1,3 1,32 1,38 1,64 1,65 2,02 2,21 2,4 3 3,2 3,23 2,5 1 0 Source: (OLADE, 2010) Figure 2. Coefficient of Central America Energy Intensity Central American Energy Intensity 2009 (BEP / $1,000 GDP 3,5 3 3 2,4 2,5 2 1,5 1,14 1,16 Costa Rica Panamá 1,38 1 0,5 0 El Salvador Honduras Nicaragua Source: (OLADE, 2010) It is important to notice that the data presented from OLADE stipulatesa value for Nicaragua s Energy Intensity of 3 BEP / $1,000 GDP. However the MEM, presents a value of $2.82 BEP / $1,000 GDP. This difference exists because OLADE s calculation method 19
has a monetary base in dollars with constant dollar values of 2,000; while calculations by the MEM are based on GPD constant values for 1994. 2.3.3. Energy consumption per capita According to Energy Balance of 2005-2009 (MEM, 2011c), the per capita consumption has decreased from 3.20 barrels of oil equivalent per capita, to 2.50 barrels of oil equivalent per capita in 2009, representing a decrease of 21.88% throughout the period. This data is reflected in the following Table: Table 4. Total Energy Consumption Per Capita in Nicaragua YEAR 2005 2006 2007 2008 2009 INDICATORS (2006-2009) Final Final Per Capita National Population Consumption Consumption Consumption (BEP/ (10³ Inhab.) (KTEP) (KBEP)14 Inhab.) 2,417.80 1,958.90 2,007.70 2,007.00 1,990.20 17,421.82 14,115.15 14,466.78 14,461.74 14,340.68 5,450.40 5,522.60 5,595.50 5,668.90 5,742.30 3.20 2.56 2.59 2.55 2.50 Source: (MEM, 2011c) Total energy consumption of Nicaragua in relation to Latin America. The energy consumption per capita for 2009 was 2.50 barrels of oil equivalent (MEM, 2011c) To determine the position in Latin America, Figure 3 and 4 shows that per capita consumption of Nicaragua is one the lowest in the Latin American and the lowest of all Central American countries (OLADE, 2010). This indicator leads to low living standards and comfort of the population, particularly if we consider the inequalities in the distribution of income and wealth. Below are Figures 3 and 4, containing the per-capita energy consumption of Latin America: 4 Conversion rate TEP a BEP of 7.205649 was used according to Conversion Table (OLADE, 2004) 20
Figure 3. Coefficient of Energy Consumption Per Capita in Latin America Latinoamerican Per Capita Energy Consumption 2009 (BOE / Inhabitants) 80 70 67,33 60 50 40 30 20 12,57 10 9,97 9,3 8,73 8,6 8,19 7,92 7,5 7,3 7,23 6,53 5,78 5,72 5,56 5,17 4,62 4,11 3,97 3,91 3,56 3,54 3,37 3,32 2,61 1,78 0 Source: Latin American Energy Organization, OLADE, 2010 Figure 4. Coefficient of Energy Consumption Per Capita in Central America Centroamerica Per Capita Energy Consumption 2009 (BOE / Inhabitants) 7 6,53 5,78 6 5 4,11 4 3,56 3,32 2,61 3 2 1 0 Panamá Costa Rica Guatemala El Salvador Honduras Nicaragua Source: Latin American Energy Organization OLADE, 2010 It is important to notice that OLADE source presents a value for Nicaragua s Per capita Energy Consumption in 2009 of 2.61 BEP / $1,000 GDP. New data from the MEM, presents a value of $2.52 BEP / $1,000 GDP. 21
2.3.4. Per capita consumption of electricity in Nicaragua According to the Energy Balance made from 2005 to 2009, the per capita electricity consumption has increased from 391.4 kilowatt-hours per capita in 2005 to 438.9 kilowatthours per capita in 2009, representing an increase of 12% during the analyzed period (MEM, 2011). Table 5. Electricity Consumption Per Capita in Nicaragua Source: (MEM, 2011c). Per-capita electricity consumption of Nicaragua in Latin America. To determine the position of Nicaragua in the region, Figure 5 and 6 show the per capita consumption in 2009 as one of the lowest in the Latin American, and the lowest of all Central American countries (OLADE, 2010). Figure 5. Coefficient of per capita electricity consumption in Latin America (KWH/inhabitant) Source: Own compilation from OLADE s data (OLADE, 2010) 22
