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A R T I C L E I N F O A B S T R A C T
Keywords: The Ecuadorian electricity sector has undergone several changes during the past decade. The objective of this
Energy policies paper is twofold: a) to show how the Ecuadorian electricity sector has evolved from 2007 to 2017, and b) to
Electricity reform discuss the relationship between energy policies and their impacts on electricity supply, management, tariffs,
Renewable energies and the country's economy. Although oil remains as the main energy source and the leading driver for economic
Ecuador
revenue, several hydropower projects have been built or are under construction intending in part to reduce the
country's dependence on oil. The installed hydropower capacity in the country in 2017 is approximately 81%
higher than in 2007 and it is expected that, by 2018, approximately 93% of the electricity will be produced from
hydropower. Currently, biomass and biogas contribute with 1.8% of the total electricity generation, but only
0.6% of the electricity is produced in wind and solar farms. Adoption of smart grid technologies is key to
transform the Ecuadorian electricity network and to positively impact the quality of the electricity supply. The
future of the Ecuadorian electricity sector relies on the successful implementation of the new Organic Law of
Public Service of Electricity and on external financing for new energy projects.
⁎
Corresponding author.
E-mail address: marcos.ponce@uleam.edu.ec (M.A. Ponce-Jara).
https://doi.org/10.1016/j.enpol.2017.11.036
Received 23 August 2017; Received in revised form 17 November 2017; Accepted 18 November 2017
0301-4215/ © 2017 Elsevier Ltd. All rights reserved.
M.A. Ponce-Jara et al. Energy Policy 113 (2018) 513–522
Table 1
Characteristics of the Ecuadorian electricity sector in periods 1999–2007 and 2007–2017, Adapted from: (Peláez-Samaniego et al., 2007; CONELEC, 2009; ARCONEL, 2016a).
Laws and regulations Law of Regime of the Electricity Sector (LRSE), promulgated in 1996. The LRSE (2007–2015) was amended. Later, the Organic Law of the Public
Service of Electrical Energy (LOSPEE) was promulgated in 2015.
Governing Structure The electricity sector was integrated by CONELEC (in charge of regulating The new governing structure is integrated mostly by State-owned
and controlling the electricity sector), CENACE (in charge of managing the institutions and companies: MEER*, ARCONEL, CENACE, public
commercial transactions of the Wholesale Electricity Market), as well as Corporations such as CELEC and CNEL and their business units (in charge of
private and state-owned companies for generation, transmission and the generation and distribution of electricity), and a few private companies
distribution of electricity. in charge of electricity generation.
State intervention The State regulated and controlled the electricity sector. The State administers, regulates, controls and manages the whole electricity
sector (i.e., generation, transmission, and distribution).
Market model Liberalized wholesale market. Regulated wholesale market.
Electricity Prices Determined in a “spot market”. Determined by ARCONEL (annually).
* Nomenclature (all by their Spanish acronyms): CONELEC – National Electricity Council, ARCONEL – Electricity Regulation and Control Agency, CELEC – Electricity Corporation of
Ecuador, CNEL – National Corporation of Electricity, MEER – Ministry of Electricity and Renewable Energy, CENACE – National Energy Control Center.
and the country's economy. In order to reach these goals, in Section 2 because electricity produced from thermopower plants is expensive),
we examine historical and socio-political factors that influenced the via subsidies to electricity. This deficit affected the cash flow of dis-
dissolution of the Law of Regime of the Electricity Sector (LRSE, for its tribution companies, which were forced to accumulate huge debts to
acronym in Spanish), the main energy policy framework active until the wholesale electricity market (i.e., to the State, since most companies
2015, and that led to the establishment of the Organic Law of the Public were State owned). Consequently, debt was the only available me-
Service of Electricity (LOSPEE, for its acronym in Spanish). In Section 3 chanism for distribution companies to recover economic resources for
we discuss and compare the current status of the electricity sector in their operation (CONELEC, 2007b).
Ecuador with the previous period. We also present a projection of the In addition to the tariffs problem, other barriers such as high levels
evolution of the power generation capacity until 2022. Finally, in of both technical and non-technical losses (23.4% in 2006), lack of
Section 4 we describe the current status of non-conventional renewable recovery of debts from final electricity buyers (i.e., costumers) (67.3%),
energies (NCRE) and Smart Grid (SG) initiatives in the country and a high dependence on the use of fossil fuels (450 million gallons/year),
brief discussion on the driving forces that are encouraging the adoption long drought periods (especially from 2004 to 2006), increasing de-
of such initiatives is presented. pendence on electricity imports (up to 9.6%), as well as overload levels
in facilities, were some of the causes that led the electric power system
2. Evolution of the structure of the Ecuadorian electricity sector to an economic crisis (CONELEC, 2007b). Fig. 2 summarizes the main
factors that caused this crisis.
