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«June, 2013 Reykir Report prepared by: ALTA Consulting Ármúli 32, 108 Reykjavík, Iceland. Tel: +354-582-5000 Fax: +354-582-5001 alta - ...»

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June, 2013


Report prepared by:

ALTA Consulting

Ármúli 32, 108 Reykjavík, Iceland. Tel: +354-582-5000 Fax: +354-582-5001

alta@alta.is - www.alta.is

Reykir Consulting

Logaland 10, 108 Reykjavík, Iceland. Tel: +354-8619689

The External Final Evaluation Team members wish to thank all those who have contributed to

this report, through interviews, discussions and various assistance (see Appendix II). In

particular, we wish to thank the project coordinators Gioconda Guevara, Mario Gonzáles and Engracia Merlo as well as Stefán Jón Hafstein and Gísli Pálsson of ICEIDA and Thráinn Fridriksson, project manager on behalf of Iceland GeoSurvey. Additionally we acknowlegde the following for valuable contribution to our report: Mrs. Lorena Lanza vice-minister of MEM, Luís Molina, Ernesto Ramón Martinez, Francisco Ruiz, Juana Ruiz, Roberta Quintero, Azucena del Carmen Espinales Martinez, Isaura Porras Cruz all working for MEM; Roberto Araquistáin Cisneros, Luis Fiallos P., Engracia Merlo, Petrona Gago and Liliana Díaz of MARENA, Francis Rodríguez and Elieth Blandford Archibold of MINREX, Leonardo Mendoza, Jorge Cisne and Maritza Vargas of UNAN-LEÓN, José Antonio Rodríguez and Magdalena Pérez of POLARIS and Víctor Valencia and Guillermo Chávez of GEONICA.

We also wish to acknowlegde the cooperation and assistance of the Icelandic experts who have worked on the project: Benedikt Steingrímsson, Halldór Ármannsson, Sigurdur Gardar Kristinsson at ÍSOR and Thóroddur F. Thóroddsson of the National Planning Agency and Helgi Jensson and Sigurrós Fridrikssdóttir at the Environment Agency of Iceland. Also to Engilbert Gudmundsson, Sighvatur Björgvinsson, Gísli Pálsson and Geir Oddsson of ICEIDA and ICEIDA´s advisors Thorkell Helgason and Thorleifur Finnsson.

Ana Maria Gonzáles (El Salvador), Roberto Renderos (El Salvador) also contributed to the GCBP but unfortunately the EFET did not get the opportunity to meet them due to season vacations.

David B. Traumann also gets sincere thanks for great assistance and agility during the translation of the reports. Finally, we wish to express our sincere thanks to Liliana Diaz for her initiative and spirit in developing the forest fragmentation studies.










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AECID Spanish Agency for International Development Cooperation APO Annual Plan of Operation CC Coordination Committee CDM Clean Development Mechanism CNE National Energy Council EAI Environment Agency of Iceland - Agencia Islandesa del Medio Ambiente EFEP External Final Evaluation Project EIA Environmental Impact Assessment - Evaluación de Impacto Ambiental ENEL National Electricity Company FINNIDA Finnish Development Organization GCBP Geothermal Capacity Building Project GCBP-FPD Geothermal Capacity Building Project - Final Proyect Document GGE Greenhouse Gas Effects GIS Geographic Information System GoI Government of Iceland GoN Government of Reconciliation and National Unity of Nicaragua IAIA International Association for Impact Assessment ICEIDA Icelandic International Development Agency IGA International Geothermal Association IIE Geothermal Directorate of the Mexico Institute for Electrical Studies ISOR Iceland GeoSurvey JICA Japan International Cooperation Agency MARENA Ministry of the Environment and Natural Resources MARENA–DGCA General Directorate for Environmental Quality MARENA-ONDL National Clean Development Office - Office Nacional de Desarrollo Limpio MEM Ministry of Energy and Mines MEM-DDG Ministry of Energy and Mines - Dirección De Geothermia - Direction of Geothermal Development MEM-DSV Ministry of Energy and Mines - Dpto. Supervision MEM-DIG Ministry of Energy and Mines - Dpto. Investigación geotérmica - Department of Geothermal Investigations MEM-UGA Ministry of Energy and Mines - Environmental Management Unit - Unidad de Gestión Ambiental MEM-GeLab Ministry of Energy and Mines - Geochemistry and Geothermal Laboratory MINREX Ministry of Foreign Affairs Ministerio de Relaciones Exteriores NPA National Planning Agency of Iceland PID Project Identification Document SC Steering Committee ToR Terms of Reference ONA Oficina Nacional de Acreditación UCA Central American University UNAN-Managua National Autonomous University Managua campus UNAN-León National Autonomous University León campus UNI National Engineering University UNU-GTP United Nations University Geothermal Training Programme - Universidad de las Naciones Unidas - Programa de Formación Geotérmica (UNU-PFG) USGS United States Geological Survey

