Ecuador raises electricity rates for large miners

Ecuador has raised the electricity rates for large consumers, including mining companies, amid its worsening electric power crisis.

In October, the President Daniel Noboa administration also asked large consumers to generate their own electricity to relieve the country's system.

New electricity rates for the group of high-voltage industrial consumers (AV2) have come into effect on November 1. This group includes Canadian mining company Lundin Gold, owner of the Fruta del Norte (FDN) gold mine, and China's EcuaCorriente, operator of the Mirador copper mine, as well as steel companies Adelca and Novacero and national oil company Petroecuador.

Fruta del Norte and Mirador are the only two industrial-scale mines in production in Ecuador.

“Depending on the day and time of consumption, mining companies will pay between 7.48 cents and 9.86 cents per kilowatt hour,” former deputy mining minister Fernando Benalcázar told BNamericas.

While announcing the end of an electric power subsidy for mining companies on October 15, Noboa said that these consumers use more energy than a hospital needs to operate.

Benalcázar said the new rate implies an increase of 26-37% compared to the ones in force until October, which "being among the highest in the country's rate scheme, would already correspond to real levels."

The decision to increase rates, implemented by regulator Arconel, comes amid an energy crisis caused by the worst drought in 61 years, which also forced the government to limit electricity distribution to 14 hours a day.

Self-generation

In October, grid operator Cenace asked large companies to reduce electricity consumption and support self-generation, which involves incentives.

In a statement, Lundin said, “under normal circumstances, the FDN mine consumes an average of 17MW of power. However, given the company's decision to implement an energy self-supply plan as a measure to support the current crisis, to date it records an approximate consumption of 8.5MW, that is, half of the total consumption, which demonstrates the efforts made.”

Lundin implemented the plan in the second half of 2023, also during a drought, which has allowed it to alleviate the burden on the interconnected system between October and December 2023, in April 2024, and since September.

The plan involves using the maximum internal self-generation capacity based on diesel, purchased at industrial prices, the cost of which is assumed by the company.

To increase this self-generation capacity, the company is importing additional generators that are expected to arrive in the coming weeks, the company told BNamericas.

EcuaCorriente, meanwhile, was disconnected from the national grid on October 16, following a request from the interim energy and mines minister Inés Manzano.

Benálcazar said that company president Zhu Xhueseng ordered the disconnection after the request and stopped production and milling operations.

The company declined to comment.

Santa Cruz hydro

EcuaCorriente's operating contract, signed with the State in 2012, includes a commitment to build the US$216mn Santa Cruz-Hidrocruz hydroelectric plant to self-generate 138MW and guarantee long-term supply for Mirador.

"If EcuaCorriente had complied with the contractual obligation established in annexes B and I of the contract to build the hydroelectric plant, it would not now have its operations halted and the losses that this will generate, since the stoppage will be for 45 days," said Benalcázar.

In a letter from May 29, 2023, sent to then deputy electricity minister Marcelo Jaramillo, the Santa Cruz project's general representative, Zhu Xhueseng, wrote that Mirador's second phase, 140,000t/d Mirador Norte, will require more energy, which would best be generated by the hydro plant. He affirmed EcuaCorriente’s interest in continuing construction and operations procedures for the project in El Pangui canton, Zamora Chinchipe province.

However, the company later requested not to have to build the plant because another company also planned to build a similar project in the area.

In August 2024, then deputy mining minister Diego Ocampo told BNamericas that if it is proven that two hydroelectric plants in the same area would cause inefficiencies, EcuaCorriente would have to look for another option, whether gas, geothermal or another type of energy to self-generate the electricity required for its project to expand Mirador from 60,000t/d to 140,000t/d of ore.

Ocampo said the country is not able to supply the electricity required for the US$600mn expansion.

So far, the government and the company have not reached an agreement on the matter, so the addendum to advance Mirador Norte has not been signed.