Is Nicaragua’s renewable energy revolution maxing out?

First in a two-part series on the future of Nicaragua’s energy sector

The rapid growth of Nicaragua’s renewable energy sector took another spin forward last week when British-funded company Globeleq inaugurated a 44-megawatt wind project in Rivas.

The inauguration of the Eolo wind farm, whose 22 turbines will produce 7% of the country’s annual energy demand, makes wind energy the fastest growing source of renewable power in Nicaragua. With plans to install an additional 40 megawatts of wind power from the ALBA Wind farm in 2014, Nicaragua’s total wind-power production will reach 180 megawatts—almost one-third of the country’s total energy demand during peak hours.

By next year there will be nearly 100 wind turbines spinning alongside the Inter-American Highway in Rivas, transforming the so-called “city of mangos” into the “city of windmills” in less than five years.

“Our team is very proud to be a part of Nicaragua’s transition to a more renewable technology energy matrix,” said Jay Gallegos, Managing Director of Gamesa Eolica S.L., one of the firms involved in the new Eolo wind farm.

Nicaragua’s combined renewable energy sources—geothermal, wind and biomass—are now producing around 320 megawatts of clean energy during the windiest months of the dry season. During the rainy season, hydroelectric plants substitute the wind farms by providing an additional 100 megawatts of power. Nicaragua is now covering almost half its energy demand through renewable sources—up from 20% just a few years ago. If the massive Tumarín hydroelectric project gets completed on schedule, Nicaragua appears to be on track to meet its goal of producing 94% renewable energy by 2016.

Despite the country’s dramatic switch to renewable energy technologies, some industry sources say Nicaragua’s “green energy revolution” might be maxing out.

Over the past five years, the country’s increase in renewable energy has happened much faster than the country’s demand for power, which increases at a clip of around 4-5% per annum. Due to distribution regulations that prohibit energy companies from signing long-term power purchase agreements (PPA) with buyers outside the country, Nicaragua’s renewable energy market might be reaching its saturation point.

Sean Porter (courtesy photo)

“To a degree, Nicaragua has maxed out its potential,” says wind-farm expert Sean Porter, of Globeleq Mesoamerica Energy.

Porter says Nicaragua has made such big strides in increasing its installed capacity for renewable energy that the country is fast approaching the point where it will no longer be able to use all the power it’s producing. The problem, he says, is that transmission regulations prohibit energy companies from negotiating PPAs with anyone other than distributing monopoly Disnorte-Dissur, which is prohibited from profiting from the international resale of excess energy to other Central American countries. Without a profit motive, Disnorte-Dissur, which is operated at a $50 million annual loss, has no reason to sign power purchasing agreements for more renewable energy than it can place locally.

Though existing private energy companies can sell excess power into the regional spot market, the inability to negotiate long-term purchasing agreements with an international buyer means prospective renewable energy companies can’t get the financial backing they need to invest in new projects in Nicaragua.

If the market for Nicaraguan renewable energies doesn’t expand soon, Porter says, the future growth of one of the country’s leading investment sectors will be severely hampered in the years to come.

Gov’t eyes reforms for future growth

The government says it is aware of the challenges and is studying ways to improve Nicaragua’s legal framework to adapt to industry changes and new regional demands for power.

Javier Chamorro, executive director of investment-promotion agency ProNicaragua, says “some cooling off was expected, because the current rate of growth couldn’t go on forever.” But he says the government is looking at ways to keep the pot boiling before the market cools too much.

Rivas will have nearly 100 windmills installed by next year (photo/ Globeleq)

“The government knows we need to improve policy to create a bigger market for investment in renewable energies,” Chamorro told The Nicaragua Dispatch. “And we are looking at opportunities to do that.”

Nicaragua’s current legal framework for renewable energies is a decade old and is “quite frankly outdated,” Chamorro says.

“We now have new knowledge and information about this market and we understand that improvements have to be made to the legal framework for the sector to continue growing,” Chamorro says.

He said he thinks the government should look at the possibility of creating a wholesale energy market that would allow power companies to negotiate power-purchasing agreements directly with private buyers in Nicaragua. The government also needs to look at ways to loosen international restrictions to allow Nicaragua to develop into a regional exporter of power as part of the Central American Electrical Interconnection System (SIEPAC), Chamorro suggests. Finally, Chamorro says, the government is studying ways to reduce energy costs and increase demand in Nicaragua.