0. EXECUTIVE SUMMARY It is the policy of the Government of Reconciliation and National Unity in Nicaragua (GoN) to increase the use of renewable energy resources for the production of electric power. The geothermal sub-sector has been identified as a key component to this end, as Nicaragua has abundant geothermal fields, almost all of which have not yet been developed. In 2004, the GoN structure was, however, lacking in human capacity and logistics to oversee and administer the planned increase in geothermal utilization. To address this problem, GoN specifically requested development co-operation in the field of geothermal energy from the Government of Iceland (GoI), in 2004.

After extensive preparation work, a contract was finalized between the Ministry of Energy and Mines (MEM) on behalf of GoN and the International Development Agency of Iceland (ICEIDA) on behalf of the Government of Iceland (GoI) in January 2008. It embraced the 5 year 2008 Geothermal Capacity Building Project (GCBP). The Ministry of the Environment and Natural Resources (MARENA) was involved already during the preparation period for the GCBP.

However, it was not until later that MARENA became formally a member of the Steering Committee of GCBP.

The aim of ICEIDA through the GCBP was to assist Nicaragua to enhance its use of environmentally benign geothermal energy resources for power production in line with the energy policy of GoN.

The objective of this External Final Evaluation Report is to assess the outcomes of the GCBP,

report on the lessons learned and obtain a detailed answer to the following key questions:

» To what extent has the GCBP assisted the GoN in enhancing the utilization of geothermal resources in Nicaragua?

» To what extent has the GCBP enhanced the institutional capacity at the national Government level to manage geothermal resources?

In order to achieve this objective, ICEIDA in consultation with GoN made a contract with Alta Consulting Inc. in Iceland to carry out the External Final Evaluation of the GCBP. The team leader responsible for the execution of the EFE was Halldóra Hreggvidsdóttir of Alta Consulting.

Geothermal expertise was provided by Prof. Stefán Arnórsson under a subcontracting agreement between Alta Consulting Inc. and Reykir Inc.

The objective of the EFE is threefold:

» Gather information on the outcome of the GCBP » Assess the success of the GCBP » Give recommendations from lessons learned.

This External Final Evaluation Report covers the findings and success of the GCBP as envisaged by the External Final Evaluation Team (EFET). The principal objective of the EFET was to ascertain the outcomes and impacts of the GCBP and examine the effects on the target beneficiaries in the target areas.

The electric energy system in Nicaragua is a reflection of its predominant social, economic, technological and environmental conditions. In comparison to countries with a similar level of economic and social development, per capita energy consumption in Nicaragua was in 2005 low, or 3.3 barrels of oil equivalent (BOE), the lowest in Central America. Per capita energy consumption is also among the lowest in Latin America. Per capita energy consumption rates are directly linked to the satisfaction of people’s basic needs. It is estimated that approximately 60% of the population has access to electrical services. However, in rural areas that figure does not reach 40%. Among all countries in Central America and the Caribbean, per capita electricity consumption in Nicaragua is higher only than that of Haiti.

Energy resources in Nicaragua include hydro, wind, biomass and geothermal, so called native energy resources. The first three are renewable in the sense that these resources are renewed at the rate equal to or higher than they are being consumed. Opinion is divided to what extent geothermal systems which are of the hydrothermal type, like those in Nicaragua, are renewable (see Stefánsson, 2000; Sanyal, 2005, O'Sullivan et al., 2010). The renewability is affected by the extent of exploitation relative to natural heat loss from these systems. The estimated potential of hydro, wind, biomass and geothermal energy resource in Nicaragua is summarized in Table 2.1, together with information on effective installed power.

