El Aromo Solar Project Sets Precedent for Renewable Energy in Ecuador

• by Tristan Partridge (santiago)
• Thursday, February 04, 2021
• Inter Press Service

The recent history of energy in Ecuador is dominated by oil–its central role in the country’s export economy as well as its devastating environmental impacts in Amazon regions, suffered by Indigenous groups in particular. While the country hosts high hydropower capacity and continues to build new hydroelectric plants, only recently has the government significantly expanded support for other low-carbon energy sources.

The country is poised to elect a new president next month, each candidate holding different views on energy development and globalized neoliberal economics. The history and potential future of El Aromo will set an important precedent within the context of Ecuador’s apparent turn toward increased renewable generation. The lasting impacts of El Aromo will also depend on whether the development is successful enough to encourage government, industry, and society actors to support further national solar expansion.

Ecuador’s Energy Makeup

El Aromo is set to boost Ecuador’s solar capacity almost tenfold, adding 258MW to the current output of 27MW. While this reflects a dramatic increase, it represents only a very small part of the national energy mix. The most recent government figures from 2018 show total capacity from all energy sources in Ecuador was 8677MW, drawing primarily from hydropower (58.4 percent), fossil fuels (39.1 percent), biomass (1.7 percent), and solar, wind, and biogas, which are less than 1 percent each.

But forecasts anticipate change of a greater magnitude. Data analysis company GlobalData recently plotted an optimistic scenario for solar growth of 15 percent over the decade, taking the country’s PV generation from just 26.7MW in 2019 to 450MW by 2030, or more than 4GW if the global rate of solar growth continues to increase. These reports have fueled hope in the government and among international energy companies keen to capitalize on Ecuador’s solar potential. That would have the potential to radically alter Ecuador’s energy mix.

Ecuador’s Master Plan for Electricity (PME) 2018-2027 outlines energy initiatives led by the Ministry of Energy and Non-Renewable Natural Resources (MERNNR). Despite some setbacks due to Covid-19, governmental support for new solar projects increased during 2020. In June, the Galapagos Conolophus project was launched, proposing 14.8MW of solar generation and 40.9MWh battery storage capacity to replace the use of diesel fuel for power generation on the Baltra and Santa Cruz islands.

By August, five interested companies had been invited to submit bids. In September, MERNNR announced a further slate of 24 renewable energy projects totaling 200MW, two of which would be solar (each 30 MW in size) to be constructed in either Santa Elena or Guayas province. A range of six small-scale hydro plans between 3.4MW and 30MW in size were also included, with final selection decisions due by August 2021.

This means that many renewable energy projects are scheduled to come online under the next administration. Both Moreno and Solarpack executives have expressed confidence in the future of El Aromo. But analysts question how foreign investors will respond to potentially a changed relationship with the IMF following February’s election and how the new president will manage Ecuador’s fraught relationship with the Fund.

A previous IMF deal in March 2019 led Moreno to introduce austerity measures in October that year, including the elimination of long-standing gasoline subsidies. Overnight, the price of diesel more than doubled and the price of petrol increased by 30 percent. This resulted in weeks of protests that were met with police violence, including evidence of excessive force, killings, and arrests.

Ahead of the August 2020 IMF deal, Moreno’s government introduced new fuel subsidy reform in May. Hailed as historic by some analysts, the measures introduced monthly caps to prevent shock increases in retail prices. Met with less resistance than previous reforms, the cuts have been praised by the IMF for improving the “reliability and efficiency“ of the energy sector. But opponents of the August 2020 IMF deal point to its similarity to past deals, requiring Ecuador to introduce austerity measures, cuts in public investment and wages, and new privatizations—all in the hope of attracting more foreign investment.

The three leading candidates have different views on the IMF. Pachakutik leader Yaku Pérez has refused to meet IMF officials, while conservative Guillermo Lasso is expected to comply with IMF loan conditions, despite his criticisms of the required tax increases. Meanwhile economist Andrés Arauz, chosen by Correa to lead the UNES political coalition and leading in some recent polls, is vocally opposed to the August 2020 IMF deal. He maintains Ecuador is not bound to the deal’s terms since it is not an international treaty, and proposes instead immediate increases in public spending, an end to privatization, and wealth tax reform.