Figure 6. Coefficient of Per Capita Electricity Consumption in Central America Source: Own compilation from OLADE s data (OLADE, 2010) It is important to highlight that the data used to analyze the country s situation in relation to other countries, corresponds from 2010. According to data from 2011 the Per Capita Electricity Consumption in Nicaragua for 2009 was 438.9 kilowatt-hours per habitant (MEM, 2011c). 2.3.5. National energy consumption Electricity Supply and Demand. As shown in Table 7, the evolution of total energy consumption in Nicaragua from 2006 to 2009 shows a moderate growth of 2.90% and 3.30% between 2006 and 2007, following a decreasing trend between 2007-2009, going from a positive annual growth rate of 3.30% in 2007 to a negative annual rate of -2.30% in 2009 as a result of the economic and environmental crisis that has affected the countries of the region, with Nicaragua suffering the worst drought in its history in 2009. This situation is also reflected in the fall of gross imports of energy, which in 2008 and 2009 had a negative growth rate of -55% and -95.20% respectively. It can also be observed that the most affected sector in this period is the hydropower sector with a fall of 44.90% in 2009, followed by geothermal energy and fossil fuels, with 7.8% and 7.30 % respectively. With respect to the demand, the sectors with greatest increases on its consumptions were irrigation sector and the residential sector. At the same time, the commercial sector demand decreased from an annual rate of 5.50% in 2006 to 2.50% in 2009. This is explained by the growth of agricultural exports in recent years and the reduction of commercial activity. 23
Table 6. Supply and Demand of Energy in Nicaragua Source: ECLAC, 2010. a / Preliminary figures b / The distribution company was privatized in 2000, after which the block of government consumption is distributed in the other blocks according to the rate c / Refers to transmission and distribution losses. d / Percentage e / Thousands of Barrels 2.3.6. Gross Domestic Supply of Energy in Nicaragua The Gross domestic supply of energy in 2009 went up to 19,917 thousand barrels of oil equivalent (KBEP), of which 79% are primary energy and the remaining 21.3 % is secondary energy. From primary energy supply, 82% is firewood and oil, with 45% and 37% respectively (MEM, 2011c). 24
Figure 7. Gross domestic supply of primary energy 2009. Source: Compiled from statistics of (MEM, 2011c) According to the energy balance for 2006 to 2009 (MEM, 2011), the domestic supply in 2009 reached 19.9 million barrels of oil equivalent. As shown in Table 8, the primary gross domestic supply of energy in Nicaragua was 15,103.04 KBEP in 2006 and 15,667.95 KBEP in 2009. Firewood and oil energy have the largest presence in the country with 46.20% and 38.40% in 2006; and 45% and 37% in 2009, respectively. The proportionate share of firewood in the country's energy matrix has decreased from 55.7% in 2004 (CNE, 2004), to 46.2% in 2006, and 45% in 2009 (MEM, 2011c). One of the factors affecting this extraordinary change is the implementation of new calculation methods for firewood demand since 2007. Gross domestic supply of oil has risen from 32.8% in 2004, to 38.40% in 2006 and decreased to 37 % in 2009, confirming the strong dependence on fossil fuels (MEM, 2011c). In the case of geothermal energy, it represented 1.6% in 2004, changed to 3.4% in 2006 and to 3.3% in 2009. In the case of hydropower, represented 1.3% in 2004, changed to 1.5% in 2006 and reached 1.40 % in 2009. Wind energy started commercial operation until 2009, and is represented for the first time in the national energy matrix in 2009 with 0.40% of total energy (MEM 2011). 25
Table 7. Gross domestic supply in Nicaragua (KBEP) 5 Source: Own calculation based on official data (MEM, 2011c) TRV + OB: Total Vegetal Residues and Other Biomass As shown in Table 9, about primary energy production excluding oil, the basis of this production through the period 2006 to 2009 was biomass, including firewood and crop residues, with 10,245.71 kbep, representing 85.40% in 2006, with a slight decrease in 2009 to 9,061.10 KBEP, representing 89.90% of primary production excluding oil. Primary energy production with hydropower and geothermal energy in 2006 represented 14.60% of total production. In 2009 they fell to 9.60%. 5 Conversion rate TEP to BEP of 7.205647 according to Conversion Chart of OLADE (OLADE, 2010) 26
