The Republic of Nicaragua is the largest country in Central America. 42.5 percent of The Nicaraguan population lives in poverty. However, economic growth, combined with an adequate legal framework and the privilege of being endowed with abundant and diverse natural resources, makes Nicaragua attractive to investors—net foreign direct investment reached $810 million in 2012.
Over the past decade, he Government of Nicaragua has improved the electricity coverage rate. However, Nicaragua's electricity infrastructure still faces major challenges. At year-end 2013, 76.2 percent of Nicaraguan households were electrified, and about 1.4 million people did not have access to electricity, which is a major barrier to achieve the electrification target of 90 percent coverage in all countries by 2020 agreed by the Central American countries. The Government of Nicaragua is committed to transformation of the energy generation mix, and has set ambitious goals to use the country's untapped renewable resources: the goal is to reach 91 percent renewable share by 2027. Nicaragua currently exploits only 10.2 percent of its substantial renewable electricity generation potential. The Government of Nicaragua has also initiated the strategic planning of renewable energy for domestic and productive uses. Approximately 900,000 Nicaraguan households cook with firewood on traditional stoves, adversely affecting the national health and environment. Firewood consumption reached 44.4 percent of total final energy consumption in 2012, surpassing oil. Consequently, the Ministry of Energy and Mines (MEM) developed the Firewood and Charcoal Strategy for 2012-2022 and is now finalizing a National Program for Sustainable Use of Firewood and Charcoal for 2014-2022.
Nicaragua currently utilizes approximately 150 MW of its geothermal power, which represents only 10% of the country's geothermal potential.
The Government of Nicaragua intends to work with IDB and the World Bank and has raised five priority areas that need support of SREP. First, in the geothermal energy industry, investors are hesitant to invest in early stage geothermal developments unless the government participates in explorations, for which external funds are required. SREP’s help in the initial phase will increase the confidence of investors. The Government of Nicaragua also wants to bring modern electricity services to more than 900,000 rural Nicaraguans uncovered by current electrification schemes. SREP can also help to replace cook stoves to improve the living conditions of households cooking with firewood on traditional cookstoves, and furthermore decrease deforestation. New small-scale hydropower projects and biofuels will be developed. SREP intervention will pave the way for the replacement of 10 percent of Nicaragua’s gasoline usage with ethanol, and 5 percent of its diesel usage by 2020 in line with the country’s commitment.