With a cumulative score of 1.49, Nicaragua ranks number 53 among emerging markets and number 82 in the global ranking.
- Emerging markets
1.73 / 5
0.94 / 5
Only 56 markets (28 emerging markets) are scored on the Buildings sector. See the full list on the methodology page.
Net-zero goal and strategy
Nicaragua has neither set a net-zero emissions goal nor outlined a long-term low-carbon strategy.
Nationally Determined Contributions (NDC)
Nicaragua submitted an updated Nationally Determined Contribution (NDC) – its plan to help achieve the goals of the Paris Agreement – to the United Nations Framework Convention on Climate Change (UNFCCC) in December 2020. This lays out an ambition to reduce the country’s emissions by 10% by 2030 versus anticipated levels in a business-as-usual scenario. The sectors being targeted for mitigation are energy, industry, and forestry and land-use change.
Fossil fuel phase-out policy
There is no fossil fuel phase-out policy in Nicaragua.
Under the country’s updated NDC, it has set a goal for 65% of electricity generation to come from renewables by 2030, up from the previous target of 60%. In 2021, renewables accounted for 45% of Nicaragua’s generation mix, with biomass and wind being the biggest contributors, at 13% and 11%, respectively. Fossil-fuel-powered plants still play an important role in the country’s power sector and Nicaragua says it will look to replace more emissions-intensive coal and diesel generation with natural gas.
Renewable energy developers enjoy a range of tax breaks in Nicaragua, including exemptions on import duties, value-added taxes and income taxes. Tax incentives to aid the development of renewables projects have been extended until 2023.
Net metering rules allow owners of solar photovoltaic and other renewables systems with up to 5 megawatts (MW) of capacity to sell surplus power to distribution companies.
Power prices and costs
Electricity tariffs in Nicaragua declined last year as the national currency lost value. Commercial and Industrial power prices dropped by 14% between 2020 and 2021, reaching $245.5 per megawatt-hour (MWh) and $178.94/MWh, respectively. Still, this is the highest in Latin America. Meanwhile residential tariffs fell by 20% across the same period to $179/MWh, although the country’s residential power prices are in the top quartile in the region. Wholesale prices suffered the least change, only dipping by 4% to $136.36/MWh.
Continued reliance on imported fossil fuels for generation is largely to blame for the high cost of power in Nicaragua. Renewables development therefore represents a potential path to greater energy independence and cheaper power.
Nicaragua's power sector is unbundled, and distinct actors – both state and privately owned – participate in the generation and distribution sectors. At least 18 companies hold active generation contracts today for projects they own. Nicaragua is part of the Central American Electrical Interconnected System (SIEPAC) and its grid is connected to El Salvador, Guatemala, Panama, Costa Rica and Honduras by transmission lines.
Installed Capacity (in MW)
Electricity Generation (in GWh)
Which segments of the power sector are open to private participation?
Wholesale power market
Does the country have a wholesale power market?
Doing business and barriers
While Nicaragua does offer tax incentives for renewables, a general lack of direct policy support will likely inhibit the sector’s growth. Very high power prices also make it difficult to attract new business to the country, and the fragile condition of the transmission system jeopardizes service reliability.
Currency of PPAs
Are PPAs (eg. corporate PPAs and all other types) signed in or indexed to U.S. Dollars or Euro?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Fossil fuel price distortions - Subsidies
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) down through subsidies?
Fossil fuel price distortions - Taxes
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) up through taxes or carbon prices?
Nicaragua’s government only introduced policies for electric vehicles (EVs) in 2022 and the market remains at an early stage. Just two EV sales were registered in 2021.
In 2022, the country introduced tax exemptions for EVs according to their price brackets until 2027 ¬– the higher the EV price, the higher the exemption. Vehicles under $30,000 will enjoy import duty, VAT and consumption tax exemptions. These exemptions also apply to charging stations.
Fuel economy standards
Does the country have a fuel economy standard in place?
The tropical climate of Nicaragua means heating requirements are minimal, so efforts to lower the carbon footprint of buildings relate to energy efficiency policies.
Energy efficiency policy
Does the country have a national energy efficiency plan?
Energy efficiency policy
Are there minimum energy performance standards for buildings?
Energy efficiency incentives
Is there access to loans or grants for energy efficiency measures (i.e. Wall or loft insulation or double glazing)?
Nicaragua passed Law 956 on energy efficiency in 2017, establishing a legal framework to promote the rational and efficient use of energy. The country has several energy efficiency and improvement planning programs that aim to reduce energy consumption, mainly from refrigeration, lighting and various consumer sectors.
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