Yahoo Finance Everything Went Dark in Ecuador After a Series of Energy Errors
(Bloomberg) -- Traffic lights, elevators, refrigeration and air conditioning stopped working. Subway passengers had to abandon wagons and walk to stations through the unlit underground tunnel to exit.
Most Read from Bloomberg
CDK Tells Car Dealers Their Systems Likely Offline Several Days
Putin’s Hybrid War Opens a Second Front on NATO’s Eastern Border
Hedge Fund Talent Schools Are Looking for the Perfect Trader
The entire nation of Ecuador lost power for hours this week, exposing the depth of an energy crisis compounded by years of underinvestment and errors.
Ecuador has plentiful energy resources and shouldn’t have problems keeping the lights on. Steep rivers cascade down the Andes and it has robust oil reserves. The problems are homemade, according to Energy Minister Roberto Luque.
“This event is a true reflection of the energy crisis we are going through,” he said, blaming the recent outages on a lack of investment in both energy generation and transmission.
In April a drought forced major hydroelectric plants offline. Then heavy rains came and threatened turbines at Coca-Codo Sinclair, the nation’s biggest power plant, with a surge in sediment. As a result, Coca-Codo Sinclair and other hydoelectric facilities went into emergency shut downs.
The same erosion forced private pipeline operator Oleoducto de Crudos Pesados Ecuador SA to shut down and declare force majeure in a development that caused some oil fields to halt output.
Overwhelmed Grid
On the campaign trail last year, President Daniel Noboa identified the problems with domestic transmission and pledged investment in the industry to resolve them.
Just weeks after taking office in November he pushed a bill through Congress to eliminate blackouts. He wasn’t celebrating for long. In April the government had to announce that the lights would go off at daily intervals amid a severe drought.
Noboa fired his young energy minister Andrea Arrobo and blamed her for “sabotage,” alleging she was part of a cabal of officials who had hidden warnings of impending blackouts. Luque, at the time a public works minister grappling with a crumbling road network, had her job added to his portfolio.
The most recent major blackout was in 2016, when putting Coca-Codo Sinclair online briefly overwhelmed the grid. Previously in 2004, another national outage had led industry experts to design a plan to safeguard the grid against this type of event. It was never carried out, Luque said.
In South America, a similar blackout struck Argentina, Brazil, Paraguay and Brazil in 2019. Ecuador’s problems are mirrored around the world as aging power grids struggle to deliver reliable power amid surging demand for electricity.
Extreme Weather
The global fight to rein in climate change means more aspects of people’s lives are running on electricity, but power infrastructure has been slow to keep pace. Utilities have faced challenges building long-distance transmission lines that are needed to carry power from new plants. That leaves cities dependent on existing generation sites and vulnerable to outages when they go down.
All of this has been exacerbated by extreme weather events triggered by climate change. Heat waves that spur millions of people to turn on air conditioners can overwhelm utilities’ ability to deliver enough electricity. Stronger hurricanes and raging wildfires can knock out power lines. And massive rainstorms like the one that drenched Ecuador are triggering floods that can damage energy infrastructure including hydropower plants.
While former President Rafael Correa, who was in office from 2007 to 2017, spent heavily on hydroelectricity, including Coca-Codo Sinclair, investment in upkeep for thermoelectric plants lagged and left the system highly reliant on adequate rainfall.
His 2008 constitution left the electrical industry a state-owned “strategic sector” and limited the options for private investment. Power bills are subsidized, reducing the incentive to save. The heavily indebted country is also reliant on the International Monetary Fund and other multilateral lenders, and at the same has pledged to trim spending to cut the deficit, making investments difficult.
“You can’t correct in a year what hasn’t been done in many years,” Luque said.
--With assistance from Will Wade.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