2.1. Background As a consequence of the urgency to solve the crisis in the electricity
sector, a new paradigm was considered by the Ecuadorian State in
The promulgation of the LRSE in 1996, effective with amendments 2007. This paradigm basically required the State to recover its planning
until 2015, did not provide a solid basis for establishing a liberalized role in new electricity generation projects in order to expand the
wholesale market model in the electricity sector (CONELEC, 2007a). electricity supply, as one of the tools to promote economic develop-
This law was part of a worldwide trend of commercial, economic and ment. According to this new vision, the State would be in charge of
financial globalization, which focused on the liberalization of the developing and managing large-scale power plants by using part of the
market with the intention of privatizing public energy utilities by at- State budget or by promoting public-private partnerships. The MEER
tracting private capital. According to the LRSE, the Ecuadorian State was created by Executive Decree No. 475, on July 2007, in order to
abandoned its planning role in the electricity sector and the new strengthen the governing role of the State on the electricity sector and
strategy was the promulgation of the Electrification National Plan. The to diversify the energy mix (MEER, 2014a). The Electrification Master
belief that promoted this new Plan was that the market, through its own Plan (PME, for its acronym in Spanish) was required to be compulsory
forces, principles and dynamism, would encourage new companies to rather than indicative, and the CONELEC was the institution re-
invest in electricity generation. However, the results were not sa- sponsible of ensuring that this requirement was accomplished. Legally,
tisfactory in Ecuador due to both insufficient interest of new companies these changes were possible after reforming the LRSE in 2006 (Ecuador,
and lack of fresh capital (CONELEC, 2007a). 2006). This reform helped the State to create and strengthen legal
Other types of barriers were additionally identified since this model frameworks and to generate a new institutional structure. All these
started operating. One of these barriers was the huge tariff deficit en- policies were supported by the first National Development Plan
countered in April 1999. The cost of electricity for end consumers at (2007–2010), as part of a national political transformation proposed by
domestic, industrial and commercial level was up to 44% lower than the Government (MICSE, 2016a). One of the first steps related to the
the real electricity tariff of US$ 8.24 cent/kWh (CONELEC, 2009). Due electricity sector was the approval of the Constitutional Mandate No. 15
to that deficit, the country was forced to establish a monthly adjustment on July 23rd, 2008, by the National Constitutional Assembly. The most
plan until the real was reached on October 1999. Nevertheless, the important guidelines of this Mandate (Ecuador, 2008a) were:
Ecuadorian economic crash of 1999 worsened this scenario, causing a
strong tariff reduction to a minimum value of US$ 2.5 cent/kWh. This a. A unique electricity tariff was established for each type of electricity
tariff was maintained until May 2000, as seen in Fig. 1. Since then, the consumer (i.e., residential, commercial, and industrial).
electricity tariff was steadily increased throughout different readjust- b. The State would be the only institution in charge of investing in
ment plans, but it never reached the target (real) tariff, thus producing generation, transmission and distribution of electric utilities. The
a critical financial situation on the electricity sector (CONELEC, 2009). budget for this purpose will be included in the State's Annual
The application of a real tariff was complex, especially due to the large Budget.
asymmetries in the levels of income of the Ecuadorian population. c. The Ministry of Finances would be responsible of covering any dif-
Therefore, governments in the period 1997–2007 had chosen to es- ference between the unique tariff and the costs of generation,
tablish tariffs that have been below the costs of production (especially transmission and distribution.
