Key Findings
- Ecuador has lost an estimated US$7.5 billion due to its ongoing energy crisis. This is the consequence of up to 14-hour daily blackouts undermining industrial and service sectors. More than 8,000 jobs have been lost in the private sector, as $12 million of economic activity is forgone with each hour of blackout.
- Ecuador’s 70–80 percent reliance on hydroelectric power has left the country vulnerable during the current regional drought. The lack of precipitation has contributed to a daily energy deficit of 1,000–1,500 megawatts, and subsidies have exacerbated the problem. The blackouts have exposed infrastructure weaknesses after more than two decades of mismanagement, unfinished projects, and corruption.
- Experts—including policy analyst and lawyer Gabriella Guerrero—argue for an immediate shift towards public-private partnerships to address the crisis. Streamlining permits, allowing energy prices to rise, and utilizing more private-sector energy production could improve supply and reduce blackouts.
The first month of the most severe energy crisis for Ecuador in three decades has led to $4 billion in economic losses for the industrial sector and $3.5 billion in the service sector. Nationwide blackouts have reached up to 14 hours daily. There have also been a couple of full days without electricity for the three industrial zones in the Quito metro area. Ecuador already experienced two-hour daily blackouts at the end of 2023 and up to eight hours without electricity per day in June 2024.
Ecuador’s Business Committee estimates that the private sector loses about $12 million per hour without electricity, and over 8,000 formal jobs have already been lost. Further, the lack of governmental coordination and assertive communication has led to an unpredictable schedule of power outages.
President Daniel Noboa has consequently faltered in public approval. In February 2024, Noboa’s approval rate was 81 percent. Now it is 51 percent. The energy crisis has become one of the top three concerns for Ecuadorians (47.2 percent), behind only insecurity and unemployment (61.9 and 55.2 percent, respectively).
The Noboa administration, however, is not the sole party responsible for the energy crisis. Since the energy sector is a strategic and state-controlled area, energy supply transcends presidential terms and incumbent government agendas. The prolonged regional drought, affecting South America, has exposed a series of decisions and actions that have led to the current dysfunction. As the saying goes, when the tide goes out, you see who has been swimming naked.
This investigation briefly reviews Ecuador’s energy policy over the past 20 years, which has culminated in this unnecessary crisis. That is particularly the case if we consider the country had an energy surplus just a decade ago. To bring light to the situation beyond publicly obtainable documents, the Impunity Observer has interviewed Gabriella Guerrero, a policy analyst, lawyer, and university lecturer. She has legal experience in energy, mining, and oil, as well as in public-private partnerships.
Ecuador’s Energy Matrix
Ecuador’s energy supply is chiefly from hydroelectric (70–80 percent) and thermoelectric (20–30 percent) sources. Renewable, unconventional energy sources—such as solar and wind power—only contribute 3 percent. During periods of heavy rainfall, hydroelectric plants can generate up to 90 percent of the country’s electricity and, if surplus exists, even export power to neighboring countries. Hydroelectric daily production, at its full potential, can exceed 5,000 megawatts.
The installed capacity of thermoelectric plants (natural gas, diesel, or liquid petroleum) could account for a maximum daily production of 3,000 megawatts. However, due to poor maintenance, a lack of spare parts or fuel, and partial operation, these plants have only provided 641 megawatts per day in 2024—so not even a third of their planned capacity.
In times of drought, hydroelectric plants rely on reservoirs and dams, but even the largest dam, constructed between 2012 and 2016, has proved insufficient. It was designed to store water for up to 45 days without rainfall, to meet consumption levels at the time. In the past decade, however, national electricity consumption has increased by 40 percent.
National energy demand is almost 6,000 megawatts per day. However, the current drought is, according to the Noboa administration, the worst in 61 years, and it has created a daily energy deficit of 1,000–1,500 megawatts.
To resolve this and ensure energy security in the short and mid term, Ecuador would need to invest $10.4 billion by 2032. This figure accounts for 9 percent of the country’s GDP.
How Ecuador Got into the Crisis
The 2008 Constitution designates the responsibility for providing electricity and promoting energy efficiency to the Ecuadorian state. While the state can delegate public services to mixed companies or public-private partnerships, energy is a strategic sector. That means the state has the legal authority to regulate, control, and manage energy in all its forms.
