Project Design Document
This Project Design Document (PDD) is provided in anticipation and for the purpose of the registration of Gemina Rice Husk Project in Chinandega, Nicaragua as a Clean Development Mechanism (CDM) project under Art. 12 Kyoto Protocol (KP). The PDD and its supporting documents (Baseline Study, Monitoring Plan, etc.) describe the project design in regard of the objectives and requirements of and modalities for the CDM. The PDD is thus a key document for the validation of the project.
List of Contents
1Key Project Parameters
2Project Entities
3Project and Sector Background
4Project Description
5Global Environmental Benefits
5.1Project Baseline and Environmental Additionality
5.2Monitoring Plan
5.3Emission Reduction Projections
6Local Environmental and Socio-Economic Benefits
7PCF Due-diligence and Expected CDM Process Requirements
8Project Documents
Key Project Parameters
The following Table presents a summary of key project data. More information is provided in the following sections and tables and in the documents referenced in Section 8.
Table 1Project Summary
Project objectives / Reduce or avoid CO2, CH4, N2OImprove local environmental conditions
Meet Nicaragua sustainable development objectives
Project location / Gemina Rice and Flour Mill, Chinandega, Nicaragua.
Type of project / Renewable energy.
The project involves the construction of a electricity generation facility that will convert waste husk from rice milling into electricity for use as a substitute for fossil fuel generated electricity. A substantial reduction in open site disposal of waste rice husks will result.
Project baseline / Business as usual scenario:
a)The Gemina flour and rice mill will consume electricity from the public grid, produced by fossil fuel.
b)Almost all husk produced by the mill will be dumped to a landfill
Crediting period / 21 Years
The project is expected to generate ERs through a period of 21 years
Estimated CO2 reduction / 212,395 TCO2e during a period of 21 years.
Sources of ERs / -On-site electricity generation facility
-Avoided rice husk decomposition
-Avoided pile burning
Sustainable development impact / The project contributes to sustainable development in Nicaragua through,
–Use of local renewable energy resources
–Increased commercial activity through clean and renewable source of power.
–Improved local environmental conditons
–Generation of employment.
Project financing / Total project cost (US$ million) : 3.845
Equity (US$ million) : 1.075
Debt (US$ million) : 2.699
Project revenues (including sale of CO2 reductions) /
- Sale of electricity to the rice and flour mill.
- Sale of CO2 emission reductions (ERs) to the PCF and possibly other buyers.
- Sale of rice husk ash
Host country approval / Nicaragua is a Non-Annex I Party of the UNFCCC and has ratified the Kyoto Protocol.
The authority has issued a letter of no objection for this project and the letter of approval is being processed.
Project start / 2002
Project Entities
The project is sponsored GEMINA GENERADOR S.A.
Table 2Project Partners and Support
Project sponsor / GEMINA GENERADOR S.A.Contact Person:David Walden
Phone: 1 - 941 - 751 0943
Fax: 1 - 941 - 758 3421
E-mail:
Project Operator / GEMINA GENERADOR S.A.
Contact Person:David Walden
Phone: 1 - 941 - 751 0943
Fax: 1 - 941 - 751 0943
E-mail:
Project planning and assistance /
- World Bank: Latin America Department (1818 H St. NW, Washington DC 20433 Mail stop I 5-502)
Phone: 1 – 202 - 458-5042
- World Bank: Prototype Carbon Fund (1818 H St. NW, Washington DC 20433 Mail stop MC4-414)
Phone: 1 – 202 – 473-6774
Project and Sector Background
The proposed Gemina Risk Husk Project for Nicaragua presented to the Prototype Carbon Fund (PCF) aims to facilitate the reduction of Greenhouse Gas (GHG) emissions and to support the development of international market mechanisms and domestic producers of a new environmental commodity known internationally as Emission Reductions (ERs), developed in the framework of the Kyoto Protocol. ERs would be generated by new and additional small- and medium-sized Renewable Energy Technology (RET) projects that reduce the emission of GHG against an established baseline. The proposed project for Nicaragua also directly supports the implementation of the National Environmental Law of 1994 and its regulations (Decree 45-94), which promotes the use of RET in Nicaragua while simultaneously mitigating global climate change.
