(posted June 19, 8:25 a.m.)- Nicaragua is one of the most attractive countries in Latin America and the Caribbean to invest in renewable energy, according to a report released yesterday at the Río+20 UN Conference on Sustainable Development in Brazil.
According to “Climatescope 2012,” a new report by the Multilateral Investment Fund and Bloomberg New Energy Finance, Nicaragua ranks No. 2 among 26 countries in the hemisphere, second only to Brazil.
The report, which uses 30 indicators to measure each country’s ability to attract investment for renewable energy and build a greener economy, found that Nicaragua performed well in areas of clean energy policies, power sector structure, total clean energy investments, and availability of green microfinance.
“From 2006 to 2010, Nicaragua attracted approximately $1.1 billion in clean energy investment for its geothermal (50%), wind (34%), small hydro (10%) and biofuels (6%) sectors,” Climatescope found. “Last year alone, about $117 million and $95 million went into financing new geothermal and wind projects, respectively.”
The report says that biomass is currently “Nicaragua’s flagship clean energy sector.” However, it notes that geothermal energy is now attracting the most interest from investors seeking to “explore Nicaragua’s promising but relatively untapped sub-surface power generation potential.”
“It is the favorable geothermal potential which positions the country well to develop more clean energy capacity in coming years,” the report reads. “Since 2009, this promising sector has been taking the lion’s share of total clean energy investment, reaching a cumulative total of $563 million in 2011.”
Climatescope found that Nicaragua’s power sector reforms have also been “somewhat successful” in opening opportunities for the private sector in generation and distribution. The report notes that the country’s energy market regulatory framework aims to displace some 700 megawatts of oil and diesel power capacity in the coming years.
The report noted that the government and development finance institutions—the Central American Bank for Economic Integration (CABEI), the Inter-American Development Bank (IDB), and the Multilateral Investment Fund (MIF)—have “played a key role in funding clean energy development in Nicaragua.”
The same is true on the micro-finance level, where investments are based more on social considerations.
“Nicaragua is the most robust green microfinance market of the Latin America and Caribbean region, with 10 organizations offering some kind of green financial product,” the report reads. “The majority of borrowers are either low income rural citizens or rural micro, small and medium enterprises.”
Despite the challenges ahead—70% of Nicaragua’s total 1,073 megawatts of installed power capacity is still derived dirty and expensive fossil fuels—the Climatescope report says the country is heading in the right direction, ratifying the Sandinista government’s claim to a renewable energy revolution in Nicaragua.