In Nicaragua, the government has set a non-binding 91% renewable energy generation target by 2027. Renewable energy developers enjoy a full range of tax breaks, including import duty, VAT and income tax exemptions. Distributors must prioritize the purchase of energy coming from clean sources by allocating a percentage to renewable power in tenders for electricity.
Nicaragua has a diversified renewable matrix. In 2014, 52% of the 4.4TWh generated in the country came from biomass, geothermal, solar, small hydro and wind. Thermal plants using fossil fuels still are Nicaragua’s main source of electricity and were responsible for 45% of total generation that year. Large hydro plants accounted for the remaining 3%.
According to the country’s November 2013 national plan for electricity expansion, Nicaragua established an interim renewables goal of 74% by 2018 in the course of attaining the voluntary target of 91% of energy generation by 2027. Large hydro qualifies toward goal attainment.
Electricity generation can be contracted via tenders organized by distributors or through bilateral contracts between generators and distributors and/or large consumers. The Instituto Nicaragüense de Energía (INE) regulates the electricity sector, where transmission and distribution are subject to regulated tariffs and generators can compete freely in the market. The Comité Nacional de Despacho de Carga (CNDC) is Nicaragua’s electricity market operator, while the Ministry of Energy and Mines (MEM) oversees energy policy and planning.
Law 532 is Nicaragua’s main policy supporting renewable development. It mandates the set-asides for renewable energy in tenders and that contracts be at least 10 years in duration. Sectors given priority are: biomass, geothermal, hydro, wind and solar. INE is responsible for defining the percentage allocated for renewables in tenders based on MEM’s strategic expansion plan. Generators that do not have contracts with distributors or large consumers may sell their power in the spot market, where they can receive a price determined by near-term supply and demand conditions.
The legislation also offers a variety of tax incentives for renewable projects. In addition to national exemptions, developers receive a reduction on municipal taxes.
In 2015, the government implemented reference prices for renewable energy technologies in order to improve the competitiveness of clean energy sources in the country. These reference prices would apply to biomass, geothermal, hydro, solar and wind projects. Prices vary from $66/MWh-$80/MWh (lowest range) for wind projects up to $103/MWh-$118/MWh (highest range) for solar plants.
Score Summary
Nicaragua in 2015 surrendered 13 places in its overall Climatescope ranking, falling to 27th with a score of 1.14 from 14th last year, when it scored 1.37.
Nicaragua’s latest performance was dented by declines in the Amount Invested Category of Clean Energy Investment and Climate Financing Parameter II. It also compared unfavorably in 2015 with 2014 on the Loans, Grants, Grant Programs Indicator of that parameter.
On Enabling Framework Parameter I, Nicaragua’s latest score of 1.53 was enough to rank it ninth. In 2014, a slightly lower score of 1.51 earned it the higher rank of sixth.
Nicaragua in 2015 lost ground on Clean Energy Investment and Climate Financing Parameter II, sinking to 26th from 4th. Its 2015 Parameter II score was 0.53 versus 1.16 in 2014.
On Low-Carbon Business & Clean Energy Value Chains Parameter III, Nicaragua occupied 42nd place in 2015, with a score of 0.97. Its 2014 Parameter III metrics were 36th position and a score of 1.16.
On Greenhouse Gas Management Activities Parameter IV, Nicaragua in 2015 was in 21st place, with a 1.53 score. In 2014, it occupied 18th place, with a score of 1.61.