San José, Costa Rica, since 1956

2006: A Dark Year for Country’s Continued Energy Crisis

It was a dark year for embattled powerdistribution company Unión Fenosa, which couldn’t manage to keep the lights on long enough to find its way out of growing problems in Nicaragua.

The country’s grinding energy crisis hit new lows this year, resulting in several months of four- to six-hour daily blackouts in most parts of the country, making life extremely difficult and unproductive for many people.

The first wave of blackouts came in June and early July, when Unión Fenosa would pull the plug daily, at unannounced times and for unknown periods of blackness. In addition to the outages, the erratic scheduling of the blackouts made it impossible for people to plan their days.

In July, the power-distribution company reported that Nicaragua was running a energy deficit of around 60-100 megawatts, or around 13-20% of the country’s total energy demand.

The company finally struck a deal to purchase surplus energy from the Central American grid, alleviating the problem temporarily. But the solution was not sustainable. By August the daily blackouts had started again.

The situation was normalized for several weeks around the presidential elections in November, to put on a good face for the world, but started up again in December. Nicaragua’s growing energy problem is being blamed on a confluence of factors that has been likened to a “perfect storm.”

A lack of rain earlier in the year prevented the country’s main hydroelectric plant from operating at full capacity.

Maintenance problems repeatedly shut down several of the aging thermal plants for repairs throughout the year. The rising price of oil created cash-flow problems between users, the distributor and producers, preventing some thermal plants from purchasing enough energy to burn at full capacity. Energy losses due to theft and antiquated infrastructure have resulted in nearly a 30% energy loss in transmission, which is nearly triple the international standard.

And poor government planning allowed the energy problem to reach a breaking point before lawmakers started to do anything serious to fix it.

The net result is a country that doesn’t produce enough energy, and a distribution company that has been accused of corruption and incompetence.

Even when running at 100%, Nicaragua still has a 30-90 megawatt energy deficit. Thirty megawatts is roughly the amount of energy needed to light up a city the size of León, with a population around 100,000.

The Nicaraguan Energy Institute (INE) filed an arbitration case against Unión Fenosa in August, claiming the company has failed to provide quality service to the company’s 600,000-plus users.

The Comptroller General’s Office has called for the annulment of the company’s concession for “incompliance with contractual obligations.”

At the end of the year, both government motions were still pending.

Leaders of the tourism sector and the business sector have claimed that the blackouts have hurt their respective industries, though it has been difficult to put a dollar amount on the economic losses.

Looking ahead to 2007, the government has promised that four smaller plants will come on line in the first few months of the year to meet the deficit. And promises from Venezuela to resolve the energy problem with oil distributed on credit by a Nicaraguan-Venezuelan company called Albanic, could play out in the coming months under a Sandinista government (see separate story).

The legislative National Assembly is also contemplating a hydroelectric mega-project in the South Atlantic Autonomous Region (RAAS) called Copalar, which would produce upwards of 900 megawatts of ower – twice the country’s current energy demand.

Building the project would mean flooding agricultural land and displacing thousands of mostly indigenous Nicaraguans – something the affected communities have promised they will not let happen.


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