The next 'revolution' for Nicaragua: energy independence

Oil dependent Nicaragua is battling high energy costs and trying to build a sustainable economy by focusing on wind, hydroelectric, and geothermal.

Nicaragua may be rich in resources, with abundant rivers, lakes, volcanoes, and wind-swept plains, but it built its economy on being a gas-guzzler.  Now, the government is reevaluating its approach, trying to wean Nicaragua off its dependence on foreign oil and becoming a leader in sustainable development along the way.

Renewable energy is not only nature-friendly; some believe it’s imperative to Nicaragua’s survival.  Oil accounts for 70 percent of the country’s power generation, which means the economy takes a kick every time international petroleum prices soar. And despite having the poorest economy in Central America, Nicaragua has the highest energy costs. Years of energy shortages debilitated the country, as its power grid aged and energy plants were unable to meet demand.  Daily power-rationing blackouts lasting 6-10 hours were the norm in 2006, but in 2007 things began to change when the Sandinista government, led by Daniel Ortega, returned to power.

Switching to renewable energy has become a linchpin in the Sandinistas' national development plan. 

“The energy issue is an essential component for our sustainable development to assure the wellbeing and progress of the current and future generations,” says Emilio Rappaccioli, Nicaragua’s minister of energy and mines.

Ortega worked with Nicaragua’s private sector and Venezuela’s Hugo Chávez to fix its immediate energy problem by installing an additional capacity of 343 megawatts of power – 41 percent more power than Nicaragua was producing five years ago.

That means that for the first time in more than a decade, Nicaragua is producing a comfortable surplus of energy.  But electricity costs remain high, and 80 percent of households receive an electricity subsidy, according to the government.  Electricity rates rose by another 9 percent on Jan. 5, forcing the government to petition for further funding from the Bolivarian Alternative for the Americas (ALBA) alliance, which consists of members like Venezuela and Cuba, to pay for continued subsidies.

The Sandinistas' focus on renewable energy will not only reduce dependence on foreign oil, but will help bring electrification, development and progress to the countryside.  Administration officials say it will do so in a way that protects the environment, by deterring deforestation and reducing harmful emissions.

“This is about the conservation of natural resources, assuring energy security policies and ensuring the competitiveness of the country,” Mr. Rappaccioli says.

Presidential adviser Paul Oquist, an academic and leading voice on Sandinista development policy, says that renewable energy policy is key to providing citizen security, labor stability, peace and development in the country.

“Who is going to invest in a country without energy?” asks Mr. Oquist.

The switch from black to green

Although Nicaragua’s growing energy production has come mostly through the smoking stacks of eight fuel-burning power plants from Venezuela, the  renewable revolution has already started.

Geothermal production has increased and Nicaragua has started experimenting with wind-energy.  The privately owned Amayo I and II wind farms are now producing 63 megawatts of power for the country.

By the end of 2012 – what the United Nations is calling the “Year of Sustainable Energy for All” – Nicaragua hopes to reduce its dependency on foreign oil by an additional 10 percent, closing out the year with an energy matrix that is 40 percent renewable based on hydroelectric, geothermal, wind, and biomass sources.  The goal is to generate 94 percent of its own electricity from renewable resources by 2016, through the help of a new hydroelectric plant that is expected to generate half of the country’s total energy demand.

If these goals are indeed met, it would mean that in the coming five years, Nicaragua could go from being the most oil-dependent nation in Central America, to the least.  And in a window of 10 years, Nicaragua’s energy sector could transform into an international leader in renewable technologies.

National development

Nicaragua’s push for a renewable energy revolution has united the country like few other issues, and has people thinking in terms of long-term national development, perhaps for the first time in the country’s history.

“This is one of the few issues in Nicaragua that has a clear long-term national vision,” Iván Cortes, director of Renewable Resources for the Ministry of Energy and Mines, tells the Monitor. “We have suffered personally the effects of the severe energy crisis, and that’s why the whole population supports renewable energy.”

The Sandinistas’ efforts to switch to renewable energy has also drawn nods of approval from the international community, at a time when many foreign governments are questioning the Ortega administration’s other political choices.

“In keeping with United States international policies and goals, the US government recognizes ambitious efforts in Nicaragua to address climate change by radically shifting its electricity generation from petroleum-based to renewable sources within a short window of time,” says William Cobb, the US embassy’s energy and environment officer.

“I don’t know of any other country in the world that has done this,” Oquist says, referring to Nicaragua’s planned 70 percent reduction in oil dependency in slightly more than seven years. “You must recall that this is taking place in the second-poorest country in Latin America and amid the worst financial, economic, social, and increasingly political crisis of world capitalism since the Great Depression of the 1930s.”

– A version of this story ran on the author's site, nicaraguadispatch.com.