Table 8. Primary Energy Production in Nicaragua (KBEP) * Source: Own calculations based on official data6 (MEM, 2011c) * Does not include oil 2.3.7. Energy consumption of electricity sector in Nicaragua According to Table 10, energy consumption in the electricity sector was 542.2 KTEP in 2009. Bunker based power plants consumed 67% of the energy and the remaining 33% was consumed by diesel based power plants. Table 9. Power Sector - Energy Consumption for 2009 Energy consumption KTEP 16.8 525.6 542.4 Source: (MEM, 2011c) Type of Power Plant (with fuel) Diesel Bunker (fuel oil) Total Energy consumption KBEP 121.1 3,787.3 3,908.4 2.3.8. Installed power generation capacity As shown in Table 11, Nicaragua in 2010 had an installed electricity generation capacity of 924.9 MW, of which 68.12% corresponds to conventional thermal generation based on fossil fuels, highlighting bunker based generation (396.7 MW) and steam turbine generation (140 MW). Electric generation from renewable sources represented 31.88% of total capacity, with a great participation of Cogeneration (127 MW) and Hydropower (100 MW). 6 Conversion rate TEP to BEP of 7.205647 according to Conversion Chart of OLADE (OLADE, 2010) 27
Table 10. Electrical Power Installed Capacity in 2009 and 2010 Source: (INE, 2011) As shown in Table 12, Nicaragua had the lowest installed power capacity in Central America in 2008 (including oil-based and renewable sources), reaching a capacity of 879.7 MW, which represents 8.7% of the total in the region (ECLAC, 2009). The installed capacity of Nicaragua in 2008 represented only 36% of installed capacity in Costa Rica, which has the largest installed capacity with 2.446 MW; 39% of Guatemala that has 2,227.10 MW; and 61% of installed capacity in Honduras, of 1579.70 MW (ECLAC 2009). Table 11. Installed Capacity in Central America, 2008 Source: (ECLAC, 2009) For 2009, of 17 existing power plants, seven were state-owned and ten belonged to the private sector. These plants together had an installed capacity of 879.7 MW. The public sector, with the seven companies, represented 40% of the total installed capacity and the private sector 60% of this capacity. However, the public sector represented only 28% of Net Energy Generation, and the private sector the remaining 72% (CABEI, 2009a). 28
Of the total electricity produced, 28% is lost in the network, of which 2% corresponds to transmission and 26% to distribution. This 26% is broken down into technical losses (8%) and non-technical losses (18%) (CABEI, 2009a) Official data of electric sector of Nicaragua are described below. According to Table 13, net energy generation of National Interconnected System was 3,109.26 GWh and 3,320.92 GWh for 2009 and 2010, respectively. It is important to notice that dependence on thermoelectric plants for energy generation has changed from 72.08% in 2009 to 65.30% in 2010. Table 12. Net Energy Generation for Type of Plant 2009 2010 Source: (INE, 2011) 2.3.9. Final energy consumption As shown in Table 15, the final energy consumption for 2004 was 17,258.29 thousand BOE, of which 57.9% were firewood, 1.5% crop residues, 0.6% charcoal, 32.9 % petroleum products and finally electricity 7.1% (CNE, 2004). In the other hand, petroleum products consumption reached 5710.9 thousand BP, of which 7.9% corresponds to LPG, 24.4% to gasoline, 3.8% to kerosene, 48.9% to diesel oil, 5.4% to fuel oil, 5.1% to coke and the remaining 4.4% to non-energy (CNE, 2004). Table 13. Final Energy Consumption by Source 2004 Source: CNE, 2004 29
In the period 2006 to 2009, as shown in Table 16, the behavior of energy consumption by source maintained its dependence on fuel and petroleum products with 87.4% of total energy consumption. In this period, electricity increased 1.1%, from 9.8% in 2006 to 10.9% in 2009 (MEM, 2011c) The energy consumption from Vegetal Residues, Other Biomass and Vegetal Carbon has maintained its values, going from 1.8% in 2006 to 1.7% in 2009. In the whole period, there is a lack of interest in the use of waste. Firewood consumption has maintained constant, coming from 6,742.28 KBEP in 2006 to 6,826.16 KBEP in 2009, representing those years 47.8% and 47.6% respectively. Table 14. Final Energy Consumption by Source 2006-2009 Source: Own calculations based on official data of MEM (MEM, 2011c) 2.3.10. Final energy consumption by sector By 2005, 61% of final energy consumption was absorbed by the population (residential sector) to meet basic needs for cooking, lighting, refrigeration and others. The remaining 39% was divided equally between productive sector and transport of passengers and freight (MEM, 2007) In the other hand, the energy consumption of production sector for 2005 was very low: the industrial and the agricultural sectors together consumed only 11% of total consumption. Figure 8 breaks down the participation of the sectors in final energy consumption: 30