Guerrero explains: “Ecuador relies on a National Energy Plan, which is usually updated each seven years. Nevertheless, government administrations have failed to comply with all the stated projects … The lack of efficient management by authorities to kickstart projects and provide permits on time could be one factor that has deepened the crisis.”
Under former President Rafael Correa’s term (2006–2017), the state created two public companies: CELEC and CNEL. CELEC, founded in January 2010, focused on new power generation projects and energy production. In contrast, CNEL, created in 2013, was responsible for electricity distribution and commercialization.
These companies have decided which electricity generation projects to pursue. They have also managed thousands of public procurement processes for delegating infrastructure construction or maintenance. From 2007 to 2017, Ecuador built 14 hydroelectric plants, costing a total of $11.4 billion, and increased public spending on thermal energy by 38 percent. Many of these projects, however, remain unfinished due to technical failures or supplier noncompliance.
Coca Codo Sinclair: The White Elephant That Failed
One of the most significant cases is Coca Codo Sinclair, a white-elephant project from Correa’s government. The mega-project, costing around $2.7 billion, consisted of three components:
- A water intake facility that diverts water from the Coca River, one of the largest rivers in Ecuador’s Amazon region.
- A 24.5-kilometer (15-mile) tunnel through which water is channeled to an intermediate reservoir, where it is released under high pressure to the turbines.
- A powerhouse inside the elevated terrain with eight turbines and eight pressure distributors.
Although the plant was designed to provide 1,500 MW daily to the national grid, it has never reached its full potential since it began operating in 2016. In the past year, it has only produced an average of 500 MW. The main problem is the more than 7,600 cracks in the plant’s water distributors—steel structures that transfer water to the turbines.
Audits show these issues date back to 2014, two years before the plant even started operations. The problems have been supposedly fixed four times, but they keep reappearing and worsening. Furthermore, the Chinese contractor, Sinohydro, did not report compliance with ASME standards—required for such a mega-project—during construction.
As a result, CELEC has not accepted the Coca Codo Sinclair project and has taken the case to international arbitration. Meanwhile, the bidding process is under investigation for alleged bribery. Further, the Coca River has experienced significant erosion since 2020, prompting feasibility studies to relocate the intake facility.
Toachi Pilatón: Ecuador’s Most Costly Power Generation
Similarly, the Quijos and Toachi Pilatón hydroelectric projects have been under construction for over a decade but remain unfinished due to infrastructure failures and noncompliant suppliers. Originally contracted in 2010 to Odebrecht, a Brazilian company, Toachi Pilatón was supposed to generate 250 MW per day. However, since March 2023 it has only been able to provide 49 MW.
The regional corruption scandal involving Odebrecht revealed the company had paid $33.5 million in bribes to Ecuadorian officials between 2007 and 2016. Russian company Inter Rao then took on the project. However, in 2017, Correa unilaterally terminated the Inter Rao contract, claiming unsubstantiated delays. The company took the matter to international arbitration and, by mid-2023, won the case, leaving Ecuador with a $45 million debt.
China International Water & Electric won the tender to continue the project. After four contract extensions and nearly $1 billion in additional spending, the project remains unfinished, reportedly on account of unexpected challenges with the terrain. At this point, the project’s cost has reached $3.9 million per installed megawatt, making it the most expensive hydroelectric plant in Ecuador. Usually, an installed megawatt costs $1 million.
The Toachi Pilatón project remains incomplete, and the operational section has cracks and compromised impermeability. Its lifespan, therefore, is in doubt. However, the Noboa administration has reached an agreement with the company to expedite the work, aiming to activate the second turbine, which is supposed to contribute 68 MW from December 2024. As of this writing, that has yet to happen.
Thermoelectric Shortcomings
Thermoelectric energy generation is far from reaching its full potential due to a lack of maintenance and damaged turbines. According to the Comptroller’s Office, this is due to public contracts suffering from cancelled agreements, unqualified suppliers, and delays caused by slow payments from the Ministry of Finance. There is also the specter of organized crime profiteering from opaque, drawn-out tender processes.