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M.A. Ponce-Jara et al. Energy Policy 113 (2018) 513–522
No. 006/08, CONELEC No. 013/08 and CONELEC No. 004/09, which
Restricons aimed at establishing specific regulatory parameters for the creation of
and low a unique tariff, in order to apply the provisions established in the
quality Constitutional Mandate No. 15. They also aimed at establishing prin-
services
ciples and regulatory parameters related to the ways in which the
Lack of electricity market had to operate. The resulting legal framework and its
High energy
investment prices amendments were sometimes contradicting. For instance, “the pre-
sumptive billing”, according to which the end-users were invoiced with
Ecuadorian a monthly estimation of electricity consumption, was not accurately
electricity adopted. This initiative partially failed due to lack of electricity meters
crisis (especially in poor sub-urban areas), to the difficulties found when in-
Lack of stalling them, and the difficulties of directly reading those equipment in
payment to Insufficient some neighborhoods that were considered dangerous. These procedures
the electric tariff rates contradicted the provisions established in the law and lasted until the
market
Poor end of 2014 (ARCONEL, 2016a).
management In order to prepare rules according to the new constitution and
of political conditions of the country, a clear regulation for each stake-
distribuon
companies holder of the Ecuadorian electricity sector (those specified by LRSE)
was required. Consequently, the LRSE was derogated and replaced by
Fig. 2. Factors that caused the economic crisis in the Ecuadorian electricity sector in 2006 the Organic Law of The Public Service of Electrical Energy (LOSPEE, for
(CONELEC, 2007a). its acronym in Spanish) on January 16th, 2015. This new legal frame-
work reinforced the State's position in the electric sector, represented
by MEER, as the sole institution in charge of planning and construction
d. The State's General Budget would take care of the Fund for Rural
of electricity facilities and distribution of the electric energy to end-
and Marginal Urban Electrification (FERUM, for its acronym in
users. The MEER is also in charge of the maintenance and operation of
Spanish), a program to increase electricity coverage in the rural and
the whole power system. These tasks could be carried out by public
marginal urban areas of the country.
companies or joint ventures in which the State has a majority share-
e. All unpaid accounts from generation, transmission and distribution
holding. The State could delegate this activity to private companies
companies in which the State had participation, directly or through
only under exceptional circumstances (Ecuador, 2015).
its institutions, were eliminated.
f. All the debts that generation, transmission and distribution com-
panies owed to PETROECUADOR (the public national company in 2.2.1. Current structure of the electricity sector
charge of the exploration and exploitation of oil) were eliminated. With the new organizational structure, the MEER is the national
energy authority. Under the MEER is the ARCONEL, which replaces the
The second big step to organize the new energy scenario was the CONELEC. The CENACE, an institution created by the LRSE in 1996,
approval, by Constitutional Referendum, of a new Constitution of the acquired renewed legal structure and duties as the National Electricity
country on September 28th, 2008. In its Fifth Chapter, the new Operator. On the other hand, the regulated wholesale market is formed
Constitution is devoted to strategic sectors, services and public com- by the so-called “business units”, constituted by public generators,
panies, and the electricity sector was positioned as one of the main distribution companies and large consumers that are incorporated into
strategic sectors in which the State's role is to administer, regulate, the Interconnected National System (SNI, for its acronym in Spanish).
control, and manage. In addition, the State shall establish public com- Besides, private generators and others small public distribution com-
panies to manage this strategic sector, as well as to provide public panies (which operate similarly to private companies) are also actors in
services and use natural resources in a sustainable manner (Ecuador, the electricity sector. Fig. 3 shows the relationships in this energy
2008b). market model, as well as the regulatory and supervisory agencies for
technical and financial operations. Each of these stakeholders is briefly
2.2. Current period: Organic Law of The Public Service of Electrical Energy described in the next section.
(LOSPEE)
2.2.1.1. The Ministry of Electricity and Renewable Energy (MEER). The
Since the Constitutional Mandate No. 15 was approved, a series of MEER is the governing and planning body of the electricity sector. The
laws and amendments were applied to fulfill the execution of such MEER's role is to solve all the electricity needs by formulating relevant
Mandate. Three of those amendments were the regulations CONELEC regulations, development plans and sectorial policies (ARCONEL,
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M.A. Ponce-Jara et al. Energy Policy 113 (2018) 513–522
– Conduct short, medium and long term operational plans for power
supply at the lowest cost, optimizing national and international
electricity transactions.
– Manage technically and commercially international electricity
transactions in behalf of the electricity sector.
– Manage the wholesale market transactions.
– Coordinate the planning and execution of generation and trans-
Fig. 5. Business Units of CNEL EP.
mission maintenance.
Adapted from (CNEL.EP, 2017a).
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M.A. Ponce-Jara et al. Energy Policy 113 (2018) 513–522
Oil 88%
Fig. 8. Gross electricity production by type of source and year (GWh) (ARCONEL, 2017a).