A focus on economics in the run-up to the election has overshadowed discussion of related concerns such as candidate views on environmental policy and the protection of rights enshrined in the 2008 Constitution. On one issue, though, Arauz is alone–in his support for Correa-era plans for the fossil fuel industry, including at the El Aromo site.

A Disputed Site, With a Future in Solar Energy?

First announced in August 2019 together with the 110MW Villonaco II/III wind projects, El Aromo attracted international attention with eight global companies submitting qualifying proposals by April 2020. Three finalists from Europe were announced in October and Solarpack’s successful bid–offering an energy price of US $69.35 / MWh on a 20-year Power Purchase Agreement (PPA) contract–was confirmed in December. While some in the industry expect setbacks due to ongoing uncertainties around Covid-19, operations at El Aromo are set to begin by the end of 2022 and generate 340 GWh per year, or more than 22 percent of energy demand across the province and more than 60 percent of demand in Manta, Manabí’s largest city.

The future of solar energy in Ecuador, however, depends on more than merely increasing output and further policy changes are also required. Marcos Ponce Jara of the ULEAM University in Manta is a specialist on Ecuador's electricity sector. He notes that Ecuador currently has only one energy policy related to photovoltaic solar energy: a net-metering policy introduced in October 2018 to promote distributed generation and to allow residential, commercial, and industrial operators to consume power generated using their own solar equipment. This policy has neither led to an increase in national solar capacity nor is it expected to significantly impact Ecuador’s energy output.

Ponce Jara says future solar growth faces obstacles including competitiveness (hampered in part by the difficulty of removing current subsidies for electricity generation from fossil fuels), financing, and the broader regulatory context. On this front, the Ecuadorian government is taking steps to incentivize investment in renewable energy development. Like other recently approved projects in Ecuador, El Aromo will be built according to the country’s private investment stimulus package which offers companies a wide range of tax benefits.

Current economic conditions and the government’s incentive package have been sufficient to support growing international interest in Ecuador’s energy sector, especially in wind and solar. But these projects also follow BOT (Build, Operate and Transfer) contracts in which private investors are responsible for project construction and operation, before transferring infrastructure to the state at the end of the contract period. Due to its scale and location El Aromo remains a bellwether project for Ecuador’s solar future.

While Solarpack already has 15 solar generation projects in Spain, Chile, Peru, and India, El Aromo will be the company’s first power plant in Ecuador. The project will occupy a location 20km from Manta that has long been the subject of controversy and the solar development will mark a shift in land use from carbon-intensive to low-carbon energy production. This site is notorious for being where an international megaproject was proposed and ultimately abandoned: the “Refinería del Pacífico” (RDP) petrochemical plant.

In January 2008, Presidents Rafael Correa and Hugo Chávez signed a memorandum of understanding to create the RDP company. They hoped to use the RDP complex to process 300,000 barrels per day, increase domestic supplies of refined petrochemical products, and to continue work toward national “energy sovereignty.” Expected to cost $10 billion, the deal linked state companies Petroecuador and PDVSA of Venezuela with further financing from China’s National Petroleum Corporation and Industrial & Commercial Bank.

In 2018, Mongabay reported on environmental disruption within the nearby Pacoche Coastal Marine Wildlife Refuge caused by deforestation, road building, and the clearing of native trees for the RDP complex, at that time covering 1200 hectares (12 km2). Initial construction began, including work completed by Brazilian company Odebrecht, but the project languished without full and transparent funding for years and, by 2019, had become the focus of corruption investigations.

Despite all this, presidential candidate Andrés Arauz has stirred controversy by echoing Correa’s insistence that the refinery should still be built. For environmental groups, pressing ahead with the RDP project amounts to a crime against nature and Indigenous peoples, as it would be used to process heavy crude extracted from the ITT sector of Yasuní National Park, one of the most biodiverse areas on the planet and home to Indigenous groups living in isolation. It remains to be seen whether construction of the El Aromo solar project rules out any further work on the RDP refinery, but any such support for the oil industry would be met with widespread opposition.

