Electricity outlook: Still difficult

For the first time in well over a year, water levels are rising at Guri Lake, the source of more than 70 percent of Venezuela’s electricity. At last, we can stop worrying that the power grid will collapse in 2010. If the weather forecasts are right, there will be plenty of water to get us through the year. Looking forward to 2011, things are less cheery.

Traveling last week in Guayana I was impressed with how well understood it is among workers in the metals and electricity industries that 2011 is the crunch year, not 2010. The problem is simple. The crisis provoked no energy savings in the residential and commercial sectors, according to the monthly reports from CNG, which runs the power grid (and has now deleted the damning monthly reports from its website). The only sector that conserved was industrial, and even there, savings were achieved in only a small number of plants, entirely by slashing output (without layoffs). Reduced activity and shutdowns at a few iron, steel and aluminum plants saved the rest of the country its comfort.*

However, recovering the dam is going to be a long slog. Today’s report showed the reservoir has gained 24 cm since bottoming at 20 percent of its useful volume April 14. We need another 1,300 cm to get to the level we were at Jan. 1 and another 1,300 cm again to fill the reservoir, as it should be around New Year’s. At current electricity consumption and generation levels, that will never happen. Average water consumption from the dam this year — after conservation was imposed and water consumption rationed around New Year’s — has been 4,574 cubic meters a second. Average inflow into the dam in an average year is 4,500 cubic meters a second, Miguel Lara, the former president of the grid regulator (then known as OPSIS), told me in a phone interview. That means that at this year’s average water consumption and with average rains, the water level will be lower a year from now than it is now. With above-average rains, we can gain a few meters, but there are complications that make the situation worse.

First, industrial rationing has to end at some point. Venalum, Alcasa and Sidor can’t remain at such low production forever while maintaining full payrolls with (by Venezuelan standards) excellent pay and benefits. Managers at Sidor say the laborers who work in the heat of the steel mill make 7,000 to 8,000 bolivars a month, well above the salary of a Venezuelan accountant or doctor. The mills run luxury buses to and from the job sites. They have made some cuts in response to the losses they started to incur with the North American housing slowdown: they have slashed medical insurance and this year, in a local scandal, stopped providing new uniforms for their company sports teams. Cuts like that are no substitute for making and selling aluminum and steel.

Second, elections are coming. Normally, the Chavez government pushes consumption-oriented policies before elections to try and soothe the population. More home appliances will increase, rather than decrease, power use.

Third, when the dam levels are as low as they are now, you need to use more water to get the same amount of power. Edelca, the power utility that runs the Caroni River hydro complex, has squeezed 11.8 kilowatt-hours of electricity out of every cubic meter of Guri Dam water in the first half of April. That is down 8 percent from the 12.8 kWh of that Edelca generated from each cubic meter in the first half of December 2009. This is because when the dam is more than half full, the pressure is much greater than now, with far less weight forcing water through the turbines. In order to keep power generation average level we’ve had for the past few months, Edelca may have to increase water consumption from the dam.

Edelca cut flows through the dam from over 5,150 cubic meters a second in December to about 4,330 this month. It will take a lot of arguing for the managers there to convince Caracas not to boost flows again now that the rain is falling.

There are only two ways to escape this situation. First would be to implement effective energy-saving measures, such as water-heater timers, solar water heaters, enforcement against excessive air conditioning, a massive program of weatherization of home and offices, energy audits for small industry, encouragement to shut off televisions, requiring all residences to provide clothes lines, and increased use of natural gas for cooking. While the propaganda calling for power savings has gradually been getting better, none of these ideas are likely to be put into effect.

The other alternative is to increase power generation. This is the government’s plan. It has pledged to bring between 4 and 6 gigawatts of generation on line this year, depending on who is speaking and to what audience. Among the plans:

Generation barges parked by the Tacoa generation plant that serves Caracas. It’s unclear what’s happening with them, but this week state oil company PDVSA said a barge arrived in Lake Maracaibo to provide 103.5 megawatts of power starting at the end of May.

Planta Centro recuperation. South America’s biggest thermal generating plant, a 2,000-megawatt fuel-oil and natural-gas-powered beast, was supposed to be operating at increased capacity by now. Instead, it has continued to struggle. It has had at most one of its five turbines in service since March 26. It was completely down April 5-11. The challenges of getting it on line were epitomized in a rumor I heard from Jose Manuel Aller, a professor at Simon Bolívar University in Caracas. He said repairs on one generator were almost complete on a turbine earlier this year but the startup was rushed and technicians failed to put oil in a pump. The pump seized up and needed to be replaced. Given Venezuela’s difficult import environment, this took forever.

Wind turbines on the Paraguana peninsula. Starting next year, 70 1.3-megawatt windmills 70 meters high are supposed to start producing 100 MW of generation. (Note that this press release for the first time quantifies how much diesel is used to generate 100 MW of power in a thermal plant: about 2,000 barrels a day, it says.)

