Ecuador’s energy outlook has undergone a drastic change in recent times. The country is fast moving from conventional sources of energy to more clean, renewable-based energy. There is a shift from a heavy reliance on fossil fuels to nearly complete self-sufficiency through renewable energies, particularly hydroelectric power. The country plans to reach energy self-sufficiency through clean production and potentially export surplus energy to its neighbouring countries. It is also improving its energy transmission infrastructure to allow massive loads to be carried more efficiently at high-voltage levels.  

Sector overview and structure

Ecuador’s power sector was majorly privatised during the mid-1990s. However, due to dissatisfaction with the level of investments made by private players in the sector, the government in 2008 decided to re-nationalise the sector and bring in under state control.

The consolidation process, which was the result of a constitutional mandate passed by the government in July 2008, led to the establishment of the state-owned Corporación Eléctrica del Ecuador (CELEC EP) and Corporación Nacional de Electricidad (CNEL). CELEC manages power generation, transmission (through Transelectric), distribution, commercialisation, and the import and export of electric power in the country. CNEL is responsible for electricity distribution and is the largest power distributor in the country.

Today, Ecuador’s electric system comprises the Sistema Nacional Interconectado (SNI) or the main national interconnected system, and Sistema No Incorporado, or the isolated system. Ministerio de Electricidad y Energía Renovable (MEER) or the Ministry of Electricity and Renewable Energy (set up in 2007) is responsible for overall planning and development of the sector. The main regulatory body, which regulates and controls all areas of the electricity sector in Ecuador, is the Consejo Nacional de Electricidad (CONELEC) or the National Electricity Council. In 2015, the government reorganised the functions of CONELEC and renamed it Agencia de Control y Regulación de Electricidad (ARCONEL).  

Trends in power sector growth

As of 2021, the country’s electricity sector comprised 9,586 MW of installed capacity, of which 93 per cent was contributed by domestic power plants and the rest was interconnection capacity. Of the total capacity, 55 per cent was based on hydropower, 36 per cent on thermal, and about 3 per cent on renewables. The peak demand in the SNI reached 27,367 GWh in 2021, 1.36 per cent higher than the previous year.

Ecuador’s transmission network comprised about 6,268 km of line length and 16,886 MVA of transformer capacity at the 138 kV to 500 kV voltage levels as of 2021. The majority of the network, or about 50 per cent of the total line length, comprises 230 kV lines. During 2017–21, 610 km of lines were installed at the 500 kV level. During 2021, the 138 kV Pimampiro substation, the 138 kV La Paz substation and the Alluriquín sectioning substation projects were operationalised. The government also delivered the new 230 kV Quevedo-San Gregorio-San Juan de Manta transmission system during 2021. Besides this, the interconnection of the Jivino III generation plant to the Sistema Eléctrico Interconectado Petrolero (SEIP) or the Oil Interconnected Electric System was completed.

Recently in December 2021, Transelectric implemented the WAMS Comprehensive Platform (Extended Area Monitoring System), which allows the utility to monitor operating conditions and obtain information from the Sistema Nacional de Transmisión (SNT) or the National Transmission System. The project involved an investment of USD3 million and helps improve the operation of the SNT using Transelectric’s existing telecommunications network.

Power sector expansion

The country’s hydroelectric plants, which are located in a single basin—the Amazonian slope—are unable to generate enough electricity throughout the year. The capacity of reservoirs in many of the hydroelectric plants is also insufficient to see the country through the dry season. Thus, the government is looking to complement Ecuador’s hydro capacity with renewable-based generation, both wind and solar, to meet the power demand of its population.

Under its Plan Maestro de Electricidad 2018–27, it is predicted that the country’s power demand will grow at a compound annual growth rate (CAGR) of 7.13 per cent from 21,248 GWh in 2021 to 58,898 GWh by 2031. Over the next decade, the country plans to add 5,428 MW of capacity based entirely on hydro and renewables sources. In August 2021, MERMR updated the Plan Maestro de Electricidad (PME) or the Master Electricity Plan up to 2031. Under this, an additional 1.44 GW of renewable energy capacity will be connected to the grid between 2024 and 2028.

The push to reduce the use of fossil fuels and increase generation through renewable energies, including hydroelectric plants and geothermal, biomass and wind power projects, offer several substantial investment opportunities to the private sector, and the majority of upcoming renewable plants will be bid out to private companies. The government has also announced plans to sell the Paute-Cardenillo (596 MW) hydro plant to private investors for the construction of the project.  CELEC EP has signed a service contract with CPCS Transcom for the structuring of a public selection process model for the concession to a private investor of the Cardenillo project, which has secured an environmental license from the Ministry of Environment.

Some of the other key upcoming generation projects include the 1,200 MW Santiago G8 Fase I and Fase II project (hydro), the 400 MW Bloque de Ciclo Combinado project (thermal) and the 110 MW Villonaco wind power plant project.