Fig. 6. Primary energy production in 2015 (million BOE) (MICSE, 2016b).
250 electricity has reduced its share from 11.4% in 2005 to around 0.3% in
200 2016. The total electricity production in 2016 was 27,154.3 GWh, from
150 which 81% was distributed via the SNI (ARCONEL, 2016b).
100 According to the PME 2012–2021 (MEER, 2013a), the current
electricity production data matches with the prediction made in 2012
106 BOE
50
0 for year 2015 (Fig. 9). The same plan forecasted that, in 2016, ap-
-50 proximately 93.5% of the electricity would come from hydropower.
-100 This has not happened yet, due to a delay in the construction of some
-150 large hydroelectric projects. Even though Ecuador is on track to
-200 meeting its purpose, since hydroelectric generation has presented an
2007 2008 2009 2010 2011 2012 2013 2014 2015
increasing trend in the last three years and the NCREs have started to
Energy Produc on Import contribute to the generation mix from several sources since 2012. The
Export Non-U lized Ecuadorian electricity generation capacity has grown at a relatively
Stock Varia on, Losses and Adjustments Total Transforma on
steady pace from 2006 to 2015, increasing the installed capacity by
Self-Consump on Final Energy Consump on
1935 MW, which represents an average evolution of 3.2% per year.
Fig. 7. Ecuadorian Energy Balance, period 2007–2015 (MICSE, 2016b). However, the installed capacity has doubled from 2015 to 2017,
reaching 4207 MW. This increase represents almost the same amount of
3.1. Power supply and transformation of the energy matrix energy generation achieved during the last decade, mainly due to the
contribution of new hydropower plants (see Fig. 10), the most re-
The production of primary energy in 2015 and the country's energy presentative of which are Coca Codo Sinclair and Sopladora. The
balance are shown in Figs. 6 and 7, respectively. In Fig. 6, it can be seen nominal installed capacity available on March 2017 is presented in
that most of the primary energy production depends on oil, which re- Table 2. It is seen that the percentage of the contribution of NCREs
presents approximately 88% of the total Ecuadorian energy matrix. In represents a minor share, in contrast to hydroelectric power plants’
2015, 65% of the oil produced was exported and 23% was refined contribution. On the other hand, power plants operating with Internal
domestically in three refineries: Esmeraldas, La Libertad and Shush- Combustion Engines (ICE) have the largest share of the thermal power
ufindi, with refining capacities of 110,000, 25,000, and 10,000 barrels/ plants, with 24.8% (ARCONEL, 2017a).
day, respectively. These numbers have not varied in since 2007 (Pelaez- It is expected that, as a result of the shift of electricity generation
Samaniego et al., 2007). The total oil production has not changed ei- sources, the changes in the energy matrix will represent a reduction on
ther, with an average production of about 27.7 Mt annually since 2005 the use of fossil fuels from 578 million of gallons in 2014 to 77 million
(BP, 2016). Natural gas, on the other hand, constitutes 4% of the pri- of gallons in 2017 (i.e., a reduction of 87% in three years). In addition,
mary energy production. The rest of the primary energy production is the reduction of oil consumption in thermal power plants will reduce
constituted by hydroenergy (5%), energy from biomass (especially su- greenhouse gas emissions (GHG) from 3.96 Mt of CO2 in 2012 to 0.34
garcane bagasse used for electricity production) (2%), firewood (1%) Mt of CO2 in 2017 (MEER, 2013a). Furthermore, due to changes in the
and other primary sources (solar and wind) that represent 0.04% of the power sector, Ecuador expects to save approximately US$ 280 million
total (MICSE, 2016b). The energy balance (Fig. 7), on the other hand, annually (considering 2016 oil prices) by not importing oil derived
shows that the primary energy production has changed little since
2007.
Regarding electricity generation, Ecuador has had a high de-
pendency on thermal power plants in the past decades. For example, in
2005, thermal power plants contributed with 43.1% of the electricity
produced in the country, whilst hydropower contributed with 45.5%
(Pelaez-Samaniego et al., 2007). This tendency did not change sig-
nificantly until 2016 (Fig. 8). This year, hydropower constituted 57.6%
of the electricity generation, resulting from the contribution of new
hydropower plants such as Coca-Codo-Sinclair (installed capacity of
1500 MW) and Sopladora (installed capacity of 487 MW), and in a
smaller amount to the increase in the use of NCRE (2.3%) such as Fig. 9. Gross electricity production by energy source – Horizon 2012–2021 (MEER,
biomass, biogas, wind and solar energies. Conversely, imported 2013a).
