Two sugar mills in Nicaragua plan to generate electricity from bagasse during the sugarcane season and eucalyptus during the rest of the year, and to sell it to the national grid. This study compared this concept with the most logical alternative at the moment, which is electricity generated from fuel oil. Costs, macro-economic impacts and environmental emissions are considered. The low cost of land and labour means that eucalyptus can be produced more cheaply than fuel oil (1.7 as compared to 3.2 $/GJ(LHV)). Consequently, it was calculated that a sugar mill can produce electricity from biomass for 4.9 cent /kWh as compared to 5.8 cent /kWh for electricity from an oil fired plant. About 64% of the money spent on biomass power stays within Nicaragua, thus contributing to its GDP, whereas in the case of fuel oil 83% goes abroad. The employment generated by the production of electricity from fuel oil is 15 person.yr/MW.yr, compared to 32 person.yr/MW.yr for biomass. Comparing biomass with fuel oil, emissions of CO2 and SO2 equivalents are, respectively, 67 and 18 times lower. Particulate emissions can be much higher in the biomass case because of lack of flue gas cleaning. We can conclude that biomass electricity generation by sugar mills in Nicaragua can compete with power generation from fuel oil. Moreover, it has an overall better environmental performance, creates double the amount of jobs, and contributes about four times as much to the GDP of Nicaragua,