How Droughts and Chinese Investment Shape Ecuador’s Energy Crisis – The Diplomat

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For the past three month, the Ecuadorian government has been struggling to combat droughts within the Mazar and Coca rivers. These droughts are occurring due to El Nino, forcing Ecuador’s mainly hydroelectric system to enforce rolling blackouts and power cuts for extended hours throughout the country. Although Ecuadorian President Daniel Noboa recently announced an end to blackouts for the holidays, the crisis has not been solved.

Droughts are the main cause of these blackouts, yet another factor may be exacerbating the issue: under-performing hydroelectric dams built by China’s state-owned enterprises (SOEs).

Presently, China’s SOEs have built or currently operate eight hydropower plants in Ecuador accounting for approximately 2,500 megawatts in max production when combined – a third of Ecuador’s total energy sector. At least three of these hydroelectric sites are on rivers facing critical drought conditions.

On the Mazar River, the Sopladora and Mazar plants are being heavily affected by El Nino. The Sopladora hydroelectrical plant, although owned by the Ecuadorian state firm Hidropaute, was constructed by China Gezhouba Group, with operations starting in 2016. The facility cost $500 million to build, with 85 percent being funded from the Export-Import Bank of China. The total capacity for the site is 487 megawatts. As of September 5, the Sopladora plant was only running at 16 percent of its total output. While drought conditions no doubt is the main culprit, additional reports suggest that Gezhouba didn’t properly train the Ecuadorian workers to maintain the plant. It has been estimated that the worker ratio of Ecuadorians to Chinese nationals is 8 to 2, with the Chinese expats having more important and, in turn, higher paying positions.

Also under drought conditions is the Mazar-Dudas hydroelectric plant along the Pindling and Mazar river, producing 21 megawatts of power. The project was built by the China National Electric Engineering Company (CNEEC) in 2011 and construction was funded by the China Development Bank for $41.6 million. Operations started April 2015. The plant was built in a protected zone of the Dudas-Mazar forest, but it had minimal environmental impact since it is a smaller dam. Yet with the current droughts occurring, any intervention of water flow made by these dams will cause greater impacts on the hundreds of species of flora, fauna, and wildlife within the protected forest.

The Coca River is also suffering, impacting the Coca Codo Sinclair dam, currently running at 59 percent production out of its 1500 megawatts capacity. This single plant produces 35 percent of Ecuador’s total electricity. However, the faults are not new with this facility. Proposed by the Ecuadorian government in 1976, the dam did not begin construction until 2010 when the China Export-Import Bank covered more than half of the cost with a $1.68 billion loan to the Ecuadorian government. The dam was constructed by Sinohydro, another of China’s SOEs, at a total cost of $2.6 billion.

Throughout the course of constructing and managing the facility, Sinohydro has faced 14 civil suits and 80 labor claims. Additionally, this dam was built near an active volcano, causing more than 7,500 cracks to the structure. Yet the most notable issue is the consistent corruption linked to the Coca Codo Sinclair dam. Almost every top Ecuadorian official involved in the project’s construction has been imprisoned or sentenced on bribery charges.

Presently, Ecuador is facing a grave issue in dealing with droughts and other weather phenomenon from El Nino, causing rolling blackouts throughout the region. Yet even before these problems, the country’s hydropower sector already had attracted widespread controversy due to China’s involvement. Green energy investments are part of Beijing’s agenda to grow its economic engagement in the region. For China, Ecuador is an attractive ally within Latin America: It is a Pacific country that can help ensure food security for China and also has sizable copper reserves.

Beijing has become increasingly reliant on food imports as the Chinese mainland holds less than 10 percent of the planet’s arable land. China has been a net importer of food since 2004 especially in soybean, corn, wheat, rice, dairy products, edible oils, sugar, meats, and processed foods. In May 2023, Ecuador and Beijing heightened economic ties with one another by signing a free trade agreement that especially targets agricultural products for tariff reductions. The free trade agreement has the potential to increase bilateral trade by $3-4 billion over 10 years.

Additionally, Ecuador seeks to grow its copper industry, which China has ties in. China’s SOEs are currently operating two mines in Ecuador, which produce approximately 290,000 tons of copper exported to China annually. This includes the Mirador copper-gold mine, owned by Ecuacorriente, a subsidiary of the Chinese consortium CRCC-Tongguan. The mine is set to produce 85,000 tons a year of copper, gold, and silver.

Overall, investments within key mining, infrastructure projects, and agriculture will increase China’s leverage over Ecuador. Yet these gains have been continually corroded due to poor management by Chinese companies, especially in the hydroelectric sector.

Ecuador’s leaders must balance strengthening economic ties with China while protecting their country’s sovereignty. However, there are steps that can be taken to reduce the risk.

First, Ecuador can continue to diversify its partners. In February 2024, the U.S. Army Corps of Engineers met with Ecuadorian government officials from the Electric Corporation of Ecuador (CELEC) to discuss managing sediment erosion in the Coca River Basin. More interactions of this kind could provide greater understanding and help Ecuador improve its resilience to future droughts – or, conversely, flooding or intense rainfall affecting the region.

Ecuador can also consider alternative energy sources. As of 2021, 79.1 percent of all energy generation in Ecuador was coming from hydropower. Wind power contributed only 0.2 percent of all energy generated. With the rapid degradation in hydropower supply due to erosion and climate factors, wind power or other alternative energy sources could be more effective.

It costs $1.3 million per megawatt for a wind turbine to create power. Commercial wind turbines have a capacity of 2-3 megawatts and offshore capacity can be as large as 16-18 megawatts. Compare this to the Coca Codo Sinclair dam: it cost $2.6 billion to create a max capacity of 1,500 megawatts, yet 1,500 megawatts in wind turbines would only cost 1.9 billion. With much of the eastern side of Ecuador having open land, it may be a worthy investment to create more wind turbines.

Overall, these solutions may grant autonomy for both short- and long-term health of Ecuador’s environment and to combat any further climate crisis.

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How Droughts and Chinese Investment Shape Ecuador’s Energy Crisis – The Diplomat

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