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Ecuador Electricity Market 2011

Industry Sector

Energy and Utilities

Published

15 February 2012

Author

Mike King

Type of News

Market

Ecuador electricity market is to increase power generation to cover with the annual increase in demand for electricity of 5 to 6 percent. Ecuador's electricity generation is highly dependent on hydro sources. Hydro sources account or 45 percent of installed capacity In 2009, Ecuador had drought conditions which forced the Government of Ecuador to diversify its supply options. United States suppliers were quick to benefit from this move and also assist in future hydro-electric projects. The Ecuador government has plans to develop several hydropower projects in the coming years and is actively seeking foreign direct investment to finance the implementation of these larger projects.


During the period 2004 to 2007, the demand for energy in Ecuador has increased although the rate of this increase has slowed over recent years. The slower growth rate in 2009 was due to severe drought conditions which cost the country an estimated US$1 billion in lost output. To address these issues, the National Electricity Council has plans to construct a total of 226 hydropower projects during the period 2012 to 2020 which are estimated to cost a total US$10.9 billion. Once completed, these projects are forecast to produce 11,818 MW. Electricity demand is currently at 3.768 MW. The government of Ecuador is at different stages of development for these projects and is currently building 15 hydropower plants which would produce 3,453 MW at an investment cost of US$5.52 billion. During the drought period in 2009, the country was forced to rely on more expensive thermo-generated energy produced by imported diesel. To cope with current electricity demands, Ecuador has also imported electricity from Peru and Colombia.


In 2008, an Energy Policy was created to improve efficiency and reduce bureaucracy. The policy allowed for more private sector involvement and investments in medium-scale projects. In this policy the development of geothermal energy, bio-diesel and bio-gas was covered. The government of Ecuador is also seeking to expand natural gas exploration and to install more wind power turbines.


Since 2010, energy demand reached 14,000 gigawatt hours (GWh) representing an annual increase of between five to six percent. By 2012, energy demand in Ecuador is forecast to total 19,000 GWh.


In July 2008, a single electricity rate for distributors was established along with the consolidation of 19 state distributors into one. The electric sector is organised with 16 main electricity generators, seven private and nine state-run or affiliated. The key players operating in the Ecquador electricity market are as follows: The Ministry of Electricity and Renewable Energy, The National Council of Electricity which develops the electric energy plan and regulates the sector. CONELEC establishes the regulations for generation companies, the transmission company, and distribution companies. The National Center for Energy Control operates and administers the system. CENACE establishes generation output by each agent, defines electricity imports, and settles payment among the sector on a monthly basis. Ecuadorian Electric Corporation that includes the electric transmission company (Transelectric) and the main public generation companies. The National Electricity Corporation was created in December 2008 to consolidate 10 distribution companies that had been reporting 40 percent losses for several years. Concessionaire companies distributing and commercializing electricity include the National Interconnected System which distributes electricity and allows energy from hydroelectric and thermoelectric plants to be distributed nationwide. Power and energy are delivered in blocks to 19 electric companies. One of the main goals of the Energy Plan is to provide electricity to 99 percent of Ecuadorians.


By December 2010, Ecuador had 206 power stations of which 82 of these were incorporated into the SNI. Approximately 44.8% of power was sourced from hydroelectric power with 50% sourced from thermoelectric plants and 11% from outside sources.
CELEC EP was created in January 2009 to administer the major state companies such as HidroPaute, HidroAgoy, TermoEsmeraldas, TermoPichincha, ElectroGuayas, and HidroNaci as business units. ElectroAustro is independent from CELEC, as well as HidroPastaza. CELEC currently generates 52 percent of the country's demand.


Ecuador is investing in the following public sector projects:


1 - Construction of transmission lines costing US$400 million in three years.;
2 - 500 kV system is being implemented to connect Guayaquil, Quito, Cocoa and Sopladora dam located near Cuenca which has received financing;
3 - Transmission system Santa Rosa-Pomasqui II;
4 - 230 kV&bull El Inga substation 230/138 kV;
5 - Transmission system Cuenca - Loja 138 kV; and
6 - Transmission system Los Lojas - Nueva Salitral, 203 kV.


In the private sector, Duke Energy produces 180 MW and represents the largest United States player in energy generation in Ecuador. Machala Power (Noble Energy) sold its assets to the GoE and left the country in May 2011.

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