The project is supported by the PCF. PCF supports projects expected to generate GHG emission reductions while complying with requirements of joint implementation (JI) Art.6 and the Clean Development Mechanism (CDM), Art. 12 of Kyoto Protocol. PCF purchases high quality GHG ERs, which could be registered with the United Nations Framework Convention on Climate Change (UNFCCC) to which Nicaragua is part. Nicaragua signed the Kyoto Protocol on July 7, 1998 and ratified it on November 18, 1999.
In 1999, Nicaragua had the lowest energy consumption per capita for the Central American Region. With a total of less than 305 KWh on average per inhabitant per year (835 Wh /day), energy consumption was only 22 % of Costa Rica and slightly lower than Guatemala (the second lowest consumer of energy in the region). On a residential level, energy consumption was less than 90 KWh/year (246 Wh/day), which is very low compared to other countries in Central America, as it is shown in the following table.
Table Nº 1. Electricity consumption (kWh/inhabitant) in Central American Countries
Countries / Total / ResidentialCosta Rica / 1,383.0 / 637.6
El Salvador / 569.3 / 222.3
Guatemala / 318.1 / 101.5
Honduras / 433.7 / 226.6
Nicaragua / 304.9 / 89.9
Panama / 1,240.5 / 403.2
These figures reflect a high level of poverty resulting in low domestic and productive consumption of energy and a low grid electrification coverage. Population who has access to electricity is 51 percent in Nicaragua, compared with over 90 percent in Costa Rica. Loss of electricity generated is estimated at 30 percent, while the regional average is below 20 percent.
According to a study by the Empresa Nacional de Transmisión Electrica (ENTRESA), published in September 2000, the demand for electricity is expected to increase around 4 to 7% annually. According to the Instituto Nicaraguense de Energia (INE) annual report 1999,[1] consumption in 1999 was about 2123 GWh, and is predicted to reach by 2005 between 2651 GWh (medium growth scenario) and 3056 GWh (high growth scenario) and by 2010, 3226 GWh to 4287 GWh. To match this increase in demand, there will be a need to increase substantially the power generation of the country.
In the past, Nicaragua has had one of the smallest power generation capacities among countries in Central America. However, installed capacity rose during the last ten years by 64%, from 371 MW in 1990 to 609 MW in 1999.
This increase in generation capacity was achieved mainly by adding oil fired power plants, except the 15.8 MW co-generation plant which is bagasse fuelled. The private sector has implemented the majority of these new plants, as can be seen in the following table.
Table Nº 2. Changes in Nominal Capacity for Power Generation in Nicaragua at 1999 (in MW)
Power system / 1990 / 1999Public owner
Fuel oil power / 175.00 / 157.50
Hydro power / 103.41 / 103.41
Diesel oil power / 15.00 / 81.00
Geothermal power / 70.00 / 70.00
Private owners
Fuel oil power / 170.20
Co-generation/Biomass / 15.80
Diesel oil power / 7.80 / 11.25
Total / 371.21 / 609.15
Source: INE 1999 annual report
Altogether, over the 1990-1999 period, 181,5 MW of fuel oil fired generation has been added and as a result reliance on oil-fired generation has almost doubled. Although a small portion of the whole, it is noteworthy that 100% of the isolated system capacity and increases has been by diesel oil fuelled units (diesel generation sets). The following table will show the share of the different power plant types in power generation in Nicaragua in percent.
Table Nº 3. Share of the different power plant types in power generation (in %)
Power system / Share in total capacity (in %)(1990) / (1999)
Fossil fuel plants / 41 / 76
Hydropower plants / 30 / 19
Geothermal plants / 29 / 5
The share of hydropower and geothermal plants has decreased considerably, while fossil fuel plants produce now more than three quarters of Nicaragua’s electricity consumption. In addition to generation, Nicaragua exchanges electricity with Costa Rica, Panama and Honduras. During 1999 Nicaragua's net import was 81.9 GWh, about 4% of total production. If demand grows as expected during the coming years, power generation will need to increase further to about 777MW by 2010 according to the study of ENTRESA.
