Petrona Calero, the matriarch of a humble Granada household of 11, finally made the tough decision this month to disconnect her family’s refrigerator. She can no longer afford to keep it running.
Calero’s electricity bill this month came to 1,450 córdobas ($60)—or 60% of her salary. Two years ago, Calero’s average electricity bill was around 350 córdobas, just a quarter of what she’s charged today.
“¡Dios mío mi lindo!” Calero says, covering her face with her hands. “We don’t consume any electricity anymore. I have a fan that I use at night for the mosquitoes, but the only light we have in living room is from the television.”
“I used to sell sodas and juices for 3 córdobas, but I had to disconnect my refrigerator so now I don’t sell anything,” she says.
Calero’s plight is increasingly common in Nicaragua, where energy costs are climbing to dizzying heights and electricity bills seem to be determined by a roulette wheel rather than scientific measurement.
“We are receiving around 190 consumer complaints each day about alterations in people’s electricity bills—people who normally pay 300 córdobas ($12.30) each month are suddenly getting charged 1,500 ($61.50),” says Marvin Pomares, director of the Nicaraguan Institute of Consumer Defense (INDEC). “The number of daily complaints we get about alterations in people’s electricity bills has more than doubled in the past year. It’s by far the No. 1 consumer complaint we receive.”
Officially, Nicaraguans’ electricity costs have been hiked by 38% since President Daniel Ortega returned to office with the promise of solving the country’s energy crisis with the help of the Venezuelan-propped Bolivarian Alliance for our Americas (ALBA). While the ALBA business arrangement led to a dramatic increase in Nicaragua’s energy production and provided subsidies to more than 600,000 users who consume less than 150 kilowatt hours per month (more than 80% of the population, according to the government), the situation is grinding on small businesses and pinched middle class.
Nicaragua now has the highest energy costs in the region—and all to pay for its rinky-dink tin pot electrical grid that can’t seem to keep the lights on through a rain shower or regulate the flow of electricity with any semblance of precision (the lights in an average Nicaraguan household dim and flicker more than do on death row in a Texas prison).
The government recently announced an extension of its electricity subsidy through 2015, but instead of ALBA picking up the tab now the bill will now be paid by other Nicaraguan users. The government is also threatening to start enforcing a 2007 reform to the penal code that calls for economic and jail sanctions for those who steal energy—a conduct the administration refers to as “not in solidarity.”
INDEC’s Pomares says if the government wants to start locking up people who steal energy, the law should be reciprocal for power company employees who intentionally manipulate people’s power bills.
“By altering electricity bills, the power distributor is stealing people’s money,” Pomares told The Nicaragua Dispatch. “It happens so frequently that it’s hard to believe it’s by error.”
How can Nicaragua reduce its energy costs?
Even after the government is done incarcerating everyone who steals electricity (they’ll need to build a lot more jails first), Nicaragua still won’t have fixed the problem of its astronomical energy costs. To bring those down, Nicaragua needs to get off its deleterious dependency on fuel oil, industry experts say.
Nicaragua has made remarkable strides to adopt new clean energy technologies over the past five years. But the benefits of the country’s gradual switch to renewable energy are not trickling down to consumers. Six years after the darkest days of Nicaragua’s power-rationing blackouts, Nicaragua’s electricity-distribution system (now controlled by TSK-Melfosur Internacional) remains on the verge of collapse, operating at a $50 million annual loss.
Nicaragua now has a surplus of power, yet energy costs continue to climb, crippling household economies and keeping small businesses from aspiring to become big businesses. To fix the pricing problem in the short term, Nicaragua may consider switching from oil to coal.
“In the past five years, Nicaragua’s first priority was to start producing more energy and to reduce its dependency on bunker oil. And the country has been successful at that. But renewable energy is not cheap energy,” says César Zamora, president of Nicaragua’s leading energy-generation company, AEI Nicaragua. “Nicaragua has a good mix of renewable energy sources, but we need to get away from expensive bunker baseload plants; they need to be substituted by geothermal or coal. Geothermal is expensive, so coal would be optimal. The government is now considering it.”
Due to the seasonal volatility of wind and hydroelectric power sources, Nicaragua is unlikely to switch 100% to renewable energy sources—even though the country has the potential to produce way more renewable power than it can consume. Nicaragua needs to maintain reliable baseload plants to provide a regulated energy flow that can be dialed up or down depending on fluctuating demand during the day. And as long as Nicaragua’s baseload power continues to be provided by expensive fuel oil plants, consumers are not going to feel much benefit from the country’s switch to renewable energy sources, industry leaders say.
Massive-scale hydroelectric plants and large geothermal plants have the capacity to produce renewable baseload energy, but they take years to build and are expensive to install. Nicaragua needs a quicker and more economical solution, Zamora says.
The proposal, which is still in the early phases of consideration, is to start transforming Nicaragua’s aging oil-burning plants into coal plants—a conversion that would cost around $100 million per plant, according to Zamora. In addition to burning cleaner than fuel oil, coal would help Nicaragua lower its energy costs and become more competitive, Zamora says.
Guatemala is the only country in Central America that produces energy from coal. Consequentially, Guatemala is able to produce energy that’s 40% less expensive than Nicaragua’s, Zamora says.
“Bunker fuel is an anchor tied around Central American economies,” Zamora says.
Converting a bunker plants to coal would take about 36 months, Zamora says. “It’s fast and it would lower electricity costs faster than anything else because it would give the country stability in its baseload production that renewables don’t.”
Javier Chamorro, executive director of investment-promotion agency ProNicaragua, confirms that the Nicaraguan government is open to the possibility of coal, as well as other energy sources, such as natural gas.
‘Central America needs a new competitive edge’
While coal could provide a quick fix, many hope the long-term solution to Central America’s baseload problem will be provided by U.S. natural gas. U.S. President Barack Obama, who visited Costa Rica earlier this month, mentioned the possibility of using the U.S.-Central American Free Trade Agreement (CAFTA) as a platform to export liquefied natural gas to the region.
If that happens, it would be a game-changer for Central America, Zamora says. If the proposed gasoduct gets built within the next decade, the region’s energy costs would drop dramatically making Central America competitive for reasons other than its cheap labor force, Zamora says. Reduced energy costs would help attract new investment to the region, create new jobs and reduce the pressure of immigration flows, the energy expert says.
And Petrona Calero could reconnect her refrigerator.
Read part I in this series here.