The Nicaraguan energy sector is very volatile. Nicaragua is a net oil importer, and record high oil prices caused economic hardship for businesses and consumers. 72% of Nicaragua's total average electricity consumption of some 400 MW per hour is thermal, i.e. produced by oil burning power plants. At the same time, Nicaragua was for large portions of the year facing between 100 and 120 MW electricity deficit. Prolonged power cuts during the summer months, resulted in street protests as cuts also lead to reduced water supply.  The blackouts, furthermore, affected the health sector as programmed surgeries had to be cancelled and vaccinations and blood supplies decomposed.

Against this volatile background, Nicaragua has the possibility to turn to a brighter future as the country has considerable unused renewable energy resources. The economic potential of the Total Integrated Systems (SIN) is 3,100 MW, where 1,700 MW is hydropower, 1,000 MW is geothermal, 200 MW biomass-based power and other 200 MW wind energy. As per 2005, only about 16 percent and 6 percent of the effective installed capacity is hydro and geothermal power respectively. Whether or not the turn towards the future is made, depends largely on political processes. For Iceland to assist in the development of geothermal resources in Nicaragua can be an exciting and rewarding endeavor. However, if the energy sector continues to be the chosen setting for political mêlées, then the planned cooperation could become difficult.

It is the policy of the Government of Nicaragua to increase the use of renewable energy resources in the production of electricity. The geothermal sub-sector has been identified as a key component to this end, as Nicaragua has abundant and under-utilized geothermal potential. The government structure is, however, lacking in human capacity to oversee and administer the planned increase in geothermal exploitation. The concept of the project is, therefore, for ICEIDA to assist with building local capacity, with the aim of making Nicaragua self-sufficient in managing the geothermal sub-sector at the governmental level, in accordance with national legislation. As human resource development takes time, the project does also make provisions for expatriate technical assistance, especially early on in the project cycle. The lifetime of the project is expected to be five years. The geothermal cooperation project will contain four main integrated project components, which tackle some of the human capacity constraints facing the Government of Nicaragua in its strive for increased geothermal utilization.

The components are:

- Training and education

- Institutional support

- Equipment and materials

- Workshops and seminars