Hence, the demand for electricity already exceeds the available supply and the current pattern of supply stands in sharp contrast with the endowment of energy resources of the country, which will be described in the following paragraph. Given the scarcity of foreign exchange, and the variety of alternative resources of energy, Nicaragua needs to devise a strategy that will allow the country to meet the growing demand, while supporting the development of inter-regional electricity markets and taking advantage of the available national resources of energy.
a)National energy potential
Nicaragua has a rich endowment of renewable energy resources. There exists a potential for geothermic plants which is estimated to be between 1000 and 1500 MW. So far, only the Ormat Momotombo plant (70 MW) uses geothermal resources to produce electricity. The hydropower potential is 3760 MW, while 94% of this potential is located on the Atlantic coast. At the moment, the four hydropower plants in Nicaragua produce 103.41 MW of electricity. Further, there exists a potential for wind energy estimated in around 90 MW and no plants have been developed in Nicaragua, so far. Regarding bioenergy thre are no estimates of its potential available, but CNE assumes a high potential especially in the north of Nicaragua. As part of the project to modernize the energy sector, CNE will conduct a study on this source. So far, only one biomass plant (15.80 MW) is in operation, whose owner is Ingenio San Antonio in Chinandega. Solar radiation for the use of direct solar energy like Photovoltaic Systems is 5,5 kWh/sqm per day in the Pacific region and Central Nicaragua and 4,5 kWh/sqm per day in the Atlantic region.
Hence, there exists a huge potential of renewable energy resources, which could be exploited to meet the electricity demand in Nicaragua. Nicaragua still depends heavily on fossil fuel imports to cover their electricity supply and this dependence will increase, unless appropriate measures ware taken to set incentives towards an increased use of RET. Private sector involvement is crucial to develop this potential. The organizational and institutional framework necessary for private sector participation is already available as will be shown in the following paragraphs.
b)Sector reform
The Nicaraguan government started the reform of the electricity sector in 1996 which resulted in a deep restructuring of the sector, its opening to private participation and market competition, the adoption of a new electricity law and the creation of new institutions to oversee the sector.
The legal and regulatory framework is set forth in the Ley de la Industria Eléctrica (LIE) (Ley # 272, April 1998) and its regulations (Decree 42-98). They establish the segmentation of activities in the electricity sector (generation, transmission and distribution), the installation of new power plants by private operators, the privatisation of the generation public plants and the development of the wholesale and retail markets. The law also sets the basis to promote interregional electricity trade, establish tariff policies and extend services to the rural areas.
The LIE distinguishes between generation, transmission and distribution, and mandates the unbundling of activities of the Empresa Nicaragüense de Electricidad (ENEL). The same economic agent is not authorized to perform more than one of the three functions, except in isolated areas where the three functions can be accumulated (Art 26 and 31 de la LIE).
ENEL’s generation plants were reorganized in several new companies. Existing hydro power plants went to HIDROGESA, the geothermal power plant at Momotombo belongs now to GEMOSA; Chinandega and Nicaragua diesel plants belong to GEOSA, and Las Brisas and Managua fuel plants were transferred to GECSA. In general, generation is open to private investors. The GoN had tried to privatise the generation plants through competitive international bids in two occasions, most recently in September 2001. However, in part due to the recent turmoil of the financial markets, and the obsolescence of some of the plants, the bidding did not succeed, and the generation plants still remain in public hands.
The electricity transmissionassets of ENEL were constituted into a separate publicly-owned company, ENTRESA, which is expected to remain public in the foreseeable future.
On September 12, 2000, the distribution division of ENEL was reorganized in two companies which were bid out to the private sector in 1999. Both companies were sold for the amount of US$ 115 MM to Union Fenosa from Spain. The privatised concession area for electricity distribution covers the Western part of the country along the Pacific Coast and divides this zone in two equally sized parts by a North-South frontier between DISNORTE and DISSUR. The Eastern part of the country along the Atlantic coast remains an open area, heavily underserved in terms of electricity supply.
The law establishes the Comisión Nacional de Energia (CNE) as the policy-making institution in charge of formulating policies and strategies for the energy sector. The objectives of the CNE include the formulation of national energy policies, the development of rural electrification strategies in coordination with multilateral and bilateral agencies and the promotion of national and foreign investment.