For example, at the end of 2023, CELEC purchased 32 turbines to supply the Quevedo II thermoelectric plant, which requires 60 turbines to operate at full capacity. This was done through a direct purchase from the same supplier that provided the engines in 2010. Amid technological advances, these engines are no longer optimal in terms of cost and electricity generation but were acquired to fit the plant’s design.
In addition, the cost of fuel is a critical factor for thermoelectric plants. While Ecuador produces fuel oil (liquid petroleum)—the most economical fuel for the state—diesel is the most efficient for power generation.
The Termogas Machala thermoelectric plant, in contrast, operates with natural gas and can function at full capacity. However, it lacks gas supply. The country’s natural-gas production—reserved exclusively for electricity generation—suffers under the bottleneck of mismanagement and corruption. As investigative journalist Janet Hinostrosa has documented, authorities have hindered the full exploitation of Campo Amistad in the Guayaquil Gulf. It offers natural gas, but rent-seeking interests profit from imported diesel and LPG.
A Path to Overcoming the Crisis
For Guerrero, CELEC has become a key actor in decision making and conflict resolution in light of the energy crisis: “The public firm has provided technical support and managed to contract energy barges [ships] to reduce the power outages in December.”
However, according to Benjamín Chávez, director of the Renewable Energy Chamber, mafias control Ecuador’s energy sector: “public energy companies should be dissolved, and those who have led them over time must be held accountable … They are, in part, guilty of the current crisis.”
In 2023, the Attorney General’s Office began investigating the Encuentro judicial case, which implicated Albanian Mafia and two officials working under presidents Guillermo Lasso and Lenin Moreno. The case stemmed from a complaint by the Anticorruption Parliamentary Front, led by the late legislator Fernando Villavicencio. This investigation exposed how the Albanian Mafia operated in Ecuador. Those facilitating drug trafficking were found to be pressuring energy authorities to prioritize Albanian Mafia-aligned officials and suppliers.
According to the investigation and public records, two women linked to the Albanian Mafia— “Karen C.” and “Erika F.”—appeared in six consortiums operating as suppliers of electrical works. Between June 2021 and September 2022, these consortiums secured 13 contracts with CNEL, totaling $8.4 million.
This mafia network of operators has been active since the beginning of the Moreno administration (2017–2021). Though Moreno campaigned as Correa’s successor, he distanced his administration from Correísmo and its leadership. The mafia, previously operating from within the Ministry of Energy and Mining and state-owned enterprises, presumably began to exert pressure on authorities to maintain kickback operations (and likely money laundering).
For example, in December 2022, CNEL’s then–General Manager Antonio Icaza was kidnapped in Guayaquil. Kidnappers asked him to pay all debts to suppliers and to refrain from making administrative changes.
However, the Albanian Mafia are hardly the only saboteurs within the energy system. Collective labor contracts protect unproductive workers from CNEL, CELEC, and state oil company Petroecuador and represent millions of dollars in annual costs to the state. Namely, 97 percent of CNEL workers belong to a union with labor benefits that add up to $78 million annually, on top of the $100 million already allocated to salaries.
Time to Overhaul Ecuador’s Energy System
The Ecuadorian state charges 4–10 cents per kilowatt-hour to users. Even according to recent government estimates, however, the rate should be between 12 and 15 cents per kilowatt-hour. This price gap inflates demand and costs the state an average of $1.1 billion annually.
Until recently, private electricity generation projects had a maximum capacity limit of 10 MW. However, on October 28, 2024, Congress passed an urgent economic law, expanding the limit to 100 MW. That is just a start. To begin private energy generation projects or expand existing ones, permits still must be obtained.
According to the Ministry of Energy and Mining, these permits can take as little as 15 working days. However, some renewable energy projects have experienced delays of longer than two years. Guerrero, refers to the projects proposed in 2022, which were recently approved by authorities: “They will generate 400 megawatts, which is a significant contribution to overcome the crisis.”
To go further, Guerrero believes “the government should prioritize public-private partnerships and provide more opportunities for private energy production. Ecuador can adopt a mixed energy system by including the private sector in the production to increase supply and service provision quality.” Her account suggests the need for flexible energy prices, reduced permit wait times, and open access to the monopolized energy distribution network.
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