Ecuador is currently facing significant power outages due to one of the worst droughts the country has experienced in decades and the declining condition of power plants following years of insufficient investment. Around 70-80% of Ecuador’s energy supply usually comes from water sources. In response to these supply challenges, the Ecuadorian government has announced planned power outages of up to 14 hours daily since the beginning of September. As a result of the power cuts, disruptions have been reported to operations in sectors such as mining, automotive and food making. The outages are reportedly costing the Ecuadorian economy millions of dollars and show no sign of ending as of mid-November.
Anomalously dry rainy season impacts hydropower generation
The majority of Ecuador featured an anomalously dry rainy season, beginning in October 2023 and extending through April of 2024. This is the period when the yearly rainfall occurs in the mountains of Ecuador and westward into the lower terrain. The dry season then lasts from May through September where there is little to no rainfall in most areas. Below normal rainfall was observed in central and eastern Ecuador where the country’s largest hydroelectric dam is located. Further, temperatures since the beginning of the last rainy season have been anomalously warm, which adds further stress via evaporation to the water system.
Looking forward, the forecast will be almost completely dry across central and western Ecuador through the remainder of November. It is now the rainy season in Ecuador, so the upcoming forecast of little to no rain is quite unusual for this time of year. Long-range computer model guidance signals a continuation in the drier than normal rainfall pattern in western Ecuador well into December which is a core month of the rainy season. As a result, the lack of hydrogeneration issues that has plagued Ecuador looks to continue through the end of the year.
Power cuts disrupt business operations across Ecuador
Manufacturing companies have faced intermittent power cuts since September, but the first round of particularly long cuts for the industrial sector began on October 5 and lasted for 15 days. As a result of these cuts, production was impacted at more than 260 companies in the industrial areas of Cuenca and Ambato. Power was reportedly cut for roughly ten hours each day. Industry representatives claim that the companies in the Cuenca Industrial Park lost around $ 20 million (€ 18.78 million) within the first three days of these power cuts. Companies located in the industrial park operate in sectors such as ceramics, tires, household appliances, furniture, and food making. At the end of October and in mid-November, dozens of companies in Ambato faced new rounds of temporary power cut for several days. Extensive power cuts of up to 14 hours have also hit companies in other parts of the country in recent weeks, most notably in its capital city Quito and in Guayaquil, where Ecuador’s biggest seaport is located. Most recently, a 24-hour power cut took place in parts of Quito from November 11 until November 14. Industry representatives warned that the outages could cost affected industries millions of dollars within days.
Some companies are preemptively reducing working hours, laying off or furloughing employees to address the power crisis. In September, 719 workers from the manufacturing sector were laid off as a result of the intensifying power crisis. Continental Tire Adina S.A reportedly furloughed 100 workers at its tire factory in Cuenca in October. Meanwhile, Promepell S.A., a leather manufacturer, reduced its operational time to five hours in Ambato. Further layoffs are likely to occur by mid-November as companies struggle to maintain production levels.
Power crisis affects food making, mining, steel and petroleum industries
So far, industries producing perishable goods are among the hardest hit by power cuts. A business association estimates that the dairy industry could lose up to 500,000 liters of milk daily due to the outages. Similarly, the shrimp industry, which is vital for Ecuador’s economy and its second biggest export, faces operational challenges as every step, from feeding and processing to storage, requires stable power supply. Prolonged outages could significantly hamper production across the entire value chain in this sector.
Notable disruptions have also been confirmed in the country’s mining sector. The Government of Ecuador has reportedly asked EcuaCorriente S.A., which runs the Mirador mine, a major copper, gold and silver mine in southern Ecuador, to disconnect its operations from the national grid with effect from October 16. As a result, production at the mine was halted from October 18 until November 3. On November 12, the company announced another 15-day operational halt due to the supply disruptions. Lundin Gold Inc., which runs the Fruta del Norte gold mine in south-east Ecuador, is already meeting around half of its electricity needs with its own generators and is reportedly planning to import more generators to increase energy production further.
A government representative claimed that mining companies in the country will be expected to be able to generate their own electricity going forward, but did not provide more specific information yet. Additionally, Ecuador is raising electricity rates for high voltage industrial consumers, adding between USD 0.0748 to 0.0986 per kilowatt-hour from November 1. Affected companies include mining companies Lundin Gold Inc. and EcuaCorriente S.A., steel makers Adelca Guayaquil and Novacero S.A., as well as the country’s national oil company EP PetroEcuador. The government considers these industries energy-intensive, resulting in higher tariffs.
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