880 MW at Sidor. Former CVG president Rodolfo Sanz said 440 MW worth of turbines were on their way from the USA and that they’d be in service in May. The Nueva Prensa de Guayana reported that Sanz said the first 175 MW of plants would arrive by the end of February and the remainder two weeks later. Delays kicked in at once. This undated press release, posted between March 20 and April 5, says the second ship had just arrived. The Sidor power plant still has a long way to go before it’s operational; I can’t see how it will happen in May as promised.

So we shall see. I think that politically, Chavez has to end the rolling blackouts by August or face serious electoral consequences. I don’t see the grid getting more than about 200 MW of new generation before then. So I think Guri will recover a very limited amount this year. There are those who are more pessimistic, and believe Guri will end the year at 20%. I say at least 30%, maybe even 40. In any case, next year, there will be no room for the failures of conservation and delays in new construction that we’ve seen this year. The country will need to consume less, while running its basic industries, and with another 444,000 Venezuelans demanding their fair share of the electrons.

A challenge!

*Anglo American Plc’s Loma de Niquel mine in Aragua state used more power in February than it has in any month since May, according to CNG’s monthly reports.

18 thoughts on “Electricity outlook: Still difficult

  1. Quico

    I’m thrilled you started blogging in public, Setty.

    One thing to note: doesn’t PDVSA’s move to bring that generating barge into the West of the country more-or-less prove that the government couldn’t manage to shield oil operations from shortages in the West of the country?

    My blog partner, who’s a maracucho, says he’s sure that PDVSA’s been having more trouble powering their operations out west than they care to admit, with outages stopping work again and again. If this is so, should we read it as a comment on the state of the grid itself?

    The complex relationship between the generation and transmissions crisis is, I think, the least-understood aspect of the problem. People can grasp a simple message like not-enough-water-in-the-reservoir=no-power, but no matter how low the water goes, as long as SOME power is flowing you’d expect them to go all out to protect oil production. Only a genuinely crumbling grid can explain why PDVSA can’t get power…which raises the question of not just how low Guri’s going to be in 2011, but to what extent does the attention being lavished on the generation crisis mean neglect of the transmission crisis…

    You dig?

  2. sapitosetty Post author

    Quico, a few items.
    -First of all, you are supposed to just say “primero!”
    -Second, you aren’t using enough capital letters. THIS IS A BLOG COMMENT.
    -Third, you refrained from calling me an hijo de anything. I think you’ve been up north too long.

    Anyway, about Maracaibo – yes, all of what you say is entirely possible. I’m going to Maracaibo; I’ll ask around. I’ll also write a future post on the weird economic geography of Venezuela — it’s as though in the past they saw the east and west as wings of Caracas, feeding the capital, and the idea that electricity, gas, highway or rail lines should connect the provinces never crossed their minds. The current administration has produced a lot of talk and many beautiful drawings of how to integrate the country and region, but so far little action.

    1. marzolian

      When I lived there, I sometimes had to travel between the Lake Maracaibo area and the eastern oilfields (Anaco, San Tomé). I had the same impression: why no flights from Maracaibo to Puerto La Cruz, Porlamar, or Maturín? Nope, entirely different systems for east and west.

    1. sapitosetty Post author

      Hi Bobthebuilder, thanks for that. It probably depends on the definition of “self-sufficient.” As I understand it, they get their power from Guri, but I’ll check and make sure. This part I’m sure of: if you click the link to “monthly reports,” above, look at the Loma de Niquel bill. It says “Energía Consumida Mineras Loma de Níquel suministrado por EDELCA.” That means “Energy Consumed-Nickel Hill Mines supplied by EDELCA.” Edelca is a state-run utility, the same one that runs Guri.

      I realize you weren’t arguing the main point, but just to be clear what I was saying: to me it’s just weird that they have been allowed to increase power consumption each month while the other metals mills have been cut back. Not bad, just more evidence of an unsustainable version of rationing.

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  4. moctavio

    Since Nickel is used in making coins and because of inflation they need more high value coins, maybe they want to produce as much Nickel as possible to minto coins.

    Wild guess? maybe, but anything is possible in Wonderzuela

  5. marc in calgary

    Thanks for making some sense of it all…

    Weatherproofing homes and offices where air conditioning is instead run full tilt all day-every day… being from the north, I notice that always, when I was in Venezuela, I didn’t see any in the average houses I visited. Not even basic caulking where I was.

    *capital letters are taxed at a higher rate here in Canada.

    1. sapitosetty Post author

      Marc: I have encouraged my Canadian friends here to try and sell energy-efficiency products and expertise to the government and owners of large buildings. However, with current electricity prices and policies, it’s hard for consumers to justify the price. They will have to absorb all the cost, and won’t get much in the way of benefit.

      The people in charge of the country’s electricity system seem unwilling to study other countries that aren’t close political allies (such as Cuba or Argentina) — even Brazil’s lessons have been ignored, and U.S. and Canadian experts, some of the best in the world, haven’t been invited to help.