Chamorro says it’s not too late for Nicaragua to implement the reforms it needs to maintain its competitive edge and encourage continued growth in the renewable energy market.

“We are not concerned that the market is getting maxed out,” Chamorro says. “The investment flow will still be significant with the current framework, but we are aware that we need to improve policy to have more investment.”

Next: part II: Nicaragua’s baseload power problem—could a switch to coal power be the answer to Nicaragua’s soaring energy costs?

 

  • gk

    It would truly be a shame is Nicaragua’s push for extended construction of renewable energy sources i.e. wind, goes by the wayside. It’s about time m ore of the “more developed” countries get on board with that. Right US energy dept? I remember being there in 2008 on Ometepe, and the next time I returned in 2010, those wind turbines were up along the Rivas countryside. Good job.

  • car

    ok, so maybe it’s me, but does anyone else see a GAPING hole in this story? if the massive hydro project is completed on time, 94% of nica’s total consumption will be provided by renewable sources. yet the gist of this article is nica’s laws prohibiting the sale of power to external buyers.

    this seems pretty retarded. why not simply use the renewable power in-country and stop producing power from non-renewable (i.e., fossil fuels) sources????

    and although part II is not out yet, if the article is accurate and more than 50% of nica’s power is coming from renewable and cheaper sources, why have costs continued to “soar?” my cost for electricity in managua went up from .27 to .35 (US cents) per kilowatt hour this month alone!

    oh wait! i forgot! albanisa is still selling the fuel to produce the power…

    • Tim Rogers

      The issue of power from non-renewable sources, ie baseload power and the problem of soaring costs, will be addressed in part II, as indicated at the end of the article

      • car

        thanks Tim

  • Alixe

    The last thing Nicaragua needs is power produced by coal. We have TONS of sun, TONS of wind and TONS of water! There is no excuse for using fossil fuels for power generation in a country as rich in natural resources as is Nicaragua. And why on earth does Javier Ch say we need to INCREASE the demand for energy in Nicaragua? Did I read that correctly? The forward looking visionary and conservationist is trying to reduce, reduce, reduce. I say we make energy the clean way and sell it to all our neighbors asap.

  • Nicagringo

    Pretty simple folks…as the economy expands and new industrial production is developed there will be more demand for energy. As GDP per capita grows people use more energy in their homes. Baseload power is needed and can’t come from wind and solar. Can come from Biomass, geothermal and hydroelectric. That is where the investment needs to be and it is coming.

    • Ben

      Excellent point, Nicagringo.

  • Dave C

    Tim,
    Last couple comments aren’t being posted?
    Having energy prices go up when we are adding mega % of alternate energy and solar is being purposely kept out of the grid, borrowing vast amounts of money from ALBA to subsidize the fake oil increases so people don’t grumble. Sneaky debt, as long as the PEOPLE don’t feel the immediate REAL price increases in their wallets, then all is well.
    For some unknown reason, from ALBA subsidizing around 9% of the bill this month it only subsidized 3%. My rates finally went over the 9 cordoba rate at 9.03KWH. A couple years ago it was under 5KWH and there was NO borrowing, NO ALBA subsidizing and very little alternate energy. Oil prices haven’t risen that much or it would be over $300 a barrel!
    What’s really going on?

    • Tim Rogers

      If some of your posts are getting dropped, it’s because you’re trying to post comments using different usernames that don’t match your IP address. Use the same username and it won’t be a problem

      • http://no Damian

        Tim, your comment means that it only works if you always use the same PC/laptop/tablet etc If I write my a comment with my pc that has a unique IP # and then I go on holiday and use different Cyber cafe(s) and computers with all their unique IP # then I might have an issue posting my comments on Nicadispatch according to your explanation. I would double check this again with your system administrator.

    • car

      this is an undeniable fact. some friends of mine were contractors on one of the wind farms in rivas. the turbines were FULLY operational for nearly one year but no electricity was flowing to the grid because of “issues” with the thieves at disnorte allowing it to enter the grid.

      all of the reporting on renewable energy values is regarding INSTALLED power producing capability NOT the actual power production that is part of the grid.

      bottom line is that the government is intentionally limiting introduction of the full capacity of these renewable sources to artificially maintain dizzying kwh prices and guarantee continued profits from stolen venezuelan oil.

      yet another reason “51% of those surveyed” approve of the government’s work–they’re ignorant of the truth.