Is the threat of power outages to blame for the rise in energy demand?

The demand for electricity in Ecuador, that is, the appetite of the commercial, industrial, residential sector, among others, for energy consumption, increased by 8.47% in 2023. This is the second highest percentage in the last six years, i.e. in the period 2017-2023. Only surpassed by growth from 2019, when stated demand grew by 11.58%. These data are in contrast to what happened in 2020, the year of the pandemic and which was also the worst year in this period for electricity demand, since this item fell by 2.90%.

Could demand be the deciding factor in the problem? fainting What threatens the state?

Although these figures published by the National Electricity Operator (Cenace) reflect a high growth in the past year, experts say that this growth is not unusual, as the Government says, but is quite expected.

The government declares a state of emergency in the power sector in order to speed up energy contracting processes

According to Alberto Acosta Burne, editor of the publication weekly analysis, The electrification master plan indicated that there would be a higher annual growth rate of 5%. However, this did not happen, but the growth was lower, especially after the pandemic (slightly less than 3%). He assures that if the economy had grown as stated in the Electrification Masterplan, blackouts would have arrived much sooner.

For Acosta Burne, the attitude of the Minister of Energy, Fernando Santos, who tries to blame the problems in electricity production on the higher demand for energy or the lack of rain, is not logical. The real problem – he believes – is that electricity production has not increased significantly. “It’s a problem of lack of investment because the economy was bad.” Ultimately, high growth in 2023 is due to lagging demand.

According to Acosta Burneo, the largest increase is seen in the commercial sector with 8.8% accumulated from July 2022 to July 2023. In the same period, the residential sector grew by 5.2% and the energy demand in the industrial sector is 4.5% .

Fernando Salinas, an energy analyst, agrees that the increase in demand last year is due to the fact that the Ecuadorian economy has not recovered significantly or had an immediate recovery effect after the pandemic. “Now we’re only seeing growth.” It assures that, on average, what is outlined in the General Electrification Plan is fulfilled. In this sense, he assures that higher demand is not the cause of electricity problems, but the lack of investment in new generations. In addition, the issue of maintenance of thermal power plants, many of which are very old, has not been effectively resolved.

There is a new drop in the production of hydropower plants, which is already 76%; Meanwhile, there are no clear announcements about whether there will be a power outage or not

It is true that Ecuador is going through a very complex moment. Demand has increased, hydropower production has dropped from 90% to 65%, a state of emergency has been declared in the power sector in order to try to contract solutions with thermal generation and even gas imports in record time, while Colombia is expected to continue selling us, at least until November, totally expensive energy, especially during peak hours. Namely, in the months of August and September, the growth of thermal energy production was recorded by 57.26% and 83.94%, respectively, while the production of hydropower plants in those same months was significantly reduced by 11.10% and 23.26%, respectively.

Meanwhile, the authorities have already started asking citizens to use less energy. Proof of this is the recent campaign launched by the public company Corporación Nacional de Electricidad (CNEL), which recommends that household appliances are not left switched on or plugged in at home.

And the residential sector is the one with the highest consumption, according to data managed by the Agency for the Regulation and Control of Energy and Non-Renewable Natural Resources: it represents 33.4% of the billed from July 2022 to July 2023. Industry follows the sector with 25%, while the commercial sector represents 17 .2% of demand. According to these data, in this period the residential sector is the one that consumes the most energy, which is probably related to the particularly warm climate on the Coast. Housing demand increased by 5.2% in that period. As for the industrial sector, it grew by 4.5 percent. And commercial has the highest growth of 8.8% on an annual level, which confirms a higher level of activity.

Will there be a power outage? “I can only say that there is a well-designed plan, and we freely believe that there is none,” says the Minister of Energy

In any case, it is clear that the issue of generation was not resolved as it should have been. According to Acosta Burne, although the government of Guillermo Lasso tried to open up to foreign investments, there was not much interest, certainly because of political problems, but also because of distortions in the tariff system. He assures that since the regime of Lenín Moreno, instead of investing in public companies, they have been deprived of liquidity. The fact is that the governments did not have the funds, but they also failed to get private investments.

Salinas, for his part, says that after evident problems, efforts should be made to increase energy production and special care should be taken during dry periods. He admits that the Government may have had problems with fiscal resources and that, therefore, decisions were not made expeditiously. And he assures that there must be a middle solution, in which there are public investments to launch projects that are almost ready, such as Toachi Pilatón. But also open the possibility of public-private alliances or concessions in the power sector.

There are several projects in preparation that were not completed in the last governments. Combined block of renewable energy sources, of 500 MW; the Machala combined cycle thermogas, the new thermogas project, Toachi Pilatón, the capture of associated gas in the Amazon and increased gas production at Campo Amistad.