The RDP site has also become the focus of other investment plans, some still under negotiation, seeking to make use of this location prepared for industrial operations. The plans include an EU development grant for new agroindustrial maize, soy, and shrimp production and, in May 2019, proposals for a “Food City” processing and packaging complex. A more recent idea to use the site as an isolation center for patients infected with Covid-19 was derailed by local opposition.

A housing camp of 140 small dwellings built in 2011 for RDP workers was used sporadically by Odebrecht personnel and then later served as an emergency operations center after the April 2016 earthquake. The site lay largely abandoned till March 2020, when one of the dwellings was burnt in a suspected arson attack amid protests against the Covid-19 isolation plan.

Now, Solarpack has the green light to use the El Aromo site for solar generation, and the focus is, once again, on Ecuador’s energy matrix. Of the original 1,500 hectares cleared at the RDP site, El Aromo will cover 290 hectares. Ponce Jara suggests that government approval for the project has been driven, at least in part, by a desire to finally settle the question of what to do with (some of) this contentious plot of land.

Environmental Justice Goes Beyond Energy Generation

The local impacts of El Aromo are not limited to this site. On the positive side, as Ponce Jara notes, increased local solar generation at El Aromo could lead to reduced use of regional oil-powered power stations (particularly the 140MW Jaramijó plant) and related improvements in air quality and emissions reductions. On the other hand, the environmental impacts of constructing requisite power transmission lines have not yet been evaluated. And in an area where agriculture and aquaculture dominate, the question of land use remains paramount.

Carlos Quinto Cedeño Bermeo is an activist and permaculture practitioner who works in Manabí province to support small-scale agroecological farming and is a member of the Troja Manaba grassroots school that offers training in agricultural techniques for food sovereignty. While debates over energy generation have focused on Manabí, Cedeño Bermeo cautions that the province’s commercial shrimp farms, “camaroneros,” currently threaten small-scale farming and efforts toward food sovereignty on a scale beyond the risks created by the energy sector.

Shrimp farms continue to grow in number and scale, occupying ever larger tracts of land. These operations also put local water supplies at risk of contamination from chemical run-off. Cedeño Bermeo says that renewable energy projects will have to create many more jobs before they can have a significant impact on local labor markets, where many women move to the cities for domestic or retail work and men take up unskilled jobs in the shrimp or oil industries.

A shift toward less polluting modes of electricity generation is welcome and the idea of repurposing land away from polluting industries is popular. But some in the region remain unconvinced. A December editorial in the Manabí newspaper El Diario, for example, raised doubts about the project, questioning whether the price of energy from El Aromo will remain competitive against hydro and fossil fuel energy and seeking to clarify both how much of the abandoned RDP site will be covered with solar panels and how the remaining land will be used.

Furthermore, El Aromo alone does not create enough new employment opportunities to generate widespread socio-economic change in Manabí, nor does it protect small farmers against the encroachment of growing agro-industrial operations. The province is still dominated by export-oriented production just as the national economy still depends heavily on the oil sector, which accounts for more than 50 percent of Ecuador’s export earnings and around 25 percent of public sector revenues.

Creating a just energy transition in Ecuador–promoting solar and wind generation, reducing dependence on oil, and providing employment for those whose livelihoods are disrupted by such changes–will require policy and action that go beyond replacing oil refineries with solar panels, even while doing so is a crucial step in remaking the country’s energy matrix.

Only if El Aromo delivers on the promise often associated with solar power—specifically by reducing the amount of oil being extracted and burned, as well as providing tangible health and economic benefits for local residents—will it help Ecuador turn a corner toward a less destructive and more future-proof energy sector.

Tristan Partridge is a social anthropologist and Research Fellow at the University of California, Santa Barbara. His research addresses Indigenous rights, collective action, and environmental justice.

This story was originally published by NACLA - The North American Congress on Latin America

© Inter Press Service (2021) — All Rights ReservedOriginal source: Inter Press Service

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