The government also plans to invest USD241 million in the construction of new works for the reinforcement and repowering of the SNT; USD340 million in the execution of three transmission projects—the 220/138 kV La Avanzada, the 500 kV Peru–Ecuador interconnection and the San Idelfonso projects in El Oro region; USD168 million in the expansion and strengthening programme of the SNT; and USD72.8 million to construct new transmission works with the expansion of substations.

As per the estimates of Global Transmission Research, more than 1,700 km of line length capacity and 4,000 MVA of transformer capacity are likely to be added in the country during 2022–26. Some of the key upcoming projects include the 500 kV Peru–Ecuador interconnection, the 230 kV Quevedo–Portoviejo transmission project, the 230 kV Milagro–Babahoyo transmission line, the 230 kV San Gregorio–San Juan de Manta transmission line, and the 500 kV Peru–Ecuador interconnection project.

Key transmission projects

500 kV Peru—Ecuador Interconnection Project

The project, part of the Transmission Plan 2017-26, entails establishing a 635-km-long 500 kV line from the Chorrillos substation in Ecuador to the La Niña substation in Peru. The Ecuadorian side of the project entails the construction of the 210-km Chorrillos–Pasaje and 71-km Pasaje–Frontera 500 kV lines; the 500/230 kV Pasaje substation; and amplification of the 500 kV Chorrillos substation. The interconnection is estimated to entail a joint investment of USD600 million, of which USD250 million will be financed by the Inter-American Development Bank (IaDB). The two countries are currently working on a single consulting contract for the studies and physical designs to define the location of the structures, and the civil and electromechanical designs of the line and substations. The studies were expected to be completed by March 2022.

230/69 kV Cajas Transmission System 

The project is being developed by Transelectric, a transmission business unit of CELEC EP. It entails the construction of the 230/69 kV, 2×75 MVA Cajas substation and a 230 kV, 4-km transmission line connection to the substation, at an estimated investment of USD29.6 million. The project aims to reinforce electricity supply in the province of Imbabura and in the northern part of the country. The new Cajas transmission system will help meet the demand requirements of the North Regional Electric Company (EMELNORTE) and will benefit 3,98,000 inhabitants of the Sierra Norte region. CELEC EP had received the environmental licence for the execution of the project in November 2021, which enabled Transelectric to start construction work.

230/138 kV Tanicuchí Transmission System Project

The project includes the construction of the 230/138 kV Tanicuchí substation, and the Santa Rosa–Tanicuchí and Pucará–Tanicuchí transmission lines. The investment for the project is estimated to be USD43.9 million. The project is part of the expansion and reinforcement programme of Ecuador’s Sistema Nacional de Transmisión (SNT) or the national transmission system and aims to improve the transmission network in the region of Cotopaxi. CELEC EP had received the environmental licence for the construction of the project in October 2021.

El Sistema de Transmisión Nororiental (STNO) Project

The transmission project, being developed by Ministerio de Energía y Recursos Naturales No Renovables (MERNNR) or the Ministry of Energy and Non-Renewable Natural Resources, entails the construction of three transmission sub-systems, six new substations with a transformation capacity of 539.5 MVA and 290.1 km of transmission lines at the 230 kV, 138 kV and 69 kV levels. This requires an investment of USD386 million. The Public Selection Process for the financing, construction, operation and maintenance of the El Sistema de Transmisión Nororiental (STNO) or the North-eastern Transmission System will allow for the connection of the Sistema Nacional Interconectado (SNI) or the National Interconnected System with Sistema Interconectado Eléctrico Petrolero (SIEP) or the Interconnected Electric Oil System, located in the northeast of Ecuador.

The link will enable the supply of clean energy to the oil industry. The concession term of the project is 30 years. The prequalification process began on December 10, 2021 and will end on 24 March 2022. The period for the preparation of offers is from April 19 to June 16, 2022. The period for opening technical offers is from April 19 to September 22, 2022. The evaluation of technical bids will take place between September 22 and November 22, 2022. The period for opening economic offers will be from November 23, 2022 to December 9, 2022. The project will be awarded to the recommended bidder on December 16, 2022. The execution of the project is part of the axes of Decree 238, which establishes a new policy for the electricity sector, focused on guaranteeing the future supply of energy to encourage the creation of new investment opportunities for the benefit of all Ecuadorians. In December 2021, MERNNR launched a tender for this transmission project. Recently, in March 2022, MERNNR received four expressions of interest from companies based in three countries, namely, Spain, Peru and Colombia, for the project.

The way forward

The country is looking to quickly transition to clean and green energy to meet the future energy demands of its population. It is looking to offer the private sector new investment opportunities to promote the development of a more efficient and sustainable energy matrix.

In parallel, CELEC is swiftly moving towards its goal of a better transmission network for Ecuador. Going forward, careful planning is needed by the national utility to avoid transmission bottlenecks and optimise power flows.