      1. sapitosetty Post author

        Sure, of course meters are great, and that would be a good program. But most of the heavier users have meters. I have a meter, but my bil is 52 BsF a month, or about $100 a year. My obsolete refrigerator consumes probably half of that. But there’s no way I can justify the purchase of a new fridge based on energy savings. And then there are the quintas in the hills, where they are “conserving” by installing diesel-fired generators to burn penny-a-gallon fuel, as that’s much cheaper than putting in a sub-roof thermal barrier or low-E windows.

        I’m not Mr. Markets by any means, but subsidizing overconsumption by rich people isn’t exactly in the mission statement of the PSUV.

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  7. Maria in Caracas

    Thanks for sharing your thoughts in an interesting blog. It was quite brave of you considering it was mostly wrong. The only thing you got right was that the water levels would be normal in 2011.

    The fact that the Guri water level is rising does not mean “we can stop worrying that the power grid will collapse in 2010”. We used to export electricity and now we have to import it? From Colombia (who has ALSO suffered the effects of the El Niño drought)?!?! Chavez has stolen money from the Venezuelan people to give to his buddies Castro, Morales, Ortega etc instead of giving maintenance and modernizing Venezuela’s power grid.

    When you state “The problem is simple. The crisis provoked no energy savings in the residential and commercial sectors…” you are actually blaming residents and business!!! Those sectors PAY FOR THE POWER AND WATER THEY USE!!! They have the right to demand good service for their money. There are millions of people in Venezuela who tap into the power and water grids ILLEGALLY and therefore DO NOT PAY ANY BILL AT ALL, in other words stealing electricity and water.

    I’m not rich. I’m middle class, basically just surviving paycheck to paycheck. I pay my electric bill and my water bill and I hate that you wrote this report like you researched everything but are actually biased.

    You say “I’ve been in Venezuela for a few years ” (yeah, right!) and yet you have no idea what’s going on? Get your facts straight before you publish them.

    sapitosetty: HOW DARE YOU SAY “subsidizing overconsumption by rich people”??? Those you call “rich people” ACTUALLY PAY their bills. They are the ones subsidizing those who don’t pay!!! Who cares if they overconsume? They’re not stealing, they’re paying!!!! If Chavez had invested the company’s money in maintenance instead of stealing it to give to his “friends”, we wouldn’t be in a crisis.

    Follow these links to see the reality of Planta Centro. By the way Espacio Planta Centro was created by the “Frente Revolucionario del Sector Eléctrico” so if you HAVE lived here for a couple of years you know that anything with the word “revolucionario” in it is pro-Chavez.




    1. sapitosetty Post author

      Maria – Good point about whether to worry or not. Worry is OK!

      Other than that — could you please tell me what parts of my report were wrong? Are you saying that just because you pay your bill, you have a right to waste, even if it causes the country to collapse? That’s unpatriotic, anti-environmental and self-destructive.

      Also, the overconsumption I was referring to, was mostly by rich people. Trust me. There’s a lot of waste that could easily be reduced.

  8. Nobody Special

    I’m going to have to agree with Maria on the illegal hookup problem. When considering the consumption end of the electric crisis in Venezuela, one must consider the basic effect of all the housing that is either hooked up to the grid illegally, or is bypassing the metering. Let’s be clear: it’s not just poor people- I’ve seen plenty of middle class housing where someone bypassed the meter and they run the air conditioning 24/7

    The political atmosphere makes it impossible to prosecute anyone for “stealing” the electricity, so we have a situation where there are no penalties… and the power workers won’t touch the “private” cable… so why should anyone pay for the electricity? People who live in apartment buildings are at the mercy of the system… but the people in the ranchos do as they damn well please.

    Do you suppose that maybe… just maybe, if everyone paid for the power they consume that there would be enough money to do the basic maintenance and keep the plants running? Who knows?

    Basic economics says that when the price is zero, the demand tends to be unlimited. So, why would the people with illegal hookups try to conserve power? They don’t pay for it and they aren’t motivated to consume less. It the “unpatriotic, anti-environmental and self-destructive” people who pay their bills radically cut back on their consumption, then I guarantee you that not only will the system have less money, but the illegal consumption will increase.

    So with all that in mind, your final statement: “the overconsumption I was referring to, was mostly by rich people” comes across as rather naive.

    1. sapitosetty Post author

      I haven’t seen these middle-class homes that bypass the meters, but I live in Caracas and most middle-class households I know are in little apartments. Interesting.

      If everyone paid their bill then of course that would help a lot. Mostly, just having bills helps people see how much energy they are using, and whether their personal habits are wasteful or not. Bills are very useful.

      As far as keeping the system running, the one bill that really needs to be paid is Venalum’s. From what I hear, it’s getting on $500 million. That’s a lot of money. Instead everyone suffers so the revolution doesn’t have to lay off union laborers in a downturn. Did I mention that sometimes it’s not so great to have the state run the big industries?

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