Ecuador's electricity sector expected to require US$17bn by 2032

Ecuador's electricity crisis highlights the need for private investment, with the electric power sector estimated to require US$17.4bn by 2032.

Of this total, expanding generation will require US$9.95bn, distribution US$5.65bn and transmission US$1.75bn, according to the country's 2023-32 electricity master plan.

“The State does not have those resources and will not have them. We will probably live through one or two decades of adjustment, unless we have a new oil boom or, probably, a mining boom,” Alberto Acosta, an economist at consultancy Grupo Spurrier said during a debate on the energy transition at the Oil & Power 2024 event in Quito.

Analysts expect a mining boom, but only in the medium or long term, meaning resources to address the current crisis will remain scarce. The situation is exacerbated by the worst drought the country has seen in years, forcing authorities to cut electricity supply for up to 14 hours a day.

In the last two months, the outages have created estimated losses of US$4bn in the industrial sector and US$3.5bn in the commercial sector, the president of Quito's chamber of commerce, Mónica Heller, said in a televised interview.

Moreover, economists expect a downturn this year.

To confront the crisis, Ecuador should open the generation, transmission and distribution segments to public, private and mixed investments, Acosta said.

A first step would be to create a wholesale electricity market, since in Ecuador the State determines the electricity price and maintains it through subsidies.

“The country's great challenge is to move towards a market-based system that determines electricity prices, since price controls limit investment. With a wholesale market, any generator, public, private or mixed, will sell its production at market prices to the industrial and commercial sectors and to electricity distributors,” Acosta told BNamericas.

Acosta proposed that subsidies should be maintained only for the residential sector, but the associated cost must be registered in the national budget, since it currently is assumed by distribution companies, which lack capital.

Reforms, Acosta said, should include establishing an independent regulatory body, avoiding monopolies, eliminating barriers to entry and fostering private investment, eliminating the restriction on private generation of up to 100MW, and allowing private capital to be used for public infrastructure maintenance.

“It's absurd. In this country, we prefer hydroelectric plants to fall apart, but we prohibit the use of private capital to maintain public infrastructure. That has to be eliminated,” Acosta said.

Potential

Hydroelectric

The master plan indicates that hydroelectric projects of more than 5MW can be developed in the country, totaling 24,900MW.

Additionally, hydroelectric projects of less than 5MW can be developed to supply isolated areas.

Wind power

National wind power potential reaches 3,000MW, according to official estimates.

Photovoltaic

With assistance from French development agency AFD, Ecuador is studying its photovoltaic potential to create a portfolio of medium and high-power projects that are estimated to total 1,000MWp.

Biomass

The country's Bioenergy Atlas identified gross potential of 1,000MW through the use of around 18Mt biomass waste from the agro-industry, livestock and forestry industries through thermochemical processes.

Geothermal

Various studies have identified more than 20 possible sites with potential for more than 900MW for electricity production.