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M.A. Ponce-Jara et al. Energy Policy 113 (2018) 513–522
9000 30000
8000
25000
7000
6000 20000
5000
MW
GWh
15000
4000
Nominal Power Capacity Electricity Demand
3000 10000
Effec ve Power Capacity Electricity Produccon
2000
5000
1000
0 0
Year Year
Fig. 10. Evolution of the installed power generation capacity in the period 2006–2017 Fig. 12. Electricity demand 2006–2017 (ARCONEL, 2016b) and (MCSE, 2016).
(MEER, 2013a) and (ARCONEL, 2017a).
fuels for electricity generation (Andes, 2016). On May 2017, Ecuador launched its National Plan of Energy
Efficiency (PLANEE, for its acronym in Spanish) which intended to use
electricity more efficiently and to save energy. Among the tasks covered
3.2. Demand of electricity by the program, they plan to develop the following: a) substituting old
appliances in the residential sector (especially 333,000 refrigerators
The demand of electricity has increased by 32.9% since 2006 (from which would save US$ 27 million annually), b) substituting bulb lights
18,159 GWh in 2006 to 27,071 GWh in 2016). Fig. 11 shows the elec- with energy saving compact fluorescent lights in the residential sector
tricity balance in 2016 and Fig. 12 presents the historical evolution of (16 million bulbs from 2012 would save US$ 104 million annually), c)
electricity demand along with the energy production during the last implementing cogeneration projects in the industrial sector (especially
decade. It is seen that the electricity demand until 2016 has been larger in the sugarcane industry), and d) promoting new/efficient technolo-
than the electricity production. Conversely, in 2016 the gross electricity gies in the transportation sector (MEER, 2017b) and (Espinoza Abad
production (27,154 GWh), which includes imported energy from Co- and Martínez Mosquera, 2015). As part of this program, Ecuador has
lombia and Peru, was higher than the demand (27,071 GWh) for the recently developed a small fleet of vehicles powered by electricity, in-
first time. (ARCONEL, 2016b) and (MICSE, 2016b). Therefore, current cluding a small fleet of electric taxis in Loja (in the south of the
generation capacity is sufficient to cover the national demand. Ac- country). This adds on to the electrically powered mass transport in
cording to the MEER (MEER, 2013a), it is expected that this trend will Quito (trolleybus) (MICSE, 2015). Other transportation programs that
continue until 2022, since all projections have proved to be relatively will demand electricity are the tram in Cuenca and the metro in Quito,
both currently under construction. According to the MEER, the demand
of electricity in this sector will require the amount of energy produced
by a 76 MW power plant (MEER, 2014b). However, the electricity de-
mand could be even higher if private electric vehicles (EV) were suc-
cessfully implanted in the short term. Currently, there are several car
brands already offering EV models in the Ecuadorian car market.
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M.A. Ponce-Jara et al. Energy Policy 113 (2018) 513–522
Table 3
Current status and main characteristics of the Ecuadorian hydroelectric projects (MEER, 2017f).
Projects Installed capacity (MW) Expected production (GWh/year) Start date Expected completion date Project Status
Coca Codo Sinclair 1500 8734 July 2010 Nov. 2016 Finished in 2016
Minas San Francisco 275 1290 December 2011 2015 93% on February 2017
Delsitanisagua 180 1411 2011 2015 81% on February 2017
Manduriacu 65 367 2012 2014 Finished in 2015
Mazar-Dudas 21 125.4 2012 2014 87% on February 2017
Toachi Pilatón 254 1100 2011 2015 95% on February 2017
Quijos 50 355 2011 2015 47% on February 2017
Sopladora 487 2800 2010 2015 Finished in 2016
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The first Solar Atlas of Ecuador for Power Generation Purposes was Ecuador is a country with high volcanic activity since there are
published in 2008 by the CONELEC. It reported that the average solar more than fifty volcanoes in the Ecuadorian Highlands. Twenty of them
insolation of the country is approximately 4575 Wh/m2/day, which were active during the Holocene and another three are currently active
proves the importance of this energy source in the country. The areas (Beate and Urquizo, 2015). Thus, there is a relatively high geothermal
with the highest radiation are located in the Andean Highlands energy potential (up to 950 MW). Although Ecuador began to explore
(CONELEC, 2008). In order to boost photovoltaic energy, the Ecua- its geothermal energy in 1979, currently there are no plans that count
dorian State issued operating certificates that authorize the construc- on this type of energy except for spas and thermal pools (Aguilera Ortiz
tion of 91 projects with a total capacity of 355 MW (15 of them with et al., 2015) and (Lloret and Labus, 2014). If energy policies do not
installed capacity of 1 MW each or higher). These projects were based change, it is expected that geothermal projects could be executed in the
on the regulations CONELEC 004/11 and 009/08 (Sanchez, 2015). coming five to ten years. A complete list of geothermal projects and
However, far from the expectations, photovoltaic generation installed their current status can be found in (INER, 2015).
