Spotlight: Ecuador’s electricity crisis, revisited

Power supply in Ecuador has returned to relative stability after months of daily, hours-long blackouts.

In October, the government declared an electricity sector emergency due to lower hydrology, which it attributed to climate phenomenon El Niño, reduced imports from Colombia – also impacted by El Niño – and higher demand.

Improving water levels, however, have helped increase dispatch, according to authorities.

A little over a month ago, then interim energy and mines minister Roberto Luque announced that non-scheduled rationing was ruled out, but he warned that the crisis was not over, highlighting the upcoming dry season.

Energy and mines minister Antonio Goncalves, who was appointed to the post earlier this month, has acknowledged that the upcoming dry season will be a “complicated” one, adding that 2024 will be one of the country’s driest years.

“We are in crisis… Ecuador's energy demand is growing in an atypical way, it is growing at 10%,” Goncalves said in a television interview.

He pointed to higher offtake from the shrimp industry and increased AC use along the coast due to warmer winters as reasons for the consumption jump.

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To shed further light on the country’s energy situation, BNamericas asked two local experts for their perspective and outlook.

PERFECT STORM

“We are in crisis, not since last year, we have been in crisis for four or five years,” according to Gabriel Benjamín Salazar Yépez, past executive director of power regulator Arconel and former renewable energy and energy efficiency undersecretary.

Salazar said the crisis began in 2015 with the publication of the public electrical energy service law which, the academic and consultant contends, had a statist orientation and focused on public investment.

“That law worked when the Ecuadoran State had a lot of money,” he said, adding that the lack of state resources and the law’s restrictive investment regime led to a “perfect storm.”

Salazar also criticized the merging of the sector’s ministerial and regulatory bodies with those of the oil and mines sectors.

“Why, because you are taking away the importance of the electricity sector and you are putting it within two sectors as large as oil and mines, then there the importance is diluted, the financing is diluted.”

Other factors mentioned by the analyst for undermining activity include a sector that is more political than technical and the subsequent lack of regulations to attract investment, and changing administrations which are more focused on the short than medium term.

The expert’s roadmap includes turning to thermoelectric plants in the short term to avoid rationing. “At this moment there is nothing other than thermoelectric generation, unfortunately, there is no other alternative.”

He also pitches bringing in natural gas, promoting small solar projects up to 10MW, fast-tracking more friendly regulations, particularly those for transmission, and separating the ministries.

Salazar highlighted a recent change that does not require an environmental license for projects up to 10MW, a process that takes one to two years to secure, but only an environmental registry which takes a month.

Such a program would allow more investors to participate, thereby increasing competition and achieving better prices, he said.

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MODEL RETHOUGHT

“This model needs to be rethought to allow the private sector to drive the development and necessary investments in the electricity sector,” according to Francisco Ortiz Pérez, an energy and environment specialist with law firm AVL Abogados.

The lawyer points to three reasons behind Ecuador’s outages: hydropower dependence, lack of maintenance of generation, transmission and distribution infrastructure, and lack of a competitive power sector.

“We have seen how Ecuador suffered blackouts during times of drought due to a lack of enough water for hydroelectric generation… we once again faced blackouts due to excess flow, which caused damage to the hydroelectric infrastructure.”

He added, “the lack of investment and maintenance in the generation, distribution and transmission sectors is linked to the management model of natural resources and strategic sectors enshrined in the constitution of Ecuador of 2008. This model grants the State a monopoly over these sectors, which makes them inefficient.

“A more dynamic market can improve the efficiency and resilience of the electricity system, ensuring a more reliable and sustainable supply.”

For additional context and developments, click on the following links:

The CELEC EP Association Regulation was approved

Why Ecuador can't keep the lights on

Ecuador will require US$10bn in generation, transmission investments

Ecuador hiring emergency generation to ride out power crisis

Technical Failure in the Milagro – Zhoray Transmission Line Caused a Cascade Disconnection at the National Level

Ecuador to tweak distributed generation framework

Ecuador fine-tuning framework for private participation in power transmission