Costa Rica Coffee Guide

Canadian Company Bets On Volcano’s Power

October 1, 2004

SAN JACINTO, León – From “sand boarding”down the hot, black slopes ofCerro Negro Volcano, to hiking up thesteep, smoldering peak of Momotombo,the spectacular volcanic ridge of León isfast becoming a new hotspot for adventuretourism in Nicaragua.But when it comes to converting thenorthern zone’s volcanic resources into bigmoney in an eco-friendly way, the Canadiancompany Polaris Geothermal Inc. is countingon the lesser-known Santa Clara Volcanoto light the country’s future. Literally.Polaris, a publicly held power companyon the Canadian stock exchange, is currentlydeveloping a 66-megawatt geothermalenergy plant on the skirts of Santa ClaraVolcano, 130 kilometers north of Managua.When the $150 million project is fullyoperational by mid-2007, it will represent15% of Nicaragua’s total energy production,and provide enough electricity to power onethird of Managua, according to companypresident and CEO Tom Ogryzlo. Whenphase I of the project is completed by nextyear, Polaris will produce enough power (20megawatts) to supply the entire 100,000-resident population of León, he said.GEOTHERMAL power productionconverts natural volcanic steam into energyin a manner proponents say is environmentallyfriendly and 100% renewable.The start-up cost associated with geothermalenergy production is considerablyhigher than power plants that run on fossilfuels. But once operational, pollution fromgeothermal plants is negligible, operationcosts are lower and energy production issustainable, according to project engineers.“Provided you design the steam fieldproperly to get good quality steam, the wellsand turbines can runnonstop for three yearswithout any major(equipment) overhauls,”said Jim Randal,project managerand vice-president ofPolaris’ operations.IN a world facinga mounting energycrisis and wars overdiminishing oil supplies,geothermal sources are consideredone of the most attractive forms of non-traditionalenergy.“Petroleum is finite. Geothermal systemsare connected to the magma of theearth. If you don’t extract the heat at toorapid a rate, it replenishes itself and is sustainable.This is a very important difference,”Ogryzlo said.Worldwide, geothermal capacity isestimated to be 50,000 times the energyof all known petroleum reserves, accordingto Canadian publication EquityResearch.More than 30 countries produce geothermalenergy, with the United States leadingthe way with a2,790-megawattoutput.In Central America,Costa Ricaproduces 163 megawattsof geothermalenergy (up195% from 1995),followed closelyby the volcanodenseEl Salvador,which produces 161 megawatts.Guatemala is just starting to exploit geothermalenergy, and Panama is in theexploratory stage.Nicaragua has one Israeli-owned geothermalplant on the base of Momotombothat pumps out some 35 megawatts ofenergy – a fraction of the country’s 2,000-megawatt geothermal output potential,according to Ogryzlo’s estimates. Nicaragua’stotal energy production now is 360megawatts, mostly from petroleum-poweredplants.GEOTHERMAL energy is producedby digging wells up to two kilometers deepin the porous rock surrounding volcanoes.The steam from the wells is passed throughunits that separate the liquid brine (saltwater) from the dry steam, which thenpasses through turbines that convert thesteam into energy. The brine is re-depositedinto the ground, so as not to upset thenatural balance of the site, according toPolaris representatives.Underground magma produces a constantsource of heat, which then convertsthe re-deposited brine solution back intosteam, completing the sustainable cycle.Geothermal plants exhaust smallamounts of non-condensable gas, namelycarbon dioxide. But the gas discharge isless than 5% of that which occurs at fossilfuelplants, according to the World Bank.Ogryzlo, who has worked for years asa gold-mine engineer, classifies geothermalproduction as “extremely benign.”ALTHOUGH the start-up cost is hefty,Polaris estimates it will repay its loans afterseven years of operation. After that,Ogryzlo estimates his company will net$12 million a year in profits, selling energyto the private energy monopoly UniónFenosa at a cost of 6 cents per kilowatthour.It will cost Polaris, which nowemploys 100 mostly local workers, 1.5cents per kilowatt-hour in production costs.In the future, Polaris hopes to sell itsenergy at a rate among the lowest in thecountry directly to major consumers throughthe System of Electrical Interconnection forthe Countries of Central America (SIEPAC),a regional grid under way that aims to connectMexico to Panama.What remains to be seen, however, is ifthe reduced-rate energy sold to UniónFenosa will translate into reduced-rate utilitybills for Nicaraguan consumers.Polaris’ Randal guesses it won’t, but saidhe thinks the Polaris project will help stabilizethe ever-rising energy bills here. UniónFenosa estimates that approximately 30% ofits users aren’t paying what they owe forenergy use, either through meter tamperingor through pirated power lines.

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