capacity at the end of 2015 was only 23.6 MW (with 17 utilities with
installed capacity above 1 MW) (ARCONEL, 2015b). Bureaucracy and 4.5. Biomass
the lack of funding were the main obstacles that led to the revocation of
several photovoltaic projects (i.e., Resolution No. ARCONEL-015/16, The main biomass resources potentially usable for energy produc-
ARCONEL-030/15, ARCONEL-021/16, among others) (ARCONEL, tion are residues from the harvest and processing of banana, oil palm,
2017c). sugarcane, cocoa, rice and corn (Peláez Samaniego et al., 2015).
Although photovoltaic energy has had little penetration in the Nevertheless, only sugarcane bagasse, residues from oil palm proces-
Ecuadorian continental area, it is important to highlight the presence of sing, and residues from the wood industry (in small amounts) are cur-
this energy source in the Galapagos Islands with (a) the Baltra Island rently used for electricity generation, and mostly in co-generation sys-
photovoltaic project (0.2 MWp with a storage system of 0.9 MWh in tems. The installed capacity of utilities producing electricity from
hybrid batteries), (b) the Puerto Ayora photovoltaic project (1.5 MWp); biomass is approximately 143 MW. From this capacity, 136.4 MW
and (c) the Isabela Hybrid project (0.92 MWp with a storage system of (which produce over 400 GWh/year) are located in the sugarcane in-
0.26 MWh together with a 1.62 MW of dual thermal plant) (MEER, dustry. The rest corresponds to the oil palm industry (2.2 MW), the
2017d). Meanwhile, in the Ecuadorian Amazonian region, the following wood composites industry (1 MW), the ethanol industry (0.3 MW), and
projects are operating: first, the Euro-solar project, carried out as the landfills near Cuenca city (1 MW). The energy produced in these in-
result of an agreement between the European Union and the govern- dustries is normally for self-consumption, except for biogas from
ment of Ecuador (2007–2013). This project was executed in 91 com- landfills, which is sold to the national grid system.
munities (66 from the Amazonian region and 25 from the coastal re- The sugarcane industry is additionally contributing to the produc-
gion). A photovoltaic system of 1.1 kWp was installed in each tion of ethanol for fuel. Since 2010, Ecuador adds up to 5% of ethanol to
community. It included internet (satellite connection V-SAT) (EU, regular gasoline, which is used mainly in Guayaquil, although currently
2013). Second, the Yatsa Ii Etsari program (“light from our sun”, in there are other cities (e.g., Cuenca) already using this fuel. The chal-
Shuar language) carried out by the Centrosur Electricity Company, lenge for 2017 is to expand the addition of ethanol to gasoline in the
which demonstrated that a decentralized rural electrification approach rest of the in order to substitute high octane naphta. To achieve this
could provide electricity in isolated communities of the Amazonian goal, 36,000 ha of new sugar cane plantations have been incorporated
Region. Between 2011 and 2015, the company successfully installed in recent years (MCPEC, 2014). Another important project is the use of
over 3200 solar PV home systems distributed in almost 200 isolated and pinion oil (Jatropha curcas) in the production of electricity as a partial
scattered communities in the Morona Santiago province (Vásquez substitute of fossil fuels in the Galapagos Islands. The first pilot project
Calero et al., 2015). is being carried out in Floreana Island by the construction of a hybrid
solar PV-thermal system of 21 kWp/138 kW that will use pinion oil as a
fuel as well (MEER, 2015).
