Ecuador invests in renewables but does not leave fossil fuels behind

RIO DE JANEIRO, BRAZIL – Guillermo Lasso’s government seeks to attract investors to build and operate power generation and transmission projects in Ecuador.

On December 10, 2021, the Ecuadorian regime opened the call for bids for three Public Selection Processes (PPS).

It would allow them to meet the objectives to 2031, which involves implementing projects that take advantage of water resources, as well as solar radiation and wind, as stated in the Electricity Master Plan (PME).

The first of these tenders solicits investors for a block of clean energy projects (hydro, wind, solar, and biomass) with a total capacity of 500 megawatts, to be located throughout the country.

The second one seeks to secure the energy supply by constructing and operating a 400 MW natural gas thermoelectric power plant.

The third one is focused on constructing a clean energy connection line between the interconnected national system and the isolated electric systems of the oil sector in the east of the country.

Private investment is expected to amount to US$13 billion over the next ten years. For the time being, the bids for these three public selection processes will receive some US$1.8 billion.

Other hydroelectric projects will follow, such as Cardenillo, which requires an investment of US$2.2 billion, and Santiago, whose budget is around US$3 billion, the Ministry of Energy told Diálogo Chino.

Currently, more than 90% of the energy produced in Ecuador comes from hydroelectric sources.

Rafael Soria, a researcher on the subject of renewable energies and professor at the Universidad San Francisco de Quito (USFQ), considers it opportune for the State to seek this diversification of energy production, given the potential effects of a climate change that so far leaves more doubts than certainties about what could happen in the medium and long term.

“Some studies say that Ecuador will be wetter; others say it will be drier. The idea is to diversify the matrix so as not to depend on a single resource that could be affected in the long term by climate change,” Soria told Diálogo Chino.

ECUADOR’S ENERGY ON THE MOVE

After six months, the initial call has generated interest from dozens of potential foreign investors, according to José Medina, undersecretary of Power Generation and Transmission at the Ministry of Energy.

“Around 140 people (interested) have accessed the Ministry’s portal, but of these, there are currently 25 registered who have already purchased the right of access (to the bidding documents),” the official told Diálogo Chino, which confirmed that those interested will be able to send their offers until October 28 of this year and the winners of these awards will be known around the fortnight of January 2023.

Those selected will build the works or execute the jobs defined on the project and will have a concession right: 30 years for the hydraulic works; 25 years for the wind and photovoltaic works; and 20 years for the biomass works (generation of energy from the burning of plantations), according to Medina.

In 2021, Ecuador’s electric power generation system produced 27,000 gigawatts per hour.

Of that energy, 92% was produced by hydroelectric plants, 7% by thermoelectric plants, and the remaining 1% corresponds to energy from non-conventional projects such as wind farms and photovoltaic technology, according to Ministry of Energy records.

Ecuador has 16 hydroelectric plants, including large, medium, and small plants. There are also three solar energy capture sites and three smaller wind energy sites.

Last April 30, Lasso participated in the signing of an investment contract to promote the 110 MW Villonaco III wind project, to be built at the Huairapamba site in Loja.

Villonaco I, financed by the China Development Bank and built by Xinjiang Goldwind Science and Technology Company Ltd, became Ecuador’s first wind farm when it opened in 2013.

But it is located in the protected Hoya de Loja Occidental forest, and violations of local environmental laws have generated criticism from regional NGOs.

Now, foreign direct investment is being sought for the entire cost of the project’s US$181 million third phase. With 110 MW, it will be the largest wind power plant in the country.

The second tender, for the 400 MW natural gas plant, currently has 65 interested parties, while the third, for works related to the northeastern transmission system that will connect the oil operations to the national grid, another 44 have submitted their interest, according to the Ministry of Energy.

For Medina, the tenders will support the country’s energy development. “The State no longer has to worry about investing in all the infrastructure in the electricity sector, but will promote the private initiative to be the one to invest in the generation we need ten years from now.”

STUDIES ON ENERGY POTENTIAL

According to José Medina, the Ministry of Energy promotes the bids based on studies and compilation of information from years ago that guarantee which locations have abundant solar radiation and usable winds.

He estimates that Ecuador has an exploitable potential of 660 MV photovoltaic (from solar energy), which was identified, according to Medina, with a “multi-criteria analysis and available secondary information, considering places with a high level of irradiation, the feasibility of connection and areas that do not present environmental, social, etc. limitations”.

Short-term wind potential is around 884 MW, particularly in Guayas, Chimborazo, Loja, Cotopaxi, Pichincha, Imbabura and Carchi; and in the Galapagos Islands, 7 MW. The nine wind projects identified by the government have an electricity generation capacity of between 25 and 100 MW each.

“The maps of wind, hydroelectric and solar resources were made preliminarily by the National Energy Institute (INE) from 1981 to 1985, and subsequently several actions have been carried out to validate what existed, including the preparation of updated maps,” Juan Peralta, professor at the Faculty of Mechanical Engineering and Production Sciences of the Escuela Superior Politécnica del Litoral (Espol) and specialist in renewable energies, told Diálogo Chino, who also asks and answers: “Does Ecuador know its resources qualitatively, spatially located? Does it know how much electricity can be produced from these resources? The answer is no.”

However, Peralta believes that there are more possibilities for harnessing solar energy, both because of its ease of implementation in various areas of the country and because of its more accessible costs than wind technology. “If I compared what was happening in 2010 with what was happening in 2021, there has been a significant decrease in costs,” he says.

It is also reflected in a 2019 Inter-American Development Bank report, which projected by 2023, “a reduction in module (solar panel) prices to US$0.15-US$0.18.” In 2017, modules from major suppliers cost an average of US$0.45.

Another factor that the government must consider, says Peralta, is the high cost of building hydroelectric power plants in areas that are difficult to access, whose distances from population centers or national grid distribution points also increase the possibility of energy losses in transmission.

Given Ecuador’s existing hydroelectric infrastructure, the most feasible sites, mainly in the country’s east, have already been exploited.

“It is not only a matter of diversifying resources but also the locations where they are intended to be used for generation. The largest remaining hydroelectric potential still to be developed is in the Amazon Basin. And the largest projects in the Amazon Basin are farther and farther away, especially in the Southern Amazon. So we have to think about other projects based on other renewable energies,” says the USFQ professor.

Another source to generate electric energy, the specialist refers to, is the one that starts with the burning or combustion of organic matter, such as sugar cane residues.

However, the experts agree that such a system’s production, logistics, and operation chain must be precisely structured for the project to be viable and profitable.

For example, the area of the plantations must be close to the boilers where the material will be used, and the turbines that use the steam to generate electricity must be strategically located with the transmission points, among other details.

The government states that they have thought about this and other factors to take advantage of the maximum potential of non-conventional ways of generating electricity. “Everything is planned and optimized so that losses are minimal,” says Medina.

With information from Dialogo Chino