Geothermal energy potential for power production has been estimated as 1,200 MWe (Table 2.1). However, other estimates have been presented which are both higher 1,519 (Geothermal Masterplan, 2001; Ruiz-Mendieta, 2009) and 3,194 (Ruiz-Cordero, 2008) MWe, respectively. It needs to be pointed out here that this generation capacity is highly uncertain, as it is based on limited information rather than data on reservoir characteristics that can only be obtained by expensive drillings.

Today, total installed capacity of geothermal power plants is 150 MWe (Momotombo 78 MWe, San Jacinto-Tizate 72 MWe). The plans to develop the Managua-Chiltepe and El Hoyo-Monte Galán by 2014-2015 have been delayed due to poor outcome of the exploration drillings. In Managua-Chiltepe, an exploration drillhole did not strike high temperatures (about 80°C).

Drillings in another part of the field have been proposed (Hersir and Ólafsson, 2009a) and will be continued by ALBANISA. At El Hoyo-Monte Galán sufficiently high temperatures have been proved in one of the two exploration holes drilled. Temperatures are low in the second hole, probably because of downflow from shallow aquifer. An evaluation of the field will contunue for a year. GeoNica has concessions to develop El Hoyo-Monte Galán. However, the concession for Managua-Chiltepe was returned by Geonica at the beginning of 2012 and granted to Alba Geotermia.

The GCBP was divided into 3 main components. Their purpose was to:

» To strengthen the capacity for technical and scientific supervision by the Ministry of Energy and Mines (MEM) and the Ministry of the Environment and Natural Resources (MARENA) to coordinate, supervise and monitor the development of geothermal resources in Nicaragua.

» Develop a process for building capacity to follow-up, monitor, supervise and manage the development of geothermal projects in Nicaragua including environmental oversight.

The development process was geared towards civil servants.

» Endow the geochemical laboratory at MEM with technical resources, infrastructure and equipment.

The expected outcomes of each component are detailed in Section 3.5 of this report and the methodology applied is described in Chapter 4.

It is the overall impression of the EFET that the GCBP has been overall very successful with respect to all components. The geochemistry laboratory is already in operation and with competent staff. It, however, still needs to be credited. Training involving participation of MEM and MARENA experts and other civil servants in workshops, lecture courses, meetings, fieldwork and reporting has been very extensive in Nicaragua, as well as in Iceland and El Salvador. It is clear that there has been much progress in capacity building within the civil sector, in particular at MEM and MARENA. However, for this report, the EFET considers that it would have been desirable to have more information on infrastructure that relates to changes in the organizational structure of MEM and MARENA with respect to definition of responsibilities, cooperation, effectiveness and duties of staff, as well as civil servants outside the mentioned ministries. Also, norms for the permit process for the geothermal sector, roles of MEM and MARENA and their co-operation.

From the analysis of the findings of the EFET study, it is concluded that the overall success of the GCBP has been effective. It has had much positive impact and satisfies well environmental requirements and gender equality. The goal of building up sustainable knowhow within the geothermal field has, however, not been attained. It is considered that it takes more than 5 years to build up such capacity. This is especially the case for efficient, high quality data interpretation and reporting. Therefore a continuation of the 2008-2012 GCBP is considered important in order to guarantee permanent, i.e. sustainable, capacity in Nicaragua for continued development of the country's geothermal resources, including all the necessary preparation stages, environmental studies and monitoring. If continued, the project ought to concentrate on specific topics and hence be less intensive than the GCBP.

By the end of 2012 the overall expence on behalf of ICEIDA is 3,583 thousand US$ which is 467 thousand US$ less than the budget plan of 4,050.8 thousand US$. These sums only cover the period 2008-2012. They do not cover preparation work for the planning of the Project carried out in 2007 and earlier as described below. The total expenditure is expected to increase somewhat as in 2013 there will be some more expences.

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