4.3. Wind energy
4.6. Electrolytic hydrogen
In Ecuador, the first wind power plant was installed in 2007 in the
San Cristobal Island (Galapagos province). It consisted of three turbines Electrolysis is thought to be an important method for hydrogen
with a total capacity of 2.4 MW. The project was carried out under an production from water in the medium term. This technology has been
agreement between by the Government of Ecuador and the Global used commercially for over 50 years and is economically cost-effective
Sustainable Electricity Partnership (GSEP) (former e7 Group). Later on, when cheap electricity is available. It is likely that energy from hy-
on January 2013, 16.5 MW were added to the SNI from the Villonaco droelectric and wind power plants could supply cheap electrical energy
wind power plant located in the South of the country (Loja province). for the production of hydrogen (Ponce-Jara et al., 2015). The avail-
The plant is formed by 11 wind turbines of 1.5 MW each (MEER, ability of new hydropower plants in Ecuador is an opportunity to ex-
2017e). Finally, on December 2014, the Baltra-Santa Cruz project (in plore hydrogen as an energy vector. Pre-feasibility studies on producing
Galapagos) started its operations with three turbines and an installed and using electrolytic hydrogen are being considered as a part of the
capacity of 2.25 MW. The project was carried out under an agreement strategy towards a low carbon economy. Large hydroelectric utilities
between the MEER and the United Nations Development Program that include large dams, such as CELEC EP-Hidropaute, could allow the
(UNDP) (ARCONEL, 2015b) and (MEER, 2017f). Despite the few wind production of electrolytic hydrogen by taking advantage of the spilled
power plants in operation, Ecuador has an estimated wind energy po- turbinable water. The potential uses of hydrogen in Ecuador include the
tential of 1670 MW, mainly in the Andean Highlands, according to the possibility of producing raw materials (e.g., ammonia for manu-
first Wind Atlas of Ecuador for Power Generation issued in 2013 by the facturing nitrogenous fertilizers), for refining oil (since currently hy-
MEER. From the mentioned potential, only 884 MW were identified as drogen for heavy oil refining in Ecuador is produced from petroleum),
feasible for exploitation in the short term. In the next few years, the or for generating electricity (Pelaez-Samaniego et al., 2014). In addi-
Huascachaca project (50 MW) will be implemented. It will be located in tion, hydrogen has been considered as an option for fueling urban
the border of the provinces of Azuay and Loja. The bidding process transportation in Cuenca (Posso et al., 2015). Even though hydrogen
would take place in the second semester of 2017 (ELECAUSTRO, 2017). can be a pathway to produce energy by means of fuel cells or
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combustion engines during peak hours, it has been mentioned that the well as its own social and institutional complexity (Bale et al., 2015).
subsidies to energy (especially oil-derived fuels) in Ecuador will hinder
the viability of incorporating hydrogen in the energy matrix of the 7. Conclusions
country (Ponce-Jara et al., 2016).
The Ecuadorian electricity sector has undergone several changes on
5. Subsidies to fossil fuels its structure, operation, and management model. Oil prices in the global
market have strongly influenced the development of the Ecuadorian
On the last decade, subsidies to energy (i.e., subsidies for liquefied energy sector in general and the electricity sector in particular. During
petroleum gas (LPG), diesel, and gasoline, as well as subsidies to elec- the past decades, thermal power plants have been the main critical
tricity) have been part of the government's policies. For instance, the source for electricity production in the country, and they have also been
current price of LPG for domestic and small business use (approxi- favored by high fossil fuel subsidies. However, it is expected that, in
mately US$ 0.10 per kg) has not changed since 2001 and the prices of coming years, hydroelectricity will cover over 90% of the electricity
regular gasoline and diesel for transportation have remained un- supply. This shift towards renewable energies will involve a stabiliza-
changed since February 2003 (Creamer et al., 2016). Subsidies to tion of the public expenditure by reducing the high dependence on
electricity focused on low-income population (i.e., households with an fossil fuels for electricity generation. Nevertheless, efficient manage-
electricity consumption under 110 kWh/month in the highlands and ment of the power sector could be at risk if excessive bureaucracy is
under 130 kWh/month in the coastal region) have a special price and added to public electric companies. In addition, Ecuador needs to di-
are referred to as the “tariff of dignity”, US$ 0.04 /kWh, which is 55.5% versify its energy matrix, mainly to prevent severe restrictions on
less than the real tariff (Creamer et al., 2016). According to the Central electricity generation caused by droughts. Thus, new sources such as
