The continuation of droughts and the end of Colombian energy imports complicate the situation in the South American country.
2024 is a demanding year for Ecuador. The wave of organized crime unleashed in January has been compounded in recent months by the worsening crisis in the energy sector. This Saturday, January 12, Inés Manzano, the interim Minister of Energy and Mines, confirmed the continuation of blackouts of up to 10 hours a day and in different time zones in the Andean country.
Days earlier, on Wednesday 9th, his predecessor, Antonio Goncalves, resigned from his post after the initial announcement of this measure. Thus, Ecuador has now had five consecutive weeks of power cuts, with two schedules that paralyze daily activities and, therefore, a good part of the national economy.
The main cause of this atypical situation lies in the dependence on hydroelectric plants. Something that worsens during drought seasons that lower the flow of reservoirs. But this is not a recent problem: as an example, the 2023 annual report of the National Electricity Operator (Cenace) revealed that 79.04% of Ecuadorian energy comes from the hydroelectric sector.
Secondly, there are thermal power stations, which contribute an insufficient 15.37%. More alarming was the fact that only 1.44% of the generation came from non-conventional sources.
But there was a time when hydroelectric power represented the future in Ecuador. During the government of Rafael Correa (2007-2017), eight plants were built, the most important being Coca Codo Sinclair (2016), developed by the Chinese state-owned company Sinohydro and valued at US$ 2.24 billion. However, apart from the large investments, Correa's administration made the mistake of installing the hydroelectric plants in a single hydrological zone and therefore, droughts affect all of them equally.
“Ecuador is one of the countries with the largest number of rivers per square meter. So, it was not unreasonable to resort to hydroelectric resources; however, the big mistake was not to also invest in the thermal park. We know that the consumption of hydroelectric energy is cheaper and perhaps, for that reason, Correa's government decided to build more plants at the time,” Jorge Jaramillo, an engineer expert in renewable energies and CEO of Tenaz Energy, told AméricaEconomía .
The whims of nature are compounded by human negligence: in 2022, the Ecuadorian Electric Corporation (Celec) revealed to Infobae that since 2012, Sinohydro had concealed the fact that the turbine distributors at the Coca Codo Sinclair power plant had around 8,000 cracks.
“In addition to having structural flaws, Coca Codo Sinclair is a run-of-river hydroelectric plant. That is, it does not have a reservoir and therefore depends on the weather conditions. If it does not rain, electricity production falls, something that has worsened because we are experiencing more months of drought than usual,” said Jorge Luis Hidalgo, general manager of GreenPower International for AméricaEconomía .
With all this background, the electricity crisis finally broke out in October 2023, when Guillermo Lasso's government announced the start of the first nationwide blackouts to avoid an "oversaturation" of the electrical system.
By April 2024, with Daniel Noboa already in power, several power outages occurred without the citizens having been warned in time. President Noboa responded by accusing 21 officials of his administration of “sabotage,” including the then Minister of Energy, Andrea Arrobo.
In the following months, the Ecuadorian government has pushed for welfare solutions, such as announcing that electricity bills for households that consume less than 180 kWh between December 2024 and February 2025 will be free. The choice of this period is not a coincidence: on February 9, Ecuador will hold new presidential elections and Noboa fears that the electricity crisis will affect his re-election ambitions.
However, a long-term management program for the electricity crisis is still not on the horizon. For Hidalgo, although it is a structural problem that predates Noboa, the truth is that the government did not take the necessary precautions.
“We saw in real time how the flow of water entering reservoirs such as the Mazar hydroelectric project was falling. Once the entire reservoir was consumed, they only made the decision in September to introduce 12-hour blackouts. When we had 30 or 20 meters of reservoir, they were able to rationalize the light in one or two peak hours, but no technical decisions were made,” he explains.
Along the same lines, Jaramillo believes that the lack of prevention has been going on for a long time. Since the inauguration of Coca Codo Sinclair in 2016, Ecuador has not developed any more large-scale hydroelectric or thermal projects. Added to this is the country's large public debt: by the time Noboa won the elections, there was already a deficit of US$4 billion in the budget for 2024.
“What we can blame Noboa for is that the government has not reported the crisis clearly. New decisions are made every week about the blackouts and this creates a feeling of unrest that makes people question whether climate change is the only reason,” he says.
There was also an over-reliance on electricity imports from Colombia. The maximum interconnection capacity between the two countries is 450 megawatts (MW), which covered 10% of Ecuador's demand. However, its neighbouring country was forced to restrict the sale of hydroelectric energy due to droughts.
Finally, the final blow came on September 30, when the delivery of thermoelectric energy was suspended. Gustavo Petro's government justified the measure by arguing that Colombia is using the thermal park intensively, which could lead to maintenance stoppages at the power plants. The only option left open was to resume energy exports if they "make use" of other energy sources that are not essential to cover the total domestic or national demand of the coffee-producing country.