The same law creates the Instituto Nicaraguense de Energia (INE) as the regulatory agency. INE awards concessions for transmission and distribution, and approves tariffs. The generation is open to market competition.
c)Environment
MARENA is the ministry in charge of the principal laws and regulations for environment and has taken an active role in promoting the reduction of local and global pollution. There have been advances in the development of environmental laws and guidelines to promote biodiversity and safeguard the environment. Environmental standards are in force since 1995, and MARENA has developed plans for gradual reduction of pollution with different industries. As a part of these activities, the use of RETs as a cleaner alternative for electricity generation is one of the important measures to achieve sustainable development, as the potential for these technologies is considerable in Nicaragua.
In addition, CNE is also actively committed to encourage the development of abundant clean and renewable energy resources in the country as an essential element in the growth of the national energy system. To take advantage of this opportunity, however, there is a need to develop a strategy of promotion of RET. So far, there are not yet equal market incentives for RET compared to conventional systems, which use fossil fuels. The wider use of renewable energy technologies is constrained by existing hydrocarbon subsidies and distorting application of import duties. Hence, the levelling of the playing field for RET is a very important challenge, which has to be faced by the GoN in order to promote the market diffusion of RET through the private sector. To this end, CNE has requested ESMAP support to develop a national RET strategy.
d)Regional developments
Recent developments in the Central American Region include a 50 MW BOO (“Build-Own-Operate”) project in Nicaragua awarded to a private consortium, with a total blended rate (energy and capacity payments) of US$0.0575/kWh using Wartsila diesel internal combustion engines. Additional thermal projects are likely to be developed in the short term as they are faster to implement and more competitive in terms of capital costs than renewable energy projects. Thermal prices are, on average, US$450-US$700 per installed kW for natural gas or fuel oil systems versus US$1,500 per installed kW for hydropower projects. Renewable energy projects in neighboring countries typically exceed US$2,000 per installed kW. It is generally expected that competitive bids for large thermal projects will drive the regional generation price lower into the range of US$0.045-0.060/kWh, despite recent increases in world oil prices.
Costa Rica has 40 MW of excess transmission capacity available and routinely trades power with utilities in Nicaragua and Honduras. Such trade builds upon the 1996 Treaty on Electricity Markets of Central America, signed by the Presidents of the six nations of Central America and ratified by the respective National Congresses, creating one regional electricity market and supporting the interconnection of electricity systems in Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama.
Complementing the 1996 treaty, the System of Electrical Interconnection of the Countries of Central America (SIEPAC) project, financed in part by the Government of Spain and the Inter-American Development Bank (IDB), plans to upgrade the existing six-nation electrical network. It is expected that SIEPAC will increase Nicaragua’s cross border transmission capacity to 300 MW, and consequently increase considerably the import/export potential for electricity trading. In case that AES builds a proposed 800 MW plant in Honduras and the SIEPAC is functional, Nicaragua may face cheap energy imports that would compete with domestic generation.
Project Description
The Gemina Rice Husk Project is being developed by a joint company, GEMINA GENERADOR S.A. (GG) created by Grupo Gemina, a Nicaraguan private company, and Bronzeoak Corporation, an independent group, which develops, funds and implements commercial, energy and environmental projects. Gemina operates the Chinandega rice and flourmill complex and is the leading company in that business in Nicaragua. So far, Gemina has bought electricity from the local power distribution company. The maximum electrical on-site demand in 2000 was 1034 kW which is expected to increase to 1200 kW by 2002. The supply of power is somewhat unreliable and the price is highly dependent on the world price of oil. GG is interested in building a biomass power plant to cover their own electricity demand and to sell the excess electricity. The plant will be located in Chinandega, in the same compound than the rice mill and at less than 1 km from an ENTRESA substation. The Rice Husk Power plant will produce 100% of the electrical power used at the mill and would consume 80% of the expected husk stream. The proposed power plant will have a capacity of 1.432 MW. The technology proposed is based on the conventional boiler/steam turbine cycle. The husks are fed to the combustor and burned to produce heat. The steam generated is passed to a steam turbine which drives an electrical generator. This basic technology has been in use commercially for more than 100 years. It has been employed with a wide range of biomass fuels including rice husks. The subproject’s construction time is approximately 12 months and is expected to be completed by summer 2003.