Bank of Ecuador (BCE, 2017), from 2007 to 2016 the Ecuadorian State solar, geothermal, and wind are expected to increase their participation
has spent around US$ 22 billion on subsidies to fossil fuels. Diesel has in the generation of electricity since the integration of NCRE has been
been the main subsidized fuel, followed by regular gasoline, LPG and sought key for this diversification. Nevertheless, it would also be ad-
premium gasoline. Historically, policies intending to eliminate these visable to take into account the concept of “prosumer” in the
subsidies have been largely unpopular. As an attempt to reduce the Ecuadorian legislation in order to encourage customers to self-power at
impact of subsidies on the national economy, the government, on Oc- peak hours and sell power to the grid when required. In addition, en-
tober 2015 (by means of Decree 799), eliminated the subsidy on LPG for ergy efficiency programs and the adoption of SG technologies will help
industrial and commercial use, in addition to jet fuel and diesel and fuel reinforce the transformation of the Ecuadorian electricity network and
oil No. 6 for industrial use. Furthermore, since 2015, there is a monthly will positively impact the quality of the electricity supply. Finally,
adjustment plan of US$ 0.02 /gallon on premium gasoline until it taking into consideration the current political framework, it has become
reaches the price of US$ 2.3/gallon (Creamer et al., 2016). clear that the State is highly motivated to move away from the fossil
fuel economy, which faces several challenges. The future of the
6. Smart Grids in Ecuador Ecuadorian electricity sector relies on the successful application of the
new Organic Law of Public Service of Electricity, the limitations of state
Smart Grids (SGs) are considered the future of the current power enterprises for managing and operating the electricity system, and on
grid, which will solve many of the problems faced by electrical net- external funding for new energy projects.
works (Ponce-Jara et al., 2017). For instance, by incorporating in-
formation and communication technologies (ICT), SGs can optimize Acknowledgements
generation sources, automate and renew the ancient electricity system,
reduce losses and introduce new sources of renewable and distributed To Carmen Gallar Sánchez for English proofreading and editing.
energy (Vasudevan et al., 2012). The path set toward SGs in Ecuador is Marcos Ponce acknowledges the Escuela de Doctorado from the UNED
relatively new: the SG program of Ecuador – Road Map (REDIE, for its (Universidad Nacional de Educación a Distancia), which has supported
acronym in Spanish) was published in January 2013 (MEER, 2013b). part of this work as a part of the accreditation for the Ph.D. program
This document is one way to facilitate the integration of different sta- (Marcos Ponce).
keholders, technologies, norms and standards, and it also provides the
basis for a modern and more reliable Ecuadorian electricity system. References
Among the elements that integrate the SG Road Map, there are at least
five that correspond to ongoing projects. One of the most relevant Aguilera Ortiz, E, P.S.M.R., 2015. Estado de la exploración de la energía geotérmica en
contributions deals with smart-metering, an initiative that is being Ecuador. In: Energías Renovables En El Ecuador. Situación Actual, Tendencias Y
Perspectivas. Universidad de Cuenca, Cuenca.
implemented by several electricity distribution companies since 2011. Andes, 2016 Agencia Pública de Noticias del Ecuador y Suramérica. Ecuador: nueva
The equipment for this project is AMI (Advanced Metering Infra- hidroeléctrica ahorrará 280 millones de dólares al año [WWW Document]. URL:
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2017).
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ARCONEL, 2015a. El Consejo Mundial de Energía ubica al Ecuador entre los 5 mejores
gather data (WEF, 2017). In addition, SG Road Map has also enhanced países en Seguridad Energética a nivel mundial [WWW Document]. URL 〈http://
and contextualized ongoing initiatives fostered by the Ecuadorian www.regulacionelectrica.gob.ec/el-consejo-mundial-de-energia-ubica-al-ecuador-
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May 2017).
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several small hydroelectric projects, the integration of renewable en- Multianual del Sector Eléctrico Ecuatoriano [WWW Document]. URL 〈http://
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2017).
energy efficiency projects, an Integrated System for Management of ARCONEL, 2016a. Informe de Sustento al Proyecto de Regulación Sobre la Presentación
Electrical Distribution System (SIGDE, for its acronym in Spanish), and del Servicio Público de Distribución y Comercialización de Energía Eléctrica. Quito.
a cloud and data center (MEER, 2013b). However, there are important ARCONEL, 2016b. Agencia de Regulación y Control de Electricidad. Estadística Anual y
Multianual del Sector Eléctrico Ecuatoriano.
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