By the Blouin News Business staff

Forget the canal: Nicaragua’s renewable energy revolution

by in Americas.

Pipes carrying superheated steam from nearby volcanoes flow into Polaris Energy's San Jacinto geothermal plant in Nicaragua, Aug. 7, 2014. MCT/MCT via Getty Images

Pipes at Polaris Energy’s San Jacinto geothermal plant in Nicaragua, Aug. 7, 2014. MCT/MCT via Getty Images

by Michael Lerner

While a lot of media attention has focused on the giant canal being built across Nicaragua, as well as on the visit of Russia’s foreign minister there this week, there is another revolution going on in Latin America’s second-poorest nation. Nicaragua is rapidly transforming itself into a renewable energy powerhouse, which may prove to have a more tangible and beneficial effect on its population than the controversial canal.

Just a few years ago, Nicaragua depended almost entirely on imported fuel oil to generate electricity even though it lacked thermal plants to do so efficiently on anything close to a large scale. Rolling blackouts and a hefty import bill from Venezuelan oil spurred the country to aggressively pursue renewable energy development. And the results have been remarkable. From 2006-12, the country attracted $1.5 billion in renewable investments, including over $400 million from U.S.-based Ram Power in the Polaris geothermal plant. Now renewables account for 50% of the country’s electricity, and government officials predict it will rise to 80% within a few years. Of its current mix, geothermal provides 16%, wind provides 15%, hydropower provides 12%, and biomass provides 7%.

Solar is just getting started but it is poised to grow quickly in this sunny country. In October, Canadian Solar supplied 3.1MW of panels to the largest private grid-connected solar project in Nicaragua. Financed by two local banks, the project created over 100 local jobs, and now provides over 30% of the power needs of 26 companies in the nearby Zona Franca Astro industrial park. It can be a model for future projects, which could be scaled up significantly. Public-private partnerships are also being encouraged, and foreign organizations like the German Agency for International Cooperation are collaborating with their Nicaraguan counterparts to enhance solar power’s role in the country and the rest of Central America.

The energy plan released by Nicaragua’s government last fall targets $4 billion more in investments over the next 15 years. The country’s goal is to generate more than 90% of its electricity from renewable sources by 2027. This would mean a 4.5GW increase in capacity, more than triple its current level, entirely from renewable sources. More jobs, cheaper and more reliable electricity for consumers, and even future exports of electricity to neighboring countries are all expected.

Large and medium-scale projects will likely generate most of the country’s electricity, but most of rural Nicaraguans still lack access to the grid. A January report by the International Renewable Energy Agency was optimistic but called for the grid to be upgraded and extended to provide full coverage of the country. That would take a few years, but in the meantime, several NGOs are helping off-grid rural communities set up small-scale solar projects that provide electricity and can be used for cooking. Compared to widely-used open fires, solar-powered stoves have a far lesser environmental impact (no need for firewood) and do not cause harmful fumes, a major step forward considering that respiratory diseases are the leading cause of death for rural Nicaraguan women.

Renewable energy in Nicaragua can also work very well with tourism and environmental protection. For example, a geothermal plant at the base of Momotombo volcano issues day permits for hikers to cross its property en route to the top, demonstrating that there does not need to be a trade-off between ecotourism and renewable energy (except perhaps from hydropower dams).

The country’s largest wind farm is on the shores of Lake Nicaragua, the same lake that will be irreversibly harmed once the canal is built and saltwater floods in from the oceans. Beloved by Nicaraguans and tourists, this source of fresh water — which is also home to important ecological habitats — has become a rallying cry for the tens of thousands of citizens opposed to the canal project. The government argues that the $40 billion Chinese-financed  project will create tens of thousands of jobs and boost GDP by up to 12%. Since almost 75% of the population earns less than $4 a day, one might expect such an opportunity to be welcomed.

But aside from the horrendous environmental destruction the canal excavation will entail, most of the better jobs will be filled by workers from China, while Nicaraguans will be left with the worst ones. And for the landowners whose properties in or near the canal route are being legally expropriated, their lives are far from being improved by the construction. The real benefits to the Nicaraguan economy will come many years from now, when the canal is completed and the two planned deep-water ports and the free trade zone are operational.

On the other hand, further development of renewable energy credibly promises to benefit all parts of Nicaraguan business and society without such a burdensome cost — now and in the near future. One must ask: if Nicaragua can have such tangible and popular success from its renewable energy efforts, does it really need the canal?