Ecuador is currently grappling with a severe energy crisis, largely driven by a combination of environmental factors, poor policy decisions, and an overreliance on hydropower. The country’s electricity sector is heavily dependent on hydropower, which accounts for about 70% of the energy supply.
However, a prolonged drought has significantly reduced water levels, causing hydropower production to fall drastically. This has led to daily rolling blackouts, with power cuts lasting from 4 a.m. to 11 a.m. and 3 p.m. to 10 p.m., crippling the economy by limiting access to electricity for most of the day.
The blackouts have had a devastating impact on Ecuador’s economy, leading to widespread job losses and business closures.
The Labor Ministry reports that over 3,500 jobs have been lost due to the disruptions, with small and medium-sized enterprises bearing the brunt of the effects. The economic cost is estimated to be around $2 billion, and many businesses have been forced to rely on diesel-powered generators, undermining Ecuador’s image as a low-carbon economy.
This highlights the urgent need for the country to invest in alternative energy sources and diversify its energy mix to prevent further economic damage.
The energy crisis is exacerbated by issues with the country’s key hydroelectric infrastructure, such as the Coca Codo Sinclair dam. Inaugurated in 2016, this dam was meant to provide 30% of Ecuador’s electricity needs. However, due to construction faults, the dam is facing erosion and sediment build-up, which has hindered its efficiency.
Ecuador Faces Severe Energy Crisis with Rolling Blackouts, Job Losses, and Economic Damage from Drought
Furthermore, the dam’s capacity has been reduced to just 30% due to the ongoing drought. Despite being warned about the potential impacts of the El Niño weather pattern, the government failed to adequately prepare for the diminished rainfall in the Amazon, where most of the country’s hydropower facilities are located.
In addition to environmental factors, structural problems within the energy sector have contributed to the crisis. The government has been slow to invest in necessary infrastructure and has neglected the development of new energy projects since the completion of the Coca Codo dam.
This lack of planning and implementation of strategic energy development plans has left the country vulnerable. Despite previous efforts to diversify the energy sector, including plans to develop solar and wind power and maintain thermal plants for backup capacity, successive governments have failed to follow through on these initiatives.
To address the crisis, President Daniel Noboa has taken steps to improve the situation, including declaring a state of emergency for the energy sector and introducing power cuts in April. However, his efforts have had limited success. He has invested in floating thermoelectric plants and incentivized private investment in energy projects, but the country’s energy production remains insufficient.
The lack of funds due to Ecuador’s broader economic challenges, including a $4 billion budget deficit for 2024, has hindered more substantial investments in thermal plants and other energy solutions. Moving forward, Ecuador needs substantial private sector investment in its energy sector to secure a more sustainable and diversified energy mix.
