Due to the increasing prices of petroleum in the global market, attracting private investment in renewable energy has become a priority for the Nicaraguan Government. Domestic consumption in Nicaragua has grown at annual rate of 4.6% between 1985 and 2004, and less than 30% of the energy is currently generated by using renewable sources of energy.

Hydro potential

Nicaragua has an estimated hydroelectric potential of 1700 MW, and currently only 2.7% of that potential is being used. Most of the hydroelectric resources are concentrated on the Atlantic coast of the country. There are numerous pre-feasibility and feasibility studies available for projects with generation capacity totaling 700 MW.

Geothermal potential

Nicaragua’s impressive volcanic chain provides a geothermal potential above 1000 MW. There are around ten geothermal areas in the Pacific Region with high possibilities of energy generation.

Wind Power and Biomass potential

There has been identified a wind energy potential over 200 MW has been identified in the country. The most potential is in the Rivas Isthmus at the south west of the country, and a in Chontales, central highlands.  Available biomass sources can also be utilized to produce cost-effective renewable energy.

Incentives & Legal Framework

Two laws establish the legal framework for this sector, namely the Electricity Industry Law (Law 272) and the Law for the Promotion of Renewable Energy.

The Law for Promotion of Renewable Energy provides the following benefits for investors:

• Exemption of customs duties and value added taxes on machinery, equipment, materials and inputs used for pre-investment, construction and all energy distribution investments associated to the project.
• Exemption on income tax and profits from the sale of carbon dioxide bonds for a seven-year period.
• Exemption of all taxes that might exist on exploitation of natural resources for a five-year period.

Ten-year exemption on:

• All municipal taxes in force on the sale of real property, sales and registration during project construction, machinery, equipment, and hydroelectric dams.
• Stamp tax for project construction, operation or extension.