“After Colombia decided to cut off our electricity supply 100%, Goncalves made a new mistake. Shortly after, he decided to reduce the number of hours of blackouts, saying that the Mazar reservoir had improved by two or three meters due to some rain. That was foolish, because later, under pressure from the industrial sector, they decided to increase the blackouts for residential areas to 10 hours again. And so, they played with people's hopes,” Hidalgo criticized.
THE CONTRIBUTION OF THE TURKISH BARGE
In mid-September, Celec revealed that Ecuador had an energy deficit of 1,090 MW. By then, Noboa's government had opted for alternative methods such as renting the electric barge Emre Bey, owned by the Turkish company Karpowership.
It is worth noting that the vessel's lease is worth US$ 114 million and it has been in commercial operation since September 17. Despite high expectations, the barge only provides 100 MW, which is far from covering Ecuador's energy deficit or even replacing Colombia's contributions.
Goncalves had promised to rent a second barge in October. However, his successor, Inés Manzano, cancelled the project because the vessel did not meet the “necessary technical requirements”. The Ecuadorian government then turned its attention to thermoelectric energy.
“This is the fastest solution the country has. That is, generating electricity from diesel, gas or petroleum derivatives. In a similar way to all the generators that now have a lot of business in the country. Until we commit to this approach, we will continue to depend on the purchase of electricity from Colombia, a country that has sold us the kilowatt for as much as US$ 0.60,” explains Jaramillo.
These high costs illustrate Ecuador's continued dependence on hydroelectric plants. In contrast, according to the Colombian Association of Electric Power Generators (Acolgen), the country currently has the sixth cleanest electricity matrix in the world: 68% of energy comes from hydroelectric sources, but 30% is also provided by thermal parks. The remaining 1.1% is shared by cogenerators, as well as solar and wind energy.
At the regional level, this trend is replicated in other countries. According to Medardo Cadena, advisor to the Executive Secretary of the Ecuadorian branch of the Latin American Energy Organization (OLADE), water sources generate almost 50% of the energy in Latin America and only 29% of the available resources have been used. However, this has not been an excuse for many countries to successfully diversify their energy matrix.
“Peru has a significant wealth in the supply of natural gas and that is a thermal support base that definitely contributes when the country faces situations of extreme drought. Now, there are also countries that have anticipated the incorporation of renewable energies. The case of Uruguay comes to mind, whose matrix is based on wind generators and biomass,” Cadena told AméricaEconomía , within the framework of the PECIER-FISE International Electric Sector EXPO in Lima.
According to Cadena, Uruguay, like Chile, turned to alternative energy sources because they did not have significant hydrocarbon deposits. In addition, their governments understood the risk of relying on volatile oil and natural gas prices. “What happened to Chile when Argentina suspended natural gas exports? That marked a major blow in its energy history, so they began to exploit the fact that they have the highest solar radiation in the world,” Cadena added.
The OLADE representative also points out that energy integration between countries is extremely important to avoid deficits. In this regard, Argentina and Uruguay maintain a solid relationship, through which Buenos Aires provides natural gas and Montevideo, wind energy. Cadena maintains that Ecuador should strengthen its ties with Peru to obtain greater energy contributions.
“If there had been an interconnection between the two countries, which is currently being built and would be operational in 2027, there would have been the possibility of using and taking advantage of the hydrological complementarity that Ecuador and Peru have,” says the spokesperson. Cadena is referring to the Lima Declaration, a document signed in October 2022 that resolutely supports the 500 kilovolt (kV) Peru-Ecuador Interconnection project, among other initiatives in favor of regional energy development.
THE END OF MINING SUBSIDIES
The last important announcement by the Ecuadorian government was made on October 15, when President Noboa announced that the electricity subsidy for mining companies was being cancelled. “Mining companies in Ecuador consume more energy than a hospital needs to operate. And yet, their energy rates have been subsidized by the State,” the president declared.
Until then, the Mirador copper mine, managed by the Chinese-owned company Ecuacorriente, and the Fruta del Norte gold mine, operated by a subsidiary of the Canadian company Lundin Gold, paid between US$0.054 and US$0.081 per kilowatt hour, depending on the time of consumption.
Since these companies made expensive investments in high-voltage cabling infrastructure to operate their transformer chambers, the Ecuadorian State decided to give them a special subsidy. This explains why both foreign-owned mining companies paid low electricity rates compared to the US$ 0.10 paid by residential consumers who receive energy from low- and medium-voltage lines.
Shortly before the end of the subsidies, Jorge Luis Hidalgo had this to say: “This country gives away energy to the big mining companies and what they consume is no small thing: a single company consumes the equivalent of 250,000 homes or a population of one million inhabitants. How do you think a family that saw its business go bankrupt due to damage to its electrical equipment feels about this situation?” Hidalgo asked.