Figure 8. Final Energy Consumption by Sector, 2005 Source: MEM, 2007 For 2005, 83% of customers with consumption below 150 kwh per month represented about 46% of electricity, while 4% of customers with consumption above 300 kwh per month accounted for 27.8 % of total electricity consumption. Figure 9 details clients according to the level of consumption: Figure 9. Customers for electricity consumption Source: MEM, 2007 In the period 2006-2009, as shown in Table 17, the main energy consuming sector is the residential sector, which rose from 47.6% in 2006 to 48.4% in 2009. 31
The second consumer is the transportation sector, which accounted for 25.7% of total consumption in 2009. It is important to highlight the low weight of industrial and agricultural sectors, which together represented only 14.2% of national energy consumption in (MEM, 2011c). In relation to 2005, there was a pronounced change in residential sector, which went from 61% to 49% in 2009. Transportation sector increased its participation on energy consumption from 19.4% in 2005 to 25.7% in 2009. The Agricultural Sector, Industry, together with Commerce and Services, have maintained similar share (2009 in relation to 2004) with respect to Total Energy Consumption, with positive changes of 1.2%, 2.9% and 1.4%, respectively. Table 15. Final Energy Consumption by Sector 2006-2009 Source: Own calculations based on offical data of MEM (MEM, 2011c) 2.3.11. Electricity Exports According to data presented by the National Load Dispatch, energy exports abroad Nicaragua reached 43,293 MWh, of which 11,040 MWh were sent towards the southern border and 32,253 MWh were sent towards the northern border (CNDC, 2010). 2.3.12. Limits of current energy pattern and prospects of renewable energy. The energy pattern of Nicaragua, which historically responds to a structural problem, made us a country with high dependence on imported oil (over 70% of thermoelectric generation with fuel oil and diesel in 2007). This situation has limited Nicaragua s economic development because of the growing trend in oil s international prices. The general energy crisis that has affected Central America in recent years has important consequences in the case of Nicaragua, for its high dependence in 74% of electricity generation from fossil fuels (ECLAC, 2008), but that has improved in 2010 with a 65.3% dependence on thermoelectric energy generation (INE, 2011). 32
In addition, the total energy production in Nicaragua depended in 2009 over 82% in firewood and imported oil consumption (MEM, 2011c). This situation causes serious environmental and economic consequences, and being Nicaragua a country with a small and open economy, and not an oil producer, it is imperative to change the energy matrix. Nicaragua's total exports in 2008 reached 1,488.7 million, 21.5 % more than the 1,224.8 million during 2007, but imports increased from 3,593.3 million in 2007 to 4,286.7 million in 2008, an increase of 19.3 percent. The main reason for this deficit in the trade balance is Nicaragua's dependence on oil consumption. The oil bill in 2008 was 953.7 million dollars, 17.9 % higher than 2007. The 953.7 million dollars from the oil bill accounted for 64.06 % of total exports in 2008 (BCN, 2009). From the environmental point of view, the general energy pattern of 2007, based on the combustion of fuel oil and firewood, has had serious environmental consequences that are not compatible with the sustainable development objectives declared of Nicaragua. This energy pattern, considered financially unsustainable, is highly polluting and contributes with CO2 emissions to atmosphere. Nicaragua has a high potential of renewable energy, which should be used extensively to promote sustainable economic growth. There is consensus among national stakeholders that the potential energy generation from renewable sources may eliminate the excessive dependence on oil. According to the estimated potential of renewable energy, and specifically to the Electricity Generation Expansion Plan, it is expected that in 2007 electric energy matrix depends in 94% of renewable, with hydropower and geothermal energy representing 77% of the total generation (MEM, 2011b). According to Table 18, Nicaragua has more than 4,500 MW of potential capacity to generate renewable energy, of which 2,500 MW correspond to hydroelectric power, 1,500 MW to geothermal energy, 800 MW to wind power and 200 MW to Biomass. Table 16. Nicaragua s Renewable Energy Potential Source: (MEM, 2011a) 33